Opg Power Regulatory News (OPG)

30 September 2021

OPG Power Ventures plc

("OPG", the "Group" or the "Company")

Final results for the year ended 31 March 2021

OPG (AIM: OPG), the developer and operator of power generation assets in India, announces its final results for the year ended 31 March 2021 ("FY21").

FY21 Highlights

· Revenue decreased to £93.8 million from £154.0 million in FY20 due to the COVID-19 disruption in the Indian economy;

· Total generation (including deemed) of 2.1 billion units (2.7 billion units in FY20);

· Adjusted EBITDA of £33.7 million (36.0% margin) compared with £31.2 million (20.2% margin) in FY20;

· Profit before tax from continued operations was £21.6 million compared with £14.5 million in FY20;

· £8.2 million (Rs.7.8 billion) term loan principal repayments made during FY21; Borrowings reduced with gross debt of £46.6 million at 31 March 2021, compared to £56.8 million at 31 March 2020;

· Net debt reduced from £53.4m at 31 March 2020 to £16.2m at 31 March 2021;

Summary financial information

* See definition of Adjusted EBITDA on page 7

** See definition of Net debt on page 10

Post year end developments and highlights

· Plant Load Factor ("PLF") for the five month period to 31 August 2021 was 72.8% (H1 FY20: 46%);

· Average tariff for the five months period to 31 August 2021 was Rs5.42, down 4.4 per cent (FY21: Rs5.67) due to the impact of COVID-19. Average Tariff was increased to c. Rs5.58 effective from August 2021;

· Subsequent to 31 March 2021, additional £5.7 million (Rs.0.6 billion) collected from a customer in respect of historic contractual claims;

· International coal prices have steadily gained since April, due to firmer Chinese demand and tighter supplies caused by rain-related disruptions in Indonesia;

· In June 2021, Environmental, Social and Governance ("ESG") Board Committee was created and Mr. Michael Grasby was appointed as Chairman of this committee. First-ever standalone FY21 ESG report was issued and is available on the Company's website.

COVID-19, Vaccination and the Indian Economy update

· In June 2021, World Bank's Global Economic Outlook projected FY22 economic growth forecast for India at 8.3%. IMF revised its India growth forecast to 9.5% for FY22;

· India faced a severe second wave of COVID-19 infections starting February 2021 which resulted in economic slowdown. The number of infected cases peaked in the middle of May 2021;

· Since 16 January 2021, India administered the rollout of vaccines to its citizens and at least 0.75 billion doses of COVID vaccines have been administered. Based on recently reported data, currently around over eight million doses are being administered daily;

· Currently COVID-19 cases are reducing and state governments are now unlocking and easing restrictions, in phases;

· On 1 April 2021, the deadline for meeting emission norms for a majority of coal-based power plants in India, was extended from 2021 to December 2024.

Arvind Gupta, Chairman said: "We are proud to report that OPG was comfortably in line with FY21 market expectations despite the disruption caused by COVID-19 and unfavourable market conditions. OPG delivered very strong cash generation and achieved a significant reduction in debt during the year. We will also continue to focus on advancing our ESG agenda."

Investor presentation

There will be a virtual presentation on the Investor Meet Company platform for investors and analysts at 11 am on Monday, 4 October 2021. Those wishing to attend should register for the presentation at: https://www.investormeetcompany.com/opg-power-ventures-plc/register-investor The presentation will be available for download at http://www.opgpower.com/ A recording of the event will subsequently be available on the Company's websites.

The Company's annual report and accounts for the year ended 31 March 2021 is available on the Company's website at www.opgpower.com/and will be sent to shareholders shortly.

For further information, please visit www.opgpower.com or contact:

Chairman's Statement

Resilience, robust profitability and strong cash generation

FY21 has been a year of extraordinary challenges. The unprecedented health crisis, caused by novel coronavirus, took an immense economic and human toll globally. At OPG, we responded immediately with a comprehensive COVID-19 response plan - putting in place health and safety measures to protect our employees, running our plant operations smoothly to ensure supply of electricity to our consumers, and providing essential support and assistance to our local communities in need. Yet, even in such critical circumstances, our Company has emerged stronger reporting solid set of financial results and paving pathways for accelerated and sustainable future growth.

Despite the disruption caused by COVID-19, OPG delivered very strong cash generation, robust profitability and achieved a significant reduction in net debt during the year.

The plants' generation, including deemed generation, during FY21 was 2.1 billion units which is a 22.4 per cent reduction in generation in comparison with FY20 primarily due to the COVID-19 induced nationwide lockdown in India, with average Plant Load Factor ("PLF") at 58 per cent (FY20: 75 per cent). During FY21 average realised tariff was Rs5.52 (FY20: Rs5.67).

In FY21, the Group's revenue was £93.8 million (FY20: £154.0 million) and Adjusted EBITDA was £33.7 million (FY20: £31.2 million). Profit from continuing operations was £13.1 million (FY20: £10.2 million) and profit for the year was £14.1 million (FY20: 8.0 million).

We are proud to report that OPG was comfortably in line with FY21 market expectations despite unfavourable market conditions.

Creating shareholder value through deleveraging

In 2018, the Board took the decision to focus on our profitable, long-life assets in Chennai, and to prioritise deleveraging as a method to grow shareholders' equity. This strategy, we believe, will deliver value to shareholders with free cash flows providing significant returns to our shareholders and opportunities to grow the business further.

Since the adoption of this strategy, additional shareholder value of 17.6p per share was accrued during last four years on account of term loan repayments.

During FY21 net debt reduced from £53.4 million to £16.2 million and net debt to Adjusted EBITDA ratio reduced from 1.7 to 0.5 demonstrating the robustness of OPG's financial position. The Company remains amongst the least leveraged power companies in India.

The Board remains convinced, especially in light of COVID-19 challenges, that our strategy of maintaining operational excellence and paying down expensive borrowings was the right one to pursue for all our stakeholders.

Maximising stakeholders' long-term value

It is OPG's paramount objective to maximise stakeholders' long-term value. In light of disruptions and uncertainty caused by COVID-19 and extraordinary volatility in coal prices and freight this year, the Board believes that it is in the best interest of the Company and its stakeholders to conserve cash for the repayment of debt and growth ESG focused projects and to maintain a strong and resilient balance sheet to withstand turbulent times.

Building sustainable future

Rapid growth in urbanisation, universal electrification, and a renewable energy transition driven by climate change, implies that India's incremental power needs will largely be met by renewable energy. Our business strategy is perfectly aligned with this, offering us an opportunity to unlock value for all our stakeholders in the years to come. OPG has developed its ESG strategy which, among other matters, includes objectives to reduce its carbon footprint. As part of this strategy, the Company is evaluating various options to increase its renewable energy asset base and to establish joint ventures to roll out various energy transition technologies. These initiatives will ensure that OPG delivers year-on-year improvements to reach the Company's emissions reduction targets in the medium and longer-term.

We are happy to present our first-ever standalone FY21 ESG report which summarises the objectives, activities, and the performance of the Company from an ESG perspective to its stakeholders. This report includes examples of how we have demonstrated our commitments and applied our management approach on a range of ESG topics, including environmental stewardship, health & safety, relationship with local community, and governance.

Indian Economy and Power Sector Update

In FY21, even amidst a relatively weaker macro-economic scenario, peak power demand hit an all-time high of 190 GW. The overall power demand in the country though weaker in the first half of the fiscal year due to COVID-19 induced disruption, saw a sharp recovery in the second half. India is the third largest producer and third largest consumer of electricity in the world with installed power capacity reaching 382.15 GW as of March 2021.

In June 2021, the World Bank's Global Economic Outlook projected India's FY22 economic growth forecast at 8.3 per cent, supported by plans for higher spending on infrastructure, rural development and health services and a stronger-than-expected recovery in services. During FY23 GDP growth is expected at a rate of 7.5 per cent.

During FY21, power consumption dipped by 1 per cent to 1,271.5 BU from 1,284.4 BU in FY20. The ICRA rating agency has estimated Indian electricity demand growth at 6.0 per cent for FY22 on a year-on-year basis, considering the favourable base effect, relatively lesser impact of the second COVID-19 wave on electricity demand and the pick-up in the vaccination programme.

Over the last several months the prices of thermal coal and freight have surged sharply primarily due to increased imports of coal and other goods by China and other Asian countries on the back of post COVID-19 economic recovery. Whilst OPG is partially covered from increases in prices with fixed price agreements for coal and freight, the Company remains exposed to market fluctuations for the unhedged portion of coal consumption and freight. However, the Company is exploring various options including sourcing the coal from other geographies (including domestic sources) to reduce the per unit cost of electricity.

Outlook

During the first six months of FY22 the prices of thermal coal and freight have surged sharply primarily due to increased imports of coal and other goods by China and other Asian countries on the back of post COVID-19 economic recovery. Coal prices may not reduce significantly in the short term.

While challenges to the economy will continue in FY22, the Company has strong foundations, allowing us both to manage the ongoing COVID-19 situation and to pursue growth sustainably. The Company's medium and long-term fundamentals remain unchanged with strong cash flows and a reduction in debt enabling the long-term profitable business model, responsible growth and sustainable returns to shareholders. We will also continue to focus on advancing our ESG agenda.

I would like to extend my gratitude to all our employees who overcame challenges posed by the pandemic, as well as vendors, banks and all stakeholders for the incredible support we have received during these unprecedented and extraordinary times.

Arvind Gupta

Chairman

29 September 2021

FINANCIAL REVIEW

The following is a commentary on the Group's financial performance for the year.

Note: Due to rounding, numbers presented throughout this document may not add up precisely to the totals provided and percentages may not precisely reflect the absolute figures.

Revenue

Even though the Group's revenue has decreased by £60.2 million (a 39.1% decline) year on year as a result of COVID-19 induced nationwide lockdown imposed by the Indian Government, Adjusted EBITDA has increased by £2.5 million (8.2% growth) primarily due to collection of contractual claims payments from its customers under power purchase agreements amounting to £9.4 million. These contractual claims were accumulated over several years and recognised in Other operating income.

The average tariff realised during FY21 was Rs5.72 per kWh. Generation exported to captive power shareholders and other customers and billed for revenue, including deemed generation, was 2.1 billion units during FY21. The reduction in generation in comparison with generation in FY20 is due to the impact of fall in demand for power caused by COVID-19 induced nationwide lockdown.

Production and output levels from the Group's operating power plant compared to the prior year were as follows:

1 Unit 3: "Deemed" PLF (%) has been included

2 Average tariff includes effect of deemed offtake tariff for Unit 3. Average FY21 tariff excluding effect of deemed offtake was Rs5.52 (FY20: Rs5.67).

Gross profit

Gross profit ('GP') in FY21 was 39.4% of revenue (FY20: 41.5%). The decrease in GP is primarily on account of disruption caused in the economy by the nationwide lockdown induced by COVID-19.

The cost of revenue represents fuel costs. The table below shows average price of coal consumed in FY21 and FY20.

Average price of coal consumed

Adjusted EBITDA

Adjusted earnings before interest, taxation, depreciation and amortisation ('Adjusted EBITDA') is a measure of a business' cash generation from operations before depreciation, interest and exceptional and non-standard or non-operational charges, e.g. share based compensation, etc. Adjusted EBITDA is useful to analyse and compare profitability among periods and companies, as it eliminates the effects of financing and capital expenditures.

Adjusted EBITDA was £33.7 million in FY21 compared with £31.2 million in FY20 and the adjusted EBITDA margin was higher at 36.0% in FY21 against 20.2% in FY20 primarily as a result of collection of contractual claims accumulated over several years as mentioned above.

Profit from continuing operations before tax was £21.6 million compared with £14.5 million in FY20.

1 PBT 2019-20 includes provision for expected credit loss of £17.0 million

Taxation

The Company's operating subsidiaries are under a tax holiday period but are subject to Minimum Alternate Tax ('MAT') on their accounting profits. Any tax paid under MAT can be offset against future tax liabilities arising after the tax holiday period.

The tax expense during the year was £8.4 million comprised of current tax expense of £0.4 million and deferred tax expense of £8.0 million.

Profits after tax from continuing operations

Profits after tax from continuing operations have increased by 28.8% in FY21 to £13.1 million primarily due to collection of contractual claims payments offset by a significant provision for expected credit loss in FY20.

Assets held for sale and loss from discontinued operations

62MW Karnataka solar projects

In FY18, four Karnataka solar projects (62MW) were commissioned. The Group has a 31% equity interest in these projects.

During FY19, the Company obtained a right to exercise an option to buy an additional 30% equity interest in solar companies. Effective from FY20 this right was assigned to a third party and from FY21 the remaining related obligations and the results of the operations of solar companies are not consolidated in the Group's consolidated financial statements due to loss of control. As previously reported, after evaluation of all options, the Company decided that the most efficient way to maximise shareholders' value from the solar operations was to dispose of these interests in the solar companies and it is continuing the disposal process which met all conditions of IFRS 5 classifying the solar business as assets held for sale as at 31 March 2021. The completion of the disposal process was impacted by COVID-19.

Accordingly, the Group's funding of £16.4 million towards these projects is presented as assets held for sale in the Consolidated Statement of Financial Position as at 31 March 2021 and the gain from operations of £1.0 million is included in gain from discontinued operations in the Consolidated Statement of Comprehensive Income.

Earnings per Share (EPS)

The Company's total reported EPS in FY21 increased to 3.52 pence from 2.11 pence.

Dividend policy

It is OPG's paramount objective to maximise stakeholders' long-term value. In light of disruptions and uncertainty caused by COVID-19 and extraordinary volatility in coal prices and freight this year, the Board believes that it is in the best interests of the Company and its stakeholders to conserve cash for the repayment of debt, to fund growth in relation to ESG focused projects and to maintain a strong and resilient balance sheet to withstand the turbulent times. Therefore, the Board decided to not declare a dividend for FY21. The Board will revisit the Company's dividend policy once the impact of COVID-19 subsides and coal prices become less volatile.

Foreign exchange loss on translation

The British Pound-to-Indian Rupee exchange rate decreased to a closing rate on 31 March 2021 of £1= INR 100.81 a rate of £1= INR 93.07 on 31 March 2020 thereby resulting in an exchange loss of £12.9 million on translating foreign operations included in Other comprehensive loss.

Property, plant and equipment

The decrease in net book value of our property, plant and equipment of £19.8 million principally relates to depreciation and foreign exchange impact on account of translation offset by additions during the year.

Other non‐current assets

Other non-current assets (excluding property, plant and equipment & intangible assets) have increased by £7.7 million primarily due to increase in the non-current portion of restricted cash, representing investments in mutual funds maturing after twelve months of £8.2 million (2020: nil) allocated to debenture redemption fund earmarked towards redemption of non-convertible debentures scheduled during FY24 of £19.8 million.

Current assets

Current assets have decreased by £28.8 million from £103.3 million to £74.5 million year on year primarily as a result of the following:

· Decrease in Assets held for sale by £29.9 million due to the presentation of a 31% investment in solar companies as an equity investment held for sale versus gross presentation of assets and liabilities held for sale in FY20;

· Decrease in trade receivables by £12.1 million as a result of strong collections from the Group's captive power shareholders and customers, including old receivable balances;

· Increase in other short-term assets by £11.5 million primarily due to increase in investments in mutual funds to £13.3 million included in other short-term assets;

· Increase in cash and bank balances (including restricted cash) by £5.5 million;

· Increase in inventory holdings by £0.7 million.

Liabilities

Current liabilities have decreased by £60.7 million from £98.9 million to £38.2 million year on year primarily due to liabilities relating to assets held of sales, borrowings, and trade and other payable.

Non-current liabilities have increased by £16.7 million from £39.0 million to £55.7 million year on year primarily on account of the issuance of non-convertible debentures issued during the year to prepay term loans.

Financial position, debt, gearing and finance costs

As of 31 March 2021, total borrowings were £46.6 million (31 March 2020: £56.8 million). The gearing ratio, net debt (i.e. total borrowings minus cash and current and non-current investments in mutual funds)/(equity plus net debt), was 9% (31 March 2020: 25%). The gearing ratio is a useful measure to identify the financial risk of a company.

Despite COVID-19 related challenges, the Company has continued to pay down the debt from internal accruals and issued Non-Convertible Debentures ("NCDs") of £19.8 million (Rs2.0 billion) to finance principal repayments of the Group's existing term loans to June 2022. The Group's NCDs are repayable in June 2023 and have an interest coupon of 9.85%. The issue of the NCDs had a material positive impact upon the Group's cash flow during the uncertain COVID-19 impacted period, through a significant deferment of principal payments and the NCDs' interest coupon being lower by c.1 per cent in comparison with the existing term loans interest rate.

During FY21 net debt (total borrowings minus cash and current and non-current investments in mutual funds) reduced from £53.4 million to £16.2 million and net debt to Adjusted EBITDA ratio reduced from 1.7 to 0.5 as a result of the repayment of term loans and working capital loans, foreign exchange impact of depreciation of INR against GBP and strong cash collections achieved during the year. This demonstrates the robustness of OPG's financial position. The Company remains amongst the least leveraged power companies in India.

Based on the term loans repayment schedule the Company is expected to be term loan free by FY25.

Finance costs have decreased by £4.7 million from £11.5 million in FY20 to £6.8 million in FY21 primarily due to the impact of decrease in foreign exchange losses and reduction in interest expenses following scheduled repayments of the term loans and the issuance of the NCDs.

Finance income decreased from £2.0 million in FY20 to £0.9 million in FY21 and therefore net finance costs in FY21 amounted to £5.9 million (FY20: £9.5 million).

Current restricted cash representing deposits maturing between three to twelve months amounted to £3.2 million (31 March 2020: £7.5 million) which have been pledged as security for Letters of Credit.

Non-current restricted cash represents investments in mutual funds maturing after twelve months amounting to £8.2 million (31 March 2020: £0.03 million) allocated to the debenture redemption fund which is earmarked towards the redemption of non-convertible debentures scheduled during FY24 of £19.8 million.

Cash flow

Cash flow from continuing operations before and after changes in working capital were £36.8 million (FY20: £48.2 million) and £40.2 million (FY20: £30.6 million) respectively. Net cash flow from operating activities increased from £30.6 million in FY20 to £40.2 million in FY21, an increase of £9.6 million, primarily due to collections of receivables and contractual claims relating to previous periods.

1 Includes purchase of investments in mutual funds and other market securities of £21.5 million included in restricted cash and other short-term assets in the statement of financial position.

Dmitri Tsvetkov

Chief Financial Officer

29 September 2021

The notes are an integral part of these consolidated financial statements

The financial statements were authorised for issue by the board of directors on 29 September 2021 and were signed on its behalf by:

The notes are an integral part of these consolidated financial statements

Consolidated statement of changes in equity

For the Year ended 31 March 2021

(All amount in £, unless otherwise stated)

During FY20 the Company has paid a scrip dividend of 12,823,311 shares (2019:31,601,503 shares)

The notes are an integral part of these consolidated financial statements.

Consolidated statement of cash flows

For the Year ended 31 March 2021

(All amount in £, unless otherwise stated)

Disclosure of Changes in financing liabilities:

Notes to the Consolidated Financial Statements

(All amount in £, unless otherwise stated)

1. Nature of operations

OPG Power Ventures Plc ('the Company' or 'OPGPV'), and its subsidiaries (collectively referred to as 'the Group') are primarily engaged in the development, owning, operation and maintenance of private sector power projects in India. The electricity generated from the Group's plants is sold principally to public sector undertakings and heavy industrial companies in India or in the short term market. The business objective of the group is to focus on the power generation business within India and thereby provide reliable, cost effective power to the industrial consumers and other users under the 'open access' provisions mandated by the Government of India.

2. Statement of compliance

The consolidated financial statements of the Group have been prepared in accordance with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board and the provisions of the Isle of Man, Companies Act 2006 applicable to companies reporting under IFRS.

3. General information

OPG Power Ventures Plc, a limited liability corporation, is the Group's ultimate parent Company and is incorporated and domiciled in the Isle of Man. The address of the Company's registered Office, which is also the principal place of business, is 55 Athol street, Douglas, Isle of Man IM1 1LA. The Company's ordinary shares are listed on the AIM Market of the London Stock Exchange.

The Consolidated Financial Statements for the year ended 31 March 2021 were approved and authorised for issue by the Board of Directors on 29 September 2021.

4. Recent accounting pronouncements

a. Standards, amendments and interpretations to existing standards that are not yet effective and have not been adopted early by the Group

At the date of authorisation of these financial statements, certain new standards, and amendments to existing standards have been published by the IASB that are not yet effective and have not been adopted early by the Group. Information on those expected to be relevant to the Group's financial statements is provided below.

Management anticipates that all relevant pronouncements will be adopted in the Group's accounting policies for the first period beginning after the effective date of the pronouncement. New standards, interpretations and amendments not either adopted or listed below are not expected to have a material impact on the Group's financial statements.

b. Changes in accounting Standards

The following standards and amendments to IFRSs became effective for the period beginning on 1 January 2020 and did not have a material impact on the consolidated financial statements:

i) Amendments to IAS 1 and IAS 8, "Definition of Material"

In October 2018, the IASB published amendments to IAS 1, "Presentation of Financial Statements" and IAS 8, "Accounting Policies, Changes in Accounting Estimates and Errors" regarding the definition of material. The amendments standardize and clarify the definition of material and its application to disclosures in financial statements presented in the IFRSs. The amendments have no impact on Group's Consolidated Financial Statements.

ii) Amendments to IFRS 3, "Definition of a Business"

In October 2018, the IASB published amendments to IAS 3, "Definition of a Business." The primary purpose of these amendments is to help distinguish between a business and a group of assets. A business comprises a group of activities and assets that involve at least one resource input and one substantive process that together contribute significantly to the ability to generate outputs. The IASB has introduced a concentration test that permits a simplified assessment of whether a set of activities and assets is a business. It is not a business if substantially all of the fair value of the gross assets acquired is concentrated in a single identifiable asset or group of similar identifiable assets, in which case IFRS 3 does not apply. The amendments have no impact on Group's Consolidated Financial Statements.

iii) Amendments to References to the Conceptual Framework

In March 2018, the IASB published Amendments to References to the Conceptual Framework in IFRS. The amendments have no impact on Group's Consolidated Financial Statements.

iv) Amendments to IFRS 9, IAS 39 and IFRS 7, "Interest Rate Benchmark Reform"

In September 2019, the IASB published amendments to IFRS 9, IAS 39 and IFRS 7, "Interest Rate Benchmark Reform." The Phase 1 amendments of the IASB's Interest Rate Benchmark Reform project (IBOR reform) provide for temporary exemption from applying specific hedge accounting requirements to hedging relationships that are directly affected by IBOR reform. The exemptions have the effect that IBOR reform should not generally cause hedge relationships to be terminated due to uncertainty about when and how reference interest rates will be replaced. However, any hedge ineffectiveness should continue to be recorded in the income statement under both IAS 39 and IFRS 9. Furthermore, the amendments set out triggers for when the exemptions will end, which include the uncertainty arising from IBOR reform. The amendments have no impact on Group's Consolidated Financial Statements.

v) Amendments to IFRS 16, "Covid-19-Related Rent Concessions-Amendment to IFRS 16"

In May 2020, the IASB issued Covid-19-Related Rent Concessions (Amendment to IFRS 16) that provides practical relief to lessees in accounting for rent concessions occurring as a direct consequence of Covid-19, by introducing a practical expedient to IFRS 16. The practical expedient permits a lessee to elect not to assess whether a Covid-19-related rent concession is a lease modification. A lessee that makes this election shall account for any change in lease payments resulting from the Covid-19-related rent concession the same way it would account for the change applying IFRS 16 if the change were not a lease modification. The practical expedient applies only to rent concessions occurring as a direct consequence of Covid-19 and only if all of the prescribed conditions are met. The Group has not received any rent concessions and so has not early adopted the amendment as it would have no impact on the presentation of these Financial Statements.

c). Standards and Interpretations Not Yet Applicable

The IASB and the IFRS IC have issued the following additional standards and interpretations. Group does not apply these rules because their application is not yet mandatory. Currently, however, these adjustments are not expected to have a material impact on the consolidated financial statements of the Group:

i) IFRS 17, "Insurance Contracts," published in May 2017, expected first-time application in next fiscal year.

ii) Amendments to IFRS 4, "Insurance Contracts-Extension of the Temporary Exemption from IFRS 9," published in June 2020, first-time application in fiscal year 2021.

5. Summary of significant accounting policies

a) Basis of preparation

The consolidated financial statements of the Group have been prepared on a historical cost basis, except for financial assets and liabilities at fair value through profit or loss and financial assets measured at FVPL.

The consolidated financial statements are presented in accordance with IAS 1 Presentation of Financial Statements and have been presented in Great Britain Pounds ('₤'), the functional and presentation currency of the Company.

During FY2019, the Company obtained a right to exercise an option to buy additional 30% equity interest in solar companies. Effective from FY2021 this right was re-assigned to a third party along with the related obligations and the results of the operations of solar companies Aavanti Solar Energy Private Limited, Mayfair Renewable Energy (I) Private Limited, Aavanti Renewable Energy Private Limited and Brics Renewable Energy Private Limited are not consolidated in Group's consolidated financial statements due to loss of control. The Group continues owning a 31% equity interest in the solar companies. As it was previously reported, after evaluation of all options, the Company decided that the most efficient way to maximise shareholders' value from solar operations is to dispose solar companies and it initiated process of disposition of solar companies which met all conditions of IFRS 5 for classification of solar business as Assets held for sale at 31 March 2021 (Note 7(b)).

Going concern

As at 31 March 2021 the Group had £8.9m in cash and net current assets of £36.3m. The directors and management have prepared a cash flow forecast to September 2022, 12 months from the date this report, which has been approved.

The Group experiences sensitivity in its cash flow forecasts due to the exposure to potential increase in USD denominated coal prices and a decrease in the value of the Indian Rupee. The Directors and management are confident that the Group will be trading in line with its forecast and that any exposure to a fluctuation in coal prices or the exchange rate INR/USD has been taken into consideration and therefore prepared the financial statements on a going concern basis.

COVID-19 virus, a global pandemic has affected the world economy leading to significant decline and volatility in financial markets and decline in economic activities. The Group has considered the possible effects that may result from the pandemic on the carrying amounts of receivables and other financial assets and carried out a Reverse Stress Test (RST). In developing the assumptions relating to the possible future uncertainties in the global economic conditions because of this pandemic, the Group, as at the date of approval of these financial statements has used internal and external sources of information. The Group has performed sensitivity analysis on the assumptions used for business projections and based on current estimates expects the carrying amount of these assets will be recovered and no material impact on the financial results inter-alia including the carrying value of various current and non-current assets are expected to arise for the year ended 31 March 2021. The Group will continue to closely monitor any variation due to the changes in situation and these changes will be taken into consideration, if necessary, as and when they crystalise. However, electricity being an essential commodity the impact on industry has been comparatively lower. The operating assets of the Group primarily are located in India. The Government of India with Reserve Bank of India (RBI) have announced various regulatory measures to help the industry. The Group has opted for such measures for deferment of payment of principal and interest on term loans and also interest on working capital loans. The Group raised approximately £19.8m (₹ 2000 million) during June 2020 through non-convertible debentures (NCDs) issue with a three years term and coupon rate of 9.85%. The NCD's proceeds were used to repay the FY21 and FY22 (i.e. to March 2022) principal term loans obligations. All debt covenants are met and have sufficient headroom. The Group has also availed the Emergency Credit Line Guarantee Scheme (ECLGS) and COVID Emergency support loans during the year aggregating to £2.7 million. The Group collected full amount of receivables from its principle customer of approximately £16.4m and historical contractual claims payments from its customers under the power purchase agreements amounting to £9.4m which were accumulated over several periods. These measures strengthened the Group's financial position at this time of economic slowdown and also substantially eased the cash flow burden on account of the Group having repaid the principal term loan obligation for FY21 and FY22 and major recoveries of overdues towards power supply from our principal customer TANGEDCO. Based on the RST analysis, we can conclude that the Group is in strong position to navigate the current situation caused by Covid-19 pandemic and going concern is not an issue.

b) Basis of consolidation

The consolidated financial statements include the assets, liabilities and results of the operation of the Company and all of its subsidiaries as of 31 March 2021. All subsidiaries have a reporting date of 31 March.

A subsidiary is defined as an entity controlled by the Company. The parent controls a subsidiary if it is exposed, or has rights, to variable returns from its involvement with the subsidiary and has the ability to affect those returns through its power over the subsidiary. Subsidiaries are fully consolidated from the date of acquisition, being the date on which effective control is acquired by the Group, and continue to be consolidated until the date that such control ceases.

All transactions and balances between Group companies are eliminated on consolidation, including unrealised gains and losses on transactions between Group companies. Where unrealised losses on intra-group asset sales are reversed on consolidation, the underlying asset is also tested for impairment from a group perspective. Amounts reported in the financial statements of subsidiaries have been adjusted where necessary to ensure consistency with the accounting policies adopted by the Group.

Non-controlling interest represents the portion of profit or loss and net assets that is not held by the Group and is presented separately in the consolidated statement of comprehensive income and within equity in the consolidated statement of financial position, separately from parent shareholders' equity. Acquisitions of additional stake or dilution of stake from/ to non-controlling interests/ other venturer in the Group where there is no loss of control are accounted for as an equity transaction, whereby, the difference between the consideration paid to or received from and the book value of the share of the net assets is recognised in 'other reserve' within the statement of changes in equity.

c) Investments in associates and joint ventures

Investments in associates and joint ventures are accounted for using the equity method. The carrying amount of the investment in associates and joint ventures is increased or decreased to recognise the Group's share of the profit or loss and other comprehensive income of the associate and joint venture, adjusted where necessary to ensure consistency with the accounting policies of the Group.

Unrealised gains and losses on transactions between the Group and its associates and joint ventures are eliminated to the extent of the Group's interest in those entities. Where unrealised losses are eliminated, the underlying asset is also tested for impairment.

d) List of subsidiaries, joint ventures, and associates

Details of the Group's subsidiaries and joint ventures, which are consolidated into the Group's consolidated financial statements, are as follows:

(*) During FY21 withdrawn as a partner from LLP

(**) Effective from FY21, the results of operations of Solar companies Aavanti Solar Energy Private Limited, Mayfair Renewable Energy (I) Private Limited, Aavanti Renewable Energy Private Limited and Brics Renewable Energy Private Limited are not consolidated in Group's consolidated financial statements due to loss of control.

e) Foreign currency translation

The functional currency of the Company is the Great Britain Pound Sterling (£). The Cyprus entity is an extension of the parent and pass through investment entity. Accordingly, the functional currency of the subsidiary in Cyprus is the Great Britain Pound Sterling. The functional currency of the Company's subsidiaries operating in India, determined based on evaluation of the individual and collective economic factors is Indian Rupees ('₹' or 'INR'). The presentation currency of the Group is the Great Britain Pound (£).

At the reporting date the assets and liabilities of the Group are translated into the presentation currency at the rate of exchange prevailing at the reporting date and the income and expense for each statement of profit or loss are translated at the average exchange rate (unless this average rate is not a reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case income and expense are translated at the rate on the date of the transactions). Exchange differences are charged/ credited to other comprehensive income and recognized in the currency translation reserve in equity.

Transactions in foreign currencies are translated at the foreign exchange rate prevailing at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies at the Statement of financial position date are translated into functional currency at the foreign exchange rate ruling at that date. Aggregate gains and losses resulting from foreign currencies are included in finance income or costs within the profit or loss.

INR exchange rates used to translate the INR financial information into the presentation currency of Great Britain Pound (£) are the closing rate as at 31 March 2021: 100.81 (2020: 93.07) and the average rate for the year ended 31 March 2021: 96.72 (2020: 89.97).

f) Revenue recognition

In accordance with IFRS 15 - Revenue from contracts with customers, the Group recognises revenue to the extent that it reflects the expected consideration for goods or services provided to the customer under contract, over the performance obligations they are being provided. For each separable performance obligation identified, the Group determines whether it is satisfied at a "point in time" or "over time" based upon an evaluation of the receipt and consumption of benefits, control of assets and enforceable payment rights associated with that obligation. If the criteria required for "over time" recognition are not met, the performance obligation is deemed to be satisfied at a "point in time". Revenue principally arises as a result of the Group's activities in electricity generation and distribution. Supply of power and billing satisfies performance obligations. The supply of power is invoiced in arrears on a monthly basis and generally the payment terms within the Group are 10 to 45 days.

Revenue

Revenue from providing electricity to captive power shareholders and sales to other customers is recognised on the basis of billing cycle under the contractual arrangement with the captive power shareholders and customers and reflects the value of units of power supplied and the applicable tariff after deductions or discounts. Revenue is earned at a point in time of joint meter reading by both buyer and seller for each billing month.

Interest and dividend

Revenue from interest is recognised as interest accrued (using the effective interest rate method). Revenue from dividends is recognised when the right to receive the payment is established.

g) Operating expenses

Operating expenses are recognised in the statement of profit or loss upon utilisation of the service or as incurred.

h) Taxes

Tax expense recognised in profit or loss comprises the sum of deferred tax and current tax not recognised in other comprehensive income or directly in equity.

Current income tax assets and/or liabilities comprise those obligations to, or claims from, taxation authorities relating to the current or prior reporting periods, that are unpaid at the reporting date. Current tax is payable on taxable profit, which differs from profit or loss in the financial statements.

Calculation of current tax is based on tax rates and tax laws that have been enacted or substantively enacted by the end of the reporting period.

Deferred income taxes are calculated using the liability method on temporary differences between the carrying amounts of assets and liabilities and their tax bases. However, deferred tax is not provided on the initial recognition of goodwill, nor on the initial recognition of an asset or liability unless the related transaction is a business combination or affects tax or accounting profit. Deferred tax on temporary differences associated with investments in subsidiaries is not provided if reversal of these temporary differences can be controlled by the Group and it is probable that reversal will not occur in the foreseeable future.

Deferred tax assets and liabilities are calculated, without discounting, at tax rates that are expected to apply to their respective period of realisation, provided they are enacted or substantively enacted by the end of the reporting period. Deferred tax liabilities are always provided for in full.

Deferred tax assets are recognised to the extent that it is probable that they will be able to be utilised against future taxable income. Deferred tax assets and liabilities are offset only when the Group has a right and the intention to set off current tax assets and liabilities from the same taxation authority. Changes in deferred tax assets or liabilities are recognised as a component of tax income or expense in profit or loss, except where they relate to items that are recognised in other comprehensive income or directly in equity, in which case the related deferred tax is also recognised in other comprehensive income or equity, respectively.

i) Financial assets

IFRS 9 Financial Instruments contains regulations on measurement categories for financial assets and financial liabilities. It also contains regulations on impairments, which are based on expected losses.

Financial assets are classified as financial assets measured at amortized cost, financial assets measured at fair value through other comprehensive income (FVOCI) and financial assets measured at fair value through profit and loss (FVPL) based on the business model and the characteristics of the cash flows. If a financial asset is held for the purpose of collecting contractual cash flows and the cash flows of the financial asset represent exclusively interest and principal payments, then the financial asset is measured at amortized cost. A financial asset is measured at fair value through other comprehensive income (FVOCI) if it is used both to collect contractual cash flows and for sales purposes and the cash flows of the financial asset consist exclusively of interest and principal payments. Unrealized gains and losses from financial assets measured at fair value through other comprehensive income (FVOCI), net of related deferred taxes, are reported as a component of equity (other comprehensive income) until realized. Realized gains and losses are determined by analyzing each transaction individually. Debt instruments that do not exclusively serve to collect contractual cash flows or to both generate contractual cash flows and sales revenue, or whose cash flows do not exclusively consist of interest and principal payments are measured at fair value through profit and loss (FVPL). For equity instruments that are held for trading purposes the group has uniformly exercised the option of recognizing changes in fair value through profit or loss (FVPL). Refer to note 29 "Summary of financial assets and liabilities by category and their fair values".

Impairments of financial assets are both recognized for losses already incurred and for expected future credit defaults. The amount of the impairment loss calculated in the determination of expected credit losses is recognized on the income statement. Impairment provisions for current and non-current trade receivables are recognised based on the simplified approach within IFRS 9 using a provision matrix in the determination of the lifetime expected credit losses. During this process the probability of the non-payment of the trade receivables is assessed. This probability is then multiplied by the amount of the expected loss arising from default to determine the lifetime expected credit loss for the trade receivables. On confirmation that the trade receivable will not be collectable, the gross carrying value of the asset is written off against the associated provision.

j) Financial liabilities

The Group's financial liabilities include borrowings and trade and other payables. Financial liabilities are measured subsequently at amortised cost using the effective interest method. All interest-related charges and, if applicable, changes in an instrument's fair value that are reported in profit or loss are included within 'finance costs' or 'finance income'.

k) Fair value of financial instruments

The fair value of financial instruments that are actively traded in organised financial markets is determined by reference to quoted market prices at the close of business on the Statement of financial position date. For financial instruments where there is no active market, fair value is determined using valuation techniques. Such techniques may include using recent arm's length market transactions; reference to the current fair value of another instrument that is substantially the same; discounted cash flow analysis or other valuation models.

l) Property, plant and equipment

Property, plant and equipment are stated at historical cost, less accumulated depreciation and any impairment in value. Historical cost includes expenditure that is directly attributable to property plant & equipment such as employee cost, borrowing costs for long-term construction projects etc, if recognition criteria are met. Likewise, when a major inspection is performed, its costs are recognised in the carrying amount of the plant and equipment as a replacement if the recognition criteria are satisfied. All other repairs and maintenance costs are recognised in the profit or loss as incurred.

Land is not depreciated. Depreciation on all other assets is computed on straight-line basis over the useful life of the asset based on management's estimate as follows:

Assets in the course of construction are stated at cost and not depreciated until commissioned.

An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are expected from its use or disposal. Any gain or loss arising on derecognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is included in the profit or loss in the year the asset is derecognised.

The assets residual values, useful lives and methods of depreciation of the assets are reviewed at each financial year end, and adjusted prospectively if appropriate.

m) Intangible assets

Acquired software

Acquired computer software licences are capitalised on the basis of the costs incurred to acquire and install the specific software.

Subsequent measurement

All intangible assets, including software are accounted for using the cost model whereby capitalised costs are amortised on a straight-line basis over their estimated useful lives, as these assets are considered finite. Residual values and useful lives are reviewed at each reporting date. The useful life of software is estimated as 4 years.

n) Leases

All leases are accounted for by recognising a right-of-use asset and a lease liability except for:

• Leases of low value assets; and

• Leases with a duration of 12 months or less.

Lease liabilities are measured at the present value of the contractual payments due to the lessor over the lease term, with the discount rate determined by reference to the rate inherent in the lease unless (as is typically the case) this is not readily determinable, in which case the group's incremental borrowing rate on commencement of the lease is used. Variable lease payments are only included in the measurement of the lease liability if they depend on an index or rate. In such cases, the initial measurement of the lease liability assumes the variable element will remain unchanged throughout the lease term. Other variable lease payments are expensed in the period to which they relate. On initial recognition, the carrying value of the lease liability also includes:

• amounts expected to be payable under any residual value guarantee;

• the exercise price of any purchase option granted in favour of the group if it is reasonable certain to assess that option;

• any penalties payable for terminating the lease, if the term of the lease has been estimated in the basis of termination option being exercised.

Right of use assets are initially measured at the amount of the lease liability, reduced for any lease incentives received, and increased for:

• lease payments made at or before commencement of the lease;

• initial direct costs incurred; and

• the amount of any provision recognised where the group is contractually required to dismantle, remove or restore the leased asset (typically leasehold dilapidations)

Subsequent to initial measurement lease liabilities increase as a result of interest charged at a constant rate on the balance outstanding and are reduced for lease payments made. Right-of-use assets are amortised on a straight-line basis over the remaining term of the lease or over the remaining economic life of the asset if, rarely, this is judged to be shorter than the lease term. When the Group revises its estimate of the term of any lease (because, for example, it re-assesses the probability of a lessee extension or termination option being exercised), it adjusts the carrying amount of the lease liability to reflect the payments to make over the revised term, which are discounted using a revised discount rate. The carrying value of lease liabilities is similarly revised when the variable element of future lease payments dependent on a rate or index is revised, except the discount rate remains unchanged. In both cases an equivalent adjustment is made to the carrying value of the right-of-use asset, with the revised carrying amount being amortised over the remaining (revised) lease term. If the carrying amount of the right-of-use asset is adjusted to zero, any further reduction is recognised in profit or loss.

o) Borrowing costs

Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, that necessarily take a substantial period of time to get ready for their intended use or sale, are added to the cost of those assets. Interest income earned on the temporary investment of specific borrowing pending its expenditure on qualifying assets is deducted from the costs of these assets.

Gains and losses on extinguishment of liability, including those arising from substantial modification from terms of loans are not treated as borrowing costs and are charged to profit or loss.

All other borrowing costs including transaction costs are recognized in the statement of profit or loss in the period in which they are incurred, the amount being determined using the effective interest rate method.

p) Impairment of non-financial assets

The Group assesses at each reporting date whether there is an indication that an asset may be impaired. If any such indication exists, or when annual impairment testing for an asset is required, the Group estimates the asset's recoverable amount. An asset's recoverable amount is the higher of an asset's or cash-generating unit's (CGU) fair value less costs to sell and its value in use and is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or Groups of assets. Where the carrying amount of an asset or CGU exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. In determining fair value less costs to sell, an appropriate valuation model is used. These calculations are corroborated by valuation multiples, quoted share prices for publicly traded subsidiaries or other available fair value indicators.

For assets excluding goodwill, an assessment is made at each reporting date as to whether there is any indication that previously recognised impairment losses may no longer exist or may have decreased. If such indication exists, the Group estimates the asset's or cash-generating unit's recoverable amount. A previously recognised impairment loss is reversed only if there has been a change in the assumptions used to determine the asset's recoverable amount since the last impairment loss was recognised. The reversal is limited so that the carrying amount of the asset does not exceed its recoverable amount, nor exceed the carrying amount that would have been determined, net of depreciation, had no impairment loss been recognised for the asset in prior years. Such reversal is recognised in the profit or loss.

q) Non-current assets Held for Sale and Discontinued Operations

Non-current assets and any corresponding liabilities held for sale and any directly attributable liabilities are recognized separately from other assets and liabilities in the balance sheet in the line items "Assets held for sale" and "Liabilities associated with assets held for sale" if they can be disposed of in their current condition and if there is sufficient probability of their disposal actually taking place. Discontinued operations are components of an entity that are either held for sale or have already been sold and can be clearly distinguished from other corporate operations, both operationally and for financial reporting purposes. Additionally, the component classified as a discontinued operation must represent a major business line or a specific geographic business segment of the Group. Non-current assets that are held for sale either individually or collectively as part of a disposal group, or that belong to a discontinued operation, are no longer depreciated. They are instead accounted for at the lower of the carrying amount and the fair value less any remaining costs to sell. If this value is less than the carrying amount, an impairment loss is recognized. The income and losses resulting from the measurement of components held for sale as well as the gains and losses arising from the disposal of discontinued operations, are reported separately on the face of the income statement under income/loss from discontinued operations, net, as is the income from the ordinary operating activities of these divisions. Prior-year income statement figures are adjusted accordingly. However, there is no reclassification of prior-year balance sheet line items attributable to discontinued operations.

r) Cash and cash equivalents

Cash and cash equivalents in the Statement of financial position includes cash in hand and at bank and short-term deposits with original maturity period of 3 months or less.

For the purpose of the consolidated cash flow statement, cash and cash equivalents consist of cash in hand and at bank and short-term deposits. Restricted cash represents deposits which are subject to a fixed charge and held as security for specific borrowings and are not included in cash and cash equivalents.

s) Inventories

Inventories are stated at the lower of cost and net realisable value. Costs incurred in bringing each product to its present location and condition is accounted based on weighted average price. Net realisable value is the estimated selling price in the ordinary course of business, less estimated selling expenses.

t) Earnings per share

The earnings considered in ascertaining the Group's earnings per share (EPS) comprise the net profit for the year attributable to ordinary equity holders of the parent. The number of shares used for computing the basic EPS is the weighted average number of shares outstanding during the year. For the purpose of calculating diluted earnings per share the net profit or loss for the period attributable to equity shareholders and the weighted average number of shares outstanding during the period are adjusted for the effects of all dilutive potential equity share.

u) Other provisions and contingent liabilities

Provisions are recognised when present obligations as a result of a past event will probably lead to an outflow of economic resources from the Group and amounts can be estimated reliably. Timing or amount of the outflow may still be uncertain. A present obligation arises from the presence of a legal or constructive obligation that has resulted from past events. Restructuring provisions are recognised only if a detailed formal plan for the restructuring has been developed and implemented, or management has at least announced the plan's main features to those affected by it. Provisions are not recognised for future operating losses.

Provisions are measured at the estimated expenditure required to settle the present obligation, based on the most reliable evidence available at the reporting date, including the risks and uncertainties associated with the present obligation. Where there are a number of similar obligations, the likelihood that an outflow will be required in settlement is determined by considering the class of obligations as a whole. Provisions are discounted to their present values, where the time value of money is material.

Any reimbursement that the Group can be virtually certain to collect from a third party with respect to the obligation is recognised as a separate asset. However, this asset may not exceed the amount of the related provision. All provisions are reviewed at each reporting date and adjusted to reflect the current best estimate.

In those cases where the possible outflow of economic resources as a result of present obligations is considered improbable or remote, no liability is recognised, unless it was assumed in the course of a business combination. In a business combination, contingent liabilities are recognised on the acquisition date when there is a present obligation that arises from past events and the fair value can be measured reliably, even if the outflow of economic resources is not probable. They are subsequently measured at the higher amount of a comparable provision as described above and the amount recognised on the acquisition date, less any amortisation.

v) Share based payments

The Group operates equity-settled share-based remuneration plans for its employees. None of the Group's plans feature any options for a cash settlement.

All goods and services received in exchange for the grant of any share-based payment are measured at their fair values. Where employees are rewarded using share-based payments, the fair values of employees' services is determined indirectly by reference to the fair value of the equity instruments granted. This fair value is appraised at the grant date and excludes the impact of non-market vesting conditions (for example profitability and sales growth targets and performance conditions).

All share-based remuneration is ultimately recognised as an expense in profit or loss with a corresponding credit to 'Other Reserves'.

If vesting periods or other vesting conditions apply, the expense is allocated over the vesting period, based on the best available estimate of the number of share options expected to vest. Non-market vesting conditions are included in assumptions about the number of options that are expected to become exercisable. Estimates are subsequently revised if there is any indication that the number of share options expected to vest differs from previous estimates. Any cumulative adjustment prior to vesting is recognised in the current period. No adjustment is made to any expense recognised in prior periods if share options ultimately exercised are different to that estimated on vesting.

Upon exercise of share options, the proceeds received net of any directly attributable transaction costs up to the nominal value of the shares issued are allocated to share capital with any excess being recorded as share premium.

w) Employee benefits

Gratuity

In accordance with applicable Indian laws, the Group provides for gratuity, a defined benefit retirement plan ("the Gratuity Plan") covering eligible employees. The Gratuity Plan provides a lump-sum payment to vested employees at retirement, death, incapacitation or termination of employment, of an amount based on the respective employee's salary and the tenure of employment.

Liabilities with regard to the gratuity plan are determined by actuarial valuation, performed by an independent actuary, at each Statement of financial position date using the projected unit credit method.

The Group recognises the net obligation of a defined benefit plan in its statement of financial position as an asset or liability, respectively in accordance with IAS 19, Employee benefits. The discount rate is based on the Government securities yield. Actuarial gains and losses arising from experience adjustments and changes in actuarial assumptions are charged or credited to profit or loss in the statement of comprehensive income in the period in which they arise.

x) Business combinations

Business combinations arising from transfers of interests in entities that are under the control of the shareholder that controls the Group are accounted for as if the acquisition had occurred at the beginning of the earliest comparative period presented or, if later, at the date that common control was established using pooling of interest method. The assets and liabilities acquired are recognised at the carrying amounts recognised previously in the Group controlling shareholder's consolidated financial statements. The components of equity of the acquired entities are added to the same components within Group equity. Any excess consideration paid is directly recognised in equity.

y) Segment Reporting

The Group has adopted the "management approach" in identifying the operating segments as outlined in IFRS 8 - Operating segments. Segments are reported in a manner consistent with the internal reporting provided to the chief operating decision maker. The Board of Directors being the chief operating decision maker evaluate the Group's performance and allocates resources based on an analysis of various performance indicators at operating segment level. During the current year 2021 the Group has deconsolidated solar entities and are classified as associates (note 7(b)). Accordingly, during FY 21 there is only one operating segment thermal power. The solar power business is classified as held for sale. There are no geographical segments as all revenues arise from India. All the non current assets are located in India.

6. Significant accounting judgements, estimates and assumptions

The preparation of financial statements in conformity with IFRS requires management to make certain critical accounting estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.

The principal accounting policies adopted by the Group in the consolidated financial statements are as set out above. The application of a number of these policies requires the Group to use a variety of estimation techniques and apply judgment to best reflect the substance of underlying transactions.

The Group has determined that a number of its accounting policies can be considered significant, in terms of the management judgment that has been required to determine the various assumptions underpinning their application in the consolidated financial statements presented which, under different conditions, could lead to material differences in these statements. The actual results may differ from the judgments, estimates and assumptions made by the management and will seldom equal the estimated results.

a. Judgements

The following are significant management judgments in applying the accounting policies of the Group that have the most significant effect on the financial statements.

Assessing control of subsidiaries, associates, joint ventures

During FY21, the Group has reclassified the 31% equity interest in the solar entities from Subsidiaries to Associates due to loss of control. The interest in the solar entities (Avanti Solar Energy Private Limited, Mayfair Renewable Energy (I) Private Limited, Avanti Renewable Energy Private Limited and Brics Renewable Energy Private Limited) are disclosed as assets held for sale.

Non-current assets held for sale and discontinued operations

The Group exercises judgement in whether assets are held for sale. After evaluation of all options, the Company decided that the most efficient way to maximise shareholders' value from solar operations is to dispose of the solar companies and it initiated the process of disposition of the solar companies. Under IFRS 5, such a transaction meets the 'Asset held for sale' when the transaction is considered sufficiently probable and other relevant criteria are met. Management consider that all the conditions under IFRS 5 for classification of the solar business as held for sale have been met as at 31 March 2021 and expects the interest in the solar companies to be sold within the next 12 months.

The investment in the joint venture Padma Shipping Limited and associated advance has been presented as an asset held for sale following the process of sale of the second vessel as mentioned in note 7(a).

Recoverability of deferred tax assets:

The recognition of deferred tax assets requires assessment of future taxable profit (see note 5(h)).

b. Estimates and uncertainties

The key assumptions concerning the future and other key sources of estimation uncertainty at the Statement of financial position date, that have a significant risk of causing material adjustments to the carrying amounts of assets and liabilities within the next financial year are discussed below:

i. Estimation of fair value of financial assets and financial liabilities: While preparing the financial statements the Group makes estimates and assumptions that affect the reported amount of financial assets and financial liabilities.

Trade Receivables

The Group ascertains the expected credit losses (ECL) for all receivables and adequate impairment provision are made. At the end of each reporting period a review of the allowance for impairment of trade receivables is performed. Trade receivables do not contain a significant financing element, and therefore expected credit losses are measured using the simplified approach permitted by IFRS 9, which requires lifetime expected credit losses to be recognised on initial recognition. A provision matrix is utilised to estimate the lifetime expected credit losses based on the age, status and risk of each class of receivable, which is periodically updated to include changes to both forward-looking and historical inputs.

Assets held for sale - Financial assets measured at FVPL

Valuation of Investment in joint venture Padma Shipping is based on estimates and subject to uncertainties (Note 7(a)).

Financial assets measured at FVPL

Management applies valuation techniques to determine the fair value of financial assets measured at FVPL where active market quotes are not available. This requires management to develop estimates and assumptions based on market inputs, using observable data that market participants would use in pricing the asset. Where such data is not observable, management uses its best estimate. Estimated fair values of the asset may vary from the actual prices that would be achieved in an arm's length transaction at the reporting date.

ii. Impairment tests: In assessing impairment, management estimates the recoverable amount of each asset or cash-generating units based on expected future cash flows and use an interest rate for discounting them. Estimation uncertainty relates to assumptions about future operating results including fuel prices, foreign currency exchange rates etc. and the determination of a suitable discount rate;

iii. Useful life of depreciable assets: Management reviews its estimate of the useful lives of depreciable assets at each reporting date, based on the expected utility of the assets.

7. Profit/(Loss) from discontinued operations

Non-current assets held for sale and Profit/(Loss) from discontinued operations consists of:

a) Investment in joint venture Padma Shipping Limited - classified as held for sale

In 2014 the Company entered into a Joint Venture agreement with Noble Chartering Ltd ("Noble"), to secure competitive long term rates for international freight for its imported coal requirements. Under the Arrangement, the company and Noble agreed to jointly purchase and operate two 64,000 MT cargo vessels through a Joint venture company Padma Shipping Ltd, Hong Kong ('Padma').

OPG has invested approximately £3,484,178 in equity and £1,727,418 to date as advance and accordingly the joint venture has been reported using equity method as per the requirements of IFRS 11. During FY2020 the Company recognised an impairment provision of £918,432 resulting in impairment of entire investment of £5,211,596 in joint venture (note 16) on account of the impending dissolution of the JV.

b) Assets held for sale and discontinued operations of solar subsidiaries

During FY19, the results of the operations of solar entities Avanti Solar Energy Private Limited, Mayfair Renewable Energy (I) Private Limited, Avanti Renewable Energy Private Limited and Brics Renewable Energy Private Limited were classified as Assets held for sale. After evaluation of all the options, the Company decided that the most efficient way to maximise shareholders' value from the solar operations is to dispose of the solar entities and the process of disposition of the solar entities was initiated. The process of sale could not be implemented during FY21 due to pandemic Covid-19 and expectation of comparatively better valuation for sale. However, the Management expects the interest in the solar entities to be sold within the next 12 months and continues to locate a buyer.

During FY19, the Company obtained a right to exercise an option to buy additional 30% equity interest in solar companies. Effective from FY20 this right was assigned to a third party and from FY21 the remaining related obligations and the results of the operations of solar companies Aavanti Solar Energy Private Limited, Mayfair Renewable Energy (I) Private Limited, Aavanti Renewable Energy Private Limited and Brics Renewable Energy Private Limited are not consolidated in Group's consolidated financial statements due to loss of control. The Group continues owning a 31% equity interest in the solar companies.

8 Segment Reporting

The Group has adopted the "management approach" in identifying the operating segments as outlined in IFRS 8 - Operating segments. Segments are reported in a manner consistent with the internal reporting provided to the chief operating decision maker. The Board of Directors being the chief operating decision maker evaluate the Group's performance and allocates resources based on an analysis of various performance indicators at operating segment level. During the current year 2021 the Group has deconsolidated the solar entities which are classified as associates (note 7(b)). Accordingly, during FY 21 there is only one operating segment thermal power. The solar power business is classified as held for sale. There are no geographical segments as all revenues arise from India. All the non current assets are located in India.

Revenue on account of sale of power to one customer exceeding 10% of total sales revenue amounts to £28,720,575 (2020: £27,152,241).

9 Costs of inventories and employee benefit expenses included in the consolidated statements of comprehensive income

* includes £31,885 (2020: 21,860) being expenses towards gratuity which is a defined benefit plan (Note 5(w))

13 Tax expense

Tax Reconciliation

Reconciliation between tax expense and the product of accounting profit multiplied by India's domestic tax rate for the years ended 31 March 2021 and 2020 is as follows:

The Company is subject to Isle of Man corporate tax at the standard rate of zero percent. As such, the Company's tax liability is zero. Additionally, the Isle of Man does not levy tax on capital gains. However, considering that the Group's operations are primarily based in India, the effective tax rate of the Group has been computed based on the current tax rates prevailing in India. Further, a substantial portion of the profits of the Group's India operations are exempt from Indian income taxes being profits attributable to generation of power in India. Under the tax holiday the taxpayer can utilize an exemption from income taxes for a period of any ten consecutive years out of a total of fifteen consecutive years from the date of commencement of the operations. However, the entities in India are still liable for Minimum Alternate Tax (MAT) which is calculated on the book profits of the respective entities currently at a rate of 17.47% (31 March 2020: 17.47%).

The Group has carried forward credit in respect of MAT tax liability paid to the extent it is probable that future taxable profit will be available against which such tax credit can be utilised.

Deferred income tax for the Group at 31 March 2021 and 2020 relates to the following:

Movement in temporary differences during the year

In assessing the recoverability of deferred income tax assets, management considers whether it is more likely than not that some portion or all of the deferred income tax assets will be realized. The ultimate realization of deferred income tax assets is dependent upon the generation of future taxable income during the periods in which the temporary differences become deductible. The amount of the deferred income tax assets considered realizable, however, could be reduced in the near term if estimates of future taxable income during the carry forward period are reduced.

Shareholders resident outside the Isle of Man will not suffer any income tax in the Isle of Man on any income distributions to them. Further, dividends are not taxable in India in the hands of the recipient up to 31 March 2021. However, the Group will be subject to a "dividend distribution tax" currently at the rate of 15% to be grossed up (plus applicable surcharge and education cess) on the total amount distributed as dividend.

There is no unrecognised deferred tax assets and liabilities. As at 31 March 2021 and 2020, there was no recognised deferred tax liability for taxes that would be payable on the unremitted earnings of certain of the Group's subsidiaries, as the Group has determined that undistributed profits of its subsidiaries will not be distributed in the foreseeable future.

15 Property, plant and equipment

The property, plant and equipment comprises of:

Property, plant and equipment with a carrying amount of £169,111,804 (2020: £187,757,094) is subject to security restrictions (refer note 22).

16 Other Assets

The financial instruments of £13,253,663 represent investments in mutual funds and their fair value is determined by reference to published data.

17 Trade and other receivables