Annexure XIV Continued… - Edelweiss

Availability and price of raw coal
Under the Colliery Control Order of 1945 and the Essential Commodities Act, 1955, as amended, the price of
raw coal in India was regulated by the Government of India. Beginning in March 1996, the Government of
India gradually deregulated, in phases, the price of various types and grades of raw coal. The pricing of raw
coal in India was completely deregulated pursuant to the Colliery Control Order, 2000, with effect from
January 1, 2000, subsequent to which vendors, including Coal India, were entitled to determine the price of
their raw coal. Our revenues depend on our ability to obtain raw coal, the price at which we acquire it and the
price at which we are able to sell it. The price of raw coal in India has increased in recent years, but the price at
which we acquire raw coal has increased at a faster rate than the price at which we are able to sell it, for
various reasons. Any further increase in this differential due to, among other reasons, the supply of domestic
and foreign raw coal, the demand for electricity and the price and availability of alternative fuels for electricity
generation could adversely affect our revenues and our ability to generate cash flows.
Availability, quality and price of fuel supply
The ability to source quality fuel at desirable prices, in light of electricity tariffs, is one of the key components
in the success of our power generation business. Our operational power project is fuelled by reprocessed coal
rejects generated by our coal beneficiation facility located in Chakabura, and we expect that our projects under
construction, implementation and development will use blended coal and raw coal. We have received domestic
coal linkage for our Raigarh Power Project and have submitted applications in respect of our other six thermal
power projects under construction, implementation or development. We also submitted an application for coal
linkage, which has not yet been allocated, for our existing operational power plant at Chakabura. The approval
and receipt of such linkages is subject to numerous regulations. We may also be unable to obtain adequate coal
linkages to meet our fuel requirements or may not receive the amount of coal to which we are entitled under
our coal linkages. If we are unable to obtain sufficient fuel through our coal beneficiation operations or coal
linkages, we would be required to meet any deficits with coal rejects and/or coal purchased in the open market,
which may cost more. The cost of coal rejects and coal that we source may also be affected by increased
shipping costs and may adversely affect our business and results of operations. For further details of our fuel
supply arrangements, please see the section titled "Our Business" on page 136 of this Draft Red Herring
Prospectus.
Acquisitions of Spectrum Coal and Global Coal
In addition to organic expansion, we have grown by acquiring companies in our industry. In July and
November 2008, we acquired a total of 27.00% of the outstanding shares of Spectrum Coal, which was
majority-owned at the time by investment companies of our Promoters. On March 30, 2009, we acquired the
remaining outstanding shares of Spectrum Coal, except for a de minimis number which were held by six
shareholders of our Company in their personal capacities and which we acquired in June 2010. The
consideration for the acquisitions in 2008 was ` 725.59 million, which we financed with our cash flows, and
for the acquisition in March 2009 was ` 1,241.75 million, which we financed with an issuance of share capital
of our Company. Spectrum Coal has two coal beneficiation plants, one in Orissa, and one in Chhattisgarh.
Also, on September 4, 2009, we acquired a 35.61% equity interest in Global Coal. Global Coal has two coal
beneficiation plants in Orissa and two in Andhra Pradesh.
Investments in Spectrum Power and Maruti Clean Coal and Power Limited
We acquired a combined direct and indirect equity interest of 34.93% in Spectrum Power in Fiscal 2007,
Fiscal 2010 and Fiscal 2011. Also, in Fiscal 2011, we acquired convertible instruments through which we have
the right to convert and own up to 45.00% of the shares, on a fully diluted basis, of Maruti Clean Coal and
Power Limited. The financial statements of Spectrum Power have not been included in our restated
consolidated financial information for the periods under review because Spectrum Power ceased to be an
indirect subsidiary of our joint venture, Cellcap Securities Limited, BVI. For further details, please see
Annexure III to our restated consolidated financial information included on page F-9 of this Draft Red Herring
Prospectus.
Both Spectrum Power and Maruti Clean Coal and Power Limited operate in the power generation business (the
latter also operates in the coal beneficiation business). As a result, their net profits are significantly affected by
factors similar to those described herein which affect us. In addition, both Spectrum Power and Maruti Clean
Coal and Power Limited have expansion plans which may require us to make further investments to the extent
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