Análisis de Requisitos

The overall power sales in FY 2015-16 were at 14,673 MUs (PY - 14,155 MUs) with breakup as under:

Category of Consumers FY 2015-16 FY 2014-15 Growth

MUs* % MUs* % % Residential 4,170 28% 3,898 28% 6.98% Commercial 2,472 17% 2,408 17% 2.65% LTP / LTMD 4,607 32% 4,656 33% (1.05%) HT 3,062 21% 3,022 21% 1.32% Others 362 2% 171 1% 112.41% Total 14,673 100% 14,155 100% 3.66%

* Including Dahej SEZ Distribution

Increased sales at Ahmedabad, Surat and Agra led to growth in residential category.

DGEN & UNOSUGEN Plants recovered partial fixed cost due to availability of gas under Government’s Scheme for utilisation of Gas based power generation capacity.

Mana

g

ement Discussion and

Anal

ysis

Pursuant to the tariff order issued by Hon’ble CERC in October 2015, under the CERC Tariff Regulations 2014-19 for SUGEN Plant, there was incremental recovery of approved fixed cost for FY 2015-16 including the differential fixed cost for FY 2014-15.

During the year, Ahmedabad and Surat Distribution showed improved performance mainly on account of full recovery of FPPPA for FY 2015-16 and recovery towards arrears of unrecovered FPPPA for FY 2014-15.

The overall performance in Agra improved due to significant reduction in AT&C loss during the year, however, in Bhiwandi, due to strike and recessionary trend in Powerloom Industry, the AT&C loss increased during the year. The other operating income in FY 2015-16, increased, inter-alia, on account of reversal of earlier years’ provisions due to change in the basis for charging O&M expenses under the supply and service agreements for Company’s Gas based Plants in the context of change in CERC Regulations emphasizing PLF as against PAF for performance incentive. There has been variation in the results between different quarters of the year, inter-alia, due to seasonality involved in business, recoveries and aforesaid reversals consequent to the regulatory orders and the introduction of Government’s scheme for providing RLNG and PSDF support from June 2015 onwards.

5. RISKS And COnCeRnS

Significant risks and concerns of the Company are enumerated below:

• Although Government has introduced the Scheme for utilisation of Gas based power generation capacity as an interim measure, uncertainty over the improvement in domestic gas availability continues to remain, resulting into lower capacity utilisation. Lower priority to power sector in the proposed Gas Allocation Policy also poses risk to the Company.

• The Company is facing problems of inferior quality of coal and shortages in coal receipt from South Eastern Coalfields Limited. Also, partial dependency on imported coal exposes the Company to price volatility and sourcing risks.

• MoEFCC has made the emission norms for all thermal power plants significantly stringent which may affect the operations of AMGEN Plant. Timeline to comply with new norms is December 2017. The Company is exploring various options to ensure compliance within stipulated timeline.

• The Company operates in a regulatory environment and is subject to the risks of regulatory interventions, introduction of new laws and regulations including changes in competitive framework. Also, in particular, the distribution segment lacks due recognition or incentives for its efficient operations in the current regulatory framework. Although the Regulator provides mechanism for true-up and recovery of increase in fuel and power purchase costs, the full recovery of such costs is getting delayed. Further, non-pass through of REC costs (to fulfil RPO) through the FPPPA mechanism continues to burden the distribution segment. All these issues lead to postponement of recovery of said costs, resulting into deferred recovery and accrual of carrying cost.

• Further, the proposed segregation of carriage and content in the Electricity Amendment Bill, 2014, would bring about a substantial change in the way the distribution business is conducted, though not impacting the Return on Equity on the investments in the distribution infrastructure.

• Non-renewal of the Bhiwandi Distribution Franchisee Agreement, expiring in January 2017, may impact the performance of the Company.

• Besides being affected by the sector specific risks, the Cable business of the Company also faces the risk of dependence on a very narrow product range.

• Macro-economic risks such as growth slowdown & uncertainty in demand may impact the performance of the Company.

• Public Policy interventions could impact the traditional ways of doing business and may lead to changes in supply & demand sources.

• Non-availability of skilled manpower may result in disruptions in business operations or incorrect / delayed decision making.

6. InTeRnAL COnTROL SYSTeM

The Company has an adequate system of Internal Controls aimed at achieving efficiency in operations, optimum utilisation of resources and compliance with all applicable laws and regulations. Independent firms of Chartered Accountants are appointed as Auditors for conduct of the Internal Audit function. The observations and recommendations following such audit, for improvement of the business operations and their implementation are reviewed by the Audit and Risk Management Committee.

7. CAUTIOnARY STATeMenT

Certain statements in the Management Discussion and Analysis, describing the Company’s analysis and interpretations are forward-looking. Actual results may vary from those expressed or implied. The Company assumes no responsibility to publicly amend, modify or revise any such statements on the basis of subsequent developments, information or events.

Effective Corporate Governance practices constitute the strong foundation on which successful commercial enterprises are built to last.

Adaptation to changing times is the key to corporate growth and long term survival. Continuous improvement is necessary in the governance practices as well. Better governance practices enable companies to introduce more effective internal controls suitable to the changing nature of business operations, improve performance and also provide an opportunity to increase stakeholders understanding of the key activities and policies of the organisation. Indian corporates have adopted better governance practices and are opting for increased transparency and disclosures. According to the report issued by Asian Corporate Governance Association (ACGA), India has been ranked in the seventh place in terms of Corporate Governance score in Asian Markets in view of a landmark reforms in the Companies Act. Endeavour on the part of the government to improve the same is discernible. This has been augmented by regulatory authorities introducing and improving governance practices for Indian corporates over the last decade.

Securities and Exchange Board of India (“SEBI”) in terms of powers conferred under Securities and Exchange Board of India Act, 1992, notified Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015 (“Listing Regulations”) on 2nd _{September, 2015, whereby it tries to align the erstwhile Listing Agreement}

with the Companies Act, 2013 (“the Act”) and consolidate the scattered requirements under the Listing Agreement for different securities under single piece of regulation. Said Regulations are applicable to any entity, accessing the stock exchange, for listing equity shares (on main board, SME exchange, institutional trading platforms), debt securities, preference shares, depository receipts, securitized debt instruments, mutual fund units and other securities as may be specified by SEBI. This regulation has come into effect from 1st _{day of December, 2015. The Regulation 23(4) related to material related party}

transactions and Regulation 31A related to Disclosure of Class of shareholders and Conditions for Reclassification have become effective with immediate effect on 2nd _{September, 2015.}

These new requirements rest on a principle based framework and is a quantum leap from more of a rule based framework that existed earlier. This will enable Corporate Governance requirements being complied with not just in letter but also in spirit.

The disclosure requirements of Corporate Governance under Listing Regulations are given below:

1. COMPAnY’S PHILOSOPHY On COde OF GOVeRnAnCe

Torrent has built its Corporate Governance practices on three inviolable principles of TRANSPARENCY, INTEGRITY (comprehensive all round disclosure + financial controls) and ACCOUNTABILITY. The Company’s philosophy is to develop the desired framework and institutionalise the spirit it entails.

The Company is in full compliance with the Corporate Governance norms as stipulated in the Listing Regulations. The Company believes that while implementation of the minimum framework is a prerequisite, superior governance practices are vital for growing a sustainable and successful business.

This report sets out the governance systems and processes of the Company, as set out in the Listing Regulations for the financial year ended 31st _{March, 2016.}