Annexure XIV Continued… - Edelweiss

Sponge iron manufacturing business
Income from our sponge iron manufacturing business refers to income generated through the sale of sponge
iron related goods. As described above, we disposed of our sponge iron business on April 9, 2011.
Sale of equipment
Our income from the sale of equipment is primarily from equipment sold to our associates.
Other income
Our other income consists primarily of interest income on fixed deposits and interest accruing on
intercompany deposits.
Expenditures
The principal components of our expenditures are purchases of coal; direct expenses; personnel cost;
administrative and selling expenses; depreciation and finance cost.
Purchases of coal
Purchase of coal comprises the purchase of coal rejects as well as purchases of raw coal sold in the e-auction
conducted by Coal India Limited and its subsidiaries. It also includes the related loading and transportation
costs at or to our coal beneficiation plants. As per most of our beneficiation contracts, we adjust the
beneficiation charges due from our customers in exchange for the coal rejects generated from the beneficiation
of raw coal on their behalf. These credits are treated as a purchase of coal.
Decrease/(increase) in stock
Decrease/(increase) in stock represents the difference between our stock of coal at the beginning of the period
and our stock of coal at the end of the period.
Direct expenses
In our coal beneficiation, power generation and sponge iron businesses, direct expenses primarily consist of
transportation and loading expenses, expenses related to the purchase of power and fuel, raw materials,
chemicals and labour and the repair and maintenance of our plants and stores.
Personnel cost
Personnel cost refers to costs related to salaries, wages and bonuses to our employees, our contributions to
provident and other funds and staff welfare expenses.
Administrative and selling expenses
Administrative and selling expenses relate to expenses incurred in connection with our income generating
operations, such as land leases, legal and professional fees, travelling and conveyance charges, deductions
related to the quality/quantity of our products, handling charges, provisions for doubtful advances and bad
debts written off.
Depreciation
Depreciation consists of depreciation on fixed assets, assets used for coal beneficiation and the manufacturing
of equipment, assets used for power generation and sponge iron production and amortization related to
leasehold land leases. We book depreciation in accordance with the Companies Act. The rates derived from
these depreciation schedules may be, on average, higher than the depreciation rates provided by electricity
regulatory commissions under tariff regulations, which set forth the amounts that we are allowed to recover
under applicable tariffs on certain projects. This increase in non-cash depreciation charges may have an
adverse impact on our future profits.
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