Annexure XIV Continued… - Edelweiss

Most of the coal we beneficiate is transported by road from the mine to our facilities and by rail from our
facilities to our customers. Our sales volumes have historically been constrained by inadequate transportation
capacities, including the non-availability of adequate rail infrastructure. The transportation of coal we have
beneficiated from our facilities to our customers has also been constrained by inadequate coal handling and
loading infrastructure at some of our facilities and by the fact that none of our facilities has rapid loading
systems. Constraints on our ability to transport coal resulting from inadequate coal handling and loading
infrastructure and coal transportation capacities are generally exacerbated during the third and fourth quarters
of our fiscal year. For further details, please see the section titled "Risk Factors – Our operations are sensitive
to seasonal changes" on page 36 of this Draft Red Herring Prospectus.
Customer profile and interest in beneficiated coal
Most of our customers are public sector power companies whose willingness to adopt new technology or
products, such as beneficiated coal, can require significant time and investment. Although regulations
requiring power companies to use coal with an ash content of less than 34% if they are located more than
1,000 kilometres from the mine from which they acquired the coal have increased demand for beneficiated
coal, our ongoing attempts to educate power companies as to the advantages of using beneficiated coal as
opposed to raw coal have met with limited success.
Development status of our power projects and anticipated capital expenditures
We currently have one operational thermal power plant in Chhattisgarh with a designed capacity of 30 MW
and a wind power facility with a designed capacity of 15 MW in Maharashtra. Further, we have two power
projects with an aggregate designed capacity of 320 MW in the construction phase which we expect to
commission in Fiscal 2012. We also have four projects under implementation with an aggregate designed
capacity of 1,880 MW (one of the plants in the implementation phase is owned in part by third parties;
consequently, our proportional capacity is expected to be 1,586 MW) which we expect to commission at
various points before the end of Fiscal 2015 as well as one project under development with an aggregate
designed capacity of 1,200 MW which we expect to commission by March 2016. For further details of our
projects under construction, implementation and development, please see the section titled "Our Business −
Power Generation Business − Power Projects under Construction, Implementation and Development" on page
157 of this Draft Red Herring Prospectus. As a consequence, we expect that an increasing percentage of our
revenue will be from our power projects beginning in Fiscal 2012. Our plans to expand our power plant
capacity will have a significant impact on our expected capital expenditures in the near to medium term. Our
budgeted capital expenditures for Fiscal 2012 are ` 25,551.54 million, and we anticipate capital expenditures
of ` 43,048.90 million in Fiscal 2013, primarily for the expansion of our power generation capacities, as well
as for upgrading and expanding our coal beneficiation and transportation capacities. The costs associated with
these expansion plans and the revenue we expect to derive from them could have a significant impact on our
future financial condition and results of operations. For further details of our capital expenditure plans and
expansion projects, please see the section titled "- Capital Expenditure" on page 302 of this Draft Red Herring
Prospectus.
Availability of cost effective funding
We have relied on cash from our operations, capital contributions from our shareholders and debt to fund the
expansion of our business. As of March 31, 2011, we have total fund-based indebtedness of ` 16,538.44
million. For further details, please see the sections titled "Business – Power Generation Business – Power
Projects under Construction, Implementation and Development" and "Financial Indebtedness" on pages 157
and 270 of this Draft Red Herring Prospectus, respectively. Our plans for the development, implementation
and construction of our power projects will require substantial capital expenditures, which we expect to fund in
part through the Net Proceeds of the Issue (in the cases of Phase II of the Chakabura Power Plant and Unit 1 of
the Sidhi Power Project), operating cash flows and additional equity financing and debt. In the event that we
obtain equity financing for any of our proposed projects, our economic interest in such project would be
proportionally reduced. We currently estimate that in order to complete our seven proposed power projects, we
will be required to incur total capital expenditures of approximately ` 166,655.60 million, of which we have
obtained sanctions for ` 72,075.91 million. We have deployed ` 12,574.40 million towards these capital
expenditures as of March 31, 2011. Our debt service costs as well as our overall cost of funding depend on
many external factors, including developments in the regional credit markets and, in particular, interest rate
movements and the existence of adequate liquidity in the debt markets. We believe that going forward the
availability of cost effective funding will be crucial and the non-availability of such funding at favorable terms
could affect our business, financial condition and results of operations.
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