NTPC Public Issue of Tax Free Bonds

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1 HIGHLIGHTS OF TAX BENEFITS NTPC LIMITED (A Government of India Enterprise) Interest from these Bonds do not form part of total income as per provisions of Section 10 (15) (iv) (h) of Income Tax Act, 1961 read along with Section 14A (1) of the Income Tax Act. Since the interest income on the Bonds is exempt, no tax deduction at source ( TDS ) is required. However interest on application money would be liable for TDS as well as would be subject to tax as per present tax laws. Wealth tax has been abolished w.e.f. financial year i.e. assessment year COMPANY PROFILE NTPC Limited (NTPC) is a Government company, which was conferred Navaratna status by the Government of India in 1997 and upgraded to Maharatna status in NTPC is the largest power producer in India in terms of both installed capacity and generation, with aggregate installed capacity of 44,398 MW representing market share of 18.77% of India s total installed capacity excluding renewable energy as on March 31, 2015, and having generated billion units of power, representing market share of 24.95% of India s total power generation in fiscal While NTPC s core business is the generation and sale of electricity in India, the company is a diversified and integrated player in the power sector, as NTPC is also engaged in various other complementary businesses, seeking to support its core business and leverage its technical and operational skills as well as client and knowledge base in India and abroad. NTPC s complementary activities conducted in some cases through Subsidiaries and Joint Ventures, include project consultancy (including services such as engineering, operation and maintenance management, project management, contracts and procurement management, quality management, training and development), power trading, electricity distribution and manufacture of equipment used in the power business. In the calendar year 2014, NTPC is ranked as the number one independent power producer ( IPP ) and energy trader in the world, on the basis of asset worth, revenues, profits and return on invested capital, according to a survey conducted by Platts. In fiscal 2015, NTPC s total revenue aggregated to Rs 82, crore and Rs 75, crore on consolidated and standalone basis, respectively, while profit after tax was Rs 9, crore and Rs 10, crore, on consolidated and standalone basis, respectively. As on March 31, 2015, NTPC s debt to equity ratio was 1.25 on a consolidated basis and 1.05 on a standalone basis while debt service coverage ratio was 2.27 on a consolidated basis and 2.44 on a standalone basis. NTPC s interest service coverage ratio was 5.54 on a consolidated basis and 6.72 on a standalone basis.

2 SALIENT FEATURES OF THE PROPOSED TAX FREE BONDS Tax benefits u/s 10 (15) (iv) (h) of the Income Tax Act, 1961 Interest from these Bonds do not form part of Total Income Credit Rating of [ICRA] AAA (Stable) by ICRA Limited ( ICRA ) and CRISIL AAA by CRISIL Limited ( CRISIL ) and CARE AAA (Triple A) by Credit Analysis and Research Limited ( CARE ) The Bonds are proposed to be listed on BSE and NSE. Strengths Leadership position in the Indian power sector NTPC is India s largest power producer, both in terms of installed capacity and generation. Hence the company enjoys considerable economies of scale and other benefits, including strong brand value, as a result of its leadership position, scale of operations and diversified presence across the Indian power sector. Robust financial position NTPC s strong financial position allows the company considerable flexibility to its plans for future growth, including in terms of its ability to make investments in business diversification, research and development, corporate social responsibility and sustainable development, as well as constituting a competitive advantage and entry barrier in the Indian power sector, vis-à-vis other players. Further NTPC s strong financial ratios and credit ratings enables it to have ready access to domestic and international credit markets. Government support The President of India acting through the MoP is the Promoter of the Company. In addition, NTPC is one of only seven companies that have been granted Maharatna status by the GoI. The grant of Maharatna status by the GoI in May 2010, further to Navaratna status having been granted to the company in 1997 that provides an appreciable degree of financial and operational flexibility. Long-term agreements for coal and gas supply as well as for sale of electricity, providing cash flow visibility The long-term fuel supply contracts, including for coal, natural gas and re-gasified liquefied natural gas, helps the company to generate power at competitive prices by allowing greater predictability and better planning of fuel supplies. Further, NTPC believes that the long-term contracts for sale of energy provides it with an appreciable degree of cash flow visibility and financial stability, therefore, allow it to effectively plan for future growth and diversification along the power value chain. Strong corporate governance NTPC believes that corporate governance, vigilance mechanisms and transparency to stakeholders are critical to improving efficiency and quality of decision making. In addition to complying with the corporate governance provisions of the listing agreements that the Company has entered into with BSE and NSE, NTPC has set up a Vigilance Department headed by the Chief Vigilance Officer, who reports to the Central Vigilance Commission as well as the Board. Skilled human resources and employee development NTPC believes that its employees possess a level of competence and commitment that provides a key competitive advantage. The senior executives have extensive experience in the industry and many of them have been with the organization for a significant portion of their careers.

3 Issue Structure COMMON TERMS AND CONDITIONS FOR ALL SERIES OF THE BONDS Lead Managers A. K. Capital Services Limited ( AK Capital ), Axis Capital Limited ( Axis ), Edelweiss Financial Services Limited ( Edelweiss ) and SBI Capital Markets Limited ( SBICAP ) Issuer NTPC Limited Type of instrument/issue of Public issue by NTPC Ltd. of tax-free secured redeemable non-convertible Bonds of face value of Rs. 1,000 each in the nature of debentures having tax Bonds/Issue Size benefits under Section 10(15)(iv)(h) of the Income Tax Act, for an amount of Rs. 400 crore with an option to retain oversubscription of up to Rs. 300 crore for issuance of additional bonds aggregating to a total of up to Rs. 700* crore during fiscal * In terms of the CBDT Notification, the Company has been authorised to issue tax free secured redeemable non-convertible bonds for an amount of Rs. 1,000 crore during the fiscal 2016 of which at least 70.00% of aggregate amount of bonds is to be raised through public issue. Accordingly, NTPC Ltd. has already issued tax-free secured redeemable non-convertible bonds amounting to Rs. 300 crore being 30.00% of the Allocated Amount by way of private placement and now plans to raise the balance Rs. 700 crore through this issue. The Company shall ensure that bonds issued pursuant to the CBDT Notification through public issue route and private placement route in fiscal 2016 shall, in aggregate, not exceed Rs.1,000 crore Face Value /Issue Price (Rs.) per Bond Rs. 1,000 Minimum Application 5 Bonds (Rs. 5,000) (individually or collectively, across all Series of Bonds) and in the multiple of One Bond (Rs. 1,000) thereafter Nature of Bonds Tax-free secured redeemable and non-convertible Nature of Indebtedness and Ranking/Seniority The claims of the Bondholders shall be superior to the claims of any unsecured creditors of the Company and subject to applicable statutory and/or regulatory requirements, rank pari passu inter se to the claims of other secured creditors of the Company having the same security. Listing The Bonds are proposed to be listed on BSE and NSE, with the BSE being the Designated Stock Exchange. Credit Ratings [ICRA] AAA (Stable) by ICRA, CRISIL AAA by CRISIL, CARE AAA (Triple A) by CARE. Mode of Issue Public Issue Bond Trustee IDBI Trusteeship Services Limited Mode of Issuance In dematerialized form only** Registrar to the Issue Karvy Computershare Private Limited Modes of Payment/Settlement Mode See Terms of the Issue Manner and Modes of Payment in the prospectus. Market Lot/Trading Lot One Bond Deemed Date of The date on which the Board approves the Allotment of Bonds for the Issue or such date as may be determined by the Board and Allotment notified to the Designated Stock Exchange. All benefits accruing in relation to the Bonds including interest on Bonds shall be available from Deemed Date of Allotment. Actual Allotment of Bonds may occur on a date later than Deemed Date of Allotment Issue Opening Date September 23, 2015 Issue Closing Date September 30, 2015.The Issue shall remain open for subscription from A.M. to 5.00 P.M. (Indian Standard Time) during the Issue Period with an option for early closure or extension, as may be decided by the Board or an authorised representative of the Board Interest on Application Amounts received, which are used towards Allotment of 7.36% per annum, 7.53% per annum and 7.62% per annum on Series 1B, Series 2B and Series 3B, respectively, and at the rate of 7.11% per annum, 7.28% per annum and 7.37% per annum on Series 1A, Series 2A and Series 3A, respectively, subject to deduction of income tax under the Income Tax Act, from the date of realization of Application Amount through cheque(s)/demand draft(s) up to one Interest on Application Amounts received, which are liable to be Refunded Frequency of Coupon/Interest Payment Step-up/Step-down Coupon Rate Depositories Redemption Amount day prior to the Deemed Date of Allotment. At the rate of 5% per annum, subject to deduction of income tax under the Income Tax Act, from the date of realization of Application Amount through cheque(s)/demand draft(s) up to one day prior to the Deemed Date of Allotment. Annual Nil NSDL and CDSL Amount repayable on the Bonds, comprising the face value of the Bonds, together with coupon/interest accrued at the applicable coupon/interest rate for each Series of Bonds on the respective Redemption Dates or Maturity Dates **In terms of Regulation 4(2)(d) of the SEBI Debt Regulations and Section 29(1) of the Companies Act 2013, our Company will make the public issue of the Bonds in the dematerialized form.

4 Bond Particulars Options Option 1 Option 2 Option 3 Tenure of Bonds 10 years 15 years 20 years Maturity/Redemption Date 10 years from Deemed Date of Allotment 15 years from Deemed Date of Allotment 20 years from Deemed Date of Allotment Coupon Rates for Category I, II and III # Series of Bonds* Series 1A Series 2A Series 3A Coupon Rate (%) per annum 7.11% 7.28% 7.37% Annualized Yield (%) per annum 7.11% 7.28% 7.37% Coupon Rates for Category IV Series of Bonds* Series 1B Series 2B Series 3B Coupon Rate (%) per annum 7.36% 7.53% 7.62% Annualized Yield (%) per annum 7.36% 7.53% 7.62% *The Company shall allot Series 1A / Series 1B (depending upon the category of Applicants) for all valid applications, wherein the Applicants have not indicated their choice of the relevant Series of Bonds # Pursuant to the CBDT Notification and for avoidance of doubt, it is clarified as under: a. The coupon rates indicated under Series 1B, Series 2B and Series 3B shall be payable only on the Retail Individual Investor Portion in the Issue. Such coupon is payable only if on the Record Date for payment of interest, the Bonds are held by investors falling under the Retail Individual Investor Category/Category IV; b. If the Bonds allotted against Series 1B, Series 2B and Series 3B are transferred by Retail Individual Investors to Non- Retail Individual Investors, being Category I, Category II and Category III investors, the coupon rate on such Bonds shall stand at par with coupon rate applicable on Series 1A, Series 2A and Series 3A respectively; c. If the Bonds allotted against Series 1B, Series 2B and Series 3B are sold/transferred by the Retail Individual Investors to investor(s) who fall under the Retail Individual Investor category as on the Record Date for payment of interest, then the coupon rates on such Bonds shall remain unchanged; d. If on any Record Date, the original Retail Individual Investor Allotee(s)/transferee(s) hold the Bonds under Series 1A, Series 1B, Series 2A, Series 2B, Series 3A and Series 3B for an aggregate face value amount of over ` 10 lakh, then the coupon rate applicable to such Retail Individual Investor Allottee(s)/transferee(s) on Bonds under Series 1B, Series 2B, Series 3B shall stand at par with coupon rate applicable on Series 1A, Series 2A, and Series 3A, respectively; e. Bonds Allotted under Series 1A, Series 2A and Series 3A shall carry coupon rates indicated above until the maturity of the respective Series of Bonds irrespective of category of holder(s) of such Bonds; and f. For the purpose of classification and verification of status of the eligibility of a Bondholder under the Retail Individual Investor category, the aggregate face value of Bonds held by the Bondholders in all the Series of Bonds Allotted under the Issue shall aggregated on the basis of PAN.

5 Who can apply? Category I/QIBs* Category II/Corporates* Category III/HNIs Category IV/Retail Individual PFIs as defined in Section 2(72) of the Companies Act 2013; Alternative Investment Funds; Scheduled commercial banks; MFs registered with SEBI; State industrial development corporations; Insurance companies registered with the IRDA; Provident funds with a minimum corpus of Rs. 25 crore; Pension funds with a minimum corpus of Rs. 25 crore; The National Investment Fund set up by resolution F. No. 2/3/2005-DD-II dated November 23, 2005 of the GoI, published in the Gazette of India; Insurance funds set up and managed by the army, navy, or air force of the Union of India; and Insurance funds set up and managed by the Department of Posts, India, subject to such being authorized to invest in the Bonds. Companies falling within the meaning of Section 2(20) of the Companies Act 2013; and Limited liability partnerships, statutory corporations, trusts, partnership firms in the name of their respective partners, associations of persons, co-operative banks, regional rural banks, societies registered under the applicable laws in India and other legal entities constituted and/or registered under applicable laws in India, that are authorized to invest in Bonds by their respective constitutional and/or charter documents, subject to compliance with respective applicable laws. Investors falling under the following categories applying for an amount aggregating to more than Rs. 10 lakh across all Series of Bonds in the Issue: Resident Individual Investors; NRIs applying on a non-repatriation basis only; and HUFs applying in the name of their respective kartas. Investors Investors falling under the following categories applying for an amount aggregating up to and including Rs. 10 lakh across all Series of Bonds in the Issue: Resident Individual Investors; NRIs applying on a non- repatriation basis only; and HUFs applying in the name of their respective kartas. * See general circular (No. 6/2015) dated April 9, 2015 issued by the MCA clarifying that in cases where the effective yield (effective rate of return) on tax free bonds is greater than the prevailing yield of one year, three year, five year or ten year government security closest to the tenor of the loan, there is no violation of Section 186(7) of the Companies Act, 2013.

6 Persons not eligible to apply: The following persons and entities will not be eligible to participate in the Issue and any Applications from such persons and entities are liable to be rejected: Minors not applying through their guardians. It is clarified that a guardian may apply on behalf of a minor, provided that such Applications indicate the names of both the minor, as well as the guardian. It is further clarified that it is the responsibility of the Applicant to ensure that the guardians are competent to contract under applicable statutory/regulatory requirements; Persons Resident Outside India and foreign nationals (including FIIs, Qualified Foreign Investors and NRIs applying on repatriation basis, but excluding NRIs applying on a non-repatriation basis only); Venture Capital Funds, as defined and registered with SEBI under the Securities and Exchange Board of India (Venture Capital Funds) Regulations, 1996 and Foreign Venture Capital Investors; Overseas Corporate Bodies; Persons ineligible to contract under applicable statutory/regulatory requirements; and Any other category of Applicants not provided for under - Who can apply? on page 160 of the prospectus. Allocation Ratio QIB Portion Corporate Portion High Net Worth Individual Portion Retail Individual Investor Portion 10% of the Issue Size 25% of the Issue Size 25% of the Issue Size 40% of the Issue Size Undersubscription in any Portion: If there is any undersubscription in any Portion (while other Portions are oversubscribed), priority in Allotments will be given in the following order (in decreasing order of priority): (i) (ii) (iii) (iv) Retail Individual Investor Portion; High Net worth Individual Portion; Corporate Portion; followed by QIB Portion. Within each Portion, priority in Allotments will be given on a first-come-first-serve basis, based on the date of upload of each Application into the electronic system of the Stock Exchanges. Allotments in case of over-subscription in any Portion: In case of over-subscription, Allotments to the maximum extent possible, will be made on a first-come-first-serve basis and thereafter on a proportionate basis in each Portion, determined based on the date of upload of each Application into the electronic system of the Stock Exchanges, meaning full Allotment of Bonds to the Applicants on a first-come-first-serve basis up to the date falling one day prior to the date of over-subscription and proportionate Allotment of Bonds to the Applicants on the date of over-subscription.

7 FINANCIAL HIGHLIGHTS (Standalone) As on/for the year (Rs. Crs) 31-Mar Mar Mar Mar Mar-15 Shareholder's Fund 67, , , , , Long-term Borrowings 39, , , , , Long-term Loans & Advances 6, , , , , Cash and bank balances 16, , , , , Short-term Loans & Advances 1, , , , , Revenue from Operations (net) 55, , , , , Total Expenses 45, , , , , Profit before Tax 12, , , , , Profit After Tax 9, , , , , Basic and diluted Earning per Share ( Rs.)

SECTION VI ISSUE INFORMATION ISSUE STRUCTURE

SECTION VI ISSUE INFORMATION ISSUE STRUCTURE Pursuant to the CBDT Notification, our Company is authorized to undertake the Issue. Our Company proposes to raise an amount of ` 400 crore with an option to