Contents

Page

Board of Directors 2

Notice 3

From the Chairman's desk 5

Directors' Report 6 Management Discussion & Analysis 8 Report on Corporate Governance 14 Other Particulars 26 Auditors' Report 27

Balance Sheet 30

Profit and Loss Account 31

Schedules to the Accounts 32

Cash Flow Statement 48

Ten Years at a glance 49

Major Statistics 50

Balance Sheet Abstract 51

List of CESC establishments 52

Cover

The newly set up 220/132/33kV substation at Nonadanga on the Eastern Metropolitan Bypass, . The substation will receive power from the 250 MW Unit III scheduled to be commissioned later this year.

1 Board of Directors Rama Prasad Goenka, Chairman Sanjiv Goenka, Vice-Chairman Pradip Kumar Khaitan Brij Mohan Khaitan Bhagwati Prasad Bajoria Birenjit Kumar Paul (Nominee of Govt. of ) Ajay Saraf (Nominee of ICICI Bank) Srinivasan Kothandaraman Vaidyanathan Srinivasan (Nominee of IDBI) Sumantra Banerjee, Managing Director

Vice President & Company Secretary Subhasis Mitra

Auditors Lovelock & Lewes

Solicitors Khaitan & Co. Sandersons & Morgans

Registered Office CESC House Chowringhee Square Kolkata 700 001 Telephone : (033) 2225 6040 Facsimile : (033) 2225 5155 E-mail : [email protected] Website : www.cesc.co.in

Bankers ABN Amro Bank N.V. Allahabad Bank Andhra Bank Limited HDFC Bank Limited ICICI Bank Limited Industrial Development Bank of India Limited Standard Chartered Bank UCO Bank United Bank of India Limited

2 Notice to Members

Notice is hereby given that the Thirty-first Annual General the consortium of Banks and Standard Chartered Bank Meeting of the Members of CESC Limited will be held at CITY (SCB) for its incremental share of Rs. 10 crore in the CENTRE, Royal Bengal Room, DC Block, Sector-1, Salt Lake, said working capital facilities Kolkata – 700 064, on Friday, 24 July, 2009 at 10.30 A.M. for the to secure the said term loan and working capital facilities following purposes : together with interests, charges, expenses, front-end fees 1. To receive and consider the Profit & Loss Account for the year and all other monies payable by the Company to PSB, PNB, ended 31 March 2009, the Balance Sheet as at that date and AXIS, YBL and SCB (collectively referred to as “the said the Reports of the Directors and the Auditors. Lenders”) in terms of their respective Letters of Sanction, Loan Agreements, Facility Agreements, Hypothecation 2. To declare Dividend. Agreements, Joint Consortium Agreements or any other 3. To appoint a Director in place of Mr. B. M. Khaitan who Agreement or any amendment thereto entered / to be entered retires by rotation and, being eligible, offers himself for into by the Company with all or any of the said Lenders so reappointment. that the mortgage and / or charge may be created by the 4. To appoint a Director in place of Mr. B. K. Paul who retires by Company in their favour, either singly or collectively, in rotation and, being eligible, offers himself for reappointment. such form and subject to such prior charges or with such pari passu or subservient ranking of charges as may be 5. To appoint Auditors and to fix their remuneration and for the decided by the Board in consultation with one or more of the purpose to consider and, if thought fit, to pass with or without said Lenders. modification, the following Ordinary Resolution: AND FURTHER THAT the Board be and is hereby authorised “RESOLVED THAT the retiring Auditors, Messrs. Lovelock to finalise and execute with all or any of the said Lenders all & Lewes, be and they are hereby reappointed Auditors of such deeds and documents for creating the aforesaid mortgage the Company to hold office from the conclusion of this and / or charge and to do all such acts, deeds and things as Annual General Meeting until the conclusion of the next may be deemed necessary for giving effect to the aforesaid Annual General Meeting of the Company at a remuneration Resolution.” of Rs. 26,00,000/- payable in two equal instalments plus service tax and reimbursement of out-of-pocket The Register of Members of the Company at Kolkata will expenses”. remain closed from 11 July 2009 to 24 July 2009, both days inclusive. SPECIAL BUSINESS To consider and, if thought fit, to pass, with or without modifications, the following Resolution : Registered Office : By Order of the Board 6. AS AN ORDINARY RESOLUTION CESC House “RESOLVED THAT the consent of the Company be and is Chowringhee Square hereby accorded in terms of Section 293(1)(a) and other Kolkata – 700 001 Subhasis Mitra applicable provisions, if any, of the Companies Act, 1956 to 22nd May, 2009 Vice President & Company Secretary mortgaging and / or charging by the Board of Directors of the Company (“the Board”) of all the immovable and movable properties of the Company, wheresoever situate, present and NOTES : future, in favour of : 1. A member entitled to attend and vote at the meeting is entitled to appoint a Proxy to attend and vote in his stead. A Proxy need a) Punjab and Sind Bank (PSB) for its term loan of Rs. 42 not be a Member of the Company. Proxies, in order to be crore; and effective, must be received by the Company not less than 48 (b) Punjab National Bank (PNB), AXIS Bank Limited (AXIS), hours before the time for holding the Meeting.

YES Bank Limited (YBL) for their respective shares of 2. An Explanatory Statement pursuant to Section 173(2) of the Rs. 25 crore, Rs. 15 crore and Rs. 15 crore in the Companies Act, 1956 in respect of the Special Business under working capital facilities extended to the Company by item 6 is annexed hereto.

3 3. If the dividend as recommended by the Board of Directors is EXPLANATORY STATEMENT PURSUANT TO SECTION 173(2) declared at the Meeting, it will be payable to those shareholders OF THE COMPANIES ACT, 1956 IN RESPECT OF ITEM OF whose names appear on the Company’s Register of Members, SPECIAL BUSINESS SET OUT IN THE NOTICE CONVENING or, who are notified as beneficiaries by the Depositories viz. THE THIRTY-FIRST ANNUAL GENERAL MEETING OF THE National Securities Depository Limited and Central Depository COMPANY TO BE HELD ON 24 JULY 2009 Services (India) Limited at the close of business on 10 July 2009. Item No. 6

4. Members holding shares in physical form may intimate the The Company has availed of financial assistance of Rs. 42 crore Company necessary particulars for ECS credit of the dividend from Punjab and Sind Bank (PSB) in order to refinance some of the directly to their bank accounts wherever ECS facility is available, costlier loans of the Company. or, for printing of their bank account details on the dividend In addition, Punjab National Bank (PNB), AXIS Bank Limited (AXIS), warrants to prevent possibilities of fraud in encashing the YES Bank Limited (YBL) have sanctioned working capital facilities warrants. For this purpose, members are requested to fill in the of Rs. 25 crore, Rs. 15 crore and Rs. 15 crore respectively while form appended to the Attendance Slip and send the filled in Standard Chartered Bank (SCB) has increased its working capital Form to the Secretarial Department of the Company latest by exposure to the Company by Rs. 10 crore (PNB, AXIS, YBL and SCB 10 July 2009. In respect of the shareholdings in demat form, are hereinafter collectively referred to as ‘the said working capital any change in the Bank particulars should be intimated to the bankers’). Depository Participants immediately so that the changed The above loan and the above working capital facilities, in terms of particulars may be used for dividend payment. their respective terms of sanctions, are required to be secured by mortgage / charge over the Company’s immovable and movable PARTICULARS OF DIRECTORS WHO ARE PROPOSED TO BE properties in the form and manner required by PSB / working capital REAPPOINTED AT THE MEETING ARE GIVEN BELOW: bankers. MR. B. M. KHAITAN is a renowned industrialist having interest in The Ordinary Resolution set out under Item No. 6 of the Notice is for tea, batteries and engineering industries. Mr Khaitan has great obtaining the approval of the Members in terms of the provisions of contributions to the tea industry with which he has been associated Section 293(1)(a) of the Companies Act, 1956 to enable the Company for over five decades. He is the Chairman of Williamson Magor & to create the aforesaid mortgage and / or charge. The Board of Company Limited and Eveready Industries India Limited. He is a Directors of the Company recommends that the Resolution be Director of Mcleod Russel India Limited, Babcock Borsig Limited, passed. Jayshree Tea & Industries Limited (also Chairman of Remuneration Committee) and Phillips Carbon Black Limited. He is on the None of the Directors is concerned or interested in the Board of Directors of CESC since 1994 and is a member of its Resolution. Audit Committee. Mr. Khaitan does not hold any share in the Company.

MR B. K PAUL is Nominee Director of the State Government on the Board of Directors of CESC since 2002. A graduate in Electrical Registered Office : By Order of the Board Engineering, Mr. Paul retired as the Managing Director of The CESC House West Bengal Power Development Corporation Limited (WBPDCL) Chowringhee Square and is on the Board of Directors of WBPDCL and Durgapur Projects Kolkata – 700 001 Subhasis Mitra Limited. 22nd May, 2009 Vice President & Company Secretary

4 From the Chairman's desk

Dear Shareholder, ❐ The Company is also rapidly progressing towards completing its 85 km long transmission line from Budge Budge. 2008-09 was a tough year for the world economy. The first half witnessed the highest commodity prices over the previous century; CESC’s generating stations are located mainly within the metropolitan the second half saw the biggest financial meltdown since the Great area of Kolkata. With environmental concerns taking centre stage in Depression. The Indian economy was also affected; liquidity dried thermal power generation, it is difficult to add capacity. We are, up and industrial growth fell. The GDP shrank from 9.1% in ’08 to therefore, looking at installing power plants outside Kolkata – in 6.8% in ’09. West Bengal, Bihar and Jharkhand – through our associates and subsidiaries. We are also looking at ways and means to generate In this difficult situation, your Company has increased both topline ‘cleaner’ and more environmentally friendly thermal power for our and profitability. CESC’s sales revenue for ’09 grew by 9% to Rs. consumers. 3,031 crore. Earnings before depreciation and taxation (EBDT) grew by nearly 12% to Rs. 640 crore and profit after taxes (PAT) increased Although the second half of 2008-09 was marked by a lower rate of by over 15% to reach Rs. 410 crore. growth, I see the downturn playing out by 2009, and the emergence of stronger growth in 2010. Therefore, I see a greater demand for Let me share some highlights with you. power in the near future. I am confident that your Company will ❐ Budge Budge and Southern, two of CESC’s three pulverised achieve healthy growth in the following years and generate greater fuel plants, are among the country’s top ten power plants in shareholder value. terms of plant efficiency. Let me thank all employees and associates for working so hard ❐ CESC is one of the very few power utilities around the world during the year and showing their unwavering commitment to the that has earned Clean Development Mechanism (CDM) credits. Company and to you, dear shareholders, for your support.

❐ New Cossipore, a sixty-year old generating station, still CESC and Kolkata have grown together for the last 110 years; and generates 445 MU of power during the ‘peak demand’ period I am sure that we will grow together in the future as well. – thanks to meticulous and innovative maintenance practices.

❐ Budge Budge, Southern and New Cossipore have been OHSAS 18001 certified. The three pulverised fuel plants generate zero water effluents – which has been recognised by the West Bengal Pollution Control Board.

❐ The new 250 MW third unit at Budge Budge is fast nearing completion; with this, the Company hopes to generate additional power for the consumer and reduce its dependence on outside sources.

❐ CESC has set up its first 220 kV / 132 kV substation; to optimise operational flexibility, it will be upgrading all its substations to 220 kV over a period of time. 22nd May, 2009 Dr. R P Goenka

5 Directors’ Report

The Directors have pleasure in presenting the Annual Report and Subsidiaries Audited Accounts of CESC Limited for the year ended 31 March CESC has six subsidiaries, namely, Spencer’s Retail Limited and its 2009. two subsidiaries (Au Bon Pain Cafe India Limited and Music World Financial Results Retail Limited); CESC Properties Limited and its subsidiary Metromark (Rs. in Crores) Green Commodities Private Limited and Haldia Energy Limited. The 2008-2009 2007-2008 details of operations of these subsidiaries are given in the section Earnings from Sale of Electricity 3,031.32 2,774.97 titled ‘Subsidiaries’ in the Management Discussion & Analysis. Other Income 168.27 155.37 In accordance with the exemption under Section 212 (8) of the Total Income 3,199.59 2,930.34 Companies Act, 1956 (‘the Act’), the accounts of its above subsidiaries for the year 2008-09 are not attached. However, the said annual Profit before Depreciation & Taxation 639.77 571.36 accounts will be made available to investors seeking such information. Depreciation (174.90) (168.45) Copies of annual accounts of the above subsidiary companies will Taxation (55.18) (47.55) also be kept for inspection in the Registered Office of the Company Profit before transfer to Reserves 409.69 355.36 and of the subsidiary companies also. The Company publishes Profit brought forward from previous year 135.14 52.02 Consolidated Financial Statements of the Company and its Transfers subsidiaries duly audited by Messrs. Lovelock & Lewes, Auditors, Reserve for unforeseen exigencies (15.58) (12.89) prepared in compliance with the applicable Accounting Standards Debenture Redemption Reserve 5.13 (0.88) and the Listing Agreements with the Stock Exchanges. General Reserve (350.00) (200.00) Projects Proposed Dividend @ Rs. 4 per In order to augment the availability of power in its licensed area, Equity Share & tax thereon (58.47) (58.47) CESC is putting up a 250 MW unit (the third unit) at its Budge Budge Leaving a balance carried forward 125.91 135.14 generating station. The project is at an advanced stage of completion. The Company is also implementing a project that will enable it to bring power from the new third unit to its licensed area. The scope Performance Overview of this project involves erecting 85 kilometres of 220 kV double During the year under review, the Company’s earnings from sale of circuit overhead lines and some associated work. Though the electricity increased by 9.2% over last year to reach Rs. 3,031.3 Company faced some hurdles mainly involving Right of Way, your crore –This is the first time that CESC earnings have crossed the Directors are confident that the Company shall be able to complete Rs. 3,000 crore mark - the overall increase in total income was also this project at the earliest. 9.2% (from Rs. 2,930.3 crore in 2007-08 to Rs. 3,199.6 crore in Awards 2008-09). Profit before depreciation and taxation (PBDT) reflected During the year, your Company’s Budge Budge Generating Station a year-on-year increase of 12%. After providing for depreciation of won the Green Tech Foundation ‘Environment Excellence Gold Rs. 174.9 crore and taxation of Rs. 55.2 crore, the profit after taxes Award’. (PAT) for 2008-09 stands at Rs. 409.7 crore, which reflects a 15.3% increase over the PAT figure of the previous year amounting Directors Rs. 355.4 crore. In terms of provisions of Section 256, read with Section 255 of A detailed review of operations for the year ended 31 March 2009 is the Act and Article 102 of the Articles of Association of the Company, given in the Management Discussion & Analysis (Annexure ‘A’), Mr. B. M. Khaitan and Mr. B. K. Paul, Directors, retire by rotation at which forms a part of this Report. the forthcoming Annual General Meeting and, being eligible, offer themselves for re-appointment. The necessary resolutions for Dividend obtaining approval of the Members have been incorporated in the The Board recommends payment of equity dividend for the year notice of the forthcoming Annual General Meeting. ended 31 March 2009 at the rate of Rs. 4 per share on the paid-up equity share capital as on that date. The dividend is proposed to be Listings paid to those shareholders whose names appear in the Register of The equity shares of your Company continue to be listed at the Members of the Company, or appear as beneficial owners as per (BSE), the National Stock Exchange particulars furnished by the Depositories at the close of business on (NSE), the (CSE) and the London Stock 10 July 2009. No tax on the said dividend will be payable by the Exchange. shareholders - as required, the Company will pay appropriate tax The Company has paid the requisite listing fee to the Stock Exchanges thereon. up to the financial year 2009-10.

6 Directors’ Responsibility Statement the year under review. Pursuant to Section 217(2AA) of the Act your Directors hereby state Conservation of Energy, Research & Development, Technology and confirm that : Absorption, Foreign Exchange Earnings and Outgo i) in the preparation of annual accounts for the financial year The information relating to conservation of energy, research & ended 31 March 2009, the applicable accounting standards development, technology absorption and foreign exchange earnings have been followed along with proper explanation relating to and outgo, as required under Section 217(1)(e) of the Act, read with material departures; the Companies (Disclosure of Particulars in the Report of Board of ii) appropriate accounting policies have been selected and applied Directors) Rules, 1988 is given in Annexure ‘C’, forming part of this consistently (except for a change in the treatment of voluntary Report. retirement scheme cost, the impact of which is not material) Particulars of Employees and judgments and estimates have been made that are The information as required in accordance with Section 217(2A) of reasonable and prudent so as to give a true and fair view of the the Act, read with the Companies (Particulars of Employees) Rules, state of affairs of the Company as at 31 March 2009 and of the 1975, as amended, is set out in an annexure to this Report. profit for the period from 1 April 2008 to 31 March 2009; However, as per the provisions of Section 219(b) (iv) of the Act, the iii) proper and sufficient care has been taken for the maintenance Report and the Accounts are being sent to all the Shareholders of of adequate accounting records in accordance with the the Company excluding the aforesaid information. Any shareholder provisions of the Act for safeguarding the assets of the interested in obtaining such information may write to the Company Company and for preventing and detecting fraud and other Secretary at the Registered Office of the Company. The said irregularities; information is also available for inspection at the Registered Office during working hours up to the date of the Annual General Meeting. iv) the annual accounts for the financial year ended 31 March 2009 have been prepared on a going concern basis. Industrial Relations During the year under review, industrial relations in your Company Corporate Governance continued to be cordial. A detailed section on the Company’s A separate Report on Corporate Governance (Annexure ‘B’), along with General Shareholders Information, as prescribed under the Human Resource initiatives is attached in the Management Discussion & Analysis. Listing Agreement with the Stock Exchanges, are annexed as a part of this Report along with the Auditor’s Certificate. Acknowledgement The Board wishes to place on record its sincere appreciation for Fixed Deposits the continued assistance and support extended to your Company by The Company has not accepted any deposits within the meaning of its consumers, banks, vendors, Government authorities and Section 58A of the Act and, as such, no amount of principal or employees. The Directors would also like to acknowledge with interest was outstanding as on the date of the Balance Sheet. 902 gratitude your encouragement and support during the year. deposits aggregating to Rs. 1.31 crore remained unclaimed as on 31 March 2009. Auditors Messrs. Lovelock & Lewes, Chartered Accountants, Statutory Auditors of the Company hold office till the conclusion of the forthcoming Annual General Meeting and being eligible, offer themselves for re-appointment. The Company has received a letter from the Statutory Auditors to the effect that their re-appointment, if made at the forthcoming Annual General Meeting, would be within On behalf of the Board of Directors the limits prescribed under Section 224 (1B) of the Act. Cost Audit Messrs. Shome & Banerjee, Cost Accountants, were reappointed to R.P. Goenka conduct the audit of the cost accounting records of the Company for Kolkata, 22nd May, 2009 Chairman

7 MANAGEMENT DISCUSSION AND ANALYSIS (Annexure ‘A’ to Directors’ Report )

ECONOMIC OVERVIEW State Regulators. State Electricity Boards have been disaggregated The World Energy Outlook into generating companies, transmission line operators and Global primary energy needs are projected to grow at 1.6% per distribution licensees. Traders in electricity who envisage a pan annum on an average between 2006 and 2030 – with the annual India Operation need license to do so from the Central Regulator. demand growing to 17 billion tonnes of oil equivalent. Although Intra-state trading in electricity, however, is within the purview of the energy demand has slowed down during the past few months due to State Regulator. the global recessionary trends and high energy prices that were Generation prevalent till the middle of calendar 2008, China and India are still the In 2008-09, India’s total installed generation capacity was nearly primary drivers of global energy needs, accounting for over half the 148,000 MW, of which an overwhelming 85% was generated by the incremental energy demand during this period. Though natural gas, central and state sectors. Chart A depicts the distribution of the among fossil fuels, has become the fastest growing energy source, generation by energy source, while Chart B illustrates the sector- coal is still the fossil fuel of choice, contributing to 41% of global wise distribution of power generation2. energy needs. Chart A Asia, led by India and China, has the fastest projected growth in worldwide, averaging 4.9% annual growth 3% from 2005 to 2030. Total electricity generation in Asian countries is 9% 25% expected to increase at an annual growth rate of 7.4%; by 2030, the region is expected to generate about 12.9 trillion kilowatt-hours. Both India and China are heavily dependent on coal as the primary energy source for electricity generation. This has its own challenges. Carbon emissions, quality of coal, coal linkages and supply chain imperatives determine both locations of power plants as well as their 63% generation efficiency. Thus, better power evacuation and minimising aggregated transmission and commercial (ATC) losses to generate Thermal Hydro Nuclear Other Renewables greater efficiencies and cleaner power from fossil fuels become an There has been a significant generation growth over the past few area of focus.1 years. From 2002-03 to 2008-09, power generation has grown from India’s Power Scenario 543.4 billion units (BU) to 723.6 BU (Table 1). India’s per capita The electricity industry is governed by the Electricity Act, 2003, power consumption is quite low - around 700 kWh - compared to the which came into force from 10 June 2003, with the objective of world average of 2,600 kWh. However, in spite of the increased introducing competition, protecting consumer interests and providing generation capacity and low per capita consumption, the country still power for all. The Act envisages transforming vertically integrated faces an average peak demand shortfall of 12%. It is estimated that and monopolistic electricity utilities into competing service providers if the power shortfall needs to be made up, total investment of the where the market would determine the cost of electricity. The Act order of US$ 200 billion would be needed during the next seven advocates open access in transmission, phased open access in years. distribution, mandatory State Electricity Regulatory Commissions (SERCs), license free generation, mandatory metering and stringent Chart B penalties for theft of electricity. Consequent to the Act, independent Regulatory Commissions have Private been constituted in the States as well as at the Centre. The Central Sector 15.5% Regulator has responsibility for generating plants owned by the State Sector Central Government, any other generating plant which may be Central 51.4% Sector delivering power to two or more States, and operators of inter state 33.1% transmission lines, with jurisdiction over tariff they can charge for their services. All intra-state generating plants, transmission line operators and distribution licensees come under the purview of the

1 Source : Energy Information Administration, US Department of Energy, Energy Outlook 2008; International Energy Agency, World Energy Outlook, 2008 2 Source : Ministry of Power

8 Table 1 : Generation: Target vs. Achievement the oldest, New Cossipore, which was commissioned in 1949. The Year Target BU Achieved BU % Achieved combined generating capacity of these four plants is 975 MW. 2002-03 545.5 543.4 97.4% Table 2 : Details of performance of CESC’s ‘pulverised fuel’ generating stations for 2008-09 2003-04 572.9 538.3 97.5% 2004-05 586.4 587.4 100.2% Generating Installed Generation Plant Load Stations Capacity (MW) (MU) Factor (PLF): % 2005-06 621.5 617.5 99.4% Budge Budge 2X250 MW 4,403 100.53% 2006-07 623.0 662.5 99.9% Southern 2X67.5 MW 1,119 94.62% 2007-08 710.0 704.5 99.2% 4X60 MW 1,934 91.98% 2008-09 774.1 723.6 93.4% Budge Budge, Southern and Titagarh generated at a combined Plant Load Factor (PLF) of more than 97% during the year under Source : Ministry of Power review. Budge Budge stands out in all parameters. Transmission The said generating stations also excelled in the field of energy India has 265,000 circuit kilometres (ckm) of bulk transmission conservation by achieving extremely low auxiliary consumption. network, divided into five regions. The interconnected transmission The pulverised fuel power stations of CESC are amongst the top system within each region is called a grid, with the national power stations in the country on the basis of PLF – a proof of the transmission system being the National Power Grid. generating efficiencies that the Company has created over a period Government of India’s ‘Power for All By 2012’ mission envisages of time. 200,000 MW of generating capacity by 2012, which in turn, means Budge Budge that it becomes essential to rapidly augment both intra-regional and Budge Budge, CESC’s twelve year old generating station, has an national level transmission capabilities. installed capacity of 2 X 250 MW; a third 250 MW unit is being added Distribution and is at an advanced stage of commissioning. Budge Budge has India has approximately 144 million consumers. But large parts of earned several distinctions. It not only continued to operate at its full the population are without electricity and substantial portions of capacity for two consecutive years but also featured in the list of top ten thermal power stations in the country. Budge Budge has also those who are connected face power shortages, outages and earned recognition from the United Nations for its Clean Development voltage fluctuations. The distribution infrastructure in India suffers Mechanism (CDM) status – a rare achievement for any thermal from high ATC losses, as much as 33%3, due to inefficient distribution power plant in the world. The generating station has created a infrastructure as well as pilferage. To combat this, Government of benchmark by overhauling a 250 MW unit in just nine days. Its India has launched the Accelerated Power Development Reform excellent environment friendly status was acknowledged by Green Program (APDRP) to finance the modernisation of sub-transmission Tech Foundation giving Budge Budge ‘Environment Excellence and distribution networks including a system of local management Gold Award’ during the year - the third consecutive year that the and energy accounting through widespread metering in every state plant has won this award. utility’s distribution circles. Southern Operations Southern is the Company’s eighteen year old power generating CESC is engaged in the business of generation and distribution of station, having being commissioned in 1991-92. In spite of its electricity within the licensed area of 567 sq. km in the city of Kolkata relative age, the generating station is at peak performance and is and adjoining areas and does not operate in any other reportable also featured among the most efficient operating power plants in the segment. The peak power demand in the licence area is now country. In 2008-09, Southern generated 1,119 MU of power at a approximately 1,460 MW, which is met through CESC’s internal PLF of 94.62%; this in spite of having to shut down for some time one generation capacities as well as through power purchased from the of its units to undertake critical component repairs. The plant’s state and national grid. Power demand, however, fluctuates based efficiencies have also been improved upon, with the unit control on seasonality and the time of the day; the maximum demand for system (DCS) undergoing a major upgrade in 2008-09. power is usually during the evening hours, with less power needs Titagarh during rest of the day. Titagarh is twenty six years old, having been commissioned in Generation 1982-83. Usually, thermal power generating plants have an effective The Company has four coal based generating stations – three working life of around thirty years; beyond this, plant efficiencies pulverised fuel stations at Budge Budge, Southern and Titagarh and become increasingly difficult to maintain. Titagarh, however, 3 Source : http: // www.cstep.in / docs / power - sector-presentation.pdf continues to deliver nearly 92% PLF, while generating over

9 1,900 MU of power. This is thanks to the meticulous maintenance order to facilitate quick location of faults and reduce the supply programmes that CESC undertakes for each of its plants. During the restoration time, a number of measures have been taken in recent year, Titagarh showed a marked improvement in specific oil times. Most significant of them is installation of around 1,600 Ring consumption through tier blending of its coal input. Two other safety Main Units during the last two years at various strategic locations of measures that the station has undertaken during the year deserve the network that allow better maintenance of the network, early fault separate mention: (a) the installation of an auxiliary cooling tower; detection and repair. A program has been undertaken to suitably and (b) installation of variable voltage and frequency drives in the reinforce high-tension feeders that have been problematic in the Induced Draft (ID) Fan of the boiler. Measures such as these have past; also, 6kV feeders are being upgraded to 11 kV in order to helped Titagarh reduce its auxiliary consumption. Plant shutdown reduce high-tension feeder tripping problems. CESC has around 2.5 time for overhauling has also been reduced significantly by million meters in the circuit and these meters are being gradually modifications that have been carried out in the turbine cooling upgraded to superior quality meters. arrangement. On the consumer support side, senior officers of the Company are New Cossipore in regular interaction with selected consumers to seek their New Cossipore was commissioned in 1949 – nearly six decades suggestions. Consumers are often reminded on telephone about ago. The fact that New Cossipore functions is in itself a remarkable any unpaid bills so that these may be regularised at the earliest. feat. Yet, thanks to meticulous maintenance practices, New Cossipore Consumers can also report incidents of fault through an upgraded continued to provide reliable support to the system during the peak tele-call system, which is available round the clock and covers the hours. This sixty year old plant delivered 445 MU of power in 2008- entire license area; the call centre immediately logs the consumer 09 during peak demand periods. complaint and expedites rectification. The bill payment system has In recognition of its environment friendly and safe generating also been simplified. practices, all three pulverised fuel power stations have been awarded The Company has engaged Singapore Power, a world famous the Occupational Health & Safety Management System Certification distribution utility, to advise the Company on measures for further (OHSAS 18001) certification. improvement of its system reliability. Distribution Distribution loss is an issue that has CESC recently completed the setting up of its first 220kV / 132 kV plagued power utilities for very many substation – the Eastern Metropolitan substation, situated on the years. Apart from technical issues Eastern Metropolitan Bypass – which was formally commissioned that contribute to these losses, the on 16 May 2009. With this, CESC is ready to receive power from the biggest component responsible for third unit of Budge Budge generating station. The substation will distribution losses is power pilferage ultimately have four 160 MVA 220/132/33 kV transformers, which and controlling this is a focus area for CESC. Efforts range from will, on one hand, step down power to 132 kV level for onward education to enforcement and, over a period of time, the Company’s transmission to various load centres and, on the other hand, meet endeavours in this sphere have borne fruit (Chart C). These operations the local area load through the 33 kV network. This marks the vital will continue in future. step towards upgrading the voltage to 220 kV; till now, the generating stations and load centre substations have been inter-connected at New Projects 132 kV. The substation will also be capable of state and central grid The maximum demand for power in the licence area that CESC interconnectivity for better operational flexibility, reliability and stability serves was around 1,460 MW during 2008-09; the Company’s of supply. The Company has also commissioned a voice, data and combined generating capacity is 975 MW. CESC imports the shortfall protection network for the entire transmission system using from other agencies. In order to reduce its dependence of import Synchronous Digital Hierarchy (SDH) equipment. from other sources, CESC has been trying to increase its own generating capacity. As stated in the Directors’ Report, a project to CESC’s consumers number around 2.2 million. To cater to customer put up the third 250 MW unit at the existing Budge Budge Generating expectations of uninterrupted power supply, low or no voltage Station site is at an advanced stage. fluctuations, timely and accurate billing and convenient bill payment facilities, CESC has built a large and sophisticated distribution and Simultaneously,as stated in the Directors' Report, CESC is currently customer service network across its licence area. implementing a project that will enable it to evacuate power from the proposed third unit to its licensed area by erecting an 85 kilometre The distribution infrastructure comprises about 15,000 circuit long 220 kV double circuit overhead line and other associated work. kilometres of cable, 5,000 distribution transformers and a large The Company’s subsidiary Haldia Energy Ltd. has decided to number of switchgears. Investments are made on an ongoing basis pursue a project for a 2X300 MW thermal power plant at Haldia in to make the network stronger and more reliable; large sums have West Bengal. Opportunities for large thermal power projects in been invested during the year in the distribution infrastructure. In Jharkhand and Orissa are also being explored.

10 Technology Training & People Development CESC operates its generating stations in environment friendly ways. There is a consensus in the Company that major people related Ammonia and water fog injection in flue gas ensures that the actual initiatives should start from the top. Hence, senior executives now Suspended Particulate Matters (SPM) is well below the prescribed mentor small batches of three or four new officers in each batch. norms. To eliminate water pollution, the Company has undertaken Fresh recruits are initially ‘handheld’ by seniors – not only from their a series of measures to ensure that water used by the generating function but drawn also from other divisions. Specific courses have plants is recycled back into the system and thus protects the been created by the Company’s senior officers for Engineers / environment. West Bengal Pollution Control Board has recognised Management Trainees to provide comprehensive technical the Zero Effluent System followed in the Company’s generating knowledge specifically required to run a power utility. An advanced stations. Management Development Programme in collaboration with IIM, Kolkata for all fresh recruits has also been put in place. As a part of Network reliability is being upgraded through the installation of the ‘industry institute interaction’, curriculum based programmes in indoor gas insulated (GI) switchgears at sub-stations. This measure collaboration with IIT, Kharagpur for Distribution Engineers have has the added advantage that these switchgears would be less been created - as a refresher course and also for advancing domain subject to the vagaries of weather; also, given space constraints, knowledge. these GI switchgears are expected to save space. Over a period of time, it is expected that CESC would have one of the largest Adequate empowerment of colleagues is a focus area across the organisation. To that effect, the Company has formed a Young population of GI switchgears among Indian utilities. Executives Board. This encourages young talent to participate in the A new technology of ‘Nitrogen Induction Drain & Stir’ (NIDS) system decision making process; their inputs also help in creating an ‘idea has been introduced for preventing fires in transformers. In case of bank’ for the organisation. Executives are also encouraged to form a potential fire hazard, the transformer oil is expected to be partially cross-functional teams for taking part in protracted brainstorming drained out and nitrogen pumped in, thus preventing a fire or sessions on various operational issues. A number of lectures, explosion in the transformer and providing greater safety and workshops and symposia are held through the year on safety and reliability. other work related matters to educate and inform various levels of The practice of meticulously maintaining various critical generating people in CESC. station equipment has significantly reduced plant outages and Performance Management System emergency replacement of spares, apart from improving plant The Performance Management System (PMS) has been redesigned availability and plant load factors of these generating stations. with a view to making it more effective. Across the organisation, Human Resources there is now a greater awareness about the need of having a system As on 31 March 2009, CESC had a workforce of 10,441 people on which rewards achievers and motivates people at all levels to do its rolls. The Company’s HR function faces the challenging task of better. presenting to this substantial human pool a vibrant work environment Succession Planning - where individual excellence is recognised, teamwork is encouraged CESC has all along been known to be an organisation with a great and aspirations are met. depth in available talent. Identification of proper talent and grooming CESC realises that in order to address effectively the emerging them up to take up greater challenges in future is a continuous business environment and the changing employee aspirations, it is exercise in the Company. Succession plans are implemented necessary to introduce a culture change process that will equip the meticulously across the organisation on an ongoing basis. Company for the future. Keeping corporate HR objectives in Change Management Initiatives mind, CESC has, during the year, undertaken a number of new Cross-Functional Teams (CFTs) were set up in May 2008 to drive initiatives. the change management process within the organisation. These teams deal with issues like Customer Centricity, Talent Management, Recruitment Communication Strategy, De-layering, Organisational Excellence Structured recruitment processes were put in place for recruiting and Performance Management System. right talent through campus hiring from reputed management institutes and engineering colleges. A cross-functional team has been put in Industrial Relations place to improve campus relations with leading institutes and to build On the industrial relations front, CESC enjoyed a cordial year, with a strong employer brand. The Company has recruited around 150 no unrest or disruption of business operations. executives in last two years through a rigorous selection process. Information Technology Post selection, recruits undergo a structured and comprehensive Information Technology today is no longer a case of ‘data capture induction programme for effective integration. and reporting’ – it has evolved to become a significant business

11 enabler and process coordinator. In line with this, CESC’s IT vision Table 3 : Stand-alone Financial Performance of CESC Ltd. for aims to align all its IT initiatives with its business goals and the year ended 31 March 2009 objectives. Rs. Crore 2008-09 2007-08 % Change In order to create greater efficiencies, 2008-09 was a year when the homogenisation and consolidation of various legacy systems have Earnings from Sale of Electricity 3,031.32 2,774.97 9.24% been given the maximum focus. To that effect, CESC has rolled out Other Income 168.27 155.37 8.30% a well-defined central IT policy and IT road map encompassing all Net Sales / Income from Operations 3,199.59 2,930.34 9.19% major elements, i.e. hardware and software procurement, network Cost of Power Purchased 412.46 378.27 9.04% access, security, use of the internet and communications protocols. Fuel Costs 944.72 865.76 9.12% This has been done with the objective of harmonising all applications, People Costs 370.24 337.78 9.61% facilitating accelerated decision-making, optimising use of IT assets Generation, Distribution, Administration and lowering the overall cost of ownership. & Other Costs 691.44 640.86 7.89% Subsidiaries Total Expenses 2,418.86 2,222.67 8.83% CESC has six subsidiaries. Their details are given in the following EBIDTA 780.73 707.67 10.32% paragraphs. Depreciation 174.90 168.45 3.83% Spencer’s Retail Limited (SRL) is in the business of organised EBIT 605.83 539.22 12.35% retail. The company presently has 205 stores across India including Interest & Finance Costs 140.96 136.31 3.41% 21 hypermarts under the ‘Spencer’s’ label. SRL offers a range of PBT 464.87 402.91 15.38% products that cater to the entire family - fresh products, foods and Less : Provision for Taxes grocery, home care products, apparel and accessories, non-food Current Tax 52.68 45.50 FMCG products, consumer durables, lifestyle products, footwear Fringe Benefit Tax 2.50 2.05 and many more. During the year, the company launched two PAT 409.69 355.36 15.29% international apparel brands to address the kids wear and casual wear demand. SRL has also signed exclusive master franchisee During 2008–09, the gross revenue of the Company was Rs. arrangements with these brands for India in the B2B and B2C 3,199.59 Crore, which reflected an improvement of 9.19% over the segments. 2007-08 figure of Rs. 2,930.30 crore. Music World Retail Limited (MWRL), a wholly owned subsidiary of Although overall expenses grew by 8.83% over 2007-08 (Rs. Spencer’s Retail Limited, is into the music and books retailing 2,418.86 crore in 2008-09 vis-à-vis Rs. 2,222.67 crore in 2007-08), business, with a pan-Indian presence with 68 stores of ‘Music World’ earnings before interest, depreciation and taxes (EBIDTA) went up & ‘Books & Beyond’. by 10.32% over last year to Rs. 780.73 crore. Interest costs increased by 3.41% over 2007-08 figures (Rs. 136.31 Au Bon Pain Cafe India Limited (ABPCIL) is a subsidiary of crore) to reach Rs. 140.96 crore, mainly on account of increase of Spencer’s Retail Limited; the company is in the process of setting up interest on fixed loans; the total loan funds of the Company having a retail chain of cafe stores. ABPCIL has signed a master franchisee increased from Rs. 1,628.78 crore to Rs. 2,398.11 crore. agreement with ABP Corporation, USA for setting up and operating Profit before depreciation and taxation (PBDT) reflected a year-on- ABP cafes in India. The first café is likely to be opened in the third year increase of 11.97% - from Rs. 571.36 crore in 2007-08 to Rs. quarter of the current financial year. 639.77 crore in 2008-09. CESC Properties Limited is engaged in the business of real estate Depreciation, at Rs. 174.90 crore, was marginally higher than the development. As an initial project, it has plans to develop a shopping previous year’s figure of Rs. 168.45 crore; mainly due to increase of mall in Kolkata. plant and machinery (net increase of Rs. 226.87 crore) and transmission and distribution system (net increase of Rs. 250.31 Metromark Green Commodities Private Limited is a wholly owned crore). subsidiary of CESC Properties Limited and plans to undertake The Company’s profit after taxes (PAT) for 2008-09 stands at Rs. appropriate business in future. 409.69 crore, which reflects a 15.29% increase over the PAT figure Haldia Energy Limited is engaged in the project of setting up 2X300 of the previous year (Rs. 355.36 crore). MW coal fired thermal power plant at Haldia in West Bengal. Land Finance & Budgeting is in the process of being acquired and clearances for the project The Company has over a period of time inculcated cost from Ministry of Environment and Forests have been obtained. The consciousness into every sphere of its operations. The employees Ministry of Coal has allocated a coal linkage for the first phase of the are aware that saving costs without compromising the quality is non- project. negotiable; thus, all expenditures are strictly monitored. The FINANCIAL PERFORMANCE Company has a well laid out budgeting system and deviations are Table 3 summarises the Financial Performance of CESC Limited for closely scrutinised and adequately and promptly reported for the year ended 31 March 2009. corrective actions. A close watch is kept on implementation of

12 various projects to avoid both time and cost overruns. been a matter of satisfaction that CESC has not lost a single Power is a capital-intensive industry and large borrowings are consumer in spite of this consumer freedom. necessary to meet the obligations of a licensee. Such borrowings Opportunities & Outlook are made in the most cost effective manner and are constantly Ministry of Power, Government of India is targeting 200,000 MW of reviewed to align costs with prevailing market trends. power generation and 15% ATC losses by 2012. If these are to be Whenever necessary, CESC approaches the capital market, both in achieved, India will need substantial amounts of investment in India and abroad, for raising resources to finance its various projects generation, transmission and distribution infrastructure. Not all of and other requirements. Investor responses to capital issues made this would come from government funding – thus, private sector by CESC have always been encouraging. participation is eminently desirable. Additional capacities have to be Risks & Concerns installed; there is also an urgent need to upgrade efficiencies in the CESC has a Risk Management frame-work in place. The Company generation, transmission and distribution arms of the existing network. has constituted a Committee comprising the functional heads of all Electricity Act, 2003 encourages competition, promotes efficiency Divisions to identify and assess major risks associated with the and protects consumer interests. The experience of the last six business of the company and take remedial measures. years of the new regulatory environment shows a move towards imposition of normative efficiencies of performance, with stiff New Plants and Expanded Distribution Network performance targets. Environmental issues have taken centre stage for all project development. It is even truer for metropolitan electricity undertakings Prior to Electricity Act, 2003, CESC’s market was bound by the like CESC. It will be important for CESC to rebuild capacity by contours of its licensed area. The Act has allowed CESC, after installing plants, which will be more efficient, will generate ‘cleaner’ meeting its Consumers’ demand, to export electricity, in turn permitting power and will adhere to ‘best in class’ environment norms. It is its generating stations to operate at considerably higher Plant Load essential for a metropolitan city like Kolkata to have a reasonable Factor (PLF). This creates a win-win situation for the Company and extent of load centre generation for reliability of supply to the its Consumers. essential loads within its licensed area. The Company is keen to leverage its position as an efficient utility by Also, the transmission corridor to bring in power into the metropolitan not only focusing on greater levels of efficiency in its core business area of Kolkata and from other stations is narrowing. but by planning to do much more in order to be ahead of time. Transmission towers have to pass over land and ‘right of way’ is a Planned growth is what the Company is looking for and various sensitive issue. options across the country are being explored. Ash Management Internal Controls and their Adequacy Ash management of the power stations is also a critical subject. The Company maintains established internal control system in order While a good portion of ash is currently used by the cement plants to ensure operational efficiency, optimum utilisation of resources close to the city, a sizable portion is exported to Bangladesh on river and compliance with applicable laws and regulations and Information barges. Some ash goes to road construction and for filling up low Technology audit. The internal control functions are carried out by lying land for housing projects. In future, a progressively larger the Internal Audit Department, based on an annual audit plan; the proportion of fly ash will have to go towards manufacture of value audit plan gives due weightages to the various risk parameters added products like aggregates, bricks and cement. Power utilities associated with the business. The findings of the Internal Audit do not have expertise in these areas. CESC makes available fly ash Department and the actions taken thereon are reviewed and to manufacturers that have the expertise in these fields. Statutory monitored by the Audit Committee and placed before the Board of provisions making it mandatory to use fly ash in the manufacture of Directors, wherever necessary. bricks will go a long way to help the situation. Fuel The Company is totally reliant on fossil fuel for its generating stations and is conscious of the diminishing fossil fuel reserves of the country and world wide, besides rising cost of fossil fuel. Competition On behalf of the Board of Directors In the course of last one year, competition has been gradually creeping into the business of all Licensee’s . In April, 2008, consumers drawing 5 MW and above were permitted to choose their supplier. In R.P. Goenka January, 2009, the threshold value has been reduced to 1 MW. It has Kolkata, 22nd May, 2009 Chairman

Note : The financial statements appearing above are in conformity with accounting principles generally accepted in India. The statements which may be considered ‘forward looking statements’ within the meaning of applicable laws and regulations, have been based upon current expectations and projection about future events. The management cannot, however, guarantee that these forward looking statements will actually be realized or achieved.

13 REPORT ON CORPORATE GOVERNANCE (Annexure ‘B’ to Directors’ Report )

Company's philosophy on code of governance CESC Limited (‘CESC’ or ‘the Company’) recognises that sound corporate governance is not only the foundation for its long-term success; it is non-negotiable for a Company of its size, history and performance. The Company believes that its core values of quality consciousness, consumer satisfaction and fairness in dealings, integrated with adopting transparent accounting policies, superior board practices and consistent consideration towards the wider stakeholder community is not only ethical but makes for sound business sense. This chapter, along with the chapters on Management Discussion and Analysis and Additional Shareholders Information, reports CESC’s compliance with clause 49 of the stock exchange listing agreements. BOARD OF DIRECTORS COMPOSITION OF THE BOARD CESC’s Board of Directors consists of nine Directors, of which five are independent Directors. Three of the non-executive independent Directors are nominees of various banks, financial institutions and the Government of West Bengal. The composition of the Board satisfies the conditions that the Listing Agreement of the Stock Exchanges has laid down in this regard. NUMBER OF BOARD MEETINGS In 2008-09, the Board of the Company met five times on 28 April 2008, 1 July 2008, 30 July 2008, 30 October 2008 and 28 January 2009. The maximum gap between any two Board meetings was less than four months. Table 1 details the composition and the attendance record of the Board of Directors. DIRECTORS’ ATTENDANCE RECORD AND DIRECTORSHIPS Table 1: Composition of the Board of Directors as on 31 March 2009. No. of other Directorships and Name of the Directors Category Committee membership/Chairmanships Attendance Particulars in other Indian public companies Director1 Member2 Chairman2 No. of No. of Board Board Attendance Meetings Meetings at last Held Attended AGM Mr. R. P. Goenka, Chairman Non-executive 4 - - 5 5 Yes Mr. S. Goenka, Vice Chairman - do - 11 1 1 5 5 Yes Mr. P. K. Khaitan Non-Independent 13 5 - 5 3 No Mr. B. M. Khaitan Independent 6 - - 5 4 No Mr. B. P. Bajoria - do - 5 2 - 5 5 Yes Mr. P. Roy3 (Nominee of Industrial Development Bank of India Ltd.) - do - 3 2 - 5 5 Yes Mr. B. K. Paul (Nominee of Govt. of West Bengal) - do - 2 - - 5 5 Yes Mr. A. Saraf (Nominee of ICICI Bank Limited) - do - 3 1 1 5 3 Yes Mr. S. K. V. Srinivasan (Nominee of Industrial Development Bank of India Ltd.)3 - do - - - - 5 - NA Mr. S. Banerjee, Managing Director Executive 8 3 - 5 4 Yes

Notes : 1. The Directorships held by Directors as mentioned above do not include alternate directorships and directorships of foreign companies, Section 25 companies and private limited companies, if any. 2. In accordance with Clause 49 of the Listing Agreement, Memberships / Chairmanships of only the Audit Committees and Shareholders’/ Investors’ Grievance Committees of all public limited companies have been considered. 3. Mr. P. Roy was a Director of the Company as Nominee of Industrial Development Bank of India till 16 February 2009. Mr. S.K.V. Srinivasan was appointed as Director and Nominee of Industrial Development Bank of India w.e.f. 16 February 2009. None of the Directors is a member of more than 10 Board-level Committees of public companies in which they are Directors, nor is Chairman of more than five such Committees.

14 DIRECTORS WITH MATERIALLY PECUNIARY OR BUSINESS RELATIONSHIP WITH THE COMPANY As mandated by Clause 49, the independent Directors on CESC’s Board : ❐ apart from receiving Director’s remuneration, do not have any material pecuniary relationships or transactions with the company, its promoters, its Directors, its senior management, its subsidiaries and associates which may affect independence of the Director. ❐ are not related to promoters or persons occupying management positions at the Board level or at one level below the Board. ❐ have not been an executive of the Company in the immediately preceding three financial years. ❐ are not partners or executives or were not partners or executives during the preceding three years of the: ✦ statutory audit firm or the internal audit firm that is associated with the company ✦ legal firm(s) and consulting firm(s) that have a material association with the company ❐ are not material suppliers, service providers or customers or lessors or lessees of the company, which may affect independence of the Director. ❐ are not substantial shareholders of the company i.e. do not own two percent or more of the block of voting shares. Details of transactions of a material nature with any of the related parties as specified in Accounting Standard (AS) 18 issued by the Institute of Chartered Accountants of India are disclosed in Note 20 of Schedule 13 annexed to the financial statements for the year 2008-09. There has been no transaction of a material nature with any of the related parties which was in conflict with the interests of the Company. There has been no material pecuniary relationship or transaction between the Company and its non-executive Directors during the year.

INFORMATION SUPPLIED TO THE BOARD The Board is presented with detailed notes along with the agenda papers well in advance of the Board Meetings. The Board periodically reviews the status of compliance by the Company regarding the laws applicable to the Company. Important operational matters are brought to the notice of the Board at its meetings held from time to time. Operational heads from various divisions of the Company attend the Board Meetings to provide inputs and explain any queries pertaining to their respective areas of operations to enable the Board to take informed decisions.

CODE OF CONDUCT The Code of Business Conduct and Ethics relating to matters concerning Board members and Senior Management Officers and their duties and responsibilities has been meticulously followed. All Directors and Senior Management Officers have affirmed compliance of the provisions of the Code during the year 2008-09 and a declaration from the Managing Director to that effect is given at the end of this report. The Code is posted on the Company’s website, www.cesc.co.in.

COMMITTEES OF THE BOARD AUDIT COMMITTEE As on 31 March 2009, CESC’s Audit Committee consisted of Mr. S. Goenka, Mr. B. M. Khaitan, Mr. A. Saraf and Mr. B. P. Bajoria as the Chairman of the Committee. All members of the Audit Committee have accounting and financial management expertise. The Chairman of the Audit Committee attended the Annual General Meeting (AGM) held on 30 July 2008. The Committee met five times during the course of the year on 28 April 2008, 1 July 2008, 30 July 2008, 30 October 2008 and 28 January 2009. Table 2 gives the attendance record of the members of the Audit Committee.

Table 2 : Attendance record of Audit Committee members for 2008-09 Name of Members Status Category No. of Meetings Held Attended Mr. S. Goenka Member Promoter, Non- Executive 5 5

Mr. B. M. Khaitan Member Independent 5 3

Mr. A. Saraf Member Independent 5 3 Mr. B. P. Bajoria Chairman Independent 5 5

15 The unaudited financial results for the quarter / year ended 31 March 2008 were placed at the meeting of the Committee held on 28 April 2008 which was attended by Mr. S. Goenka and Mr. B. P. Bajoria, as the Chairman. All the members of the Committee attended the meeting held on 1 July 2008 in which the audited results for the year ended 31 March 2008 were placed. The chief of finance and representatives of the statutory auditors, cost auditors and internal auditors are invited by the Audit Committee to its meetings. The Vice President & Company Secretary is the secretary to the Committee. The functions of the Audit Committee include the following : 1. Oversight of the Company’s financial reporting process and the disclosure of its financial information to ensure that the financial statement is correct, sufficient and credible. 2. Recommending to the Board, the appointment, re-appointment and, if required, the replacement or removal of the statutory auditor and the fixation of audit fees. 3. Reviewing, with the management : a) The annual financial statements before submission to the Board for approval, with particular reference to matters required to be included in the Directors’ Responsibility Statement to be included in the Board’s report in terms of clause (2AA) of section 217 of the Companies Act, 1956. b) Changes, if any, in accounting policies and practices and reasons for the same. c) Major accounting entries involving estimates based on the exercise of judgment by management, if any. d) Significant adjustments made in the financial statements arising out of audit findings, if any. e) Compliance with listing and other legal requirements relating to financial statements. f) Disclosure of any related party transactions. g) Quarterly financial statements before submission to the Board for approval. 4. Reviewing, with the management, performance of statutory and internal auditors, adequacy of the internal control systems and review of Company's risk management policies. 5. Reviewing the adequacy of internal audit function and discussion with internal auditors on any significant audit findings and follow up thereon. 6. Reviewing the findings of any internal investigations by the internal auditors and follow up thereon. 7. Discussion with statutory auditors to ascertain any area of concern. 8. Carrying out any other function as is mentioned in the terms of reference of the Audit Committee. The Audit Committee is empowered, pursuant to its terms of reference, to: a) Supervision of internal control systems, internal audit functions, Company’s financial reporting process and disclosures in order to ensure that the same are accurate, proper and sufficient. b) Overseeing observations of the auditors and periodical financial statements before submission to the Board. c) Recommendation of matters relating to financial management and corrective action in respect of audit reports. d) Investigating matters relating to the terms of reference or those referred to it by the Board and to seek any information it requires and, for this purpose, the Committee has full access to information / records and also to secure professional support from outsiders, if necessary. The Company has systems and procedures in place to ensure that the Audit Committee mandatorily reviews: ■ Management discussion and analysis of financial condition and results of operations. ■ Statement of significant related party transactions submitted by management. ■ Internal audit reports. ■ Uses / applications of funds raised through public issues, rights issues, preferential issues by major category and status of reports of monitoring agency.

16 INVESTORS’ GRIEVANCE COMMITTEE The Committee looks into all matters related with the transfer of securities; it also specifically looks into redressing complaints of shareholders and investors such as transfer of shares, issue of share certificates, non-receipt of Annual Report and non-receipt of declared dividends. The Committee comprising of Mr. S. Goenka, who is the Chairman of the Committee and Mr. S. Banerjee, met seven times during the year. For expediting the process of registration of transfers of the Company’s securities, the Board has delegated the power of approving share / debenture transfers and for dealing with matters connected therewith, to the Vice President & Company Secretary who is the Compliance Officer also. Table 3 gives the details of attendance. Table 3 : Attendance record of Investors’ Grievance Committee for 2008-09

Name of Members Status Category No. of Meetings Held Attended Mr. S. Goenka Member Promoter, Non- Executive 7 7 Mr. S. Banerjee Executive Member 7 7

REMUNERATION COMMITTEE CESC’s Remuneration Committee is responsible for recommending the fixation and periodic revision of remunerations to the Managing Director. The Committee consists of Mr. P. K. Khaitan (Chairman), Mr. B. P. Bajoria, Mr. P. Roy and Mr. A. Saraf. The Committee met twice during the year on 1 July 2008 and 28 January 2009. Payment of remuneration to the Managing Director is as per the agreements executed between him and the Company and are governed by Board and shareholders’ resolutions. The remuneration structure comprises of Salary, Commission linked to profits, perquisites and allowances and retiral benefits (superannuation and gratuity). The details of all remuneration paid or payable to the Non Executive Directors have been disclosed in Table 4 below. Table 4: Remuneration paid or payable to Non Executive Directors for the year ended 31 March 2009

Name of the Director Sitting Fees 2

Mr. R. P. Goenka1 (Chairman) 1,00,000 Mr. S. Goenka1 (Vice Chairman) 3,40,000 Mr. P. K. Khaitan 80,000 Mr. B. M. Khaitan 1,40,000 Mr. B. P. Bajoria 2,40,000 Mr. P. Roy3 (Nominee of Industrial Development Bank of India Ltd. till 16 February 2009) 1,40,000 Mr. B. K. Paul (Nominee of Govt. of West Bengal) 1,00,000 Mr. A. Saraf3 (Nominee of ICICI Bank Ltd.) 1,60,000 Mr. S. K. V. Srinivasan (Nominee of Industrial Development Bank of India Ltd.with effect from 16 February 2009) —

TOTAL 13,00,000

Notes : 1. None of the Directors are related to each other, except Mr. R. P. Goenka and Mr. S. Goenka. 2. Sitting fees include payment for Board-level committee meetings. 3. Sitting fees of nominee Directors are paid to the financial institution they represent. 4. In terms of the Special Resolution passed by the Members of the Company, commission of Rs 4,00,00,000 is payable to the Directors in such manner as the Board of Directors may determine.

17 REMUNERATION OF THE MANAGING DIRECTOR Mr. S. Banerjee was reappointed as the Managing Director of the Company for a period of 5 years with effect from 1 August 2008. The remuneration of Mr Banerjee for the year in accordance with the Special Resolution passed by the shareholders at the Thirtieth Annual General Meeting held on 30 July 2008 was as follows: (Rs. Lakh) Salary 36.00 Performance Award for 2007-08 25.00 Contribution to Pension and Provident Funds and Gratuity 11.45 Estimated value of other benefits 22.73 Commission payable for 2008-09 200.00 Total : 295.18 Service Contract : 5 years from 1 August 2008 Notice Period : 6 months Stock Option : Nil Severance Fee : Nil Mr. Banerjee is the only executive on the Company’s Board. SHARES AND CONVERTIBLE INSTRUMENTS HELD BY NON-EXECUTIVE DIRECTORS As on 31 March 2009, Mr. R. P. Goenka, Chairman and non-executive Director held 30,073 equity shares of the Company, Mr. S. Goenka, Vice-chairman and non-executive Director held 133,318 equity shares of the Company.No other non-executive Director holds any equity shares in CESC. Mr. S. Banerjee, Managing Director, held 1,200 equity shares of the Company. As on 31 March 2009, no convertible instruments of the Company are outstanding. SUBSIDIARY COMPANIES Clause 49 defines a ‘material non-listed Indian subsidiary’ as an unlisted subsidiary, incorporated in India, whose turnover or net worth (i.e. paid up capital and free reserves) exceeds 20% of the consolidated turnover or net worth respectively, of the listed holding company and its subsidiaries in the immediately preceding accounting year. As on 31 March 2009, CESC had one material non-listed Indian subsidiary, Spencer’s Retail Limited. Mr. B. P. Bajoria, independent Director of CESC has been nominated on the Board of Directors of Spencer’s Retail Limited w.e.f. 5 August 2008. MANAGEMENT MANAGEMENT DISCUSSION AND ANALYSIS This annual report has a detailed chapter on Management Discussion and Analysis. DISCLOSURES BY MANAGEMENT TO THE BOARD All disclosures relating to financial and commercial transactions where Directors may have a potential interest are provided to the Board, and the interested Directors do not participate in the discussion nor do they vote on such matters. DISCLOSURE OF ACCOUNTING CONVENTION IN PREPARATION OF FINANCIAL STATEMENTS The financial statements have been prepared to comply in all material aspects with the applicable accounting principles in India, including accounting standards notified under section 211(3C) of the Companies Act, 1956 and the relevant provisions of the said Act and the regulations under the Electricity Act, 2003, to the extent applicable. The financial statements have also been prepared in accordance with relevant presentational requirements of the Companies Act, 1956 of India. CODE FOR PREVENTION OF INSIDER-TRADING PRACTICES In compliance with the SEBI regulation on prevention of insider trading, the Company has in place a comprehensive code of conduct for its Directors and Senior Management Officers. The code lays down guidelines, which advises them on procedures to be followed and disclosures to be made, while dealing with shares of the Company. The code clearly specifies, among other matters, that Directors and specified employees of the company can trade in the shares of the company only during ‘Trading Window Open Period’. The trading window is closed during the time of declaration of results, dividend and material events, as per the Code. Mr. S. Mitra, Vice President & Company Secretary is the Compliance Officer. CEO/ CFO CERTIFICATION The CEO and CFO certification of the financial statements for the year has been submitted to the Board of Directors, as required by the Listing Agreement. SHAREHOLDERS APPOINTMENT/ RE-APPOINTMENT OF DIRECTORS Mr. B. M. Khaitan and Mr. B. K. Paul retire by rotation at the end of this year’s Annual General Meeting, and being eligible, offer themselves for re-appointment. Their details are mentioned below.

18 Mr. B. M. Khaitan, 81 years, is a renowned industrialist having interest in tea, batteries and engineering industries. Mr Khaitan has great contributions to the tea industry with which he has been associated for over five decades. Other Directorships Mr Khaitan is the Chairman of Williamson Magor & Company Limited and Eveready Industries India Limited. He is a Director of Mcleod Russel India Limited, Babcock Borsig Limited, Jayshree Tea & Industries Limited (also Chairman of Remuneration Committee) and Phillips Carbon Black Limited. He is on the Board of Directors of CESC since 1994 and is a member of its Audit Committee. Number of shares in the Company held NIL Mr. B. K. Paul, 69 years, a graduate in Electrical Engineering is the Nominee Director of the State Government on the Board of Directors of CESC since 2002. Mr. Paul retired as the Managing Director of The West Bengal Power Development Corporation Limited (WBPDCL). Other Directorships Mr. Paul is on the Board of Directors of WBPDCL and Durgapur Projects Limited. Number of shares in the Company held NIL

COMMUNICATION TO SHAREHOLDERS CESC puts forth key information about the Company and its performance, including quarterly results, official news releases, and presentations to analysts, on its website www.cesc.co.in regularly for the benefit of the public at large. During the year, the Company’s quarterly / yearly results have been published in leading English and Bengali newspapers and also posted on its website. Hence, they are not separately sent to the shareholders. However, the Company furnishes the quarterly results on receipt of a request from any shareholder. INVESTOR GRIEVANCES & SHAREHOLDER REDRESSAL The Company has appointed a Registrar and Share Transfer Agent, Link Intime India Private Ltd., which is fully equipped to carry out share transfer activities and redress investor complaints. Mr. S. Mitra, Vice President & Company Secretary is the Compliance Officer for redressal of all shareholders’ grievances. DETAILS OF NON-COMPLIANCE BY THE COMPANY CESC has complied with all the requirements of regulatory authorities. No penalties/strictures were imposed on the Company by stock exchanges or SEBI or any statutory authority on any matter related to capital markets during the last three years. GENERAL BODY MEETINGS The date, time and venue of the last three annual general meetings are given below. Table 5 : Details of last three Annual General Meetings Financial year Date Time Venue Special Resolutions Passed 2005-06 21 July 2006 10.30 A.M. CITY CENTRE Royal Bengal Room DC Block Sector-I Salt Lake, Kolkata 700064 None 2006-07 27 July 2007 10.30 A.M. CITY CENTRE Royal Bengal Room DC Block Sector-I Salt Lake, Kolkata 700064 None 2007-08 30 July 2008 10.30 A.M. CITY CENTRE Royal Bengal Room DC Block Sector-I Salt Lake, Kolkata 700064 Two

No special resolutions passed at the above Annual General Meetings were required to be put through postal ballot. No resolution is proposed to be passed at the forthcoming Annual General Meeting through postal ballot.

COMPLIANCE MANDATORY REQUIREMENTS The Company is fully compliant with the applicable mandatory requirements of Clause 49.

NON- MANDATORY REQUIREMENTS The details of compliance of the non-mandatory requirements are listed below.

19 REMUNERATION COMMITTEE Details of the composition and function of the Remuneration Committee are given in the section ‘Committees of the Board’. SHAREHOLDER RIGHTS - FURNISHING OF QUARTERLY RESULTS Details of the shareholders’ rights in this regard are given in the section ‘Communication to Shareholders’. AUDIT QUALIFICATIONS For the current financial year 2008-09, there are no audit qualifications in the standalone financial statements of the Company. The Company continues to adopt appropriate best practices in order to ensure unqualified financial statements. AUDITOR’S CERTIFICATE ON CORPORATE GOVERNANCE The Company has obtained a Certificate from the Statutory Auditors regarding compliance of conditions of corporate governance, as mandated in Clause 49. The certificate is annexed to this report. Additional Shareholder Information ANNUAL GENERAL MEETING Date : 24 JULY 2009 Time : 10.30 A.M. Venue : CITY CENTRE, Royal Bengal Room DC Block Sector I, Salt Lake, Kolkata 700064 FINANCIAL CALENDAR :1 April to 31 March For the year ended 31 March 2009, unaudited financial results were announced on: First quarter 30 July 2008 Second quarter 30 October 2008 Third quarter 28 January 2009 Fourth quarter and annual 30 April 2009 For the year ending 31 March 2010, results will be announced by: First quarter Last week of July 2009 Second quarter Last week of October 2009 Third quarter Last week of January 2010 Fourth quarter and annual Last week of April 2010 BOOK CLOSURE The Register of Members will remain closed from 11 July 2009 to 24 July 2009 (both days inclusive) as annual closure for the Annual General Meeting. DIVIDEND DATE Equity Shares: The Board has recommended a dividend of Rs. 4 per equity share for the year ended 31 March 2009; if declared at the AGM, this would be payable on and from 27 July 2009. UTILISATION OF ISSUE PROCEEDS The net issue proceeds of Global Depositary Receipts made in 2005 – 06 have been utilized for the 250 MW thermal power project at Budge Budge. Out of the net proceeds of 95,60,000 equity shares allotted in 2007 – 08 to Qualified Institutional Buyers in accordance with Chapter XIII A of SEBI (DIP) Guidelines 2000, as amended, a sum of Rs 232.76 crore stands placed as deposits with scheduled banks / investments with Mutual Funds after utilization of the balance proceeds for strengthening the Company’s distribution network and for making an equity contribution in Haldia Energy Limited, a wholly owned subsidiary of the Company for the purpose of setting up a 600 MW generating facility in Haldia, aggregating to Rs 340.79 crore. LISTING Equity shares of CESC Limited are listed on the Calcutta Stock Exchange Association Ltd., Bombay Stock Exchange Limited, Mumbai and National Stock Exchange of India Limited, Mumbai and London Stock Exchange. The Global Depository receipts of the Company are listed in the Luxembourg Stock Exchange. STOCK CODES CALCUTTA STOCK EXCHANGE : PHYSICAL: 34; DEMAT: 10000034 BOMBAY STOCK EXCHANGE : PHYSICAL: 84; DEMAT: 500084 NATIONAL STOCK EXCHANGE : CESC LONDON STOCK EXCHANGE : GB REGISTER: 0162869: INDIAN REGISTER: 6161097 ISIN No. INE486A01013

All listing and custodial fees to the Stock Exchanges and depositories have been paid to the respective institutions.

20 STOCK DATA Table 6 below gives the monthly high and low prices and volumes of CESC Limited’s equity shares at Bombay Stock Exchange Limited (BSE) and the National Stock Exchange Limited (NSE) for the year 2008-09. Table 6: High and Low Prices, and Trading Volumes at the BSE and NSE Month Bombay Stock Exchange (BSE) National Stock Exchange (NSE) High (Rs.) Low (Rs.) High (Rs.) Low (Rs.) April 2008 510.05 395.00 515.00 372.20 May 2008 511.90 453.00 518.80 452.15 June 2008 493.50 372.25 499.80 366.15 July 2008 398.90 309.00 397.90 305.00 August 2008 380.00 312.20 379.90 312.60 September 2008 349.60 263.00 348.00 260.00 October 2008 292.90 165.00 293.50 165.00 November 2008 235.00 171.00 238.00 187.15 December 2008 276.00 200.00 276.00 199.90 January 2009 273.40 221.00 273.80 220.05 February 2009 247.00 195.55 246.00 192.30 March 2009 222.10 180.00 221.95 183.15

Note : There has been no trading of the Company’s equity shares in the Calcutta Stock Exchange Association Ltd.

STOCK PERFORMANCE Chart ‘A’ plots the movement of CESC’s shares adjusted closing prices compared to the BSE Sensex. Chart A: Share prices of CESC Limited versus BSE Sensex for the year ended 31 March 2009

CESC vs. BSE : 2008-09

Note : BSE Sensex and CESC's share price on BSE have been indexed to 100 as on 1 April 2008.

Chart ‘B’ plots the movement of CESC’s shares adjusted closing prices compared to the NIFTY.

21 Chart B: Share prices of CESC Limited versus NSE NIFTY for the year ended 31 March 2009

CESC vs. NSE : 2008-09

Note : NSE Nifty and CESC's share price on NSE have been indexed to 100 as on 1 April 2008. SHARE TRANSFER AGENTS AND SHARE TRANSFER AND DEMAT SYSTEM CESC executes share transfers through its share transfer agents, whose details are given below: LINK INTIME INDIA PRIVATE LIMITED 59C Chowringhee Road, 3rd Floor, Kolkata – 700 020 In compliance with the SEBI circular dated 27 December, 2002, requiring share registry in terms of both physical and electronic mode to be maintained at a single point, CESC has established direct connections with National Securities Depositories Limited (NSDL) and Central Depository Services (India) Limited (CDSL), the two depositories, through its share transfer agent. Shares received in physical form are processed and the share certificates are returned within 10 to 15 days from the date of receipt, subject to the documents being complete and valid in all respects. The Company’s equity shares are under compulsory dematerialised trading. Shares held in the dematerialised form are electronically traded in the Depository. The Registrar and the Share Transfer Agent of the Company periodically receives data regarding the beneficiary holdings, so as to enable them to update their records and send all corporate communications, dividend warrants, etc. As on 31 March 2009, dematerialised shares accounted for 60.86% of total equity. Table 7 gives details about the nature of complaints and their status as on 31 March 2009. Table 7: Number and nature of complaints for the year 2008-09

Complaints Others Particulars Non- Change Non- (Non-Receipt of Receipt of of address receipt of Annual Reports/ Certificates dividend Non Receipt of Demat credit, etc.) Total

Received during the year 15 2 15 30 62

Attended during the year 15 2 15 30 62

Pending as on 31 March 2009 Nil Nil Nil Nil Nil

22 SHAREHOLDING PATTERN Tables 8 and 9 give the pattern of shareholding by ownership and share class respectively. Table 8 : Pattern of shareholding by ownership as on 31 March 2009 Category As on 31 March, 2009 Total No. of shares Percentage 1. Management Group / Families 65576642 52.49 2. Institutional Investors a. Mutual Funds and UTI 15617955 12.50 b. Banks, Financial Institutions, Insurance Companies 6366540 5.10 c. FIIs 24057049 19.25 Total 46041544 36.85 3. Others a. Private Corporate Bodies 6492467 5.20 b. Indian Public 4584239 3.67 c. NRIs / OCBs 2239833 1.79 d. Directors & Relatives (not in control of the Company) 1200 0.00

Total 13317739 10.66 Grand Total 124935925 100.00

Table 9: Pattern of shareholding by share class as on 31 March 2009

Shareholding Class No of shareholders No of shares held Shareholding %

upto 2,500 34260 4374207 3.50 2,501 to 5,000 152 532347 0.43 5,001 to 10,000 87 628524 0.50 10,001 to 20,000 49 711496 0.57 20,001 to 30,000 21 509444 0.40 30,001 to 40,000 17 611840 0.49 40,001 to 50,000 9 410760 0.33 50,001 to 1,00,000 25 1883328 1.51 100,001 and above 118 115273979 92.27

Total 34738 124935925 100.00

PLANT LOCATIONS CESC’s generating stations are located in Budge Budge, New Cossipore, Southern and Titagarh in and around the city of Kolkata. The details of other offices of the Company are mentioned elsewhere in the Annual Report.

23 INVESTOR CORRESPONDENCE ADDRESS At the Company’s Registered Office Address At the Registrar’s Address Secretarial Department LINK INTIME INDIA PRIVATE LIMITED CESC LTD. 59C Chowringhee Road, 3rd Floor CESC House Kolkata – 700 020 Chowringhee Square Kolkata – 700 001 Tel No.: 22890540 Tel No.: 22040754 Fax No.: 22890539 Fax No.: 22363868 E-mail: [email protected] E-mail : [email protected] Website: www.linkintime.co.in

COMPLIANCE OFFICER FOR INVESTOR REDRESSAL For the convenience of UK based shareholders, the Company also has UK Registrars: Computershare Investor Services plc., P.O. Box 82, The Pavilions, Bridgwater Road, Bristol BS99 7NH, Telephone : 0870 703 6300, Fax : 0870 703 6114. Website: www.computershare.com COMPLIANCE OFFICER FOR INVESTOR REDRESSAL Mr Subhasis Mitra, Vice President & Company Secretary, is the Compliance Officer for investor related matters. TRANSFER OF UNCLAIMED DIVIDEND TO INVESTOR EDUCATION AND PROTECTION FUND (IEPF) The due dates on which unclaimed dividends lying in the unpaid dividend accounts of the Company would be credited to the IEPF are stated in the table below. Investors are requested to claim their unclaimed dividends before these due dates. Pursuant to Section 205C of the Companies Act, 1956 and the Investor Education And Protection Fund (IEPF) (Awareness and Protection of Investors) Rules, 2001, the following amounts being the unclaimed dividend for the respective years will be credited to the IEPF.

Year Date of payment Due date for credit to IEPF 2004-05 1 August 2005 30 August 2012 2005-06 24 July 2006 22 August 2013 2006-07 1 August 2007 30 August 2014 2007-08 1 August 2008 30 August 2015

On behalf of the Board of Directors

R.P. Goenka Kolkata, 22nd May, 2009 Chairman

DECLARATION As required under the relevant provisions of the Listing Agreement entered into by the Company with the Stock Exchanges, it is confirmed that all the Directors and Senior Management Officers have affirmed compliance of the Code of Business Conduct and Ethics during the year 2008-09.

S. Banerjee Kolkata, 22nd May, 2009 Managing Director

24 Auditors’ Certificate regarding compliance of conditions of Corporate Governance To the Members of CESC Limited We have examined the compliance of conditions of Corporate Governance by CESC Limited, for the year ended 31st March 2009, as stipulated in Clause 49 of the Listing Agreements of the said Company with the stock exchanges in India. The compliance of conditions of Corporate Governance is the responsibility of the Company’s management. Our examination was carried out in accordance with the Guidance Note on Certification of Corporate Governance (as stipulated in Clause 49 of the Listing Agreements), issued by the Institute of Chartered Accountants of India and was limited to procedures and implementation thereof, adopted by the Company for ensuring the compliance of the conditions of Corporate Governance. It is neither an audit nor an expression of opinion on the financial statements of the Company. In our opinion and to the best of our information and according to the explanations given to us, we certify that the Company has complied with the conditions of Corporate Governance as stipulated in the above mentioned Listing Agreements. We state that such compliance is neither an assurance as to the future viability of the Company nor the efficiency or effectiveness with which the management has conducted the affairs of the Company.

Prabal Kr. Sarkar Partner Membership No. 52340 For and on behalf of Place : Kolkata LOVELOCK & LEWES Date : 22nd May, 2009 Chartered Accountants

25 PARTICULARS AS REQUIRED UNDER SECTION 217(1)(e) OF THE COMPANIES ACT, 1956 (Annexure ‘C’ to Directors’ Report )

Particulars relating to Conservation of Energy, Technology Absorbtion etc. for the year ended 31 March 2009. A. Conservation of Energy 1. Energy conservation measures taken – i) Minimising the component of transmission and i) Installation of Capacitor Banks at all voltage levels distribution losses arising on account of change in in transmission and distribution system. These load mix with a bias towards the low and medium include 50 MVAR at 132 KV, 15 MVAR at 33 KV voltage supplies. and 20 MVAR at 6 & 11 KV installed during the ii) Reduction in safety hazards and improved year. operational flexibility.

ii) Progressive changeover of DC supplies to AC for B. Technology Absorption medium / low voltage consumers. i) Condition Monitoring of 132 kV Cable was carried out iii) Augmentation / reorganization of power distribution on an experimental basis with definite results. The network so as to relieve the loaded section by same will be taken up for all critical components in the installing new plant & equipment. system. iv) Replacement of age-old rectifier transformers by ii) Introduction of Gas Insulated Ring Main Units in HV smaller capacity transformers with bridge rectifiers, Distribution System on a large scale achieving reduced commensurate with the declining DC load. During interruptions in the event of an outage. the year DC plant of an aggregate capacity of 2.70 iii) Automated Meter Reading of Distribution Transformers MW was removed. for energy audit. v) Installation of energy efficient lamps and luminaires. Altogether, 875 nos. energy efficient lamps & Benefits Derived fittings were installed at the Company’s offices Improved utilization of material and manpower, replacing old ones with electromagnetic chokes reduction in safety hazards and down time and better and poor reflectors leading to a saving of about consumer services. 2600 KWH (units) per month. Research & Development vi) Upgrading primary distribution voltage from 6 kV R&D activities were oriented towards improvements to 11 kV progressively. During the year 126 Nos. in various operational functions. existing LT Transformers were changed over to 11 KV System, representing 40 MVA approx. C. Foreign Exchange Earnings and outgo There has been a foreign exchange earning during the year 2. Additional investment / proposals – of Rs. 11.42 crore for carbon credit. The foreign exchange i) Commissioning a new 132/33 KV Substation at outgo during the year amounted to Rs. 261.30 crore which Dum Dum towards augmentation of network and included repayment of principal and finance charges on reliability of supply. foreign currency loans, fuel charges, dividend to non-resident ii) Commissioning a new 132/33 KV Receiving Station shareholders, fees to UK Registrars, London and Luxembourg at Rishra for import of additional power to meet Stock Exchange fees, technical service fees, travelling growing system demand. expenses etc. iii) Replacement of obsolete & hazardous bulk oil 33 KV switchboard at Princep Street Rec. Station by ‘state of the art’ GIS switchboard. iv) Introducing ‘Automated Meter Reading’ (AMR) for HV / EHV bulk consumers. On behalf of the Board of Directors

3. Impact of the measures –

Impact of the measures as outlined under items 1 & 2 R.P. Goenka above may be set out as follows: Kolkata, 22nd May, 2009 Chairman

26 Auditors’ Report

TO THE SHAREHOLDERS OF CESC LIMITED

1. We report that we have audited the attached Balance Sheet ii. In our opinion, proper books of account, as required by of CESC Limited as at 31st March 2009 and the related Profit law, have been kept by the Company so far as appears and Loss Account and Cash Flow Statement for the year from our examination of those books. ended on that date annexed thereto, all of which we have iii. The Balance Sheet, Profit and Loss Account and Cash signed under reference to this report. These financial Flow Statement dealt with by this report are in agreement statements are the responsibility of the Company’s with the books of account. management. Our responsibility is to express an opinion on these financial statements based on our audit. iv. In our opinion, the Balance Sheet and Profit and Loss Account and Cash Flow Statement dealt with by this 2. We conducted our audit in accordance with auditing standards report comply with the requirements of the accounting generally accepted in India. Those standards require that we standards referred to in sub-section (3C) of Section 211 plan and perform the audit to obtain reasonable assurance of ‘The Act’ about whether the financial statements are free of material misstatements. An audit includes examining, on a test basis, v. On the basis of written representations received from evidence supporting the amounts and disclosures in the the directors as at 31st March 2009, which have been financial statements. An audit also includes assessing the taken on record by the Board of Directors, we report that accounting principles used and significant estimates made none of the directors of the Company is disqualified as by the management, as well as evaluating the overall financial at 31st March 2009 from being appointed as a director statement presentation. We believe that our audit provides a in terms of clause (g) of sub-section (1) of Section 274 reasonable basis for our opinion. of ‘The Act’.

3. As required by the Companies (Auditor’s Report) Order, vi. In our opinion and to the best of our information and 2003 as amended by the Companies (Auditors’ Report) according to the explanations given to us, the Balance (Amendment) Order, 2004, issued by the Central Government Sheet, Profit and Loss Account and Cash Flow Statement of India in terms of sub-section (4A) of Section 227 of the together with the notes thereon and attached thereto, give Companies Act, 1956 of India (‘The Act’) and on the basis of the information required by ‘The Act’ in the manner so such checks of the books and records of the Company as we required and give a true and fair view in conformity with considered appropriate and according to the information and the accounting principles generally accepted in India: explanations given to us during the course of our audit, we give in the attached Annexure, a statement on matters a. in case of the Balance Sheet, of the state of the specified in paragraphs 4 and 5 of the said Order. affairs of the Company as at 31st March, 2009;

4. Further to our comments in the Annexure referred to in b. in case of the Profit & Loss Account, of the profit for paragraph 3 above, we report that : the year ended on that date; and

i. We have obtained all the information and explanations, c. in case of the Cash Flow Statement, of the cash which, to the best of our knowledge and belief, were flows for the year ended on that date. necessary for the purposes of the audit.

Prabal Kr. Sarkar Partner Membership No.: 52340 For and on behalf of LOVELOCK & LEWES Kolkata, 22nd May, 2009 Chartered Accountants

27 Annexure to the Auditors’ Report

[Referred to in Paragraph 3 of our report of even date to the members of CESC Limited on the financial statements for the year ended 31st March 2009]

1. (a) The Company is maintaining proper records showing full 4. In our opinion and according to the information and explanations particulars including quantitative details and situation of given to us, there is an adequate internal control system fixed assets. commensurate with the size of the Company and the nature of its business for purchase of inventory, fixed assets and for sale (b) The fixed assets of the Company, except those in the of energy / services. Further, on the basis of our examination of transmission and distribution system for which, we have the books and records of the Company, and according to the been informed that, physical verification is not practicable, information and explanations given to us, we have neither come have been physically verified by the management according across nor have been informed of any continuing failure to to a phased programme designed to cover all items over correct major weaknesses in the aforesaid internal control a period of three years, which in our opinion is reasonable system. having regard to the size of the company and nature of its assets. Pursuant to the programme, a portion of the fixed 5. In our opinion and according to the information and explanations assets have been physically verified by the management given to us, there are no contracts or arrangements referred to during the year and no material discrepancies between in Section 301 of ‘The Act’ that need to be entered into the book records and physical inventory have been noticed. register required to be maintained under that section.

(c) In our opinion and according to the information and 6. In our opinion and according to the information and explanations explanations given to us, a substantial part of fixed assets given to us, the Company has complied with the provisions of has not been disposed off by the Company during the year. Sections 58A and 58AA of ‘The Act’ and the Companies (Acceptance of Deposits) Rules, 1975 with regard to the deposits 2. (a) The inventories (excluding inventories in transit) have accepted from the public. According to the information and been physically verified by the management during the explanations given to us, no order under the aforesaid Sections year. In respect of inventories in transit, these were verified has been passed by the Company Law Board on the Company. with reference to subsequent receipts. In our opinion, the frequency of verification is reasonable. 7. In our opinion, the Company has an internal audit system commensurate with its size and nature of its business. (b) In our opinion and according to the information and explanations given to us, the procedures of physical 8. We have broadly reviewed the books of account maintained by verification of inventory followed by the management are the Company in respect of product where, pursuant to the Rules reasonable and adequate in relation to the size of the made by the Central Government of India, the maintenance of Company and the nature of its business. cost records has been prescribed under clause (d) of sub- section (1) of Section 209 of ‘The Act’ and are of the opinion that (c) On the basis of our examination of the inventory records, prima facie, the prescribed accounts and records have been in our opinion, the Company is maintaining proper records made and maintained. We have not, however, made a detailed of inventory. The discrepancies noticed on physical examination of the records with a view to determine whether verification of inventory as compared to book records were they are accurate or complete. not material. 9. (a) According to the information and explanations given to us 3. (a) The Company has not granted any loan, secured or and the records of the Company examined by us, in our unsecured, to companies, firms or other parties covered in opinion, the Company is regular in depositing the undisputed the register maintained under Section 301 of ‘The Act’. statutory dues including provident fund, investor education and protection fund, employees’ state insurance, income- (b) The Company has not taken any loan, secured or tax, sales-tax, wealth tax, service tax, customs duty and unsecured, from companies, firms or other parties covered other material statutory dues, as applicable, with the in the register maintained under Section 301 of ‘The Act’. appropriate authorities.

28 (b) According to the information and explanations given to us 15. In our opinion, and according to the information and explanations and the records of the Company examined by us, the given to us, the Company has not given any guarantee for loans particulars of dues as at 31st March 2009 which have not taken by others from banks or financial institutions during the been deposited on account of a dispute, are as follows – year.

Name of the Nature of dues Amount Forum where statute (Rs.’Crores) dispute is pending 16. In our opinion, and according to the information and explanations given to us, on an overall basis, the term loans have been West Bengal Sales tax on 0.30 Hon’ble High Sales Tax Act, meter rentals Court at Calcutta applied for the purposes for which they were obtained. 1994

Water (Prevention Water Cess and 11.16 Hon’ble High 17. On the basis of an overall examination of the balance sheet and Control of interest thereon Court at Calcutta of the Company, in our opinion and according to the information Pollution) Cess and explanations given to us, there are no funds raised on a Act, 1977 short-term basis which have been used for long-term Same as above Same as above 0.31 West Bengal investment. Pollution Control Board – Appellate Committee 18. The Company has not made any preferential allotment of shares to parties and companies covered in the register 10. The Company has no accumulated losses as at 31st March maintained under Section 301 of ‘The Act’ during the year. 2009 and it has not incurred any cash losses in the financial year ended on that date or in the immediately preceding financial 19. The Company has not issued any debentures during the year year. and accordingly the question of creation of security or charge does not arise. 11. According to the records of the Company examined by us and the information and explanations given to us, during the year the 20. The management has disclosed the end use of monies raised Company has not defaulted in repayment of dues to any by public issue (refer Note 8 (a) in Schedule 13) and the same financial institution or bank or debenture holders as at the has been verified by us. balance sheet date.

12. The Company has not granted any loans and advances on the 21. During the course of our examination of the books and records basis of security by way of pledge of shares, debentures and of the Company, carried out in accordance with the generally other securities. accepted auditing practices in India, and according to the information and explanations given to us, we have neither come 13. The provisions of any special statute applicable to chit fund / across any instance of fraud on or by the Company, noticed or nidhi / mutual benefit fund / societies are not applicable to the reported during the year, nor have we been informed of such Company. case by the management except in cases of theft of electricity 14. In our opinion, the Company is not a dealer or trader in shares, reported by the loss control cell of the Company the amount for securities, debentures and other investments. which is not ascertainable.

Prabal Kr. Sarkar Partner Membership No.: 52340 For and on behalf of LOVELOCK & LEWES Kolkata, 22nd May, 2009 Chartered Accountants

29 Balance Sheet as at 31st March, 2009

Rs. in Crore Schedule As at 31st As at 31st No. March, 2009 March, 2008 I. SOURCES OF FUNDS Shareholders’ Funds Share Capital 1 125.60 125.60 Reserves and Surplus 2 4,757.29 4,460.88 4,882.89 4,586.48 Loan Funds Secured Loans 3 2,189.82 1,510.61 Unsecured Loans 4 208.29 118.17 2,398.11 1,628.78 Consumers’ Security Deposits 821.18 742.18 Deferred Tax Liability 416.53 302.99 (Note 17, Schedule 13) Less : Recoverable 416.53 302.99 – – Advance against Depreciation 337.63 197.95 (Note 3, Schedule 13) 8,439.81 7,155.39 II. APPLICATION OF FUNDS Fixed Assets 5 Gross Block 9,428.87 8,743.53 Less : Depreciation 3,826.09 3,533.92 Net Block 5,602.78 5,209.61 Capital Work-in-Progress 1,279.63 619.55 6,882.41 5,829.16 Investments 6 310.43 569.69 Current Assets, Loans and Advances 7 Inventories 211.96 176.21 Sundry Debtors 388.87 315.15 Cash and Bank Balances 1,251.03 986.44 Loans and Advances 1,032.67 455.14 Deferred Payments 42.22 28.70 2,926.75 1,961.64 Less : Current Liabilities and Provisions 8 Current Liabilities 1,564.53 1,093.11 Provisions 123.11 120.57 1,687.64 1,213.68 Net Current Assets 1,239.11 747.96 Miscellaneous Expenditure to the extent not written off or adjusted 9 7.86 8.58 8,439.81 7,155.39 NOTES ON ACCOUNTS 13 Schedules referred to above form an integral part of the Balance Sheet.

This is the Balance Sheet referred to in our Report of even date. Prabal Kr. Sarkar Partner Membership No. : 52340 For and on behalf of For and on behalf of the Board of Directors LOVELOCK & LEWES Chairman R. P. Goenka Chartered Accountants Subhasis Mitra Director P. K. Khaitan Kolkata, 22nd May, 2009 Vice President & Company Secretary Managing Director S. Banerjee

30 Profit and Loss Account for the year ended 31st March, 2009

Rs. in Crore Schedule No. 2008-09 2007-08 INCOME Earnings from sale of Electricity 3,031.32 2,774.97 Other Income 10 168.27 155.37

3,199.59 2,930.34 EXPENDITURE Cost of Electrical Energy purchased 412.46 378.27 Generation, Distribution, Administration and Other Expenses 11 2,006.40 1,844.40 Interest 12 140.96 136.31 Depreciation 174.90 168.45

2,734.72 2,527.43

Profit before Taxation and Other Appropriation 464.87 402.91 Provision for Taxation – Current (52.68) (45.50) – Fringe Benefit Tax (2.50) (2.05) – Deferred Tax (net) (113.54) (189.96) Recoverable / (Payable) 113.54 – 189.96

Profit after Taxation 409.69 355.36 Profit brought forward from previous year 135.14 52.02 Transfer (to) / from Reserve for unforeseen exigencies (15.58) (12.89) Debenture Redemption Reserve 5.13 (0.88) General Reserve (350.00) (200.00)

Proposed dividend on Equity Shares (49.97) (49.97) Tax on proposed dividend (8.50) (8.50)

Carried forward to Balance Sheet 125.91 135.14

Earnings per equity share (in Rupees) (Face value of Rs. 10 per share) Basic & Diluted 32.79 30.05 (Note 18, Schedule 13)

NOTES ON ACCOUNTS 13 Schedules referred to above form an integral part of the Profit and Loss Account.

This is the Profit and Loss Account referred to in our Report of even date. Prabal Kr. Sarkar Partner Membership No. : 52340 For and on behalf of For and on behalf of the Board of Directors LOVELOCK & LEWES Chairman R. P. Goenka Chartered Accountants Subhasis Mitra Director P. K. Khaitan Kolkata, 22nd May, 2009 Vice President & Company Secretary Managing Director S. Banerjee

31 Schedules to the Accounts

Rs. in Crore As at 31st As at 31st March, 2009 March, 2008 SCHEDULE 1 – SHARE CAPITAL AUTHORISED CAPITAL 15,00,00,000 Equity Shares of Rs. 10 each 150.00 150.00 150.00 150.00 ISSUED CAPITAL 13,12,35,897 Equity Shares of Rs. 10 each 131.24 131.24

131.24 131.24 SUBSCRIBED AND PAID UP CAPITAL 12,49,35,925 Equity Shares of Rs. 10 each 124.94 124.94 Add : Forfeited Shares (amount originally paid-up) 0.66 0.66 125.60 125.60 Notes :

1. 71,94,951 Equity Shares of Rs. 10 each were allotted on 7 April, 1979 as fully paid to the stockholders of The Calcutta Electric Supply Corporation Limited, the erstwhile sterling company, in terms of a Scheme of Arrangement and Amalgamation approved by the Hon’ble High Courts at Calcutta and London pursuant to which the undertaking and the assets, liabilities, reserves and surplus of the said sterling company were transferred to this Company.

2. 3,10,58,414 Equity Shares of Rs. 10 each were allotted as fully paid-up on 12 October, 2007 prusuant to a Scheme of Amalgamation sanctioned by the Hon’ble High Court at Calcutta.

SCHEDULE 2 – RESERVES AND SURPLUS Capital contribution from consumers as at beginning of the year 400.82 340.82 Add : Contributions during the year 68.96 60.00 469.78 400.82 Capital Redemption Reserve 20.13 20.13 Share Premium Account as at beginning of the year 1,254.85 673.60 Add : Addition during the year – 581.25 1,254.85 1,254.85 Revaluation Reserve as at beginning of the year 1,614.32 1,821.76 Less : Withdrawal on account of depreciation on amount added on revaluation 122.45 203.48 1,491.87 1,618.28 Less : Withdrawal of the residual amount added on revaluation consequent to sale/disposal of revalued assets 1.32 3.96 1,490.55 1,614.32

Reserve for unforeseen exigencies as at beginning of the year 25.14 12.25 Add : Transfer from Profit and Loss Account 15.58 12.89 40.72 25.14 Debenture Redemption Reserve as at beginning of the year 5.13 4.25 Add : Transfer (to) / from Profit and Loss Account (5.13) 0.88 – 5.13 General Reserve as at beginning of the year 1,005.35 805.35 Add : Transfer from Profit and Loss Account 350.00 200.00 1,355.35 1,005.35 Add : Adjustments (Rs. 23,000) consequent to recomputation as of 1.4.2007 of liability for defined benefit plans in accordance with AS-15 (Revised) Employee Benefits (Net of related tax Rs. 7,742) – 0.00 1,355.35 1,005.35

Surplus as per Profit and Loss Account 125.91 135.14

4,757.29 4,460.88

32 Schedules to the Accounts (Contd.)

Rs. in Crore As at 31st As at 31st March, 2009 March, 2008

SCHEDULE 3 – SECURED LOANS I. Debentures Non-Convertible Debentures of Rs. 1,00,00,000 each allotted on 1 February, 2004 – 43.00

– 43.00 II. Term Loans A. Rupee Loans : (i) Banks 1,044.20 363.49 (ii) Financial and other Institutions 583.93 540.13 1,628.13 903.62 B. Foreign Currency Loans : (i) Standard Chartered Bank 61.12 130.06 (ii) ICICI Bank Limited 400.28 214.18 461.40 344.24 III. Facilities from Banks : (i) Overdraft 100.29 204.75 (ii) Others – 15.00 100.29 219.75

2,189.82 1,510.61 Notes :

1. The term loans and facilities from banks in II and III above are secured by equitable mortgage / hypothecation of all fixed assets of the Company including its land, buildings and all construction thereon and plant and machinery etc. and hypothecation of the Company's current assets comprising stock of stores, coal and other consumables, book debts, monies receivable and bank balances. However, creation of mortgage security in respect of one Rupee Loan of Rs. 42 crore is in process.

2. The security for the term loans in II above ranks pari passu inter se while the security in respect of facilities from banks in III above ranks pari passu amongst the said banks.

3. The ranking of the above security created by way of equitable mortgage / hypothecation is as follows

On Prior Charge Subservient Charge

Fixed Assets Term Loans in II above Facilities from Banks in III above Current Assets Facilities from Banks in III above Term Loans in II above

4. The debentures in I above have been fully redeemed during the year.

SCHEDULE 4 – UNSECURED LOANS (a) Public Deposits – 0.54

(b) Facilities from Banks (i) Short term loans / Overdraft 137.55 55.69 (ii) Others – 6.79

(c) Floating Rate Notes 70.74 55.15 (US$ 13.75 million repayable in year 2012-13) 208.29 118.17

33 – 7.15 3.77 3.34 0.21 2008 As at 25.94 66.23 13.96 205.12 165.68 345.25 827.83 1,602.84 1,942.29 5,209.61 31st March, Rs. in Crore NET BLOCK – 150.00 – 828.12 5.96 6.34 1.79 3.09 4.45 0.11 2009 2009 As at As at 13.46 2.44 26.48 40.89 57.14 176.09 12.29 12.51 20.40 343.53 192.59 215.99 189.01 62.00 1,268.56 1,748.16 2,033.96 2,013.51 3,533.92 5,209.61 3,826.09 5,602.78 31st March, 31st March, DEPRECIATION Adjustments Adjustments ––– ––– 4.35 0.10 – 4.63 1.75 0.42 1.54 0.25 – 2008 As at 10.63 2.83 – 24.32 2.71 0.55 52.94 4.20 – 11.37 0.92 – 18.67 1.73 – 178.81 16.17 2.39 184.78 4.23 – 1st April, Additions/ Withdrawals/ 1,163.57 105.97 0.98 1,878.31 156.49 0.84 3,179.49 371.93 17.50 3,533.92 297.35 5.18 4.56 4.88 2009 As at 12.30 15.90 67.37 24.80 150.00 408.58 251.01 233.23 828.12 363.93 3,016.72 4,047.47 8,743.53 9,428.87 31st March, (Contd.)

1.50 – 150.00 – Adjustments Adjustments GROSS BLOCK AT COST OR VALUATION 4.56 – – 4.88 – – 2008 As at 11.78 1.07 0.55 50.26 17.75 0.64 383.93 28.15 3.50 251.01 – – 218.62 14.61 – 363.92 0.01 – 827.83 0.29 – 2,766.41 251.88 1.57 3,820.60 228.37 1.50 8,469.58 301.95 28.00 8,743.53 693.63 8.29 Freehold Leasehold Freehold Leasehold 25.33 – 0.53 Leasehold Freehold SCHEDULE 5 – FIXED ASSETS Railway Sidings Vehicles Trademarks* – Software 14.40 Furniture, fittings and office equipments Meters and Other Apparatus on Consumers’ Premises River Tunnel Transmission and Distribution System * Acquired on 31 March 2009 Plant and Machinery Previous Year PARTICULARS 1st April, Additions/ Withdrawals/ Buildings and Structures Land Schedules to the Accounts

34 Schedules to the Accounts (Contd.)

Rs. in Crore As at 31st As at 31st March, 2009 March, 2008 SCHEDULE 6 – INVESTMENTS LONG TERM – Unquoted Trade 13,000 Equity Shares of Integrated Coal Mining Ltd. of Rs. 10 each, fully paid 0.01 0.01 3,00,00,000 1% Cumulative Optionally Convertible Redeemable Preference Shares of Integrated Coal Mining Limited of Rs. 10 each, fully paid 30.00 30.00

Other than Trade Subsidiary Companies 2,46,38,103 Equity Shares of Spencer's Retail Limited of Rs. 10 each, fully paid 40.80 40.80 50,000 Equity Shares of CESC Properties Limited of Rs. 10 each, fully paid 0.05 0.05 2,10,003 Equity Shares of Haldia Energy Limited of Rs. 10 each, fully paid 0.31 – Others 5,000 Equity Shares of Mahuagarhi Coal Company Private Limited of Rs. 10 each, fully paid 0.01 – 79,00,000 Equity Shares of Crescent Power Limited of Rs. 10 each, fully paid 7.90 – 12,685.585 Units of UTI-Floating Rate Fund of Rs. 1000 each fully paid (Market value 31.03.09 - Rs. 1.81 crore, 31.03.08 - Rs. 1.65 crore) 1.35 1.35

Current – Unquoted (fully paid) 10,00,00,000 units of Rs. 10 each of ICICI Prudential FMP Series 39 - 6 Months Plan C – 100.00 2,02,52,732.61 units of Rs. 10 each of ICICI Prudential FMP Series 39 - 3 Months Plan C – 20.25 7,00,00,000 units of Rs. 10 each of ICICI Prudential FMP Series 39 - 16 Weeks Plan A – 70.00 10,02,37,340.50 units of Rs. 10.0027 each of Reliance Interval Fund - Quarterly Plan - Series I – 100.26 9,99,40,717.34 units of Rs. 10.0277 each of HDFC Quarterly Interval Fund - Plan B – 100.22 7,62,34,138.46 units of Rs. 10 each of Kotak Quarterly Interval Plan Series -5 – 76.23 3,05,14,946.32 units of Rs. 10.0167 each of Birla Sun Life Quarterly Interval - Series 5 – 30.52 2,33,44,414.149 units of Rs. 10.7092 each of IDFC Cash Fund - Super Inst Plan C-Growth 25.00 – 1,72,927.507 units of Rs. 1445.3980 each of UTI Liquid Cash Plan Institutional - Growth Option 25.00 – 1,88,75,902.268 units of Rs. 13.2444 each of Reliance Liquidity Fund - Growth Option 25.00 – 1,92,50,315.705 units of Rs. 12.9868 each of ICICI Prudential Institutional Liquid Plan - Super Institutional Growth 25.00 – 1,41,55,964.757 units of Rs. 17.6604 each of HDFC Liquid Fund - Premium Plus Plan-Growth 25.00 – 1,12,18,622.9140 units of Rs. 17.8275 each of Kotak Liquid (Institutional Premium) - Growth 20.00 – 82,74,104.535 units of Rs. 12.0859 each of Religare Liquid Fund - Super Institutional Growth 10.00 – 1,77,76,260.870 units of Rs. 14.0637 each of Birla Sun Life Cash Plus - Instl. Prem. Growth 25.00 – 1,27,27,244.9587 units of Rs. 19.6429 each of SBI - Magnum Insta Cash Fund - Cash Option 25.00 – 1,53,690.345 units of Rs. 1,626.6474 each of Tata Liquid Super High Inv. Fund - Appreciation 25.00 –

310.43 569.69

35 Note : During the year the following current investments were purchased and sold : 1,06,11,32,695.443 units of IDFC Cash Fund Super Inst. Plan C Growth at a cost of Rs.1,103 crore 25,55,943.401 units of IDFC Liquid Fund Growth at a cost of Rs. 300 crore 15,26,61,922.165 units of IDFC Money Manager Investment Plan B Daily Dividend at a cost of Rs. 152.75 crore 2,50,00,000 units of IDFC Quarterly Series 36 Dividend at a cost of Rs. 25 crore 15,20,743.644 units of IDFC Liquid Fund Daily Dividend at a cost of Rs. 152.11 crore 11,39,71,507.124 units of IDFC Cash Fund Plan C Daily Dividend at a cost of Rs. 114 crore 13,42,63,830.758 units of IDFC Money Manager Treasury Plan B Daily Dividend at a cost of Rs. 135.20 crore 1,71,974.724 units of UTI Treasury Advantage Inst. Growth at a cost of Rs. 20 crore 70,95,731.765 units of UTI Liquid Cast Inst. Growth at a cost of Rs. 991 crore 20,90,695.956 units of UTI Treasury Advantage Inst. Daily Dividend at a cost of Rs. 209.11 crore 15,44,043.003 units of UTI Liquid Cash Inst. Daily Dividend at a cost of Rs. 157.41 crore 2,00,00,000 units of UTI Fixed Income Interval Fund Monthly Interval Plan Series I Inst. Dividend Plan - RI at a cost of Rs. 20 crore 7,24,68,241.27 units of Birla Sunlife Cash Plus Inst Growth at a cost of Rs. 101 crore 6,75,64,529.48 units of Birla Sunlife Savings Fund Inst Daily Dividend at a cost of Rs. 67.61 crore 13,01,231.93 units of Reliance Money Manager Fund Inst Daily Dividend at a cost of Rs. 130.2 crore 1,96,24,260.82 units of Reliance Liquid Fund Treasury Plan Inst Daily Dividend at a cost of Rs. 30 crore 15,24,28,685.549 units of Reliance Liquidity Fund Growth at a cost of Rs. 225 crore 4,70,08,386.296 units of HDFC Cash Management Fund Savings Plan Daily Dividend at a cost of Rs. 50 crore 15,16,41,121.531 units of HDFC Cash Management Fund Treasury Advantage Plan Wholesale Daily Dividend at a cost of Rs. 152.12 crore 5,45,16,728.925 units of HDFC Liquid Fund Premium Plus Growth at a cost of Rs. 95 crore 2,00,00,000 units of SBI Debt Fund Series 30 Days Growth at a cost of Rs. 20 crore 1,75,28,562.1186 units of SBI Magnum Insta Cash Fund Cash Option at a cost of Rs. 34 crore 8,22,126.913 units of Tata Liquid Fund Super High Investment Fund Appreciation at a cost of Rs. 110 crore 6,97,85,108.08 units of Tata Floater Fund Daily Dividend at a cost of Rs. 70 crore 70,00,000 Units of ICICI Interval Fund Half Yearly Inst Plan II Retail Dividend at a cost of Rs. 7 crore 7,42,25,239.755 units of ICICI Liquid Super IP Growth at a cost of Rs. 90 crore 14,18,64,094.197 units of ICICI Flexible Income Plan Premium Daily Dividend at a cost of Rs. 150 crore 7,60,13,744.875 units of Kotak Flexi Debt Scheme Daily Dividend at a cost of Rs. 76.25 crore 2,10,17,165.381 units of Kotak Liquid Inst Premium Daily Dividend at a cost of Rs. 25.70 crore 2,55,00,493.022 units of Kotak Floater Long Term Daily Dividend at a cost of Rs. 25.70 crore 3,72,48,456.517 units of Kotak Flexi Debt Scheme at a cost of Rs. 40 crore 7,70,34,936.983 units of Kotak Flexi Debt Scheme Inst Daily Dividend at a cost of Rs. 77.40 crore 70,00,000 units of Kotak FMP 3M Series at a cost of Rs. 7 crore 2,06,192.03 units of DSPBR Money Manager Fund Inst Plan Daily Dividend at a cost of Rs. 20.64 crore 5,17,028.08 units of DSPBR Money Manager Fund Inst Plan Daily Dividend at a cost of Rs. 51.70 crore 2,07,15,175.6 units of DSPBR FMP 3M Series 8 Inst Dividend at a cost of Rs. 20.71 crore 1,99,83,613.437 units of DWS Money Plus Fund Inst Daily Dividend at a cost of Rs. 20 crore 1,99,99,800.002 units of Fortis Money Plus Fund at a cost of Rs. 20 crore 3,14,54,763.738 units of Religare Ultra Short Term Fund Inst Daily Dividend at a cost of Rs. 30 crore 84,19,776.371 units of Religare Liquid Fund Super Inst Growth at a cost of Rs. 10 crore 99,96,701.089 units of Religare Liquid Fund Super Inst Daily Dividend at a cost of Rs. 10 crore

36 Schedules to the Accounts (Contd.)

Rs. in Crore As at 31st As at 31st March, 2009 March, 2008 SCHEDULE 7 – CURRENT ASSETS, LOANS AND ADVANCES (a) Inventories Stores and Spares 137.62 123.81 Fuel 74.34 52.40 211.96 176.21 (b) Sundry Debtors 1. For electricity supplied Debts outstanding for a period exceeding six months Secured – considered good 6.68 6.97 Unsecured – considered good 31.37 67.75 38.05 74.72 Unsecured – considered doubtful 5.75 7.50 43.80 82.22 Other Debts Secured – considered good 181.42 131.28 Unsecured – considered good 157.89 95.82 339.31 227.10 383.11 309.32 Less : Provision for doubtful debts 5.75 7.50 377.36 301.82 Note : Rs. 21,775 (31.3.2008 : Rs. 18,722) due by a Director of the Company on account of electricity bills; maximum amount due by a Director of the Company during the year : Rs. 25,232 (previous year – Rs. 24,237) 2. For claims and services rendered – unsecured (considered good) Debts outstanding for a period exceeding six months 8.36 3.25 Other Debts 3.15 10.08 11.51 13.33 388.87 315.15 (c) Cash and Bank Balances Cash in hand 3.80 3.14 Cheques in hand 6.54 3.97 With Scheduled Banks on : Current accounts 137.58 132.77 Dividend accounts 0.83 0.57 Deposit accounts 1,102.28 845.99 1,240.69 979.33 1,251.03 986.44 (d) Loans and Advances Unsecured – considered good Intercorporate Deposit 18.50 18.50 Advance to subsidiaries for share subscription 844.63 249.96 Advances recoverable in cash or in kind or for value to be received 115.80 134.54 (Includes Interest accrued on deposits with banks : 31.3.2009 - Rs. 20.95 crore; 31.3.2008 - Rs. 10.95 crore) Deposits with Excise, Port Trust etc. 2.83 2.34 Other Deposits 50.91 49.80 Unsecured - considered doubtful Advances recoverable in cash or in kind or for value to be received 9.00 – 1,041.67 455.14 Less : Provision for doubtful advances 9.00 – 1,032.67 455.14 (e) Deferred Payments 42.22 28.70

37 Schedules to the Accounts (Contd.)

Rs. in Crore As at 31st As at 31st March, 2009 March, 2008

SCHEDULE 8 – CURRENT LIABILITIES AND PROVISIONS (a) Current Liabilities Sundry Creditors 238.79 201.23 Other Liabilities 1,070.97 720.00 Unpaid / Unclaimed dividend 0.83 0.57 Unclaimed public deposits 1.31 1.77 Interest accrued but not due on loans and debentures 23.72 22.19

1,335.62 945.76 Consumers’ Benefit account 0.71 0.71 Liabilities on capital account 207.58 99.58 Advance payment received from consumers for capital jobs 20.62 47.06

1,564.53 1,093.11 (b) Provisions Taxation (net of advance payment of tax Rs.184.39 crore; 31.3.2008 Rs. 127.58 crore) 0.95 2.58 Retirement / Separation Benefits 63.69 59.52 Proposed dividend 49.97 49.97 Tax on proposed dividend 8.50 8.50

123.11 120.57

Notes : (i) Sundry Creditors and Liabilities on Capital Account include outstanding dues of Micro and Small Enterprises Rs. Nil (31.3.2008 - Rs. Nil) (Note 14, Schedule 13).

(ii) Unclaimed dividend and unclaimed Public Deposits do not include any amounts, due and outstanding, to be credited to Investor Education and Protection Fund.

SCHEDULE 9 – MISCELLANEOUS EXPENDITURE TO THE EXTENT NOT WRITTEN OFF OR ADJUSTED Share / Debenture / Debt issue expenses 8.58 9.30 Less : Written off during the year 0.72 0.72 7.86 8.58

7.86 8.58

38 Schedules to the Accounts (Contd.)

Rs. in Crore 2008-09 2007-08

SCHEDULE 10 – OTHER INCOME Hire of meters 38.77 34.77 Profit on sale of investments – 0.01 Income from long term trade investments 0.30 0.30 Income from current investments - other than trade 42.35 30.49 Interest on deposits (net of allocation to capital account; Rs. 18.46 crore, previous year : Rs. 25.38 crore) 52.69 27.46 (Tax deducted at source Rs. 15.07 crore; previous year : Rs. 10.73 crore) Delayed Payment Surcharge 13.79 8.95 Profit on sale of assets 1.69 26.91 Miscellaneous income 18.68 26.48

168.27 155.37

SCHEDULE 11 – GENERATION, DISTRIBUTION, ADMINISTRATION AND OTHER EXPENSES Cost of Fuel (including freight Rs. 157.61 crore; previous year – Rs. 155.09 crore) 944.72 865.76 Consumption of stores & spares 244.99 205.85 Repairs – – Building 6.50 4.57 – Plant and Machinery 38.39 31.58 – Distribution System 48.28 38.24 – Others 5.17 9.53 98.34 Salaries, wages and bonus 320.40 295.28 Contributions to provident and other funds 34.39 27.08 Employees’ welfare expenses 15.45 15.42 Insurance 6.33 6.46 Rent (including lease rent Rs. 14.39 crore; previous year : Rs. 10.99 crore) 19.47 15.99 Rates and taxes 7.80 8.05 Audit fees 0.26 0.20 Interest on consumers’ security deposits 51.74 45.53 Bad debts/advances (net of recoveries/provision Rs. 2.72 crore; previous year – Rs. 10.46 crore) 14.17 13.09 Provision for doubtful debts / advances made (Net of write back of provision - Rs. 1.75 crore) 7.25 – Cost Adjustments 269.83 257.96 Miscellaneous expenditure written off 0.72 0.72 Foreign Exchange Rate Variation 24.30 6.62 Foreign Exchange Restatement 27.78 (13.38) Miscellaneous expenses 131.36 141.99 2,219.30 1,976.54 Less : Allocated to capital & deferred payment accounts 212.90 132.14 2,006.40 1,844.40 SCHEDULE 12 – INTEREST Debentures 1.35 8.59 Fixed loans 164.31 118.19 Fixed deposits from public and others 0.01 1.37 Others 22.02 21.48 187.69 149.63 Less : Allocated to capital accounts 46.73 13.32

140.96 136.31

39 Schedules to the Accounts (Contd.)

SCHEDULE 13 – NOTES ON ACCOUNTS

1. The operations of the Company are governed by the Electricity Act, 2003 and various Regulations and/or Policies framed thereunder by the appropriate authorities. Accordingly, in preparing the financial statements the relevant provisions of the said Act, Regulations etc. have been duly considered. 2. Significant Accounting Policies (a) Accounting Convention These financial statements have been prepared to comply in all material aspects with the applicable accounting principles in India, including standards notified u/s 211(3C) of the Companies Act, 1956 and the relevant provisions of the Companies Act, 1956 and the Regulations under the Electricity Act 2003, to the extent applicable. A summary of important accounting policies which have been applied consistently except with respect to treatment of voluntary retirement cost stated in paragraph ‘k’ below are set out below. The financial statements have also been prepared in accordance with relevant presentational requirements of the Companies Act, 1956 of India. (b) Basis of Accounting The financial statements have been prepared under the historical cost convention, modified by revaluation of certain fixed assets as stated in item ‘2c’ and Note 4 below. (c) Fixed Assets Fixed Assets other than furniture and vehicles acquired upto 31st March 2005, have been adjusted for the effect of valuation made by an approved external valuer at the then current replacement cost after necessary adjustment for depreciation. Subsequent acquisition of these assets and furniture and vehicles are stated at cost of acquisition together with any incidental expenses related to acquisition and appropriate borrowing costs. In case of a project, cost also includes pre-operative expenses and where applicable, expenses during trial run after netting off of revenue earned during trial run and income arising from temporary use of funds pending utilisation. An impairment loss is recognized where applicable, when the carrying value of fixed assets of cash generating unit exceed its market value or value in use, whichever is higher. Capital Works in progress include advances made in respect of capital expenditure. Intangible Assets comprising software, expected to provide future enduring economic benefits and trade marks are stated at cost of acquisition / implementation / development less accumulated amortisation. (d) Depreciation / Amortisation In terms of applicable Regulations under the Electricity Act 2003, depreciation on fixed assets other than freehold land is provided on straight line method on a prorata basis at the rates specified therein, the basis of which is considered by the West Bengal Electricity Regulatory Commission (Commission) in determining the tariff for the year of the Company. Additional charge of depreciation for the year on increase in value arising from revaluation is recouped from Revaluation Reserve. Leasehold land is amortized over the unexpired period of the lease. Intangible assets, comprising software related expenditure, are amortised in three years and those relating to Trademarks in twenty years, based on useful life assessed by an independent valuer. (e) Leasing Lease rentals in respect of assets taken under operating lease are charged to revenue. (f) Investments Current Investments are stated at lower of cost or fair value and Long Term Investments are stated at cost. Provision is made where there is a decline, other than temporary, in the value of long term investment. (g) Inventories Inventories of stores and spares and fuel are valued at lower of cost or net realizable value. Cost is calculated on weighted average basis and comprises of expenditure incurred in the normal course of business in bringing such inventories to their location and condition. Obsolete, slow moving and defective inventories are identified at the time of physical verification of inventories and where necessary, adjustment is made for such items. (h) Foreign Currency Transactions Transactions in foreign currency are accounted for at the exchange rate prevailing on the date of transactions. Transactions remaining unsettled are translated at the exchange rate prevailing at the end of the financial year. Exchange gain or loss arising on settlement / translation is recognized in the Profit and Loss Account. The outstanding loans repayable in foreign currency are restated at the year-end exchange rate. Exchange gain or loss arising in respect of such restatement is accounted for as an income or expense with recognition of the said amount as refundable or recoverable, which will be taken into consideration in determining the Company’s future tariff in respect of the amount settled. However, foreign currency loan availed of on a fully hedged basis are accounted for in the currencies in which such loans have been fully hedged, where no exchange fluctuation is on the Company’s account in terms of the underlying contracts. (i) Sales Earnings from sale of electricity are net of discount for prompt payment of bills and do not include electricity duty payable to the State Government. They also include, as per established practice, consistently followed by the Company in the past, estimated sums recoverable from / adjustable on consumers’ account, calculated on the basis of rates approved / specified by the appropriate authorities which are reflected in the subsequent bills. In terms of the applicable regulations and tariff determination process followed by the Commission, advance against depreciation forms part of tariff. Such advance of a year is adjusted against earning from sale of electricity for inclusion in the same in subsequent years, on due adjustment by the authorities in the tariff determination process.

40 Schedules to the Accounts (Contd.)

SCHEDULE 13 – NOTES ON ACCOUNTS (Contd.)

(j) Other Income Income from hire of meters is accounted for as per the approved rates. Income from investments and deposits etc. are accounted for on accrual basis inclusive of related tax deducted at source, where applicable. Delayed payment surcharge, as a general practice, is determined and recognised on receipt of overdue payment from consumers. (k) Employee Benefits Contributions to Provident Fund and contributory Pension Fund are accounted for on accrual basis. Provident Fund contributions are made to a fund administered through duly constituted approved independent trust. The interest rate payable to the members of the trust shall not be lower than the statutory rate of interest declared by the Central Government under the Employees Provident Funds and Miscellaneous Provisions Act, 1952 and shortfall, if any, is made good by the Company. The Company, as per its schemes, extend employee benefits current and/or post retirement, which are accounted for on accrual basis, which includes actuarial valuation as at the balance sheet date in respect of gratuity, leave encashment and certain medical benefits, to the extent applicable, made by independent actuaries. Actuarial gains and losses, where applicable, are recognised in the Profit and Loss Account. Compensation paid during the year in respect of voluntary retirement scheme is being amortized in two equal annual instalments. Hitherto, such payments were used to be amortized in three equal annual instalments. The change is in accordance with the requirements of Accounting Standard 15, “Employee Benefits” and the resultant impact on the profit and net asset of the Company is not material. (l) Miscellaneous expenditure to the extent not written off or adjusted The erstwhile governing statute for the Company, viz., the Electricity (Supply) Act, 1948 (ESA), provided for amortisation of preliminary expenses and certain capital issue expenses over the unexpired period of licence. The Company, as per the consistently applied accounting policy continues with such amortisation of expenditure incurred upto the year 2004-05. Thereafter, pursuant to repeal of ESA, such expenditures are charged off to revenue. (m) Borrowing Costs Borrowing Costs attributable to acquisition and / or construction of qualifying assets are capitalized as a part of cost of such assets upto the date where such assets are ready for their intended use. Other borrowing costs are charged to revenue. (n) Deferred Taxation Provision for deferred taxation is made using liability method at the current rates of taxation on all timing differences to the extent it is probable that a liability or asset will crystallize. Deferred tax assets are recognized subject to the consideration of prudence and are periodically reviewed to reassess realization thereof. Carry forward unabsorbed depreciation as per assessment orders / returns filed has been recognised to the extent of deferred tax liability. Deferred Tax liability or asset will give rise to actual tax payable or recoverable at the time of reversal thereof. Since tax on profits forms part of chargeable expenditure under the applicable regulations, deferred tax liability or asset is recoverable or payable through future tariff. Hence, recognition of deferred tax asset or liability is made with corresponding provision of liability or asset, as the case may be. 3. Earnings from sale of electricity are determined in accordance with the relevant orders of the Commission, where appropriate, giving due effect of the required adjustments including those relating to recovery of arrears in respect of earlier years which resulted in a net credit adjustment of Rs. 74.56 crore in the current year. Such earnings are net of discount for prompt payment of bills and advance against depreciation amounting to Rs.56.91 crore (previous year : Rs.53.93 crore) and Rs.139.68 crore (previous year : Rs.97.47 crore) respectively. 4. Fixed assets other than furniture, vehicles and intangible assets as on 31 March 2005 have been revalued which resulted in an increase in the value of such assets by an amount of Rs.1900.77 crore with corresponding credit to Revaluation Reserve. 5. Estimated amount of contracts remaining to be executed on capital account and not provided for is Rs. 279.74 crore (31 March, 2008: Rs.835.48 crore). 6. Claims against the Company not acknowledged as debts:- (a) The West Bengal Taxation Tribunal had held meter rentals received by the Company from consumers to be deemed sales under the provisions of the Bengal Finance (Sales Tax) Act, 1941 and that sales tax was payable on such rentals. Based on such findings the Commercial Taxes Directorate assessed Rs.0.69 crore as sales tax on meter rentals received during the year ended 31st March, 1993 and raised a demand of Rs.0.36 crore on account of interest. Against the above demand, the Company had deposited a sum of Rs.0.75 crore with the sales tax authorities and obtained a stay against the balance demand from the Deputy Commissioner of Commercial Taxes. The sales tax authorities also indicated their intention to levy such sales tax on meter rentals for the subsequent years as well, against which, the Company filed a writ petition in the and prayed for an interim order, inter alia, restraining the sales tax authorities from proceeding with the assessment for the subsequent years till disposal of the appeal. An interim order has been issued by the High Court permitting the sales tax authorities to carry out assessments but restraining them from serving any assessment order on the Company. The disposal of the case is still pending. (b) Other matters : i. Municipal Tax : Rs.1.11 crore (31 March, 2008: Rs.0.78 crore) in respect of certain properties, the rates of which are disputed by the Company. ii. Income Tax : Rs.0.61 crore (31 March, 2008: Rs.0.61 crore) towards advance tax not admitted by authorities. iii. Water Cess : Rs. 8.13 crore (31 March, 2008 : Rs. Nil) in respect of interest on water cess disputed by the Company. 7. Capital works-in-progress include a sum of Rs. 1017.07 crore (31 March, 2008 : Rs. 407.59 crore) towards expenditure incurred in respect of the 250 MW thermal power project at Budge Budge, before netting off a sum of Rs. 68.08 crore (31 March, 2008 : Rs. 51.34 crore) relating to income attributable to the Company’s contribution to the project and an amount of Rs.18.37 crore (31 March, 2008 : Rs 70.68 crore) on account of advances made for capital expenditure.

41 Schedules to the Accounts (Contd.)

SCHEDULE 13 – NOTES ON ACCOUNTS (Contd.) 8. (a) The net issue proceeds of Global Depository Receipts made in 2005-06, have been utilised for the 250 MW thermal power project at Budge Budge. Out of the net proceeds of 95,60,000 equity shares allotted in 2007-08 to Qualified Institutional Buyers in accordance with Chapter XIII A of SEBI (DIP) Guidelines 2000, as amended, a sum of Rs. 232.76 crore stands placed as deposits with scheduled banks/investments with Mutual Funds included under Cash and Bank balances and Investments respectively after utilisation of the balance proceeds for strengthening the Company’s distribution network and for making an equity contribution in Haldia Energy Limited, a wholly owned subsidiary of the Company for the purpose of setting up a 600 MW generating facility in Haldia, aggregating to Rs.340.79 crore. (b) Amount lying in deposit accounts with scheduled banks as at 31st March 2009 includes Rs. 27.19 crore (31st March, 2008 : Rs. 12.25 crore) appropriated upto the previous year towards Reserve for unforeseen exigencies and interest attributable thereto. 9. The Company has accounted for in the current year a net sum of Rs. 269.83 crore (previous year : Rs. 257.96 crore) shown as cost adjustments in schedule 11 to the Profit & Loss account, based on the Company’s understanding of the applicable regulatory provisions in respect thereof, towards an estimated adjustable sum on account of cost of electrical energy purchased and fuel and related cost and adjustment relating to revenue account after giving the effect arising from the applicable orders for earlier years in this regard. The accurate quantification and disposal of the matter are being given effect to from time to time on receipt of necessary directions from the appropriate authorities. 10. Interest expenses and discounting charges in Schedule 12 and cost of fuel in Schedule 11 include loss of Rs. 0.02 crore, Rs. NIL and Rs. 9.76 crore respectively (previous year: gain of Rs. 0.15 crore, Rs. 3.57 crore and Rs. Nil respectively) due to exchange fluctuations. Miscellaneous Expenses in Schedule 11 include Borrowing Cost other than interest, amounting to Rs.3.62 crore (31 March, 2008 : Rs. 6.90 crore), which has been allocated to capital account. 11. Generation at the Company’s plant at Mulajore was discontinued in the year 2003-04 in view of its unviable cost of generation, pollution related issues and the observations of the Supreme Court of India. Necessary permissions from the appropriate authorities had been obtained for permanent closure of the establishment and disposal of the discarded assets. Such disposal had taken place during the previous year, which gave rise to an income of Rs. 25.89 crores in the said year, included in Other Income in Schedule 10. 12. Based on a review of the projected business prospects of the Company’s subsidiaries, inspite of present losses therein, the management does not foresee any permanent diminution in the value of the Company’s long term investments (including advance against equity) therein. 13. Future rentals payable in respect of non-cancellable leases for assets comprising various equipment and vehicles acquired after April 1, 2001 under operating leases work out to Rs. 12.44 crore and Rs. 32.77 crore during next one year and thereafter till five years respectively. There are no restrictions in respect of such leases. 14. There are no amount due to Micro and Small Enterprises, as defined in the Micro, Small, Medium Enterprises Development Act, 2006, based on information available with the Company. 15. Employee Benefits Defined Contribution Plan The Company makes contributions for provident fund and pension (including for superannuation) towards defined contribution retirement benefit plans for eligible employees. Under the said plans, the Company is required to contribute a specified percentage of the employees’ salaries to fund the benefits. During the year, based on applicable rates, the Company has recognised Rs. 24.76 crore (previous year : Rs. 20.75 crore) on this count in the Profit and Loss Account. Defined Benefit Plans The company makes annual contribution to the Employees Group Gratuity Scheme of eligible agencies for qualifying employees. Liabilities at the year-end for gratuity, leave encashment and medical benefits have been determined on the basis of actuarial valuation carried out by an independent actuary, based on the method prescribed in Accounting Standard 15 Net Liability / (Asset) recognized in the Balance Sheet : (Rs. in Crore) For the year ended 31st March, 2009 For the year ended 31st March, 2008 Gratuity Leave Encashment Medical Gratuity Leave Encashment Medical

Present value of funded obligation 99.14 - - 91.51 - - Fair Value of Plan Assets 106.42 - - 100.19 (7.28) - - (8.68) - - Present value of un-funded obligation - 49.61 14.08 - 47.77 11.75 Unrecognised past service cost ------Net Liability / (Asset) (7.28) 49.61 14.08 (8.68) 47.77 11.75

42 Schedules to the Accounts (Contd.)

SCHEDULE 13 – NOTES ON ACCOUNTS (Contd.) Expenditure shown in the Schedule 11 to Profit & Loss Account as follows :- (Rs. in Crore) For the year ended 31st March, 2009 For the year ended 31st March, 2008 Gratuity Leave Encashment Medical Gratuity Leave Encashment Medical

Current Service Cost 5.74 0.17 - 4.53 1.03 - Interest Cost 7.17 3.82 0.94 6.85 3.53 0.70 Expected Return on Plan Assets (8.13) - - (7.40) - - Actuarial loss/(gain) 2.57 0.11 1.85 0.02 1.94 2.82 Past Service Cost ------Total 7.35 4.10 2.79 4.00 6.50 3.52

Reconciliation of Opening and Closing Balances of the present value of obligations : (Rs. in Crore) For the year ended 31st March, 2009 For the year ended 31st March, 2008 Gratuity Leave Encashment Medical Gratuity Leave Encashment Medical

Opening defined benefit obligation 91.51 47.77 11.75 86.03 43.52 8.61 Current Service Cost 5.74 0.17 - 4.53 1.03 - Interest Cost 7.17 3.82 0.94 6.85 3.53 0.70 Actuarial loss/(gain) 2.85 0.11 1.85 1.43 1.94 2.82 Benefits paid (8.13) (2.26) (0.46) (7.33) (2.25) (0.38) Closing Defined Benefit Obligation 99.14 49.61 14.08 91.51 47.77 11.75

Reconciliation of Opening and Closing Balances of fair value of plan assets : (Rs. in Crore) For the year ended 31st March, 2009 For the year ended 31st March, 2008 Gratuity Leave Encashment Medical Gratuity Leave Encashment Medical

Opening fair value of Plan Assets 100.19 - - 86.56 - - Expected Return on Plan Assets 8.13 - - 7.40 - - Actual Company Contributions 5.95 - - 12.15 - - Actuarial gain/(loss) 0.28 - - 1.41 - - Benefits paid (8.13) - - (7.33) - - Closing Fair Value on Plan Assets 106.42 - - 100.19 --

Actual Return on Plan Assets Rs. 8.41 crore Rs. 8.81 crore Plan Assets consist of funds maintained with LIC and ICICI Prudential & HDFC Standard Life. Effect of increase/decrease of one percentage point in the assumed medical inflation rates : (Rs. in Crore) For the year ended 31st March, 2009 For the year ended 31st March, 2008 Increase Decrease Increase Decrease Effect on aggregate of interest cost and current service cost ---- Effect on defined benefit obligation 0.14 (0.11)* 2.44 1.53* * in case of hospitalised treatment only

43 Schedules to the Accounts (Contd.)

SCHEDULE 13 – NOTES ON ACCOUNTS (Contd.)

Principal Actuarial Assumption Used : (Rs. in Crore) For the year ended 31st March, 2009 For the year ended 31st March, 2008 Discount Rates 8. 00% 8.20% Expected Return on Plan Assets 8. 20% 8.32% Rate of increase in medical cost trend 5% 5% Mortality Rates “LIC 1994-96 Ultimate” “LIC 1994-96 Ultimate”

The estimates of future salary increase considered in the actuarial valuation takes into account factors like inflation, seniority, promotion and other relevant factors. The expected return on plan assets is based on actuarial expectation of the average long term rate of return expected on investments of the funds during the estimated terms of the obligations. The contribution expected to be made by the Company for the year ending 31st March 2010 is not readily ascertainable and therefore not disclosed. (Rs. in Crore) 2008-09 2007-08 16. Directors’ Remuneration : Salary 0.61 0.36 Commission 6.00 - Contributions to Pension, Provident and Gratuity Funds 0.11 0.08 Estimated value of other benefits 0.23 0.15 Non-Wholetime Directors’ Fees 0.13 0.14 7.08 0.73

Computation of Directors’ Commission 2008-09 (Rs. in Crore) Profit after book depreciation but before taxation 464.87 Add : Directors’ Remuneration 7.08 Provision for doubtful debts / advances 7.25 Compensation under Voluntary Retirement Scheme 3.26 Less : Profit on sale of fixed assets 1.69 Profit for the purpose of Directors’ Commission 480.77

Note : Maximum Commission in terms of the respective limits specified in the Special Resolutions passed in the Annual General meeting held on 30th July, 2008. Managing Director : Rs. 2.40 crore Non-executive Directors : Rs. 4.81 crore Provision for Commission Managing Director : Rs. 2.00 crore Non-executive Directors : Rs. 4.00 crore 17. The major components of Deferred Tax Assets / (Liabilities) based on the timing difference as at 31 March, 2009 are as under : (Rs. in Crore) 2008-09 2007-08 Liabilities Depreciation difference (436.18) (393.34) Assets Items covered under section 43 B 14.18 13.47 Unabsorbed business depreciation - 66.31 Others including items covered under section 35DDA 5.47 10.57 (416.53) (302.99)

44 Schedules to the Accounts (Contd.)

SCHEDULE 13 – NOTES ON ACCOUNTS (Contd.) 18. Earnings per Share : Computation of earnings per share for the year 2008-09

Particulars 2008-09 2007-08

Profit After Tax (Rs. in Crore) (A) 409.69 355.36 Weighted Average no. of shares for Earnings per Share (B) 12,49,35,925 11,82,49,149 Basic & Diluted Earnings per Share of Rs. 10/- = [(A) / (B)] (Rs.) 32.79 30.05

19. The Company is engaged in generation and distribution of electricity and does not operate in any other reportable segment.

20. Related Parties disclosures (a) Related Parties and their relationship Names of Related Parties Nature of Relationship Spencer’s Retail Limited Subsidiary Company Au Bon Pain Café India Limited Subsidiary of Spencer’s Retail Limited Music World Retail Limited Subsidiary of Spencer’s Retail Limited CESC Properties Limited Subsidiary Company Metromark Green Commodities Pvt. Ltd. Subsidiary of CESC Properties Limited Haldia Energy Limited Subsidiary Company Mahuagarhi Coal Company Private Limited (*) Joint Venture Mr. Sumantra Banerjee Key Management Personnel

(*) Mahuagarhi Coal Company Private Limited (MCCPL) was incorporated in India for development of Mahuagarhi coal field and exploration of coal there from as a joint venture company with 50% participation of the Company in MCCPL’s share capital, in terms of the requirements of allocation of the coal block by the Ministry of Coal, Government of India, which is yet to commence its commercial operation. The interests of the Company as at 31 March, 2009 in the assets and liabilities of the joint venture are Rs. 0.52 crore and Rs.0.02 crore respectively.

(b) Details of transaction between the Company and related parties and status of outstanding balance (Rs. in Crore) Nature of Transaction Subsidiaries Joint Venture Key Management Total Personnel 31 Mar 09 31 Mar 08 31 Mar 09 31 Mar 08 31 Mar 09 31 Mar 08 31 Mar 09 31 Mar 08 Acquisition of investment 0.31 0.04 0.01 Nil – – 0.32 0.04 Advance for share subscription – Spencer’s Retail Limited (*) 370.65 248.00 – – – – 370.65 248.00 – CESC Properties Limited 18.00 1.96 – –––18.00 1.96 – Haldia Energy Limited 206.02 – – –––206.02 – – Mahuagarhi Coal Company Pvt. Ltd. – – 0.53 –––0.53 – (*) net of refund of Rs 300 crore ( 2008 : Rs 278.40 crores) from time to time Purchase of Trademarks 150.00 – – – – – 150.00 – Income from sale / services (including user fees) 1.18 3.86 – – – – 1.18 3.86 Security Deposit 0.05 0.58 – – – – 0.05 0.58 Remuneration – – – – 2.95 0.59 2.95 0.59 Outstanding Balance – Debit 847.54 252.87 0.53 – – – 845.16 252.87 – Credit 0.63 0.58 – -- 2.00 -- 2.00 0.58

45 SCHEDULE 13 – NOTES ON ACCOUNTS (Contd.)

(Rs. in Crore) 2008-09 2007-08 21. Miscellaneous Expenses shown in Schedule 11 include Auditors’ Remuneration and Expenses : (a) Tax Audit 0.04 0.04 (b) Other Services 0.33 0.68 (c) Reimbursement of expenses (including applicable service tax) 0.07 0.14

(Rs. in Crore) 2008-09 2007-08 22. C.I.F. value of imports : Capital goods 0.35 0.01 Fuel 159.46 114.76

(Rs. in Crore) 2008-09 2007-08 23. Expenditure in foreign currency : Travelling 1.00 1.11 Technical services fees (net of tax) 0.79 0.50 Finance charges (net of tax) 7.25 16.15 Others 0.73 2.20 Total 9.77 19.96

24. Dividend remitted in foreign currency : On account of dividends to non-resident shareholders relating to previous year 2008-09 2007-08 No. of No. of Net amount No. of No. of Net amount Shareholders Shares held remitted Shareholders Shares held remitted (Rs. in Crore) (Rs. in Crore) Equity Dividend 2007/08 378 13,76,284 0.55 376 14,19,441 0.50

25. Earnings in foreign currency : (Rs. in Crore) 2008-09 2007-08 Income from Carbon Credit 11.42 1.19

26. Values of raw materials and stores and spare parts consumed (excluding on capital account) : 2008-09 2007-08 Rs. in Crore % Rs. in Crore % Raw Material Imported 161.76 17.12 150.05 17.33 Indigenous 782.96 82.88 715.71 82.67 944.72 100.00 865.76 100.00 Stores and Spares Imported –– –– Indigenous 105.58 100.00 100.74 100.00 105.58 100.00 100.74 100.00

46 SCHEDULE 13 – NOTES ON ACCOUNTS (Contd.)

(Million kWh) 2008-09 2007-08 27. (a) Total number of units generated during the year 7900 7980 (b) Total number of units consumed in Generating Stations 659 671 (c) Total number of units sent out 7241 7309 (d) Total number of units purchased during the year 1477 1309 (e) Total number of units through Unscheduled Interchange (Net) (13) (5) (f) Total number of units delivered 8705 8613 (g) Total number of units sold as per meter readings 7206 6948 (h) Total number of units sold to persons other than own consumers and WBSEDCL 302 441 (i) Total number of units consumed in Company’s premises 20 19 (j) Total number of Units sold to WBSEDCL 73 75

28. The derated installed capacity of the Generating Stations of the Company (as per certification of technical expert) as on 31 March, 2009 was 975000 kW (31 March, 2008 : 975000kW) .

29. Consumption of fuel : 2008-09 2007-08 (a) Consumption of coal Quantity Tonnes 4961238 4917932 Value Rs. in Crore 930.92 853.94 (b) Consumption of oil Quantity Kilolitres 3374.65 3861.43 Value Rs. in Crore 13.80 11.82

30. Previous year’s figures have been regrouped / rearranged, wherever necessary.

For and on behalf of the Board of Directors Chairman R. P. Goenka Subhasis Mitra Director P. K. Khaitan Kolkata, 22nd May, 2009 Vice President & Company Secretary Managing Director S. Banerjee

47 Cash Flow Statement for the year ended 31st March, 2009

Rs. in Crore 2008-09 2007-08 A. Cash flow from Operating Activities Profit before Taxation and Other Appropriation 464.87 402.91 Adjustments for : Depreciation 174.90 168.45 (Profit) / Loss on Sale/Disposal of Assets (1.69) (26.91) Profit on Sale of Investments – (0.01) Income from current Investments -other than Trade (42.35) (30.49) Income from Long Term Trade Investment (0.30) (0.30) Miscellaneous expenditure written off 0.72 0.72 Provision for doubtful debts / Advances 7.25 – Bad debts / Advances written off (net) 14.17 13.09 Interest Expense 140.96 136.31 Share Issue Expenses – 21.09 Interest Income (52.69) (27.46) Advance against depreciation 139.68 97.47 Foreign Exchange Rate Variation 24.30 6.62 Operating Profit before Working Capital changes 869.82 761.49

Adjustments for : Trade & other receivable (59.08) 67.39 Inventories (35.75) (8.89) Trade payables 392.79 187.70 Cash Generated from Operations 1167.78 1007.69 Income Tax paid (net) (56.81) (45.22) Net cash flow from Operating Activities 1110.97 962.47 B. Cash flow from Investing Activities Addition to Fixed Assets/Capital Work-in-Progress (1249.98) (615.19) Sale of Fixed Assets 2.76 29.24 Investment in Subsidiaries and Joint Ventures (0.32) (9.83) Purchase of long term investments (7.90) – (Purchase) / Sale of Current Investments (net) 309.83 (256.98) Income from Long Term Trade Investment received 0.30 0.30 Interest received 42.69 28.61 Advance to subsidiaries, Joint Venture and other for share subscription (598.70) (249.96) Net cash flow from Investing Activities (1501.32) (1073.81) C. Cash flow from Financing Activities Share Issue Expenses – (21.09) Proceeds from issue of Share Capital – 590.81 Proceeds from Long Term Loans (including refinance loan) 1086.15 326.47 Repayment of Long Term Loans (309.71) (471.82) Repayment of Public Deposits (1.00) (32.84) Net increase / (decrease) in Cash Credit facilities and other Short Term Loans (44.39) 24.00 Capital Contributions and Advance received from Consumers 42.52 46.55 Consumers Security Deposit 79.00 90.08 Interest Paid (139.42) (151.55) Dividends paid (49.71) (29.28) Dividend tax paid (8.50) (5.02) Net Cash flow from Financing Activities 654.94 366.31

Net Increase in cash and cash equivalents 264.59 254.97 Cash and Cash equivalents - Opening Balance 986.44 731.44 Cash and equivalents taken over on amalgamation – 0.03 Cash and Cash equivalents - Closing Balance 1251.03 986.44 Note : a) Previous year’s figures have been regrouped/rearranged wherever necessary. b) The Cash Flow Statement has been prepared under the indirect method as given in the Accounting Standard on Cash Flow Statement (AS-3). This is the Cash Flow Statement referred to in our Report of even date. Prabal Kr Sarkar Partner Membership No. : 52340 For and on behalf of For and on behalf of the Board of Directors LOVELOCK & LEWES Chairman R. P. Goenka Chartered Accountants Subhasis Mitra Director P. K. Khaitan Kolkata, 22nd May, 2009 Vice President & Company Secretary Managing Director S. Banerjee

48 Ten Years at a Glance : 2000 – 2009

Rupees in Crore

Year ended 31st March 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

Gross Revenue from Sale of Electricity and Other Income 1781 2089 2143 2243 2416 2387 2587 2573 2930 3200

Profit before Taxation ( after charging Depreciation and Interest ) (71) 13 (88) 8 93 163 204 341 403 465

Taxation - - - 1 7 13 20 40 48 55

Profit after Taxation (71) 13 (88) 7 86 150 184 301 355 410

Net Special Appropriations including Appropriations to Contingencies Reserve/ Reserve for Unforseen exigencise 53 47 27 12 15 3 7 12 13 16

Profit / (Loss) after Tax and Special Appropriations (124) (34) (115) (5) 71 147 177 289 342 394

Proposed Dividend including Tax –––––2123355858

Sources of Funds –

Share Capital 63 62 62 62 67 75 83 85 126 126

Equity Warrants issued and subscribed ––––––4–––

Reserves and Surplus (Net) 1874 1847 1737 1747 1309 1464 3606 3730 4519 4757

Loan Funds 2881 2987 3076 2993 2609 2167 1910 1799 1629 2398

Security Deposits 191 215 250 316 373 441 560 652 742 821

Advance against Depreciation –––––––100198338

5009 5111 5125 5118 4358 4147 6163 6366 7214 8440

Application of Funds –

Fixed Assets ( less Depreciation ) 5128 4942 4688 4457 4035 3843 5566 5556 5829 6883

Investments 13 13 11 11 30 31 31 241 570 310

Net Current Assets ( includes Miscellaneous Expenditure not written off ) (132) 156 426 650 293 273 566 569 815 1247

5009 5111 5125 5118 4358 4147 6163 6366 7214 8440

Additions to Fixed Assets 1568 227 166 108 146 146 161 232 302 694

Depreciation 198 308 315 323 296 292 254 158 168 175

Units sold (millions) 4937 5165 5333 5557 5711 5864 6251 6424 6948 7206

Units exported (millions) ––––7160418458441302

System Maximum Demand (megawatts) 1195 1238 1280 1281 1281 1253 1343 1359 1436 1450

No. of Consumers (in Lakhs) 17.21 17.89 18.28 18.77 19.49 20.19 20.96 21.83 22.08 22.94

49 Major Statistics : 2008 – 2009

Generating Capacity Budge Budge Generating Station 500 MW Southern Generating Station 135 MW Titagarh Generating Station 240 MW New Cossipore Generating Station 100 MW

132/33 KV Substations Installed Capacity 1932 MVA

Distribution Stations Number of Stations 91 Transformer Capacity 2608 MVA

LT Substations No. of AC Substations 5927 Transformer Capacity 1930 MVA No. of DC Substations 5 DC Substations Capacity 900 KW

Network (Circuit KM.) 132 KV UG 207 Ckt. Km. 132 KV OH 81 Ckt. Km. 33 KV UG 1124 Ckt. Km. 33 KV OH 92 Ckt. Km. 20 KV UG 50 Ckt. Km.

11 & 6 KV UG 4312 Ckt. Km. 11 & 6 KV OH 87 Ckt. Km. 3.3 KV UG 21 Ckt. Km.

MV UG 5919 Ckt. Km. MV OH 4437 Ckt. Km.

Additions During the Year 132/33 KV Substations NIL LT UG Mains 200 Ckt. Km. Distribution Stations 154.0 MVA LT OH Mains 63 Ckt. Km. LTAC Substations 153.8 MVA 132 KV UG 21 Ckt. Km. No. of LT Services 16813 NOS 33 KV UG 22 Ckt. Km. No. of HT Services 30 NOS 6 KV UG 228 Ckt. Km. 11 KV UG 45 Ckt. Km.

Abbreviations : MW – Megawatt, MVA – Megavoltampere, KV – Kilovolt, UG – Underground, OH – Overhead, Ckt. Km. – Circuit Kilometre

50 Balance Sheet Abstract and Company’s General Business Profile

I. Registration Details

Registration No. 21-31411 (CIN - L31901WB1978PLC031411)

State Code 21

Balance Sheet Date 31 March, 2009

II. Capital raised during the year (Amount in Rupees Crore) Public Issue Nil Rights Issue Nil

Bonus Issue Nil Private Placement (QIP) Nil

III. Position of mobilisation and deployment of funds (Amount in Rupees Crore)

Total Liabilities 8439.81 Total Assets 8439.81

Sources of Funds Application of Funds

Paid up Capital 125.60 Net Fixed Assets 6882.41

Reserves and Surplus 4882.89 Investments 310.43

Secured Loans 2189.82 Net Current Assets 1239.11

Unsecured Loans 208.29 Miscellaneous Expenditure 7.86

Other Funds 821.18

Advance against Depreciation 337.63

IV. Performance of the Company (Amount in Rupees Crore)

Turnover (including Other Income) 3199.59 Total Expenditure 2734.72

Profit before Tax 464.87 Profit after Tax 409.69

Earnings Per Share (Rs.) Basic & Diluted 32.79 Dividend Rate (%) 40%

V. Generic Names of Principal Products / Services of the Company (As per monetary terms)

Item Code No. Not specified Product Description Electricity

51 Head Office CESC House Chowringhee Square Kolkata 700 001 Phone : (033) 2225 6040 (10 lines) Fax : (033) 2225 5155 E-Mail : [email protected] Website : www.cesc.co.in

Generating Stations Budge Budge Regional Offices Vill. & P.O. - Pujali, P.S. Budge Budge Central 24 Parganas (S), Pin : 700 138 CESC House Phone : 2482 1708, 2482 2957 Chowringhee Square Kolkata 700 001 New Cossipore Phone : 2225 6040 (10 lines) 28 Jheel Road, Kolkata 700 002 Phone : 2556 6695, 2556 6696 Howrah Round-the-clock 433/1 G. T. Road (N), Howrah 711 101 Fault Reporting Centres Southern Phone : 2666 1667, 2666 6014 North 28 Road 2666 9199 South Kolkata 700 024 Central Phone : 2469 6886, 2469 7557 North Howrah 226 A & B APC Road, Kolkata 700 004 Northern 1912 Titagarh Phone : 2555 9815 (4 lines) Southern 44031912 B. T. Road, P.O. Khardah, Titagarh Serampore 24 Parganas (N), Pin : 700 119 North Suburban South-West Phone : 2501 1042, 2553 3392 32 B. T. Road West Suburban (Opp. Sagar Dutta Hospital) North Suburban Investor Service Kolkata 700 058 Secretarial Department Phone : 2553 7583, 2583 9391 Customer Relations CESC House CESC House Chowringhee Square South Chowringhee Square Kolkata 700 001 6 Mandeville Gardens Kolkata 700 001 Telephones : Kolkata 700 019 Phone : 2237 3612, 2237 3853 For resident shareholders Phone : 2440 6470 2204 0754 Consumer Grievance Cell For non-resident shareholders South-West CESC House (91) (033) 2204 0663 P-18 Taratolla Road Chowringhee Square Fax : 2236 3868 Kolkata 700 088 Kolkata 700 001 E-mail : [email protected] Phone : 2401 4541 ( 5 lines) Telefax : 2236 5669

52 CONSOLIDATED FINANCIAL STATEMENTS OF CESC LIMITED AND ITS SUBSIDIARIES 2008-09

1 Report of the Auditors

REPORT OF THE AUDITORS TO THE BOARD OF DIRECTORS OF CESC LIMITED ON THE CONSOLIDATED FINANCIAL STATEMENTS OF CESC LIMITED AND ITS SUBSIDIARIES

1. We have audited the attached Consolidated Balance Sheet of CESC Attention is drawn to note no. 14 in schedule 13 regarding recognition Limited (“the company”) and its subsidiaries (“the Group”) as at of net deferred tax asset of Rs. 17,445.54 lakh (including 31 March, 2009, the Consolidated Profit and Loss Account for the Rs. 11,243.97 lakh for the year) in the accounts up to 31 March, 2009 year ended on that date annexed thereto, and the Consolidated Cash based on the future profitability projections made by the management. Flow Statement for the year ended on that date, which we have However, the auditors were unable to express any opinion on the signed under reference to this report. These consolidated financial above projections and their consequent impact, if any, on such statements are the responsibility of the company’s management. deferred tax asset. Our responsibility is to express an opinion on these consolidated 5. We further report that the Consolidated Financial Statements have financial statements based on our audit. been prepared by the company in accordance with the requirements 2. We conducted our audit in accordance with auditing standards of Accounting Standard 21 on Consolidated Financial Statements, generally accepted in India. Those Standards require that we plan Accounting Standard 27 on Financial Reporting of Interest in Joint and perform the audit to obtain reasonable assurance about whether Ventures notified under Companies Accounting Standard Rules, the financial statements are free of material misstatements. An audit 2006 and on the basis of the separate audited financial statements includes examining, on a test basis, evidence supporting the of CESC Limited, its subsidiaries and joint venture included in the amounts and disclosures in the financial statements. An audit also Consolidated Financial Statements. includes assessing the accounting principles used and significant 6. On the basis of the information and explanations given to us and on estimates made by management, as well as evaluating the overall consideration of the separate audit reports on individual audited financial statement presentation. We believe that our audit provides financial statements of CESC Limited and its aforesaid subsidiaries a reasonable basis for our opinion. and joint venture, in our opinion, subject to our remarks in Paragraph 3. We did not audit the financial statements of certain subsidiaries and 4 above, the Consolidated Financial Statements give a true and fair joint venture, whose financial statements reflect total assets of view in conformity with the accounting principles generally accepted Rs. 129,080.70 lakh as at 31 March, 2009, total revenues of in India: Rs. 102,122.24 lakh and total net cash inflows of Rs. 54.45 lakh for a. in the case of the Consolidated Balance Sheet, of the state of the year ended on that date. These financial statements have been affairs of the Group as at 31 March, 2009 ; audited by other auditors whose report have been furnished to us, and our opinion, in so far as it relates to the amounts included in b. in the case of the Consolidated Profit and Loss Account, of the respect of the subsidiaries and joint venture, is based solely on the results of operations of the Group for the year ended on that report of the other auditors. date; and

4. In respect of one of the subsidiaries, the auditors had made the c. in the case of the Consolidated Cash Flow Statement, of the following observation: cash flows of the Group for the year ended on that date.

For and on behalf of LOVELOCK & LEWES Chartered Accountants Prabal Kr. Sarkar Partner Kolkata, 8th June, 2009 Membership No. : 52340

2 Consolidated Balance Sheet as at 31st March, 2009

Rs. in Lakh Rs. in Lakh Schedule As at 31st As at 31st No. March, 2009 March, 2008 I. SOURCES OF FUNDS Shareholders’ Funds Share Capital 1 12,559.15 12,559.15 Share Application Money 49.99 – Reserves and Surplus 2 437,489.41 441,067.04 450,098.55 453,626.19 Minority Interest – 98.45 Loan Funds Secured Loans 3 226,609.59 159,515.14 Unsecured Loans 4 50,840.03 47,317.25 277,449.62 206,832.39 Consumers’ Security Deposits 82,055.37 74,160.52 Deferred Tax Liability 41,653.00 30,299.00 (Note 14, Schedule 13) Less : Recoverable (41,653.00) (30,299.00) – – Advance against Depreciation 33,763.00 19,795.00 843,366.54 754,512.55 II. APPLICATION OF FUNDS Fixed Assets 5 Gross Block 984,218.89 910,317.15 Less : Depreciation 390,533.45 357,793.21 Net Block 593,685.44 552,523.94 Capital Work-in-Progress 135,149.06 71,190.47 728,834.50 623,714.41 Investments 6 43,427.30 52,985.47 Deferred Tax Assets 17,445.54 6,201.57 (Note 14, Schedule 13) Current Assets, Loans and Advances 7 Inventories 37,762.31 35,203.29 Sundry Debtors 41,188.67 34,034.59 Cash and Bank Balances 128,368.17 101,702.92 Loans and Advances 28,873.88 37,874.17 Deferred Payments 4,222.00 2,869.51 240,415.03 211,684.48 Less : Current Liabilities and Provisions 8 Current Liabilities 175,251.43 128,757.47 Provisions 12,487.82 12,189.26 187,739.25 140,946.73 Net Current Assets 52,675.78 70,737.75 Miscellaneous Expenditure to the extent not written off or adjusted 9 983.42 873.35 843,366.54 754,512.55 NOTES ON ACCOUNTS 13 Schedules referred to above form an integral part of the Balance Sheet. This is the Balance Sheet referred to in our Report of even date. Prabal Kr. Sarkar Partner Membership No. : 52340 For and on behalf of For and on behalf of the Board of Directors LOVELOCK & LEWES Chairman R. P. Goenka Chartered Accountants Subhasis Mitra Director P. K. Khaitan Kolkata, 8th June, 2009 Vice President & Company Secretary Managing Director S. Banerjee

3 Consolidated Profit and Loss Account for the year ended 31st March, 2009

Rs. in Lakh Rs. in Lakh Schedule No. 2008-09 2007-08 INCOME Sales 405,139.60 354,275.34 Other Income 10 21,844.58 19,620.16 426,984.18 373,895.50 EXPENDITURE Cost of Electrical Energy purchased for Power Business 41,246.02 37,827.45 Cost of Fuel for Power Business 94,471.68 86,575.99 Cost of Goods Sold for Retail Business 90,782.19 65,761.64 Other Expenses 11 153,236.40 124,343.92 Interest 12 15,706.31 14,802.66 Depreciation 21,578.34 19,618.93 417,020.94 348,930.59

Profit before Taxation and Other Appropriation 9,963.24 24,964.91 Exceptional Items (Note 18, Schedule 13) (7,899.82) – Provision for Taxation – Current (5,268.00) (4,550.00) – Fringe Benefit Tax (405.49) (344.35) – Deferred Tax (net) 11,243.97 5,570.48 6,201.65 Profit after Taxation before Minority Interest 7,633.90 26,272.21 Minority Interest 116.22 471.53 Profit after Taxation after Minority Interest 7,750.12 26,743.74 Brought Forward Profit from the previous years – 5,201.88 Transfer from / (to) Reserve for unforeseen exigencies (1,558.00) (1,289.00) Debenture Redemption Reserve 513.00 (88.00) Proposed dividend on Equity Shares (4,997.44) (4,997.44) Tax on proposed dividend (849.31) (849.31) General Reserve / Surplus as per Balance Sheet (858.37) (24,721.87) Earnings per equity share (in Rupees) (Face value of Rs. 10 per share) Basic & Diluted before Exceptional Items 12.53 22.62 Basic & Diluted after Exceptional Items 6.20 22.62 (Note 15, Schedule 13) NOTES ON ACCOUNTS 13 Schedules referred to above form an integral part of the Profit and Loss Account.

This is the Profit and Loss Account referred to in our Report of even date. Prabal Kr. Sarkar Partner Membership No. : 52340 For and on behalf of For and on behalf of the Board of Directors LOVELOCK & LEWES Chairman R. P. Goenka Chartered Accountants Subhasis Mitra Director P. K. Khaitan Kolkata, 8th June, 2009 Vice President & Company Secretary Managing Director S. Banerjee

4 Schedules to the Accounts

Rs. in Lakh Rs. in Lakh As at 31st As at 31st March, 2009 March, 2008 SCHEDULE 1 – SHARE CAPITAL AUTHORISED CAPITAL 15,00,00,000 Equity Shares of Rs. 10 each 15,000.00 15,000.00 15,000.00 15,000.00 ISSUED CAPITAL 13,12,35,897 Equity Shares of Rs. 10 each 13,123.59 13,123.59

13,123.59 13,123.59 SUBSCRIBED AND PAID UP CAPITAL 12,49,35,925 Equity Shares of Rs. 10 each 12,493.59 12,493.59 Add : Forfeited Shares (amount originally paid-up) 65.56 65.56 12,559.15 12,559.15 Notes :

1. 71,94,951 Equity Shares of Rs. 10 each were allotted on 7 April, 1979 as fully paid to the stockholders of The Calcutta Electric Supply Corporation Limited, the erstwhile sterling company, in terms of a Scheme of Arrangement and Amalgamation approved by the Hon’ble High Courts at Calcutta and London pursuant to which the undertaking and the assets, liabilities, reserves and surplus of the said sterling company were transferred to the Parent.

2. 3,10,58,414 Equity Shares of Rs.10 each were allotted as fully paid-up on 12 October, 2007 pursuant to a Scheme of Amalgamation sanctioned by the Hon’ble High Court at Calcutta.

SCHEDULE 2 – RESERVES AND SURPLUS Capital contribution from consumers as at beginning of the year 40,082.04 34,081.55 Add : Contributions during the year 6,895.75 6,000.49 46,977.79 40,082.04 Capital Reserve on consolidation as at beginning of the year 3,771.66 – Add : Addition during the year 0.65 3,771.66 3,772.31 3,771.66 Capital Redemption Reserve 2,012.70 2,012.70 Share Premium Account as at beginning of the year 125,484.54 67,359.74 Add : Addition during the year – 58,124.80 125,484.54 125,484.54 Revaluation Reserve as at beginning of the year 161,432.17 182,175.61 Less : Withdrawal on account of depreciation on amount added on revaluation 12,244.74 20,348.13 149,187.43 161,827.48 Less : Withdrawal of the residual amount added on revaluation consequent to sale/disposal of revalued assets 132.66 395.31 149,054.77 161,432.17 Reserve for unforeseen exigencies as at beginning of the year 2,514.00 1,225.00 Add : Transfer from Profit and Loss Account 1,558.00 1,289.00 4,072.00 2,514.00 Debenture Redemption Reserve as at beginning of the year 513.00 425.00 Add : Transfer (to) / from Profit and Loss Account (513.00) 88.00 – 513.00 General Reserve / Surplus as at beginning of the year 105,256.93 80,534.91 Add : Additions during the year 858.37 24,721.87 Add : Adjustments Rs. Nil (31.3.2008 - Rs. 0.23 lakh) consequent to recomputation as of 1.4.2007 of liability for defined benefit plans in accordance with AS-15 (Revised) Employee Benefits [net of related tax Rs. Nil (Rs. 0.08 lakh)] – 0.15 106,115.30 105,256.93

437,489.41 441,067.04

5 Schedules to the Accounts (Contd.)

Rs. in Lakh Rs. in Lakh As at 31st As at 31st March, 2009 March, 2008 SCHEDULE 3 – SECURED LOANS I. Debentures Non-Convertible Debentures of Rs. 1,00,00,000 each allotted on 1 February, 2004 – 4,300.00 – 4,300.00 II. Term Loans A. Rupee Loans : (i) Banks 111,545.19 43,943.30 (ii) Financial and other Institutions 58,657.60 54,527.30 170,202.79 98,470.60 B. Foreign Currency Loans : (i) Standard Chartered Bank 6,111.73 13,006.06 (ii) ICICI Bank Limited 40,028.05 21,417.90 46,139.78 34,423.96 III. Facilities from Banks : (i) Overdraft 10,267.02 20,820.58 (ii) Others – 1,500.00 10,267.02 22,320.58

226,609.59 159,515.14 Notes : 1. The term loans and facilities from bank in respect of the Parent in II and III above are secured by equitable mortgage / hypothecation of all fixed assets of the Parent including its land, building and all construction thereon and plant and machinery etc. and hypothecation of its current assets comprising stock of stores, coal and other consumables, book debts, monies receivable and bank balances. However, creation of mortgage security in respect of one Rupee Loan of the Parent of Rs. 4,200 lakh is in process. 2. The security for the term loans in respect of the Parent in II above ranks pari passu inter se while the security in respect of facilities from banks in respect of the Parent in III above ranks pari passu amongst the said banks. 3. The ranking of the above security in respect of the Parent created by way of equitable mortgage / hypothecation is as follows On Prior Charge Subservient Charge Fixed Assets Term Loans in II above Facilities from Banks in III above Current Assets Facilities from Banks in III above Term Loans in II above 4. Term loans amounting to Rs. 7,125 lakh in IIA (i) in respect of one of the subsidiaries are secured as follows : i. Hypothecation by way of an exclusive residual charge subject to a first charge in favour of IDFC over all the collections (cash and non-cash) in HDFC Bank from the Mumbai and Hyderabad stores of that subsidiary. ii. Hypothecation by way of first charge in favour of ICICI bank Limited over all the current assets and movable assets (tangible & intangible, both present and future) and all the receivables arising out of, pursuant to or under the merchant establishment agreement (including the credit card receivables account) save and except any asset situated in or any such receivables arising from the hyper stores situated at Vishakapatnam, Hyderabad and Malad (Mumbai). iii. Secured by a corporate guarantee given by a body corporate. 5. Term loans amounting to Rs. 264.54 lakh in II(A) in respect of one of the subsidiaries are secured as follows : i. A First charge by way of hypothecation in favour of the lender of all the movables of the subsidiary relating to the specified projects including movable plant and machinery, machinery spares, tools and accessories, furniture and fixtures, vehicles, and all other movable assets, book debts, operating cash flows, receivables, commissions, revenues of whatsoever nature and wherever arising, present and future subject to prior charges created/to be created in favour of the subsidiary's bankers on the stocks of raw materials, semi finished and finished goods, consumable goods and book debts and operating cash flows for securing the borrowing for working capital requirements in the ordinary course of business. ii. A first charge on all the intangible assets including but not limited to the goodwill, trademark, uncalled capital, and undertaking of the subsidiary. iii. A first charge by way of assignment or creation of security, interest in (a) all the rights, title, interest, benefits, claims and demands whatsoever of the subsidiary in the license agreement with respect to Hyper Markets in Mumbai, subject to consent from counter parties; (b) all the rights, title, interest , benefits, claims and demands whatsoever in the license agreement dated June 14th, 2002 with respect to the use of the trademarks and copyrights which requires modification, subject to consent from the counter parties and (c) all insurance contracts/insurance proceeds relating to the project. iv. A first charge on the trust and retention accounts , other reserves and any other bank accounts of the subsidiary relating to the project wherever maintained. 6. Facilities from banks in III(i) in respect of one of the subsidiaries are secured by the hypothecation of stock in trade, consumable stores, book debts, other receivables, both present and future of the Music World Retail Limited (erstwhile Music World and Books and Beyond Division of the subsidiary). 7. The debentures in I above have been fully redeemed during the year.

SCHEDULE 4 – UNSECURED LOANS (a) Public Deposits – 53.78 (b) Facilities from Banks (i) Short term loans / Overdraft 43,755.42 40,569.04 (ii) Others – 679.31 (c) Floating Rate Notes 7,074.37 5515.12 (US$ 13.75 million repayable in year 2012-13) (d) Short Term Loan - Others 0.50 500.00 Interest Accrued and due 7.61 – 50,837.90 47,317.25 Add : Share of Joint Venture 2.13 – 50,840.03 47,317.25

6 – 1.97 2008 As at 92.16 20.91 822.33 333.59 1,051.01 7,563.75 1,396.68 82,783.00 34,524.49 16,567.47 18,079.91 20,512.99 552,523.94 208,489.58 160,284.10 31st March, Rs. in Lakh – 3,200.00 – 122.61 6.73 82,847.50 2009 2009 As at As at 28.87 660.46 677.50 747.08 179.49 307.93 444.92 11.12 1,716.08 1,755.36 2,083.45 38,427.58 5,723.26 17,655.77 5,635.14 10,657.50 1,228.55 1,251.56 21,772.07 22,965.69 19,258.31 21,600.73 390,533.45 593,685.44 204,922.37 216,658.98 126,856.71 174,815.57 31st March, 31st March, acquisition Adjustments Adjustments DEPRECIATION/AMORTISATION NET BLOCK –––– –––– – – 6.73 – 5.91 – 22.96 – 2008 As at Assets taken 153.83 – 25.66 – 435.13516.01 – – 9.79 206.60 – 45.11 1st April, over on Additions/ Withdrawals/ 1,299.52 – 416.56 – 1,867.38 – 216.07 – 5,294.13 0.80 428.46 0.13 4,185.45 – 1,543.55 93.86 1,136.77 – 91.78 – 19,891.40 – 2,334.15 453.48 17,880.61 – 1,616.58 238.88 357,793.21 0.80 33,877.83 1,138.39 188,769.70116,357.37 – 16,361.53 – 10,597.41 208.86 98.07 2009 As at 122.61 689.33 487.42 456.04 3,200.00 3,471.44 2,480.11 1,424.58 82,854.23 40,511.03 23,379.03 44,737.76 40,859.04 16,292.64 984,218.89 421,581.35 301,672.28 31st March, 591.26 – 3,200.00 – (Contd.)

acquisition Adjustments Adjustments GROSS BLOCK AT COST OR VALUATION 1.97 – 120.64 – 2008 As at Assets taken 98.07 – 487.42 – – – 456.04 – – – 2,350.53 – 1,120.91 – 1,338.34 – 156.43 70.19 2,533.45 – – 53.34 82,783.00 13.07 58.16 – 36,391.87 12.86 4,106.30 – 21,861.60 7.15 1,510.65 0.37 37,971.31 – 8,280.74 1,514.29 38,393.60 – 2,815.62 350.18 11,749.20 – 4,726.95 183.51 910,317.15859,476.56 33.08 79,796.62 – 5,927.96 54,392.44 3,551.85 910,317.15 320,217.34 – 39,732.62 2,156.75 357,793.21 552,523.94 397,259.28276,641.47 – 27,920.99 – 3,598.92 25,187.97 157.16 Freehold Leasehold Freehold Leasehold Freehold Leasehold SCHEDULE 5 – FIXED ASSETS PARTICULARS 1st April, over on Additions/ Withdrawals/ Trademarks – – Goodwill on consolidation Land Software License Buildings and Structures Previous Year Plant and Machinery Transmission and Distribution System Meters and Other Apparatus on Consumers’ Premises River Tunnel Furniture, fittings and office equipments Railway Sidings Vehicles Schedules to the Accounts

7 Schedules to the Accounts (Contd.)

Rs. in Lakh Rs. in Lakh As at 31st As at 31st March, 2009 March, 2008 SCHEDULE 6 – INVESTMENTS LONG TERM – Unquoted Trade 9,98,000 Equity Shares of Rs. 10 each in RPG Cellucom India Pvt. Ltd. – 99.80 13,000 Equity Shares of Integrated Coal Mining Ltd. of Rs. 10/- each, fully paid 1.30 1.30 3,00,00,000 1% Cumulative Optionally Convertible Redeemable Preference Shares of Integrated Coal Mining Limited of Rs. 10/- each, fully paid 3,000.00 3,000.00

Other than Trade 79,00,000 Equity Shares of Crescent Power Limited of Rs. 10 each, fully paid 790.00 – 12,685.585 Units of UTI-Floating Rate Fund of Rs. 1000 each, fully paid 135.00 135.00 10,000 Equity Shares of Rs. 10 each in Retail Association of India 1.00 1.00

Current – Unquoted (fully paid) 10,00,00,000 units of Rs. 10 each in ICICI Prudential FMP Series 39 - 6 Months Plan C – 10,000.00 2,02,52,732.61 units of Rs. 10 each in ICICI Prudential FMP Series 39 - 3 Months Plan C – 2,025.27 7,00,00,000 units of Rs. 10 each in ICICI Prudential FMP Series 39 -16 Weeks Plan A – 7,000.00 10,02,37,340.50 units of Rs. 10.0027 each in Reliance Interval Fund - Quarterly Plan - Series I – 10,026.44 9,99,40,717.34 units of Rs. 10.0277 each in HDFC Quarterly Interval Fund - Plan B – 10,021.76 7,62,34,138.46 units of Rs. 10 each in Kotak Quarterly Interval Plan Series -5 – 7,623.41 3,05,14,946.32 units of Rs. 10.0167 each in Birla Sun Life Quarterly Interval - Series 5 – 3,051.49 2,33,44,414.149 units of Rs. 10.7092 each of IDFC Cash Fund - Super Inst Plan C-Growth 2,500.00 – 1,72,927.507 units of Rs. 1445.3980 each of UTI Liquid Cash Plan Institutional - Growth Option 2,500.00 – 1,88,75,902.268 units of Rs. 13.2444 each of Reliance Liquidity Fund - Growth Option 2,500.00 – 1,92,50,315.705 units of Rs. 12.9868 each of ICICI Prudential Institutional Liquid Plan - Super Institutional Growth 2,500.00 – 1,41,55,964.757 units of Rs. 17.6604 each of HDFC Liquid Fund - Premium Plus Plan-Growth 2,500.00 – 1,12,18,622.9140 units of Rs. 17.8275 each of Kotak Liquid (Institutional Premium) - Growth 2,000.00 – 82,74,104.535 units of Rs. 12.0859 each of Religare Liquid Fund - Super Institutional Growth 1,000.00 – 1,77,76,260.870 units of Rs. 14.0637 each of Birla Sun Life Cash Plus - Instl. Prem. Growth 2,500.00 – 1,27,27,244.9587 units of Rs. 19.6429 each of SBI - Magnum Insta Cash Fund - Cash Option 2,500.00 – 1,53,690.345 units of Rs. 1626.6474 each of Tata Liquid Super High Inv. Fund - Appreciation 2,500.00 – 1,42,23,638.264 units of Rs. 14.0611 each of Birla Sunlife Cash Fund 2,000.00 – 1,13,27,016.634 units of Rs. 17.6569 each of HDFC Liquid Fund 2,000.00 – 1,86,79,717.563 units of Rs. 10.7068 each of IDFC Cash Fund 2,000.00 – 1,45,59,431.600 units of Rs. 13.7368 each of Principal Mutual Fund 2,000.00 – 1,51,03,686.810 units of Rs. 13.2418 each of Reliance Liquidity Fund 2,000.00 – 1,01,83,817.9133 units of Rs. 19.6390 each of SBI MICF 2,000.00 – 1,22,974.933 units of Rs. 1626.3477 each of Tata Liquid Fund 2,000.00 – 1,72,962.741 units of Rs. 1445.3980 each of UTI Liquid Cash Plan 2,500.00 –

43,427.30 52,985.47

8 Schedules to the Accounts (Contd.)

Rs. in Lakh Rs. in Lakh As at 31st As at 31st March, 2009 March, 2008 SCHEDULE 7 – CURRENT ASSETS, LOANS AND ADVANCES (a) Inventories Stores and Spares 13,762.24 12,380.70 Fuel 7,433.71 5,239.99 Packing Materials 386.88 214.11 Traded goods 16,179.48 17,368.49 37,762.31 35,203.29 (b) Sundry Debtors 1. For operations Debts outstanding for a period exceeding six months Secured – considered good 668.23 696.60 Unsecured – considered good 3,355.95 6,927.25 4,024.18 7,623.85 Unsecured – considered doubtful 689.55 840.45 4,713.73 8,464.30 Other Debts Secured – considered good 18,142.24 13,128.18 Unsecured – considered good 18,120.26 11,949.98 Unsecured – considered doubtful 85.49 127.86 36,347.99 25,206.02 41,061.72 33,670.32 Less : Provision for doubtful debts 775.04 968.31 40,286.68 32,702.01 2. For claims and services rendered – unsecured (considered good) Debts outstanding for a period exceeding six months 835.06 324.50 Other Debts 66.93 1,008.08 901.99 1,332.58 41,188.67 34,034.59 (c) Cash and Bank Balances Cash in hand 747.16 796.08 Cheques in hand 658.80 396.76 With Scheduled Banks on : Current accounts 15,802.33 15,239.53 Dividend accounts 82.59 57.16 Deposit accounts 111,077.29 85,213.39 126,962.21 100,510.08 128,368.17 101,702.92 (d) Loans and Advances Unsecured – considered good Intercorporate Deposit 1,849.55 1,849.55 Against Equity Shares – 3,851.46 Advances recoverable in cash or kind or for value to be received 13,115.36 19,813.42 (Includes Interest accrued on deposits with banks Rs. 2,103.49 lakh, 31.3.08 - Rs. 1,099.80 lakh) Deposits with Excise, Port Trust etc. 282.61 233.85 Other Deposits 13,626.36 12,125.89 Unsecured, considered doubtful Deposit 35.00 24.00 Advances recoverable in cash or in kind or for value to be received 917.54 28.11 29,826.42 37,926.28 Less : Provisions – Doubtful Deposits 35.00 24.00 – Doubtful Advances 917.54 28.11 952.54 52.11 28,873.88 37,874.17

(e) Deferred Payments 4,222.00 2,869.51

9 Schedules to the Accounts (Contd.)

Rs. in Lakh Rs. in Lakh As at 31st As at 31st March, 2009 March, 2008

SCHEDULE 8 – CURRENT LIABILITIES AND PROVISIONS (a) Current Liabilities Sundry Creditors 39,145.70 34,442.97 Other Liabilities 108,624.97 73,939.88 Unpaid / Unclaimed dividend 82.59 57.16 Unclaimed public deposits 130.74 176.52 Interest accrued but not due on loans and debentures 2,519.57 2,238.03

150,503.57 110,854.56

Consumers’ Benefit account 71.15 71.15 Liabilities on capital account 22,614.61 13,126.22 Advance payment received from consumers for capital jobs 2,061.82 4,705.54

175,251.15 128,757.47 Add : Share of Joint Venture 0.28 –

175,251.43 128,757.47 (b) Provisions Taxation (net of advance payment of tax Rs.18,568.87 lakh; 31.3.08 - Rs. 12, 893.56 lakh) 107.66 140.42 Retirement / Separation Benefits 6,533.41 6,202.09 Proposed dividend 4,997.44 4,997.44 Tax on proposed dividend 849.31 849.31

12,487.82 12,189.26

SCHEDULE 9 – MISCELLANEOUS EXPENDITURE TO THE EXTENT NOT WRITTEN OFF OR ADJUSTED (a) Preliminary expenses 0.61 0.54 Less : Written off during the year 0.02 – 0.59 0.54 (b) Share / Debenture / Debt issue expenses 858.06 929.57 Less : Written off during the year 71.51 71.51 786.55 858.06 (c) Other Pre-operating expenses 192.92 14.75 980.06 873.35 Add : Share of Joint Venture 3.36 –

983.42 873.35

10 Schedules to the Accounts (Contd.)

Rs. in Lakh Rs. in Lakh 2008-09 2007-08

SCHEDULE 10 – OTHER INCOME Hire of meters 3,877.10 3,476.77 Profit on sale of investments 24.78 56.30 Income from long term trade investments 30.00 30.00 Income from current investments - other than trade 4,234.97 3,048.98 Interest on deposits 5,321.24 3,090.22 Delayed Payment Surcharge 1,378.57 894.51 Profit on sale of assets (net) 169.10 2,658.86 Income from Recoveries and Services 6,599.39 3,796.85 Miscellaneous income 209.43 2,567.67

21,844.58 19,620.16

SCHEDULE 11 – OTHER EXPENDITURE Power and Fuel 3,869.21 2,781.19 Packing Materials Consumed 1,138.58 516.30 Consumption of stores & spares 24,499.07 20,584.67 Repairs – Building 649.86 457.16 – Plant and Machinery 4,092.55 3,321.38 – Distribution System 4,828.08 3,824.14 – Others 2,198.80 2,814.50 11,769.29 Salaries, wages and bonus 45,041.86 36,123.91 Contributions to provident and other funds 4,543.92 3,606.65 Employees’ welfare expenses 2,246.16 2,172.77 Insurance 698.61 696.04 Rent 13,025.15 8,337.97 Rates and taxes 1,006.46 1,039.27 Audit fees 83.36 76.00 Interest on consumers’ security deposits 5,174.39 4,552.93 Bad debts/advances 1,486.20 1,323.41 Cost Adjustments 26,983.00 25,796.00 Loss on sale / disposal of assets 614.99 – Provision for Obsolete Stocks 49.02 97.99 Provision for Doubtful Debts, Store / Lease Deposits / Advances 736.55 81.51 Write off of fixed assets – 70.27 Miscellaneous expenditure written off 71.53 71.51 Foreign Exchange Rate Variation 2,429.83 662.07 Foreign Exchange Restatement 2,778.41 (1,337.88) Miscellaneous expenses 26,281.14 19,888.39 174,526.73 137,558.15 Less : Allocated to capital & deferred payment accounts 21,290.33 13,214.23 153,236.40 124,343.92

SCHEDULE 12 – INTEREST Debentures 135.36 858.98 Fixed loans 18,040.80 12,992.56 Fixed deposits from public and others 1.06 136.84 Others 2,201.76 2,147.71 20,378.98 16,136.09 Less : Allocated to capital accounts 4,672.67 1,333.43

15,706.31 14,802.66

11 Schedules to the Accounts (Contd.)

SCHEDULE 13 – NOTES ON CONSOLIDATED ACCOUNTS

1. a) Basis of Preparation The Consolidated Financial Statements comprises of the financial statements of CESC Limited (the Parent), its subsidiaries and proportionate interests in joint venture entity. The Consolidated Financial Statements have been prepared in accordance with the Accounting Standard 21 on “Consolidated Financial Statements” and Accounting Standard 27 on “Financial Reporting of Interests in Joint Ventures” notified under Companies Accounting Standard Rules, 2006. The Consolidated Financial Statements are prepared on the following basis :

O The audited financial statements of the Parent and its subsidiary companies have been combined on a line by line basis by adding together like items of assets, liabilities, income and expenses. The intra-group balances, intra-group transactions and unrealized profits or losses thereon have been fully eliminated.

O The financial statements of the subsidiaries used in the consolidation are drawn upto the same reporting date as that of the Parent.

O Joint venture has been accounted for in the Consolidated Financial Statements using the proportionate consolidation method whereby a venturer’s share of each of the assets, liabilities, income and expenses of the jointly controlled entity is accounted for on a pro-rata basis. b) The subsidiaries considered in the preparation of the Consolidated Financial Statements are: Sl. No. Name of the Subsidiaries Country of Percentage of ownership Percentage of ownership Incorporation interest as at interest as at 31st March 2009 31st March 2008 1. Spencer’s Retail Limited (SRL) India 94.72 94.72 2. Music World Retail Limited (100% subsidiary of SRL with effect from 31 March, 2009) India 94.72 - 3. Au Bon Pain Café India Limited (100% subsi- diary of SRL with effect from 30 June, 2008) India 94.72 - 4. CESC Properties Limited (CPL) India 100 100.00 5. Metromark Green Commodities Private Limited (100% subsidiary of CPL with effect from 9 June, 2008) India 100 - 6. Haldia Energy Limited (subsidiary with effect from 30 June, 2008) India 100 - The subsidiary companies appearing in Sl. Nos. 3 to 6 are yet to commence their commercial operations. c) Interests in joint venture : The Group’s interests in jointly controlled entity (incorporated joint venture) remains in Mahugarhi Coal Company Private Limited, which was incorporated in India on 4 April, 2008 and percentage of ownership interest as at 31 March, 2009 stands at 50%. The company was incorporated for the development of Mahugarhi coal field and exploration of coal therefrom and is yet to commence commercial operations. 2. The operations of the Parent are governed by the Electricity Act, 2003 and various Regulations and/or Policies framed there under by the appropriate authorities. Accordingly, the relevant provisions of the said Act, Regulations etc. have been duly considered. 3. Significant Accounting Policies (a) Accounting Convention These consolidated financial statements have been prepared to comply in all material aspects with the applicable accounting principles in India and the Accounting Standards notified under Companies Accounting Standard Rules, 2006 . A summary of important accounting policies are set out below. (b) Basis of Accounting The consolidated financial statements have been prepared under the historical cost convention, modified by revaluation of certain fixed assets as stated in item 3 (c) below. (c) Fixed Assets Fixed Assets are stated at historical cost of acquisition except fixed assets other than furniture and vehicles acquired upto 31st March 2005 of the Parent. Those assets have been adjusted for the effect of valuation made by an approved external valuer at the then current replacement cost after necessary adjustment for depreciation. Subsequent acquisition of these assets and furniture and vehicles are stated at cost of acquisition together with any incidental expenses related to acquisition and appropriate borrowing costs. In case of a project, cost also includes pre-operative

12 Schedules to the Accounts (Contd.)

SCHEDULE 13 – NOTES ON CONSOLIDATED ACCOUNTS (Contd.)

expenses and where applicable, expenses during trial run after netting off of revenue earned during trial run and income arising from temporary use of funds pending utilisation. An impairment loss is recognized, where applicable, when the carrying value of fixed assets of cash generating unit exceed its market value or value in use, whichever is higher. Capital Works in progress include advances made in respect of capital expenditure. Intangible Assets comprising software expected to provide future enduring economic benefits, licences, franchisee rights and trade marks are stated at cost of acquisition / implementation / development less accumulated amortisation. With respect to certain subsidiaries, expenditure in respect of improvements, etc. carried out at the rented / leased premises are capitalized and expenditure incurred in setting up the stores are capitalized as a part of the leasehold improvements. (d) Depreciation / Amortisation With respect to the Parent, in terms of applicable Regulations under the Electricity Act 2003, depreciation on fixed assets other than freehold land is provided on straight line method on a prorata basis at the rates specified therein, the basis of which is considered by the West Bengal Electricity Regulatory Commission (Commission) in determining the tariff for the year of the Company. Additional charge of depreciation for the year on increase in value arising from revaluation is recouped from Revaluation Reserve. Leasehold land is amortized over the unexpired period of the lease. Intangible assets, comprising software related expenditure, are amortised in three years, except in case of a subsidiary, where such assets amounting to Rs.1,507.98 lakh (Gross Block) as at 31 March, 2009 are amortised over a period of six years and those relating to trademark, licences and franchisee rights in twenty years, ten years and five years respectively based on assessment of useful life. For certain subsidiaries, depreciation is charged on straight line method at the rates prescribed in Schedule XIV under the Companies Act, 1956 and in one of the subsidiaries in certain cases a higher rate of depreciation is applied based on the useful life of the relevant assets (Gross Block – Rs. 51,550.05 lakh). In case of other subsidiaries, depreciation on fixed assets (Gross Block – Rs. 4,240.65 lakh) is provided on written down value method at the rates prescribed in Schedule XIV under the Companies Act, 1956. (e) Expenditure during construction Two of the subsidiaries and the joint venture entity are yet to commence commercial operation and hence, in the absence of such operation, no Profit and Loss Account has been drawn up for these entities. Indirect expenses related to the project and incidental thereto are included under Capital Work-in-Progress and are to be capitalised subsequently. Other indirect expenses, which are not related to the project, are disclosed as “Other Pre-operative Expenses” under “Miscellaneous Expenditure (to the extent not written off or adjusted)” (refer paragraph “o” below) and will be charged off to the Profit and Loss Account in the year of commencement of commercial operation. (f) Leasing Lease rentals in respect of assets taken under operating lease are charged to revenue / included in “Miscellaneous expenses to the extent not written off or adjusted”. In case of one of the subsidiaries, finance leases, which effectively transfer substantially all the risk and benefits incidental to the ownership of the leased item, are capitalized at the lower of the fair value and present value of the minimum lease payment at the inception of the lease and disclosed as leased assets. Lease payments are apportioned between the finance charges and reduction of the leased liability based on the implicit rate of return. Finance charges are charged directly against income. Lease management fees, legal charges and other initial direct costs are capitalized. In case there is no reasonable certainty that the company will obtain the ownership by the end of the lease term, the capitalized leased assets are depreciated over the shorter of the estimated useful life of the asset or the lease term. (g) Investments Current Investments are stated at lower of cost or fair value and Long Term Investments are stated at cost. Provision is made where there is a decline, other than temporary, in the value of long term investment. (h) Inventories Inventories are valued at lower of cost or net realizable value. Cost is calculated on weighted average basis and comprises of expenditure incurred in the normal course of business in bringing such inventories to their location and condition. Obsolete, slow moving and defective inventories are identified at the time of physical verification of inventories and where necessary, adjustment is made for such items. (i) Foreign Currency Transactions Transactions in foreign currency are accounted for at the exchange rate prevailing on the date of transactions. Transactions remaining unsettled are translated at the exchange rate prevailing at the end of the financial year. Exchange gain or loss arising on settlement / translation is recognized in the Profit and Loss Account except in respect of two of the subsidiaries, yet to commence commercial operation, where such gain or loss is charged to “Miscellaneous Expenditure to the extent not written-off or adjusted”. With respect to the Parent, exchange gain or loss arising in respect of restatement of outstanding loan balances is accounted for as an income or expense with recognition of the said amount as refundable or

13 Schedules to the Accounts (Contd.)

SCHEDULE 13 – NOTES ON CONSOLIDATED ACCOUNTS (Contd.)

recoverable, which will be taken into consideration in determining the Parent’s future tariff in respect of the amount settled. However, foreign currency loan availed of on a fully hedged basis are accounted for in the currencies in which such loans have been fully hedged , where no exchange fluctuation is on the Parent’s account in terms of the underlying contracts.

(j) Sales Earnings from sale of electricity of the Parent are net of discount for prompt payment of bills and do not include electricity duty payable to the State Government. They also include, as per established practice, consistently followed in the past, estimated sums recoverable from / adjustable on consumers’ account, calculated on the basis of rates approved / specified by the appropriate authorities which are reflected in the subsequent bills. In terms of the applicable regulations and tariff determination process followed by the Commission, advance against depreciation forms part of tariff. Such advance of a year is adjusted against earning from sale of electricity for inclusion in the same in subsequent years, on due adjustment by the authorities in the tariff determination process. With respect to the subsidiaries, revenue is recognized when significant risk and rewards of ownership of the goods get passed on to the buyers. (k) Other Income O With respect to the Parent, income from hire of meters is accounted for as per the approved rates. Delayed payment surcharge, as a general practice, is determined and recognised on receipt of overdue payment from consumers.

O With respect to the subsidiaries, income from recoveries and services mainly represents recoveries made on account of advertisement for use of space and other expenses charged from suppliers and are recognized and recorded based on the arrangements with concerned parties.

O Income from investments and deposits etc. are accounted for on accrual basis inclusive of related tax deducted at source, where applicable. (l) Employee Benefits Contributions to Provident Fund, contributory Pension and Superannuation Fund, where applicable, are accounted for on accrual basis. Provident Fund contributions are made to funds maintained by the independent Board of Trustees or Regional Provident Fund Commissioner. The interest rate payable to the members of the trust fund shall not be lower than the statutory rate of interest declared by the Central Government under the Employees Provident Funds and Miscellaneous Provisions Act, 1952 and shortfall, if any, is made good by the employer. The employer, as per its schemes, extend employee benefits current and/or post retirement, which are accounted for on accrual basis, which includes actuarial valuation as at the balance sheet date in respect of gratuity, leave encashment, long term compensated absences and certain medical benefits, to the extent applicable, made by independent actuaries. Actuarial gains and losses, where applicable, are recognised in the Profit and Loss Account, except in one of the subsidiaries yet to commence commercial operation where such actuarial gain and losses are recognized as incidental project expenses. Compensation in respect of voluntary retirement scheme are charged off in two equal annual instalments. (m) Borrowing Costs Borrowing Costs attributable to acquisition and / or construction of qualifying assets are capitalized as a part of cost of such assets upto the date where such assets are ready for their intended use. Other borrowing costs are charged to revenue excepting in case of one of the subsidiaries, yet to commence commercial operation, where such expenses are included under “Miscellaneous Expenditure to the extent not written off or adjusted”. In respect of one of the subsidiaries, ancillary costs amounting to Rs. 146.03 lakh incurred in connection with the arrangement of borrowings are amortized over the period of borrowings for which these are incurred. (n) Deferred Taxation Provision for deferred taxation is made using liability method at the current rates of taxation on all timing differences to the extent it is probable that a liability or asset will crystallize. Deferred tax assets are recognized subject to the consideration of prudence and are periodically reviewed to reassess realization thereof. Carry forward unabsorbed depreciation as per assessment orders / returns filed has been recognised to the extent of deferred tax liability. Deferred Tax liability or asset will give rise to actual tax payable or recoverable at the time of reversal thereof. With respect to the Parent, since tax on profits forms part of chargeable expenditure under the applicable regulations, deferred tax liability or asset is recoverable or payable through future tariff. Hence, recognition of deferred tax asset or liability is made with corresponding provision of liability or asset, as the case may be. (o) Miscellaneous expenditure to the extent not written off or adjusted With respect to the Parent, the erstwhile governing statute, viz., the Electricity (Supply) Act, 1948 (ESA), provided for amortisation of preliminary expenses and certain capital issue expenses over the unexpired period of licence. The Parent, as per the consistently applied accounting policy continues with such amortisation of expenditure incurred upto the year 2004-05. Thereafter, pursuant to repeal of ESA, such expenditures are charged off to revenue. (also refer to paragraph “e” above) 4. Earnings from sale of electricity are determined in accordance with the relevant orders of the Commission, where appropriate, giving due effect of the required adjustments including those relating to recovery of arrears in respect of earlier years which resulted in a net credit adjustment of Rs. 7,456.00 lakh in the current year. Such earnings are net of discount for prompt payment of bills and advance against depreciation amounting to Rs.5,691.45 lakh (previous year : Rs.5,393.22 lakh) and Rs.13,968.00 lakh (previous year : Rs. 9,747.00 lakh) respectively.

14 Schedules to the Accounts (Contd.)

SCHEDULE 13 – NOTES ON CONSOLIDATED ACCOUNTS (Contd.)

5. Fixed assets of the Parent other than furniture, vehicles and intangible assets as on 31 March 2005 have been revalued which resulted in an increase in the value of such assets by an amount of Rs. 190,077.25 lakh with corresponding credit to Revaluation Reserve. 6. Estimated amount of contracts remaining to be executed on capital account and not provided for is Rs.29,144.28 lakh (previous year : Rs. 89,036.37 lakh). 7. (I) Claims against the Parent not acknowledged as debts: (a) The West Bengal Taxation Tribunal had held meter rentals received by the Parent from consumers to be deemed sales under the provisions of the Bengal Finance (Sales Tax) Act, 1941 and that sales tax was payable on such rentals. Based on such findings the Commercial Taxes Directorate assessed Rs. 69.22 lakh as sales tax on meter rentals received during the year ended 31st March, 1993 and raised a demand of Rs. 35.61 lakh on account of interest. Against the above demand, the Parent had deposited a sum of Rs. 75.00 lakh with the sales tax authorities and obtained a stay against the balance demand from the Deputy Commissioner of Commercial Taxes. The sales tax authorities also indicated their intention to levy such sales tax on meter rentals for the subsequent years as well, against which, the Parent filed a writ petition in the Calcutta High Court and prayed for an interim order, inter alia, restraining the sales tax authorities from proceeding with the assessment for the subsequent years till disposal of the appeal. An interim order has been issued by the High Court permitting the sales tax authorities to carry out assessments but restraining them from serving any assessment order on the Parent. The disposal of the case is still pending. (b) Other matters : i. Municipal Tax : Rs. 111.36 lakh (previous year : Rs. 78.03 lakh) in respect of certain properties, the rates of which are disputed by the Parent. ii. Income Tax : Rs. 60.60 lakh (previous year : Rs. 60.60 lakh) towards advance tax not admitted by authorities. iii. Water Cess : Rs. 812.75 lakh (31 March 2008 : Rs. Nil) in respect of interest on water cess disputed by the Parent. (II) Claims against a subsidiary not acknowledged as debts : (Rs. in Lakh) Contingencies : 2008-09 2007-08 Contingent liabilities not provided for in respect of: - Sales tax demands under appeal 661.13 81.84 - Service tax on rent expense / income, applicability whereof has been stayed by certain High Courts 213.86 - - Rent towards unexpired lock-in-period on account of closed stores 432.43 -

(III) Contingent liabilities with respect to joint venture entity : The joint venture entity has provided bank guarantee amounting to Rs. 4,100 lakh in favour of The President of India, acting through the Ministry of Coal, Government of India, towards future liability of the joint venture entity equivalent to royalty for one year in respect of allocation of Mahuagarhi coal block in the State of Jharkhand. The aforesaid bank guarantee is secured by third party guarantee. 8. Capital works-in-progress include a sum of Rs. 1,01,707 lakh (31 March 2008 : Rs. 40,759 lakh) towards expenditure incurred in respect of the 250 MW thermal power project at Budge Budge being set up by the Parent, before netting off a sum of Rs. 6,808 lakh (31 March, 2008 : Rs. 5,134 lakh) relating to income attributable to the Parent’s contribution to the project and an amount of Rs.1,837 lakh (31 March 2008 : Rs 7,068 lakh) on account of advances made for capital expenditure. 9. The net issue proceeds of Global Depository Receipts made by the Parent in 2005-06, have been utilised for the 250 MW thermal power project at Budge Budge. Out of the net proceeds of 95,60,000 equity shares allotted in 2007-08 to Qualified Institutional Buyers by the Parent in accordance with Chapter XIII A of SEBI (DIP) Guidelines 2000, as amended, a sum of Rs.23,276.05 lakh stands placed as deposits with scheduled banks/ investments with Mutual Funds included under Cash and Bank balances and Investments respectively after utilisation of the balance proceeds for strengthening the Parent’s distribution network and for making an equity contribution in Haldia Energy Limited, a wholly owned subsidiary of the Parent for the purpose of setting up a 600 MW generating facility in Haldia, aggregating to Rs.34,078.79 lakh. 10. The Parent has accounted for in the current year a net sum of Rs.26,983.00 lakh (previous year : Rs.25,796.00 lakh) shown as cost adjustments in schedule 11 to the Profit and Loss account, based on the Parent’s understanding of the applicable regulatory provisions in respect thereof, towards an estimated adjustable sum on account of cost of electrical energy purchased and fuel and related cost and adjustment relating to revenue account after giving the effect arising from the applicable orders for earlier years in this regard. The accurate quantification and disposal of the matter are being given effect to from time to time on receipt of necessary directions from the appropriate authorities.

15 Schedules to the Accounts (Contd.)

SCHEDULE 13 – NOTES ON CONSOLIDATED ACCOUNTS (Contd.)

11. Leases : (a) With respect to Parent company, Future rentals payable in respect of non-cancellable leases for assets comprising various equipment and vehicles acquired after 1 April, 2001 under operating leases work out to Rs. 1,243.54 lakh and Rs. 3,277.40 lakh during next one year and thereafter till five years respectively. There are no restrictions in respect of such leases. (b) With respect to SRL, Retail stores are taken by the company generally on operating lease and the lease rent is payable as per the agreements entered with the lessors. Agreements are both in the nature of cancellable and non cancellable leases. The lease term is for varied years and renewable for further years as per the agreements at the option of the company. There are no restrictions imposed by these lease arrangements. There are no subleases. The details of lease rentals payable are given below: Operating Leases 2008-09 2007-08 (Rs. in Lakh) (Rs. in Lakh) Lease payments for the year 10,293.71 6,154.63 Minimum lease payments – Not later than one year 6,832.36 3,666.94 Later than one year but not later than five year 29,282.66 11,447.30 Later than five year 50,242.15 19,384.43 Rent includes Rs. 783.00 lakh (Rs. 584.09 lakh) being lease rent, payable by the company in future years, but accounted for during the year as lease equalization in terms of Accounting Standard-19 on Leases which requires lease rental to be charged on a straight line basis over the lease term. (c) With respect to CPL, Future minimum lease payments under non-cancellable operating leases for leased premises (a) not later than one year Rs. 7.70 lakh (b) later than one year and not later than five years Rs. 33.24 lakh (c) later than five years Rs. 187.40 lakh 12. Franchisee Fees In consideration of the rights granted under the Master Franchisee Agreement, one of the subsidiaries has a further obligation to pay non refundable franchisee fees of US$3,50,000 to ABP Corporation, USA, which shall be payable by them in instalments as per the terms of the Master Franchisee Agreement. 13. One of the subsidiaries has incurred losses during the year, primarily due to nascent stage of organized retail industry in the country, coupled with severe recession and economic melt down. However, the subsidiary having created a robust infrastructure for organized retail business, is confident of generating positive cash flows and operational surplus in the near future with certain interim support from the holding company and the promoters. 14. The major components of Deferred Tax Assets / (Liabilities) based on the timing difference as at 31 March 2009 are as under : 2008-09 2007-08 (Rs. in Lakh) (Rs. in Lakh) Liabilities Depreciation difference (43,716.94) (40,326.78) Assets Unabsorbed business depreciation 5,166.15 9,543.33 Unabsorbed business losses 11,400.51 3,750.99 Other Timing Differences 2,942.82 2,935.03 Net Deferred Tax Liability (24,207.46) (24,097.43) Less : Recoverable deferred tax element of Parent Company 41,653.00 30,299.00 Net Deferred Tax Asset 17,445.54 6,201.57 Note : During the year, one of the subsidiaries has recognized net deferred tax assets of Rs.17,445.54 lakh in the accounts as at 31st March 2009. There are unabsorbed depreciation and carried forward losses as at the Balance Sheet date. However, based on future profitability projections, the management is virtually certain that there would be sufficient taxable income in future, to claim the above tax credit.

16 Schedules to the Accounts (Contd.)

SCHEDULE 13 – NOTES ON CONSOLIDATED ACCOUNTS (Contd.)

15. Earnings per Share : Computation of earnings per share Particulars 2008-09 2007-08 Profit after Tax and before exceptional items (Rs. Lakh) (A) 15,649.94 26,743.66 Weighted Average no. of shares for Earnings per Share (B) 124,935,925 118,249,149 Basic and Diluted Earnings per Share of Rs. 10/- each before Exceptional Items = [(A) / (B)] (Rs.) 12.53 22.62 Profit after Tax and after exceptional items (C) 7,750.12 26,743.66 Weighted Average no. of shares for Earnings per Share (D) 124,935,925 118,249,149 Basic and Diluted Earnings per Share of Rs. 10/- each after Exceptional Items = [(C) / (D)] (Rs.) 6.20 22.62

16. Consolidated Segment Reporting By Business Segment : (Rs. in Lakh)

Power Retail Property Total

2008-09 2007-08 2008-09 2007-08 2008-09 2007-08 2008-09 2007-08

Sales Revenue 303,132.36 277,463.93 102,122.24 76,811.41 – – 405,254.60 354,275.34

Other Segment Revenue 16,826.84 15,515.57 5,020.74 4,437.92 – – 21,847.58 19,953.49

Adjustments on consolidation (118.00) (333.33)

Total Segment Revenue 319,959.20 292,979.50 107,142.98 81,249.33 – – 426,984.18 373,895.50

Segment Result Before Tax 46,485.45 40,290.98 (28,855.64) (14,992.74) (11.32) – 17,618.49 25,298.24

Adjustments on consolidation (15,555.07) (333.33)

Provision for Taxation (5,518.00) (4,755.00) 11,088.48 6,062.30 – – 5,570.48 1,307.30

Profit after Taxation before Minority Interests 40,967.45 35,535.98 (17,767.16) (8,930.44) (11.32) – 7,633.90 26,272.21

Segment Assets 943,292.52 806,677.30 78,782.40 80,811.12 2,279.30 895.94 1,024,354.22 888,384.36

Unallocated Assets 122.61 –

Adjustments on consolidation (11,800.00) –

Total Assets 943,292.52 806,677.30 78,782.40 80,811.12 2279.30 895.94 1,012,676.83 888,384.36

Segment Liabilities 168,795.87 121,367.69 18,869.33 19,323.17 74.05 255.87 187,739.25 140,946.73

Unallocated Liabilities – –

Total Liabilities 168,795.87 121,367.69 18,869.33 19,323.17 74.05 255.87 187,739.25 140,946.73

Capital Expenditure 123,871.74 65,582.00 18,329.54 30,730.16 1,433.29 897.89 143,634.57 97,210.05

Depreciation (excluding amortisation of Intangible assets included below) 17,041.89 16,455.69 3,925.58 2,614.63 10.02 3.51 20,977.49 19,073.83

Amortisation 495.49 461.00 153.22 159.61 6.88 – 655.59 620.61

Non Cash Expenditure other than depreciation and amortisation 2,213.11 1,380.51 930.94 894.51 0.02 – 3,144.07 2,275.02

17 Schedules to the Accounts (Contd.)

SCHEDULE 13 – NOTES ON CONSOLIDATED ACCOUNTS (Contd.)

Notes : a. Business Segments : The internal business segmentations and the activities encompassed therein are as follows: • Power : Generation & Distribution of electricity • Retail : Organised Retailing • Property : Property Development b. The Group operates in India only and has no reportable geographical segments. c. The segment wise revenue, results, assets and liabilities figures relate to the respective amounts directly identifiable to each of the segments. 17. Related Party disclosure Related Party and their relationship Names of Related Parties Nature of Relationship Mr. S. Banerjee Key Management Personnel, CESC Limited Mahuagarhi Coal Company Private Limited Joint Venture (w.e.f. 4 April, 2008) RPG Cellucom India Private Limited Associate of SRL (till 1 December, 2008)

Particulars of transactions : (Rs. in Lakh) Nature Key Management Personnel Associate 2008-09 2007-08 2008-09 2007-08 Director Remuneration 295 59 NA NA Sale of Goods NA NA - 14.40 Purchase of Goods NA NA - 455.52 Income receivable / received NA NA 38.71 17.13 Expenses reimbursement receivable / received NA NA 8.58 9.80 Expenses reimbursement payable NA NA - 4.68 Equity investment NA NA - 99.80 Advance against equity shares NA NA 391.16 3,851.46 Closing Balance : Debit - - - 3,863.28 Credit 200 - - -

18. Exceptional items with respect to one of the subsidiaries, comprise losses incurred of Rs.4,591.50 lakh (previous year : Nil) arriving out of disposal of investments in an associate company and Rs.3,308.32 lakh (previous year : Nil) on account of non-usable assets written-off in respect to the non- viable and loss making stores, which were closed during the year. 19. With respect to a subsidiary, following expenses pertaining to previous year, are included in the Profit and Loss Account as indicated below : (Rs. in Lakh) Nature of expense Amount Repairs and Maintenance – Others 10.44 Printing and Stationery 30.45 Legal and Consultancy charges 56.55 Advertisement and selling expenses (net of recoveries) 32.90 Total 130.34

18 Schedules to the Accounts (Contd.)

SCHEDULE 13 – NOTES ON CONSOLIDATED ACCOUNTS (Contd.)

20. Generation at the Parent’s plant at Mulajore was discontinued in the year 2003-04 in view of its unviable cost of generation, pollution related issues and the observations of the Supreme Court of India. Necessary permissions from the appropriate authorities had been obtained for permanent closure of the establishment and disposal of the discarded assets. Such disposal had taken place during the previous year, which gave rise to an income of Rs. 2,589.41 lakh in the said year, included in Other Income in Schedule 10. 21. Employee benefits (a) With respect to Parent Company, Defined Contribution Plan The Company makes contributions for provident fund and pension (including for superannuation) towards defined contribution retirement benefit plans for eligible employees. Under the said plans, the Company is required to contribute a specified percentage of the employees’ salaries to fund the benefits. During the year, based on applicable rates, the Company has recognised Rs. 2,476 lakh (previous year : Rs. 2,075 lakh) on this count in the Profit and Loss Account. Defined Benefit Plans The company makes annual contribution to the Employees Group Gratuity Scheme of eligible agencies for qualifying employees. Liabilities at the year-end for gratuity, leave encashment and medical benefits have been determined on the basis of actuarial valuation carried out by an independent actuary, based on the method prescribed in Accounting Standard 15. (b) With respect to SRL, Defined Contribution Plan The Company makes contributions for provident fund and pension towards defined contribution retirement benefit plans for eligible employees. Under the said plans, the Company is required to contribute a specified percentage of the employees’ salaries to fund the benefits. During the year, based on applicable rates, the Company has recognised Rs. 810.54 lakh (previous year : Rs. 691.79 lakh) on this count in the Profit and Loss Account. Defined Benefit Plans The Company has a defined benefit gratuity plan. Every employee who has completed five years or more of service gets a gratuity on departure at 15 days salary (last drawn salary) for each completed year of service. The scheme is funded with an insurance company in the form of a qualifying insurance policy. (c) With respect to CPL, Defined Contribution Plan The Company maintains a Provident Fund with the Regional Provident Fund authorities where contributions are made by the Company as well as by the employees. An amount of Rs. 3.18 lakh (2007-08 – Rs.1.44 lakh) has been included in Incidental Project Expenses on account of Provident Fund. Defined Benefit Plans The Company makes annual contribution to the Employees’ Group Gratuity Scheme of eligible agencies for qualifying employees. Liabilities at the year end for Gratuity and Leave Encashment have been determined on the basis of Actuarial Valuation carried out by an Independent Actuary based on the method prescribed in Accounting Standard 15.

Expenses recognized in Profit and Loss account for the year ended 31st March 2009 : (Rs. in Lakh) For the year ended 31st March, 2009 For the year ended 31st March, 2008

Gratuity Leave Encashment Medical Gratuity Leave Encashment Medical

Current Service Cost 659.04 73.88 - 537.47 181.82 - Interest Cost 726.80 397.09 94.00 689.98 362.83 70.00 Expected Return on Plan Assets (819.50) - - (743.01) - - Actuarial loss/(gain) 263.90 (0.10) 185.00 0.76 227.68 282.00 Past Service Cost ------Total 830.24 470.87 279.00 485.20 772.33 352.00

19 Schedules to the Accounts (Contd.)

SCHEDULE 13 – NOTES ON CONSOLIDATED ACCOUNTS (Contd.)

Net Liability / (Asset) recognized in the Balance Sheet :

(Rs. in Lakh) For the year ended 31st March, 2009 For the year ended 31st March, 2008

Gratuity Leave Encashment Medical Gratuity Leave Encashment Medical

Present value of funded obligation 10,112.07 - - 9,293.04 - - Fair Value of Plan Assets 10,712.70 - - 10,100.23 - - (600.63) - - (807.19) - - Present value of un-funded obligation - 5,153.23 1,408.00 - 5,017.98 1,175.00 Unrecognised past service cost ------Net Liability/(Asset) (600.63) 5,153.23 1,408.00 (807.19) 5,017.98 1,175.00

Reconciliation of Opening and Closing Balances of the present value of obligations : (Rs. in Lakh)

For the year ended 31st March, 2009 For the year ended 31st March, 2008

Gratuity Leave Encashment Medical Gratuity Leave Encashment Medical

Opening defined benefit obligation 9,293.04 5,017.98 1,175.00 8,671.10 4,479.07 861.00 Current Service Cost 659.04 73.88 - 537.47 181.82 - Interest Cost 726.80 397.09 94.00 689.98 362.83 70.00 Actuarial loss/(gain) 297.51 (0.10) 185.00 142.28 227.68 282.00 Benefits paid / Liability transferred on sale of Division (864.32) (335.62) (46.00) (747.79) (233.42) (38.00) Closing Defined Benefit Obligation 10,112.07 5,153.23 1,408.00 9,293.04 5,017.98 1,175.00

Reconciliation of Opening and Closing Balances of fair value of plan assets : (Rs. in Lakh)

For the year ended 31st March, 2009 For the year ended 31st March, 2008

Gratuity Leave Encashment Medical Gratuity Leave Encashment Medical

Opening fair value of Plan Assets 10,100.23 - - 8,693.64 - - Expected Return on Plan Assets 819.50 - - 743.01 - - Actual Contributions 595.00 - - 1,269.86 - - Actuarial gain/(loss) 33.61 - - 141.51 - - Benefits paid (835.64) - - (747.79) - - Closing Fair Value on Plan Assets 10,712.70 -- 10,100.23 -- Actual Return on Plan Assets Rs. 841.12 Lakh Rs. 881.07 Lakh

The major categories of plan assets consist of funds maintained with insurer like LIC, ICICI Prudential, HDFC Standard Life etc.

20 Schedules to the Accounts (Contd.)

SCHEDULE 13 – NOTES ON CONSOLIDATED ACCOUNTS (Contd.)

Effect of increase/decrease of one percentage point in the assumed medical inflation rates : (Rs. in Lakh)

For the year ended 31st March, 2009 For the year ended 31st March, 2008

Increase Decrease Increase Decrease

Effect on defined benefit obligation 14.00 (11.00)* 244.00 153.00*

* in case of hospitalised treatment only

Principal Actuarial Assumption Used : For the year ended 31st March, 2009 For the year ended 31st March, 2008

Discount Rates 7.50% - 8.00% 8.00% - 8.50% Expected Return on Plan Assets 8.00% - 8.20% 8.00% - 8.32% Rate of increase in medical cost trend 5% 5% Mortality Rates “LIC 1994-96 Ultimate” “LIC 1994-96 Ultimate”

The estimates of future salary increase considered in the actuarial valuation takes into account factors like inflation, seniority, promotion and other relevant factors. The expected return on plan assets is based on actuarial expectation of the average long term rate of return expected on investments of the funds during the estimated terms of the obligations.The contribution expected to be made by the Group for the year ending 31st March 2010 is not readily ascertainable and therefore not disclosed.

22. Previous year’s figures have been regrouped / rearranged, wherever necessary.

For and on behalf of the Board of Directors Chairman R. P. Goenka Subhasis Mitra Director P. K. Khaitan Kolkata, 8th June, 2009 Vice President & Company Secretary Managing Director S. Banerjee

21 Consolidated Cash Flow Statement for the year ended 31st March, 2009

Rs. in Lakh Rs. in Lakh

2008-09 2007-08

A. Cash flow from Operating Activities Profit before Exceptional Item, Taxation and Other Appropriation 9,963.24 24,964.91 Adjustments for : Depreciation 21,578.34 19,618.93 (Profit) / Loss on Sale/Disposal of Assets (net) 445.89 (2,658.86) Profit on Sale of Investments (24.78) (56.30) Income from current Investments other than Trade (4,234.97) (3,048.98) Income from Long Term Trade Investment (30.00) (30.00) Miscellaneous expenditure written off 71.53 71.51 Provision for doubtful debts, Store/ Lease Deposits/Advances 736.55 81.51 Provision for obsolete stocks 49.02 97.99 Bad debts / Advances written off (net) 1,486.20 1,323.41 Asset written off – 70.27 Interest Expense 15,706.31 14,802.66 Share Issue expenses – 2,108.62 Interest Income (5,321.24) (3,090.22) Advance against depreciation 13,968.00 9,747.00 Foreign Exchange Rate Variation 2,429.83 662.07 Provision for Lease equalisation 783.00 584.09 Provision for Employee Stock Option 17.77 46.47 Liability Written back (166.00) (24.84) Operating Profit before Working Capital changes 57,458.69 65,270.24

Adjustments for : Trade and other receivable (2,973.06) (6,428.69) Inventories (2,607.77) (12,525.88) Trade payables 37,851.07 26,898.99 Increase in Miscellaneous/ Development Expenditure (181.60) (15.21) Cash Generated from Operations 89,547.33 73,199.45 Income Tax paid (net) (5,844.01) (4,723.23) Net cash flow from Operating Activities 83,703.32 68,476.22

B. Cash flow from Investing Activities Addition to Fixed Assets/Capital Work-in-Progress (133,015.30) (92,359.16) Sale of Fixed Assets 536.54 2,984.84 Acquisition of shares for Subsidiaries (135.29) – Expenses in connection with Investment – (978.50) Proceeds from sale of Investments in Associate Company 99.80 – Purchase of long term investments (790.00) – (Purchase) / Sale of Current Investments (net) 14,508.12 (25,642.73) Income from Long Term Trade Investment received 30.00 30.00 Interest received 4,317.55 3,209.44 Advance for share subscription (350.00) – Net cash flow from Investing Activities (114,798.58) (112,756.11)

22 Consolidated Cash Flow Statement for the year ended 31st March, 2009 (Contd.)

Rs. in Lakh Rs. in Lakh

2008-09 2007-08 C. Cash flow from Financing Activities Share Issue Expenses – (2,108.62) Issue of share Capital – 59,080.80 Advance received against share capital 50.00 – Proceeds from Long Term Loans ( including refinance loan) 108,615.00 32,647.23 Repayment of Long Term Loans (30,971.00) (47,181.32) Repayment of Mid Term Loans (718.80) (393.47) Repayment of Public Deposits (99.56) (3,284.86) Net increase / (decrease) in Cash Credit facilities and other Short Term Loans (10,015.92) 38,017.60 Capital Contributions and Advance received from Consumers 4,252.03 4,655.42 Consumers' Security Deposit 7,894.85 8,949.88 Interest Paid (15,424.77) (16,317.96) Dividends paid (4,972.01) (2,927.77) Dividend tax paid (849.31) (501.54) Net Cash flow from Financing Activities 57,760.51 70,635.39

Net Increase in cash and cash equivalents 26,665.25 26,355.50

Cash and Cash equivalents - Opening Balance 101,702.92 75,343.96 Cash and equivalents taken over on amalgamation – 3.46 Cash and Cash equivalents - Closing Balance 128,368.17 101,702.92 Notes: a) Previous year’s figures have been regrouped / rearranged wherever necessary. b) The Cash Flow Statement has been prepared under the indirect method as given in the Accounting Standard on Cash Flow Statement (AS-3).

This is the Cash Flow Statement referred to in our report of even date. Prabal Kr. Sarkar Partner Membership No. : 52340 For and on behalf of For and on behalf of the Board of Directors LOVELOCK & LEWES Chairman R. P. Goenka Chartered Accountants Subhasis Mitra Director P. K. Khaitan Kolkata, 8th June, 2009 Vice President & Company Secretary Managing Director S. Banerjee Information Regarding Subsidiary Companies (Rs. in Lakh) Spencer’s Retail Au Bon Pain Café Music World CESC Properties Metromark Green Haldia Energy Limited India Limited Retail Limited Limited Commodities Pvt. Ltd. Limited Issued and Subscribed Share Capital 2,601.21 5.00 500.00 5.00 2.00 21.00 Reserves (21,009.07) - 7,519.01 - - 10.09 Total Assets 113,828.62 199.12 8,024.49 2,008.61 97.00 20,633.55 Total Liabilities 113,828.62 199.12 8,024.49 2,008.61 97.00 20,633.55 Investments (except in case of investments in the subsidiaries) 1.00 - - - - - Turnover 107,142.98 - - - - - Profit / (Loss) before taxation (28,855.65) - (4.99) - (11.31) (0.56) Provision for taxation - FBT (155.49) - - - - - Deferred Tax Credit 11,243.97 - - - - - Profit / (Loss) after taxation (17,767.17) - (4.99) - (11.31) (0.56) Proposed Dividend ------

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