Annexure XIV Continued… - Edelweiss

Other contractual obligations
The following table sets forth our other contractual obligations as of December 31, 2010:
Within 1
year
1 to 3
years
3 to 5
years
More
than 5
years
December 31, 2010
Total
(` in millions)
Other lease commitments (1) ............................................... 47.05 72.34 66.91 303.69 489.99
Total contractual obligations ......................................... 47.05 72.34 66.91 303.69 489.99
_________
(1) This includes rental of employee accommodations, guest houses, land, offices and railway siding, which do not fall within the
definition of lease commitments under Indian GAAP. In addition, since the rent for future periods is undefined in most of our
agreements, these are estimates based on the current rental rate.
We also operate a defined benefit gratuity plan, whereby every employee who has completed five years or
more of service is entitled to a payment on ceasing to be an employee equivalent to 15 days of his or her most
recent salary for each completed year of service. The plan is unfunded except for in the case of one of our
subsidiaries, in which case it is funded through Life Insurance Corporation of India, and the liabilities of the
defined benefit gratuity plan were ` 59.66 million as of December 31, 2010. For further details, please see
Note 2 (e) to Annexure III to our restated consolidated financial information included on page F-11 of this
Draft Red Herring Prospectus. The above table also excludes contractual obligations related to capital
expenditures, debt obligations and trade and other payables. For a discussion of contractual obligations related
to capital expenditures, please see the section titled "Capital Expenditure" above. For a discussion of debt
obligations, please see the section titled "Contractual Obligations – Debt Obligations" above.
Quantitative and Qualitative Disclosure about Market Risk
We are exposed to market risks associated with commodity prices and interest rates. The commodity price risk
exposure results from market fluctuations in the selling price of electricity and in purchase price and
transportation costs of other commodities, including coal and fuel. We are exposed to various types of market
risks in the normal course of business. For instance, we are exposed to market interest rates and exchange rate
movements on operating expenses. The following discussion and analysis, which constitute "forward-looking
statements," summarize our exposure to various market risks.
Credit Risk
Credit risk arises from cash and cash equivalents, derivative financial instruments and deposits with banks and
financial institutions, as well as exposures to outstanding receivables from customers. All of our businesses
maintain cash balances in order to meet settlement requirements for purchases and sales transactions. Any
surplus funds are generally deposited in the working capital loan accounts to reduce the interest burden on
account of utilization of such limits.
Credit terms extended to our customers vary between zero and 60 days. To minimize the risk of a significant
impact on the business due to a customer defaulting on its commitments, we closely monitor trade receivables.
Bad debt provisions are calculated as a 100.0% provision for all trade receivables which are considered by
management to be at significant risk of default.
In our coal beneficiation and power generation businesses, we currently derive most of our operating revenue
from contracts with state utilities. Payments by such entities are not currently secured by any form of credit
support such as letters of credit, performance guarantees or escrow arrangements. Moreover, we also derive a
significant portion of our revenue from a few major customers, increasing our credit risk further.
Commodity Risk
In respect of our sale of coal business, the price of our raw coal and products sold at negotiated prices, and
consequently our revenues, are subject to the risk of fluctuation in prices of coal and coal products in the
international markets. In respect of our power generation business, once our power projects enter commercial
operation, we become dependent upon our suppliers for our fuel requirements. With respect to those PPAs
where fuel is not a complete pass through expense, we are subject to variations in the price of fuel at rates
fixed by such companies. We are also exposed to fluctuations in the price, availability and quality of the
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