Suzlon Energy

1.  Change in accounting policy
 
 In line with notification of the Companies (Accounting Standards)
 Amendment Rules 2009 issued by Ministry of Corporate Affairs on March
 31, 2009 amending Accounting Standard - 11 (AS - 11) The Effects of
 Changes in Foreign Exchange Rates (revised 2003), the Company has
 chosen to exercise the option under para 46 inserted in the standard by
 the notification. Accordingly, exchange differences on all long term
 monetary items, with retrospective effect from April 01, 2007, are:
 
 (a) To the extent such items are used for the acquisition of a
 depreciable capital asset are added to / deducted from the cost of the
 asset and depreciated over the balance life of the asset. As a result
 of which an amount of Rs 2.43 crore [net of depreciation of Rs 0.12
 crore and tax of Rs. Nil] have been added to fixed assets, being the
 exchange difference on long term monetary items related to the
 acquisition of a depreciable capital asset.
 
 (b) In other cases accumulated in the “Foreign Currency Monetary
 Translation Difference Account” and amortised to the profit and loss
 account over the balance life of the long term monetary item but not
 beyond March31, 2011.
 
 (c) As a resultof point (a) and (b) above, Rs 0.84 crore [net of tax
 Rs. Nil] was charged to general reserve which was recognised in the
 profit and loss account till the previous financial year ended March
 31, 2008.
 
 (d) Rs 132.02 crore amortisation cost charged to the profit and loss
 account during the year.
 
 (e) Rs. 399.26 crore accumulated in the “Foreign Currency Monetary
 Translation Difference Account”, being the amount remaining to be
 amortised as at March 31, 2009.
 
 As a result of the above change in the accounting policy, the net loss
 before tax for the year is lower by Rs402.52 crore.
 
 2.  Exceptional items
 
 The details of exceptional items aggregating to Rs873.16 crore (Rs
 285.21 crore) are as below:
 
 a) Foreign exchange losses of Rs 131.35 crore (foreign exchange gain of
 Rs 4.40 crore) arising due to restatement of zero coupon convertible
 bonds of USD 500millionatyear end exchange rates.
 
 b) Provision for blade retrofit/replacement cost aggregating Rs 221.59
 crore (Rs 121.71 crore) and consequential generation/availability costs
 of Rs 189.51 crore (Rs 20.37 crore).
 
 c) Cost of site restoration aggregating Rs Nil (Rs 65.46 crore) and
 cost of consequential generation losses aggregating Rs Nil (Rs 59.07
 crore) relating to disruption of operation of WTGsin Dhule and Sangli
 by local residents.
 
 d) Mark-to-market losses of Rs 330.71 crore (Rs 23.00 crore)in respect
 of foreign exchange forward/option contracts, taken for hedging
 purposes.
 
 Exceptional items for the prior year comparatives include amounts in
 respect of items which have been classified as exceptional in current
 year.
 
 3.  Zero coupon convertible bonds
 
 On June 11, 2007 the Company made an issue of zero coupon convertible
 bonds aggregating USD 300 million (Rs 1,223.70 crore)
 comprisingof300,000 Zero Coupon Convertible Bonds due
 2012ofUSD1,000each (PhaseI Bonds), which were:
 
 a) convertible by the holders at any time on or after July 22, 2007 but
 prior to close of business on June 5, 2012, each bond to be converted
 into 113.50 fully paid up equity shares of face value of Rs 2 per share
 at an initial conversion priceofRs359.68per equity
 shareofRs2eachatafixedexchange rateofRs40.83=USD 1.
 
 b) convertible in whole but not in part at the option of the Company at
 any time on or after June 11, 2009 subject to satisfaction of certain
 conditions.
 
 c) redeemable in whole but not in part at the option of the Company at
 any time if less than10percentofthe aggregate principal amount of the
 Phase I Bonds originally issued is outstanding, subject to satisfaction
 of certain conditions.
 
 d) redeemable on maturity date at145.23% of its principal amount if not
 redeemed or converted earlier.  Further,onOctober 10, 2007 the Company
 made an additional issue of zero coupon convertible bonds aggregating
 USD 200 Million (Rs 786.20 crore) comprising of 200,000 zero coupon
 convertible bonds due 2012 of USD 1,000 each (Phase II Bonds), which
 were:
 
 a) convertible by the holders at any time on or after November 20, 2007
 but prior to close of business on October 4, 2012, each bond to be
 converted into 107.30 fully paid up equity shares with face value of Rs
 2 per share at an initial conversion priceofRs371.55perequity
 shareofRs2eachatafixedexchange rateofRs39.87=USD 1.
 
 b) convertible in whole but not in part at the option of the Company at
 any time on or after October 10, 2009 subject to satisfaction of
 certain conditions.
 
 c) redeemable in whole but not in part at the option of the Company if
 less than 10 percent of the aggregate principal amount of the Phase II
 Bonds originally issued is outstanding, subject to satisfaction of
 certain conditions.
 
 d) redeemable on maturity date at 144.88%of its principal amount,if not
 redeemed or converted earlier.  Subsequent to the year-end, the Company
 proposed a restructuring of its Zero Coupon Convertible Bonds, with an
 approval of the Reserve Bank of India (RBI) and the bondholders were
 offered the following options as part of the restructuring:
 
 - Cash buy back of bonds @54.55% of the face value of US00 per bond
 
 - Issue of new bonds in place of old bonds at a fixed ratio of 3:5 (60
 cents to dollar) bearing a coupon of 7.5 per cent per
 annum,payablesemi-annually. Unless previously redeemed, converted or
 purchased and cancelled, the Company will redeem eachJune2012 New
 Bondat150.24 percent of its principal amount and each October2012 New
 Bond at 157.72 per cent of its principal amount onthe relevant Maturity
 Date. The conversion price is set at Rs 76.68 per share.  These bonds
 do not have any financial covenants and are of the same maturity as the
 old bonds.
 
 WTGs
 
 The Company has taken WTGs on non-cancellable operating lease,
 chargeable on per unit basis of net electricity generated and
 delivered. The lease amount would be determined in the future on the
 number of units generated. Lease rental expense for the period is
 Rs2.38 crore (Rs 2.53 crore).
 
 Sublease rental income recognised in the statement of profit and loss
 account for the period is Rs 2.38 crore (Rs 2.53 crore).
 
 4. Other notes
 
 a) Expenditure amounting to Rs 3.61 crore (Rs 4.86 crore) and Rs 6.22
 crore (Rs 6.94 crore) pertaining to employee remuneration and benefits;
 and operating and other expenditure respectively, being expenditure
 incurred in connection with the construction of certain self
 manufactured assets have been deducted from the respective expenditure
 heads and have been capitalised under appropriate asset heads.
 
 b) Borrowing costs amounting to Rs 14.39 crore (Rs Nil) have been
 capitalised to qualifying assets.
 
 c) The Company incurs expenditure on development of infrastructure
 facilities for power evacuation arrangements as per authorization of
 the state electricity boards (SEB) / nodal agencies. In certain cases
 the expenditure is reimbursed, on agreed terms, by the SEB/nodal
 agencies and in certain cases the Company recovers it from the
 customers. Where the expenditure is reimbursed by the SEB / nodal
 agency, the cost incurred is reduced by the reimbursements received and
 the net amount is charged to the profit and loss account. Where an
 arrangement is entered into with customers for power evacuation
 charges, the proportionate direct cost computed on per mega watt basis
 is netted off from the amount charged to customers and the net
 deficit/(surplus) is charged / credited to profit and loss account. The
 deficit/surplus from infrastructure development across all SEBs / nodal
 agencies is shown under infrastructure development expenses or other
 income as the case may be. Indirect expenses not directly relatable to
 power evacuation are charged to the respective account heads in the
 profit and loss account.
 
 d) In case of an overseas subsidiary, the Company has investments in
 equity shares of Rs 133.06 crore (Rs 133.06 crore).  Considering the
 future potential and recoverability, the Company has estimated and
 provided for Rs 99.76 crore as diminution other than temporary in the
 value of the investments. In the opinion of the management, the balance
 amount is recoverable.
 
 e) During the current year, the Company has issued 12.50% secured
 redeemable Non-Convertible Debentures (NCDs) aggregating Rs 300.00
 crore to Life Insurance Corporation of India (LIC). The Company has
 incurred expenses amounting to Rs 5.06 crore towards issue of NCDs.
 These NCDs are secured by pledge of shares of the Company held by
 promoters to the extent of 1.5 times the NCD amount and subservient
 charge on the Pondichery factory. The company is required to maintain
 minimum security cover of 1.5 times at all times during the tenor of
 the debenture.  The tenor of the debentures is seven years and they
 shall be redeemed in three equal annual instalments commencing from
 theendofthe5th year from the date of allotment.
 
 f) During the current year, the board of directors of the company had
 approved a rights issue of equity shares of the company to a maximum
 extent of Rs 1,800 crore. In anticipation of the right issue, the
 company had received Rs 200 crore from a promoter group company as an
 advance towards the share application money. The rights issue was
 suspended due to market conditions prevailing at that time; and Rs105
 crore outofRs200 crore was refunded to the promoter group company.
 Subsequently on March 27, 2009, the Company, considering the market
 conditions and in turn its inability to come out with a right issue,
 has decided refund the remaining advance amount outstanding towards
 share application money. Accordingly, the amounth as been refunded post
 balance sheet date.
 
 g) Tax on dividend of Rs 1.05 crore pertains to dividend distribution
 tax credit claimed by the company on dividends distributed by subsidia
 ries in the previous year.
 
 h) Creditors include acceptances of Rs406.37 crore (Rs 614.66 crore).
 
 5. a. Contingent liabilities
 
 Particulars                            As at March 31,
                                       2009        2008
 
 Guarantees given on behalf of 
 subsidiaries in respect of loans granted
 to them by banks / financial 
 institutions                        7,117.45    7,451.10
 
 Premium on redemption of zero 
 coupon convertible bonds              226.11      101.08
 
 Claims against the Company not 
 acknowledged as debts                  27.26        0.25
 
 Income tax matters pending in appeal   15.23       19.23
 
 b. Capital commitments
 
 Particulars                            As at March 31,
                                        2009        2008
 
 Estimated amount of contracts 
 remaining to be executed on 
 capital account
 and not provided for net of advances   59.36       50.96
 
 Commitments for investments in 
 Subsidiary                               -         82.34
 
 B.  Other related parties with whom transactions have taken place
 during the year
 
 a) Entities where key management personnel (KMP)/relatives of key
 management personnel (RKMP) have significant influence -
 
 Sarjan Realities Limited, Suzlon Infrastructure Limited, Senergy Global
 Limited, Shubh Realty (South) Private Limited, Tanti Holdings Limited,
 Suzlon Foundation, GirishR. Tanti (HUF),SESteel Limited
 
 b) Key management personnel of Suzlon Energy Limited Tulsi R. Tanti,
 Girish R. Tanti
 
 c) Relatives of key management personnel of Suzlon Energy Limited
 
 VinodR. Tanti, Jitendra R.Tanti
 
 d) Employee funds
 
 Suzlon Energy Limited-Superannuation Fund.
 
 Suzlon Energy Limited-Employees Group Gratuity Scheme.
 
 6.  Segment reporting
 
 As permitted by paragraph4 ofAccounting Standard-17 (AS - 17), Segment
 Reporting, if a single financial report contains both consolidated
 financial statements and the separate financial statements of the
 parent, segment information need be presented only on the basis of the
 consolidated financial statements. Thus, disclosures required by AS 17
 are given in consolidated financial statements.
 
 7.  Prior year amounts have been reclassified wherever necessary to
 conform with current year presentation. Figures in the brackets are in
 respect of the previous year.