From Published Accounts

Accounting for composite scheme of
amalgamation and arrangement as per accounting standards applicable as on the
appointed date and not as per IndAS as applicable for the financial year

Suzlon Energy Ltd. (Year ended 31st March
2017)

 From Notes
to Financial Statements

 Composite scheme of amalgamation and
arrangement

On April 27,
2016, the Board of Directors of the Company had approved a composite scheme
which comprised of merger of its three wholly owned subsidiaries, namely, SE
Blades Limited (‘SEBL’), SE Electricals Limited (‘SEEL’) and Suzlon Wind
International Limited (‘SWIL’) in the Company, with effect from January 1, 2016
(being the appointed date for merger) and demerger of tower business from
wholly owned subsidiary, Suzlon Structures Limited (‘SSL’) (now known as Suzlon
Global Services Limited) (‘Scheme’) from the Company, with effect from April 1,
2016 (being the appointed date for demerger).

This Scheme has been approved by the
Honourable National Company Law Tribunal, Ahmedabad Bench on May 31, 2017 and
the Company has incorporated the accounting effects in its books of accounts as
per the accounting treatment prescribed in the Scheme which is in compliance
and accordance with the accounting standards applicable to the Company as of
the appointed date of the Scheme. Accounting standards currently applicable to
the Company are Ind AS. Had the Company applied the accounting treatment in accordance
with Ind AS 103, Business Combination, the following would have been the
accounting treatment:

 a)  The assets and liabilities
of transferor companies would have been taken over at carrying amount in the
books of transferor company and not at fair value;

 b)  Retained earnings appearing
in the books of transferor companies would have been aggregated with the books
of the Company. The total amount of retained earnings would have been Rs.
11,236.30 Crore.

 c)  No new assets / liabilities
would have been recognised and no adjustments would have been made to reflect
fair values of assets or liabilities of the transferor companies. As a result
of acquisition of transferor companies, the Company has recognised Goodwill of
Rs 1,059.80 Crore which shall be amortised over five years in accordance with
the Scheme.

 d)  Financial statements in
respect of prior period would have been restated as if business combination had
occurred from the transition date. The Company has accounted for the business
combination of transferor companies as well as demerged business from the
appointed dates defined in the Scheme.

 e)  Business combinations which
are effected after the balance sheet date but before approval of financial
statements, are not incorporated in the financial statements but only
disclosures required by Ind AS 10 Events after the reporting period are made.
In the current case, the Company has recorded the business combination on the
appointed date defined in the Scheme.

 f)   The Company has not
recognised deferred tax asset or liabilities arising out of assets acquired or
liabilities assumed.

Accounting for
composite scheme of amalgamation and arrangement

On April 27, 2016, the Board of Directors of
the Company had approved a Composite Scheme (‘Scheme’) which comprised of:

 a)  Merger of its three wholly
owned subsidiary companies, namely, SE Blades Limited (‘SEBL’), SE Electricals
Limited (‘SEEL’) and Suzlon Wind International Limited (‘SWIL’) in the Company,
with effect from January 1, 2016 (being the appointed date for merger);

b)  Demerger of tower business
from wholly owned subsidiary, Suzlon Structures Limited (‘SSL’) (renamed as
Suzlon Global Services Limited (‘SGSL”)) from the Company, with effect from
April 1, 2016 (being the appointed date for demerger).

SEBL, SEEL, SWIL are hereinafter referred to
as the ‘transferor companies’ and tower business of SSL is referred to as
‘demerged business’.

Prior to merger, the transferor companies
and tower business of SSL, were engaged in manufacturing components of wind
turbine generators (WTGs). The Scheme defined following accounting treatment
for recording this transaction with transferor companies in the books of the
Company:

 a)  Transfer of all assets and
liabilities appearing in the books of transferor companies to the Company at
their fair values as on the appointed date;

b)  The cost of equity and
preference shares issued by transferor companies and held by the Company, shall
be treated as consideration paid for acquisition of business of transferor
companies;

c)  The Reserves (whether
capital or revenue or on revaluation) of transferor companies should not be
recorded in the financial statements of the Company;

d)  Loans and advances inter-se
between the transferor companies and the Company, if any shall stand cancelled;

e)  Differences in accounting
policy between the transferor companies and the Company will be quantified and
adjusted in the balance in the statement of the profit and loss of the Company;
and

f)   Difference between net
assets value taken over from transferor companies and the cost of investments
defined in (b) above, shall be debited to Goodwill account / credited to
capital reserve account. Goodwill, if any, shall be amortised on a
straight-line basis over period of full five years (i.e. 60 months) and shall
accordingly be amortised proportionately for a part of any financial year, if
so required.

The Scheme defined the following accounting
treatment for recording this transaction with demerged business in the books of
the Company:

a)  Transfer of all assets and
liabilities in the books of demerged business to the Company at their
respective book values, as appearing in the books of SSL immediately preceding
the appointed date

b)  Intercompany balances, if
any between the demerged business and the Company shall stand cancelled

c)  Amount of net assets /
(liabilities) of demerged business transferred to the Company, shall be
recorded as Capital Reserve / Goodwill respectively. This Goodwill / Capital
Reserve shall be independent of Goodwill / Capital Reserve arising on merger of
transferor companies defined above.

This Scheme has been approved by the
Honourable National Company Law Tribunal, Ahmedabad Bench on May 31, 2017 and
the Company has incorporated the accounting effects in its books of accounts as
per the accounting treatment prescribed in the Scheme which is in compliance
and accordance with the accounting standards applicable to the Company as of
the appointed date of the Scheme. Accounting standards currently applicable to
the Company are Ind AS.

The details of Fair values of assets and
liabilities taken over from transferor companies and book value of assets and
liabilities taken over from demerged business in accordance with the Scheme are
as follows:

None of the trade receivables is credit
impaired and it is expected that the full contractual amounts can be collected.

The above mentioned fair valuation is based
on valuations performed by an accredited independent valuer and the valuation
model is in accordance with that recommended by the International Valuation
Standards Committee.

 Notes:

a)  Other financial liabilities
of SSL include an amount of Rs. 22.14 Crore, relating to amount payable by the
tower business to other businesses included in SSL. As this in the nature of
other financial liability, the same has been included in the computation of net
assets of tower business.

b)  The Scheme states that
since the entire share capital of transferor companies being SEBL, SEEL and
SWIL is held by SEL, being wholly owned subsidiaries of SEL, no shares of SEL
shall be allotted in respect of its holding in the transferor companies
pursuant to amalgamation due to operation of law. The value of investment in
the shares of transferor companies held by SEL shall stand cancelled in the
books of SEL, without further act or deed. The cost of acquisition of such
equity and preference shares in the hands of SEL shall be treated as the
consideration for the acquisition of business of transferor companies. As
regards the de-merger of tower manufacturing division of SSL, the Scheme states
that since the entire share capital of demerged company is held by SEL and its
nominees, no shares of SEL shall be allotted in respect of its holding in the
demerged company pursuant to demerger, due to operation of law.

** As a result of the merger, the Company
has recognised adjustment of Rs. 69.15 Crore on account of cancellation of
RCPs, Rs. 111.90 Crore on account of accounting policy alignment including Ind
AS adjustments.

From
Auditors’ Report

Emphasis of Matter