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Notes to Accounts of Black Box Ltd.

Mar 31, 2023

Subsidiaries are all entities over which the group has control. The group controls an entity when the group is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power to direct the relevant activities of the entity. Subsidiaries are fully consolidated from the date on which control is transferred to the group. They are deconsolidated from the date that control ceases.

** The relationship of associate was established on 31 March 2023. The Company through its subsidiaries, was holding 86% of the ownership interest as at 31 March 2022, however neither the Company had control over this entity as per Ind AS 110 "Consolidated Financial Statementsâ, nor it exercised significant influence as per Ind AS 28 "Investment in Associates and Joint Venturesâ (âInd AS 28â) until the relationship was established on 31 March 2023. Further, for both the years, voting power was waived under a waiver agreement, thus voting power percentage was Nil as at 31 March 2023 and 31 March 2022.

Section 129(3) of the Act requires preparation of consolidated financial statement of the Holding Company and of all the subsidiaries including associate company and joint venture businesses in the same form and manner as that of its own. Ind AS 28 defines Associate as an entity over which the investor has significant influence. It mentions that if an entity holds, directly or indirectly through intermediaries, 20% or more of the voting power of the enterprise, it is presumed that the entity has significant influence, unless it can be clearly demonstrated that this is not the case. Also, an investor does not have significant influence in an enterprise can be demonstrated through following conditions:

(i) The investor does not have any representation on the board of directors or corresponding governing body of the investee.

(ii) The investor does not participate in policy making process.

(iii) The investor does not have any material transactions with the investee.

(iv) The investor does not interchange any managerial personnel.

(v) The investor does not provide any essential technical information to the investee.

Investments in subsidiaries and associates are carried at cost less accumulated impairment losses, if any. Where an indication of impairment exists, the carrying amount of the investment is assessed and written down immediately to its recoverable amount. On disposal of investments in subsidiaries and associates, the difference between net disposal proceeds and the carrying amounts are recognised in the standalone statement of profit and loss.

Footnote:

Pursuant to shareholdersâ approval obtained in the Extraordinary General Meeting held on 11 December 2020, the Company had allotted on preferential basis, 3,333,334 convertible warrants of '' 10 each at a premium of '' 665 per warrant to Essar Telecom Limited and Onir Metallics Limited on 8 January 2021. During the year ended 31 March 2021, the Company had received money aggregating to '' 187.81 Crores against convertible warrants. Initially each warrant was convertible into 1 equity share of '' 10 (before sub-division) each of the Company within 18 months from the date of allotment subject to payment of balance subscription amount. Out of total 3,333,334 convertible warrants, 2,598,651 warrants were converted into equity shares until 31 March 2021. During the year 31 March 2023, remaining 734,683 warrants have been converted into equity shares of '' 2 each. In the previous year, Onir Metallics Limited had merged with Essar Steel Metal Trading Limited [refer note 36(II)].

Also, Company had received consideration in excess by '' 0.10 Crores which is now refundable to warrant holders and accordingly, liability is transferred to Other Financial Liability (current). Refer note 17 and note 36(III).

(b) Rights, preference and restriction on equity shares

The Company has only one class of equity shares having par value of '' 2 per share. Each holder of equity share is entitled to one vote per equity share. The Company declares and pays dividends in INR. The dividend, if any, proposed by the Board of Directors is subject to the approval of the shareholders in the ensuing Annual General Meeting, except for interim dividend which is approved by the Board.

In the event of liquidation of the Company, the holders of equity shares will be entitled to receive assets of the Company remaining after distribution of all preferential amounts. The distribution will be in proportion to the number of fully paid-up equity shares held by the shareholders.

(c) Essar Telecom Limited (ETL) was the holding company with effect from 20 March 2021 and up to 20 September 2021. Essar Global Fund Limited is the ultimate holding company as at 31 March 2023 and 31 March 2022. Refer note (h) below.

(d) Aggregate number of bonus shares issued or buy back of shares during the period of five years immediately preceding the reporting date

The Company has neither issued bonus shares nor there has been any buy back of shares during five years immediately preceding 31 March 2023.

(e) Shares issued for consideration other than cash

The Company had allotted 6,355,925 fully paid-up equity shares of '' 2 each on conversion of compulsorily convertible preference shares during the year ended 31 March 2019.

Above amounts have been included in the line item "Contribution to provident fund and other fundsâ in note 26. Also, the contribution of the Company is limited to the amount contributed and it has no further contractual or constructive obligation.

(b) Defined benefit plan - The Company has an unfunded defined benefit plan i.e. Gratuity, for its employees. Under the gratuity plan, every employee who has completed at least five years of service gets a gratuity on departure at 15 days of last drawn salary for each completed year of service. This defined benefit plan is governed by The Payment of Gratuity Act, 1972.

The following tables summarise the components of employee benefits expense recognised in the standalone statement of profit and loss and the amounts recognised in the standalone balance sheet for the gratuity plan.

These assumptions were developed by the management with the assistance of independent actuarial appraiser. Discount factors are determined close to each year end by reference to government bonds of relevant economic markets and that have terms to maturity approximating to the terms of the related obligation. Other assumptions are based on managementâs historical experience. The estimates of future salary growth rate considered in actuarial valuation take account of inflation, seniority, promotion and other relevant factors such as supply and demand in the employment market.

The weighted average duration of the defined benefit obligation plan at the end of the reporting period is 7 years (31 March 2022: 8 years)

The Company expects to make a contribution of '' 7.90 Crores (31 March 2022: '' 7.77 Crores) to the defined benefit plan during the next financial year.

(c) Compensated absences: With effect from 1 January 2017, the Company has decided to restrict the balance of un-availed privilege leave (âPLâ) to a maximum of 42 days from erstwhile limit of 90 days. Further, PL cannot be en-cashed or accumulated and shall lapse every year in the month of December. The balance as at 31 December 2016 is entitled to be en-cashed only during separation from the Company based on the basic salary as at 31 December 2016.

34 EMPLOYEES STOCK OPTION PLAN

The Company provides share based payment schemes to its employees. Since the year ended 31 March 2016, an employee stock option plan (âESOPâ) was in existence i.e. ESOP scheme 2015. The relevant details of the scheme and the grant are as below.

The shareholders of the Company through postal ballot on 21 April 2015 approved the equity settled ESOP scheme 2015 for issue of stock options to key employees and directors of the Company setting aside 1,423,323 options under this scheme. The Company had previously granted 1,004,866, 320,248, 170,799 and 63,000 stock options on 14 May 2015, 19 May 2016, 15 June 2018 and 19 October 2020, respectively. According to the scheme, the employees selected by the Nomination and Remuneration Committee from time to time will be entitled to

Volatility : Volatility is a measure of the amount by which a price has fluctuated or is expected to fluctuate during the period. The measure of volatility used in Black-Scholes-Merton formula is the annualised standard deviation of the continuously compounded rates of return on the stock over a period of time. Company considered the daily historical volatility of Companyâs stock price on NSE over a period prior to the date of grant, corresponding with the expected life of the options.

Risk free rate : The risk free rate being considered for the calculation is the interest rate applicable for a maturity equal to the expected life of the options based on zero coupon yield curve for government securities.

Expected life of the options : Expected life of the options is the period for which the Company expects the options to be live. The minimum life of stock options is the minimum period before which the options cannot be exercised and the maximum life of the option is the maximum period after which the options cannot be exercised. The Company has calculated expected life as the average of the minimum and the maximum life of the options.

Dividend yield: Expected dividend yield has been calculated by dividing the last declared dividend per share by the market price per share as on the date of grant.

35 SEGMENT INFORMATION

The Company has presented data related to its segments in its consolidated financial statements. No disclosures regarding segments are therefore presented in these standalone financial statements.

1. Foreign currency balances (other than advances) are reinstated in INR using year end exchange rate.

2. Investments (as at balance sheet date) in share capital of related parties of the Company is not considered under âAmount due to/from related parties (as at year-end)â as these are not considered âoutstandingâ exposures.

3. All the amounts due to/from related parties (as at year-end) are unsecured.

4. All the amounts due to/from related parties (as at year-end), other than advances, will be cash-settled. Goods or services will be received/provided against the advance given/taken.

** These amounts include trade payables, advance from customers and excess money received from warrant holders

# Amount disclosed is gross carrying value. Allowance for doubtful debt as at 31 March 2023 is '' 5.41 Crores (31 March 2022: '' Nil)

(IV) Key Management Personnel (''KMPâ) compensation:

The following table provides the total amount of transactions that have been entered into with KMP for the relevant financial year:

During the year, Nil (31 March 2022: Nil) ESOPs are granted to KMP and Nil (31 March 2022: Nil) ESOPs granted to KMP have lapsed.

Notes:

1. The remuneration to the KMP does not include the provisions made for gratuity and compensated absences, as they are determined on an actuarial basis for the Company as a whole.

2. No remuneration has been paid to Mr. Sanjeev Verma, Whole-time Director during the years ended 31 March 2023 and 31 March 2022 through Company.

3. Company has paid the remuneration to its directors during the year in accordance with the provision of and limits laid down under section 197 read with Schedule V to the Act.

(V) There are no commitments with any related party during the year or as at year end.

(VI) All the related party transactions are made on terms equivalent to those that prevail in an armâs length transactions, for which prior approval of Audit Committee was obtained during the years ended 31 March 2023 and 31 March 2022.

37 CONTINGENT LIABILITIES AND CAPITAL COMMITMENTS (A) Contingent liabilities '' in Crores
Footnote	31 March 2023	31 March 2022
I] Claims against the Company not acknowledged as debt (a)	0.60	2.37
II] Guarantees excluding financial guarantees (refer note 43)	-	17.03
III] Other money for which the Company is contingently liable
(A) In respect of disputed demands for matters under appeal (b) with
(a) Income tax authorities *	6.88	27.14
(b) Excise, service tax and customs authorities *	4.20	18.50
(c) Sales tax authorities *	10.80	10.80
(B) Form-F pending receipt (c)	0.83	0.83

Notes:

1. The Company is contesting all of the above demands in respect of Income tax, Excise duty, Service tax, Customs duty and Sales tax and the management believes that its positions are likely to be upheld at the appellate stage. No expense has been accrued in the standalone financial statements for the aforesaid demands. The management believes that the ultimate outcome of these proceedings are not expected to have a material adverse effect on the Companyâs financial position and results of operations and hence no provision has been made in this regard.

2. I t is not practicable for the Company to estimate the timings of cash outflows, if any, in respect of the above pending resolution of the respective proceedings.

3. The amounts disclosed above represent the best possible estimates arrived at on the basis of available information and do not include any penalty payable.

4. The Company does not expect any reimbursements in respect of the above contingent liabilities.

5. Refer note 47 for penalty unascertained on account of non-compliance with provisions of Foreign Exchange Management Act, 1999.

* Amount outstanding as at balance sheet date represents gross demand raised by the tax authorities, as amount paid under protest is not charged to the standalone statement of profit and loss by the Company

Footnotes:

(a) It represents demand raised by vendor for remaining outstanding amount which is disputed by Company over non-performance of certain duties by vendor under the contract.

(b) It represents demands raised by direct and indirect tax authorities on various grounds, which are contested by the Company.

(B) Capital commitments

Estimated amount of contracts remaining to be executed on capital account and not provided for is '' Nil (31 March 2022: '' 0.09 Crores).

The Company uses the following hierarchy for determining and disclosing the fair value of financial instruments by valuation technique:

Level 1: quoted (unadjusted) prices in active markets for identical assets or liabilities.

Level 2: inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices).

Level 3: techniques which use inputs that have a significant effect on the recorded fair value that are not based on observable market data (unobservable inputs).

For assets and liabilities that are recognised in the standalone financial statements on a recurring basis, the Company determines whether transfers have occurred between levels in the hierarchy by re-assessing categorisation (based on the lowest level input that is significant to the fair value measurement as a whole) at the end of each reporting period.

The fair values of the financial assets and liabilities are included at the amount at which the instrument could be exchanged in a current transaction between willing parties, other than in a forced or liquidation sale. The following methods and assumptions are used to estimate the fair values:

1. Fair value of cash and cash equivalents, bank balances other than cash and cash equivalents, trade receivables, trade payables, other current financial assets/liabilities and short term borrowings approximate their carrying amounts largely due to short term maturities of these instruments. They are classified as Level 3 fair values in the fair value hierarchy due to the inclusion of unobservable inputs including counter party credit risk.

2. Financial instruments are evaluated by the Company based on parameters such as individual credit worthiness of the counter-party. Based on this evaluation, allowances are taken to account for expected losses of these receivables. Accordingly, fair value of such instruments is not materially different from their carrying amounts. They are classified as Level 3 fair values in the fair value hierarchy due to the inclusion of unobservable inputs including counter party credit risk.

3. The fair values for deposits, finance lease contracts and financial guarantee contract were calculated based on cash flows discounted using lending rate on the date of initial recognition. The lease liability is initially recognised at the present value of the future lease payments and are discounted using the interest rate implicit in the lease or, if not readily determinable, using the incremental borrowing rates and subsequently measured at amortised cost. Accordingly, all these are classified as Level 3 fair values in the fair value hierarchy due to the inclusion of unobservable inputs including counter party credit risk.

4. Fair value of long term borrowings approximate their carrying amounts due to the fact no upfront fees is paid as compensation to secure the borrowing and the interest rate is equals to the market interest rate. This is classified as Level 3 fair values in the fair value hierarchy due to the inclusion of unobservable inputs.

39.2 Financial risk management objectives and policies

The Companyâs activities expose it to a variety of financial risks: market risk, credit risk and liquidity risk. The Companyâs primary focus is to foresee the unpredictability of financial markets and seek to minimise potential adverse effects on its financial performance. The primary market risk to the Company is foreign exchange risk. The Board of Directors reviews and agrees policies for managing each of these risks, which are summarised below:

a) Market risk

Market risk is the risk of loss of future earnings, fair values or future cash flows that may result from a change in the price of a financial instrument. The value of a financial instrument may change as a result of changes in the interest rates, foreign currency exchange rates and other market changes that affect market risk sensitive instruments. Market risk is attributable to all market risk sensitive financial instruments including deposits, foreign currency receivables, foreign currency payables and borrowings.

b) Interest rate risk

Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates. The Companyâs exposure to the risk of changes in market interest rates relates primarily to the Companyâs debt obligations.

c) Credit risk

Credit risk is the risk of financial loss to the Company if a customer or counterparty to a financial instrument fails to meet its contractual obligations, and arises from cash and cash equivalents, bank balances other than cash and cash equivalents, other financial assets as well as credit exposures to customers including outstanding receivables and contract assets. The maximum exposure to credit risk is equal to the carrying value of the financial assets.

Trade receivables and contract assets

The Companyâs exposure to credit risk is influenced mainly by the individual characteristics of each customer. To manage this, the Company periodically assesses the financial reliability of customers, taking into account the financial condition, current economic trends, forward looking macroeconomic information, analysis of historical bad debts and ageing of accounts receivables. Individual risk limits are set accordingly.

The expected credit loss rates are based on the payment profiles of sales over a period of 36 months before the reporting date and the corresponding historical credit losses experienced within this period. The historical loss rates are adjusted to reflect current and forward-looking information on macro-economic factors affecting the ability of the customers to settle the receivables. The Company recognises lifetime expected losses for all trade receivables and contract assets that do not constitute a financing component.

The Company has no concentration of credit risk as the customer base is widely distributed both economically and geographically and there is no single customer contributing more than 10% of outstanding trade receivables as at 31 March 2023 and 31 March 2022.

Outstanding customer receivables and contract assets are regularly monitored.

Other financial assets

The Company periodically monitors the recoverability and credit risks of its other financial assets. The Company evaluates 12 months expected credit losses for all the financial assets for which credit risk has not increased significantly. In case credit risk has increased significantly, the Company considers life time expected credit losses for the purpose of impairment provisioning.

The Company has considered financial condition, current economic trends, forward looking macroeconomic information, analysis of historical bad or doubtful receivables and ageing of receivables related to cash and cash equivalents, bank balances other than cash and cash equivalents, margin deposits, security deposits, finance lease assets and other financial assets. In most of the cases, risk is considered low since the counterparties are reputed organisations with no history of default to the Company and no unfavourable forward looking macro economic factors. Wherever applicable, expected credit loss allowance is recorded (refer notes 7 and 13).

There is no loss allowance created or reversed on contract assets during the year ended 31 March 2023 and 31 March 2022.

d) Liquidity risk

Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they become due. The Company manages its liquidity risk by ensuring, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due. The Company manages its liquidity needs by monitoring scheduled debt servicing payments for financial liabilities as well as forecast cash inflow and outflows due in day to day business. In addition, processes and policies related to such risks are overseen by senior management.

39.3 Foreign currency risk

Foreign currency risk is the risk that future cash flows of a financial instrument will fluctuate because of changes in foreign exchange rates. The Company procures goods and services in their functional currency and in case of imports, it primarily deals in United States Dollars (âUSDâ) and Great Britain Pound (âGBPâ).

The Company evaluates exchange rate exposure arising from foreign currency transactions and follows established risk management policies. There are earnings from customers in foreign currency which act as a natural hedge against foreign currency risk.

Company has accumulated net exposure to foreign currency risk amounting to '' 29.49 Crores (31 March 2022: '' 31.08 Crores).

The Company had issued corporate guarantee on behalf of its wholly owned subsidiary, Black Box Technologies Pte. Limited, amounting to USD Nil (31 March 2022: USD 2.25 million), equivalent to '' Nil (31 March 2022: '' 17.03 Crores). It is contingent in nature and Company does not expect any liability against the same in foreseeable future.

* Includes provision for expenses, billing of which is pending as at reporting date and will be billed in currency other than presentation currency. These are forming part of trade payables.

Sensitivity to foreign currency risk

The following table demonstrates the sensitivity in the USD and GBP with all other variables held constant. The below impact on the Companyâs profit or loss before tax is based on changes in the fair value of unhedged foreign currency monetary assets and liabilities as at standalone balance sheet date:

40 CAPITAL MANAGEMENT

The Companyâs objectives when managing capital are to

â¢ safeguard their ability to continue as a going concern, so that they can continue to provide returns for shareholders and benefits for other stakeholders, and

â¢ maintain an optimal capital structure to reduce the cost of capital.

41 LEASES

The disclosures required in accordance with Ind AS 116 âLeasesâ are as follows:

a) The Companyâs leased assets primarily consists of leases for office premises, furniture, computer and servers having different lease terms. There are several lease agreements with extension and termination options, for which management exercises significant judgement in determining whether these extension and termination options are reasonably certain to be exercised. Since it is reasonably certain to exercise extension option and not to exercise termination option, the Company has opted to include such extended term and ignore termination option in determination of lease term. Further, Company is not exposed to any variable lease payments or residual value guarantee.

e) The Company has entered into finance leases on its office premise and specific inventory item. These leases have term of ten years. The lease contract includes a clause to enable upward revision of the rental charge on an annual basis according to prevailing market conditions. Rental income (including unwinding of interest) recognised by the Company during the year is '' 1.98 Crores (31 March 2022: '' 1.30 Crores). Further, wherever applicable, lessee is reasonable certain to exercise extension option and not to exercise termination option, hence the Company has opted to include such extended term and ignore termination option in determination of lease term. Further, Company has not retained any right in underlying asset.

a) Performance obligations:

The performance obligation of Company is satisfied at a point in time or over the period of time depending on

the nature of products and services provided.

1) Revenue from sale of products: It includes unified and voice communication solutions, IP Phones, data products, video conferencing products and cyber security solutions. It also includes leasing of specific inventory item. Revenue is recognised at a point in time, which is generally on the delivery of product (performance obligation is satisfied).

2) Revenue from implementation contracts: It includes implementation services on products (including installation and commissioning). Revenue is recognised in the accounting period in which services are rendered, as the performance obligations are met.

3) Revenue from maintenance contracts: Revenue from fixed maintenance contracts is recognised based on time elapsed and revenue is straight lined over the period of the performance or on the performance of services as specified in the contract.

e) Remaining performance obligation

As at 31 March 2023, the aggregate amount of transaction price allocated to remaining performance obligations is '' 18.81 Crores (31 March 2022: 14.43 Crores) of which approximately 65% (31 March 2022: 98%) is expected to be recognised as revenue within one year.

f) Company does not have any significant obligations for returns and refunds. For type of warranties, refer note 18(a).

1. The Company had given corporate guarantee to the bank for the loan facility (fund based and non-fund based) availed by Black Box Technologies Pte. Limited, wholly owned subsidiary and a guarantee commission @ 1.75% (31 March 2022: 1.75%) per annum is charged. The Company had recognised the financial guarantee contract (corporate guarantee) at its fair value as per Ind AS 109 "Financial Instrumentsâ for the fund based component of the corporate guarantee and the non-current and current portion of financial liability was disclosed under "Other financial liabilitiesâ. Fund based facility ceased to exist in financial year 2021-22 and accordingly guarantee asset and liability was de-recognised to that extent. The outstanding amount of guarantee shown above is for nonfund based component amounting to USD Nil (31 March 2022: USD 2.25 million).

44 As per Ind AS 12 "Income Taxesâ, a deferred tax asset (âDTAâ) shall be recognised for the carry forward of unused tax loss, unused tax credits and taxable timing differences to the extent it is probable that future taxable profit will be available against which the unused tax loss, unused tax credits and taxable timing differences can be utilised. Accordingly, DTA has been recognised only to the extent of deferred tax liability.

45 As per the transfer pricing rules, the Company has examined international transactions and documentation in respect thereof to ensure compliance with the said rules. The management does not anticipate any material adjustments with regard to the transactions involved, other than those already adjusted in the standalone financial statements.

The Companyâs spent towards CSR does not involve any long term projects and accordingly, disclosure requirements relating to ongoing projects is not applicable as at reporting dates.

47 The outstanding balance of trade payables, trade receivables and other financial assets as at 31 March 2023 includes amount payable aggregating to '' 3.28 Crores (31 March 2022: '' 2.71 Crores) and amount receivable aggregating to '' 6.02 Crores (31 March 2022: '' 3.68 Crores) and '' 11.80 Crores (31 March 2022: '' 11.36 Crores), respectively, to/from the companies situated outside India. These balances are pending for settlement and have resulted in delay in remittance/collection beyond the timeline stipulated under the Foreign Exchange Management Act, 1999. The Company has filed necessary application with AD Category I bank (âAD Bankâ) for extension of time limit on payables aggregating to '' 2.71 Crores (31 March 2022: '' 1.67 Crores) during the current year and on payables aggregating to '' 0.24 Crores (31 March 2022: '' 1.04 Crores) subsequent to the year end. For the remaining payables amounting to '' 0.33 Crores (31 March 2022: '' Nil) where extension has not been filed, management is planning to approach AD Bank or RBI with write off request. Similarly, the Company has filed application with AD Bank for extension of time limit for the aforementioned receivables aggregating to '' 15.43 Crores (31 March 2022: '' 14.01 Crores) during the current year and on receivables aggregating to '' 2.39 Crores (31 March 2022: '' 1.03 Crores) subsequent to the year end. For all the cases, approval is pending from AD Bank.

Pending conclusion of the aforesaid matter, the amount of penalty, if any, that may be levied, is not ascertainable but not expected to be material and accordingly, the standalone financial statements does not include any adjustments that may arise due to such delays.

48 Pursuant to approval of the members received on 20 April 2022, the Company had sub-divided its equity share of '' 10 each into equity share of '' 2 each. As a result, each equity share of '' 10 was sub-divided into 5 (five) equity shares of '' 2 each. Consequently, the basic and diluted earnings per share is computed for all the periods on the basis of the new number of equity shares in accordance with Ind AS 33 "Earnings per Shareâ.

Notes:

1 Debt = Non current borrowings Current borrowings

2 Net worth = Paid up share capital Reserves created out of profit - Accumulated losses

3 Earnings available for debt service = Net profit after tax (excluding OCI) Non cash operating expenses Interest expenses

4 Debt service = Interest expenses Lease payment within next 12 months Principal repayment of borrowings within next 12 months

5 Cost of goods sold = Purchases of stock-in-trade Changes in inventories of work-in-progress and stock-in-trade

6 Net purchases = Purchases of stock-in-trade Service charges

7 Working capital = Current assets - Current liabilities

8 EBIT = Earnings before finance costs, other income and tax

9 Capital employed = Tangible net worth (i.e., net worth - intangible assets) total borrowings deferred tax liabilities

Reason for variance of more than 25% as compared to the previous year :

Debt service coverage ratio : Improved due to increase in non-cash operating expenses

Inventory turnover ratio : Improved due to better inventory management and high demand of products.

Return on capital employed : Improved due to current year improved EBIT.

50 BORROWING SECURED AGAINST CURRENT ASSETS

The Company has sanctioned borrowings/facilities from banks on the basis of security of current assets. The quarterly returns or statements of trade receivables and inventory are filed by the Company with banks regularly and the required reconciliation is presented below. Company is not required to submit the quarterly returns or statements of other current assets which are pledged.

51 ADDITIONAL REGULATORY INFORMATION REQUIRED BY SCHEDULE III

a) Details of benami property

Company is not holding any benami property under the Benami Transactions (Prohibition) Act, 1988 (45 of 1988) and rules made thereunder as at 31 March 2023 and 31 March 2022. Further, no proceedings have been initiated or pending against the Company for holding any benami property under the act and rules mentioned above for the years ended 31 March 2023 and 31 March 2022.

b) Wilful defaulter

The Company has not been declared wilful defaulter by any bank or financial institution or any other lender for the years ended 31 March 2023 and 31 March 2022.

c) Relationship with struck off companies

The disclosure of relationship and transaction with struck off companies under section 248 of the Act is as follows:

In respect of the Company:

There was no transaction and year-end balance as at 31 March 2023 with struck off companies.

d) Compliance with number of layers of companies

The Company has complied with the number of layers prescribed under section 2(87) of the Act for the years ended 31 March 2023 and 31 March 2022.

e) Compliance with approved scheme of arrangements

The Company has not entered into any scheme of arrangement in terms of section 230 to 237 of the Act for the years ended 31 March 2023 and 31 March 2022.

f) Utilisation of borrowed funds and share premium (for the years ended 31 March 2023 and 31 March 2022)

The Company has not advanced or loaned or invested (either from borrowed funds or share premium or any other sources or kind of funds) to any other person or entity, including foreign entity (âIntermediariesâ) with the understanding (whether recorded in writing or otherwise) that the Intermediary shall:

a. directly or indirectly lend or invest in other persons or entities identified in any manner whatsoever by or on behalf of the Company (âUltimate Beneficiariesâ) or

b. provide any guarantee, security or the like to or on behalf of the Ultimate Beneficiaries.

The Company has not received any fund from any person or entity, including foreign entity (âFunding Partyâ) with the understanding (whether recorded in writing or otherwise) that the Company shall:

a. directly or indirectly lend or invest in other persons or entities identified in any manner whatsoever by or on behalf of the Funding Party (âUltimate Beneficiariesâ) or

b. provide any guarantee, security or the like on behalf of the Ultimate Beneficiaries.

g) Undisclosed income

No income has been surrendered or disclosed as income during the current and previous year.

h) Details of crypto currency or virtual currency

The Company has not traded or invested in crypto currency or virtual currency during the current and previous year.

52 The Company has not given any loan or advance in the nature of loan to its subsidiary or other entity during the year ended 31 March 2023 and 31 March 2022. Therefore, disclosure under Regulation 53(1)(f) of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 is not applicable.

53 In the board meeting held on 11 November 2022, the Board of Directors of the Company have approved setting off of accumulated losses under retained earnings with credit balance in securities premium account and capital reserve account, subject to no objection certificate (âNOCâ) from NSE and BSE (collectively referred to as âstock exchangesâ) and approval from members of the Company and National Company Law Tribunal (âNCLTâ). Post approval from the Board of Directors, the Company has submitted application to stock exchanges for seeking NOC and the response is still awaited.

54 The Company had filed claim before NCLT, Mumbai, towards recovery of dues from EPC Constructions India Limited (âEPCCILâ or âCorporate Debtorâ) on account of services rendered by the Company to EPCCIL during its Corporate Insolvency Resolution Process (âCIRPâ) period commencing from April 2018.

NCLT vide its order dated 08 June 2021, uploaded on its website on 26 June 2021, had directed EPCCIL to make payment of all outstanding dues to the Company within a period of 3 months from the date of receipt of the aforesaid order and had further directed EPCCIL to continue to pay monthly charges towards services to be rendered by the Company. Based on the above order, Company had recorded the revenue of '' 8.51 Crores and interest income of '' 1.49 Crores during the year ended 31 March 2022. Subsequently, on appeal filed by EPCCIL challenging the aforesaid order, National Company Law Appellate Tribunal (âNCLATâ), New Delhi had passed an order dated 28 September 2021 in favour of the Company and had directed EPCCIL to pay '' 4.50 Crores (inclusive of '' 1.00 Crore already paid in the month of June 2019) to the Company within a period of 2 months from the date of this order and had further directed EPCCIL to continue to pay monthly charges towards services to be rendered by the Company. EPCCIL had paid '' 3.10 Crores within the period directed by NCLAT.

Subsequent to 31 March 2022, The Company and EPCCIL had arrived at amicable settlement whereby EPCCIL had agreed to make payment of entire outstanding principal amount of '' 5.50 Crores (inclusive of taxes) in three monthly instalments subject to fulfilment of conditions attached to the settlement arrangement and shall continue to pay revised monthly charges of '' 0.20 Crores per month (earlier '' 0.25 Crores per month) to the Company effective May 2022. In lieu of the same, Company has agreed to waive claim of interest amount of '' 1.49 Crores and adjustment is made in the statement of profit and loss.

I n view of these events, both the parties had also finalised documents such as Settlement Agreement and Joint Application seeking withdrawal of the appeal. However, despite having finalised the aforesaid documents, EPCCIL failed to execute the same in spite of payment of initial settlement amount. To challenge the said illegal actions of EPCCIL, Company had preferred an application praying for the enforcement of the finalised contract. NCLAT, New Delhi has passed an order dated 02 February 2023 directing the Company to file application before NCLT to seek clarification on the amount due and amount recoverable which is to be decided by the NCLT preferably within a period of two months. Further, NCLAT has directed EPCCIL to continue to pay monthly charges towards services to be rendered by the Company.

Management is confident of the recovery however considering the prolonged delay in collection, 100% of the outstanding amount, i.e., '' 5.41 Crores is provided for in the standalone statement of profit and loss during the year ended 31 March 2023.

55 EVENTS AFTER THE REPORTING DATE

Black Box Technologies Australia Pty Ltd, step-down subsidiary of the Company, has entered into a share purchase agreement to acquire 100% equity stake of Global Speech Networks Pty Ltd, incorporated in Australia, for a total consideration of AUD 2.50 million (equivalent to '' 13.72 Crores) on 17 May 2023. This acquisition is anticipated to be completed within 60 days of signing the share purchase agreement.

56 AUTHORISATION OF STANDALONE FINANCIAL STATEMENTS

The standalone financial statements as at and for the year ended 31 March 2023 were approved by the Board of Directors on 30 May 2023.

57 Previous year figures have been regrouped, reclassified and rearranged wherever necessary, to conform to this yearâs presentation, which are not considered material to standalone financial statements.

Mar 31, 2021

Footnote:

Pursuant to shareholdersâ approval obtained in the Extraordinary General Meeting held on 11 December 2020, the Company has allotted on preferential basis, 3,333,334 convertible warrants of '' 10 each at a premium of '' 665 per warrant to Essar Telecom Limited and Onir Metallics Limited on 8 January 2021. As at 31 March 2021, the Company has received money aggregating to '' 187.81 Crores against convertible warrants. Each warrant is convertible into 1 equity share of '' 10 each of the Company within 18 months from the date of allotment subject to payment of balance subscription amount. Out of total 3,333,334 convertible warrants, 2,598,651 warrants have been converted into equity shares. Subsequent to 31 March 2021, Onir Metallics Limited has merged with Essar Steel Metal Trading Limited.

(b) Rights, preference and restriction on equity shares

The Company has only one class of equity shares having par value of '' 10 per share. Each holder of equity share is entitled to one vote per equity share. The Company declares and pays dividends in INR. The dividend, if any, proposed by the Board of Directors is subject to the approval of the shareholders in the ensuing Annual General Meeting.

(c) Essar Telecom Limited (ETL) is the holding company with effect from 20 March 2021. As at 31 March 2021, ETL is holding 16,346,336 (31 March 2020 : 14,082,055) equity shares of '' 10 each fully paid-up amounting to '' 16.35 Crores (31 March 2020 : '' 14.08 Crores).

(d) Aggregate number of bonus shares issued or buy back of shares during the period of five years immediately preceding the reporting date

The Company has neither issued bonus shares nor there has been any buy back of shares during five years immediately preceding 31 March 2021.

(e) Shares issued for consideration other than cash

The Company has allotted 1,271,185 fully paid-up equity shares of '' 10 each on conversion of compulsorily convertible preference shares during the year ended 31 March 2019.

As per records of the Company, including its register of shareholders / members and other declarations received from shareholders regarding beneficial interest, the above shareholding represents both legal and beneficial ownership of shares.

(g) Shares reserved for issue under options

The Company has reserved 734,683 shares (31 March 2020 : Nil) for issue on conversion of warrants, refer footnote to note (a) above.

For details of shares reserved for issue under the employee stock option plan of the Company, refer note 30.

Notes:

(a) Cash credit facilities from banks are secured by first pari-passu charge on entire current assets of the Company (present and future) including inventory of material and components, work-in-progress, stock-in-trade, trade receivables, insurances etc. and by second pari-passu charge on all moveable PPE of the Company.

Cash credit carry an effective interest rate of 11.75% to 14.50% p.a. (31 March 2020 : 13.00% to 15.00% p.a.).

(b) I n view of COVID-19 pandemic, the Reserve Bank of India had, vide Circular No. RBI/2019-20/186 dated 27 March 2020 and Circular No. RBI/2019-20/244 dated 23 May 2020, inter-alia, permitted the lending institutions to defer the recovery of interest in respect of working capital facility during the period 1 March 2020 to 31 August 2020. In addition to above, the latter circular permitted the conversion of accumulated interest for the period up to 31 August 2020 into a funded interest term loan (FITL) which shall be repayable not later than 31 March 2021. The Company had applied for the aforementioned moratorium benefits for all the cash credit facilities. Further, during the year ended 31 March 2021, the accumulated interest for the period up to 31 August 2020 was converted into FITL and repaid in full on or before 31 March 2021 by the Company.

(c) During the year ended 31 March 2020, the Company had defaulted in repayment of working capital loan to Yes Bank amounting to '' 2.55 Crores, which was due on 9 May 2019. The repayment had subsequently been made after the due date on 5 July 2019 for the aforementioned default.

(c) Compensated absences: With effect from 1 January 2017, the Company has decided to restrict the balance of un-availed privilege leave (PL) to a maximum of 42 days from erstwhile limit of 90 days. Further, PL cannot be en-cashed or accumulated and shall lapse every year in the month of December. The balance as at 31 December 2016 is entitled to be en-cashed only during separation from the Company based on the basic salary as at 31 December 2016.

30 EMPLOYEES STOCK OPTION PLAN

The Company provides share based payment schemes to its employees. Since the year ended 31 March 2016, an employee stock option plan (ESOP) was in existence i.e. ESOP scheme 2015. The relevant details of the scheme and the grant are as below.

The shareholders of the Company through postal ballot on 21 April 2015 approved the equity settled ESOP scheme 2015 for issue of stock options to key employees and directors of the Company setting aside 1,423,323 options under this scheme. The Company had previously granted 1,004,866, 320,248 and 170,799 stock options on 14 May 2015, 19 May 2016 and 15 June 2018, respectively. On 19 October 2020, the Company has granted 63,000 stock options. According to the scheme, the employees selected by the Remuneration Committee from time to time will be entitled to options, subject to satisfaction of the prescribed vesting conditions. The other relevant terms of the grants are as below:

Dividend yield: Expected dividend yield has been calculated by dividing the last declared dividend per share by the market price per share as on the date of grant.

31 SEGMENT iNFORMATiON

The Company has presented data related to its segments in its consolidated financial statements. No disclosures regarding segments are therefore presented in these financial statements.

b) Fair value hierarchy and method of valuation

The Company uses the following hierarchy for determining and disclosing the fair value of financial instruments by valuation technique:

Level 1: quoted (unadjusted) prices in active markets for identical assets or liabilities.

Level 2: inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices).

Level 3: techniques which use inputs that have a significant effect on the recorded fair value that are not based on observable market data (unobservable inputs).

1. Fair value of cash and cash equivalents, bank balances other than cash and cash equivalents, trade receivables, trade payables, other current financial assets / liabilities, short term loans from banks approximate their carrying amounts largely due to short term maturities of these instruments. They are classified as Level 3 fair values in the fair value hierarchy due to the inclusion of unobservable inputs including counter party credit risk.

2. Financial instruments with fixed and variable interest rates are evaluated by the Company based on parameters such as interest rates and individual credit worthiness of the counter-party. Based on this evaluation, allowances are taken to account for expected losses of these receivables. Accordingly, fair value of such instruments is not materially different from their carrying amounts. They are classified as Level 3 fair values in the fair value hierarchy due to the inclusion of unobservable inputs including counter party credit risk.

The fair values for deposits and financial guarantee contract were calculated based on cash flows discounted using lending rate on the date of initial recognition. The lease liability is initially measured at amortised cost at the present value of the future lease payments and are discounted using the interest rate implicit in the lease or, if not readily determinable, using the incremental borrowing rates. Accordingly, all these are classified as Level 3 fair values in the fair value hierarchy due to the inclusion of unobservable inputs including counter party credit risk.

35.2 Financial risk management objectives and policies

a) Market risk

I nterest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates. The Companyâs exposure to the risk of changes in market interest rates relates primarily to the Companyâs debt interest obligations.

c) Credit risk

Credit risk is the risk of financial loss to the Company if a customer or counterparty to a financial instrument fails to meet its contractual obligations, and arises from cash and cash equivalents, bank balances other than cash and cash equivalents, loans, other financial assets as well as credit exposures to customers including outstanding receivables.

The maximum exposure to credit risk is equal to the carrying value of the financial assets.

Trade receivables

Outstanding customer receivables are regularly monitored.

Other financial assets

The Company periodically monitors the recoverability and credit risks of its other financial assets. The Company evaluates 12 months expected credit losses for all the financial assets for which credit risk has not increased. In case credit risk has increased significantly, the Company considers life time expected credit losses for the purpose of impairment provisioning.

The credit risk for cash and cash equivalents, bank balances other than cash and cash equivalents and loans is considered negligible, since the counterparties are reputable organisations with high quality external credit ratings.

d) Liquidity risk

The table below provides details regarding the contractual maturities of significant financial liabilities as at 31 March 2021 and 31 March 2020:

Maturity profile of financial liabilities

Foreign currency risk is the risk that future cash flows of a financial instrument will fluctuate because of changes in foreign exchange rates. The Company procures goods and services in their respective local currency and in case of imports, it primarily deals in United States Dollars (USD). The Company has mainly foreign currency trade payables and other receivables which are unhedged and exposed to foreign currency risk.

Company has accumulated net exposure to foreign currency risk amounting to '' 27.56 Crores (31 March 2020 : '' 0.35 Crores).

The Company had issued corporate guarantee on behalf of its wholly owned subsidiary, AGC Networks Pte. Limited amounting to USD 5.95 million (31 March 2020: USD 5.95 million), equivalent to '' 43.59 Crores (31 March 2020: '' 44.88 Crores). It is contingent in nature and Company does not expect any liability against the same in next five years. The aforesaid guarantee has been subsequently discharged on 28 April 2021.

* It includes provision for expenses, billing of which is pending as at reporting date and will be billed in currency other than reporting currency.

a) Performance obligations:

The performance obligation of Company is satisfied at a point in time or period of time depending on the nature

of products and services provided.

1) Revenue from sale of products: It includes unified and voice communication solutions, IP Phones, data products, video conferencing products and cyber security solutions. Revenue is recognised at a point in time, which is generally on the delivery of product.

Notes:

1. The Company has recognised the financial guarantee contract (corporate guarantee) at its fair value as per Ind AS 109 âFinancial Instrumentsâ. The non-current and current portion of financial liability is disclosed under âOther financial liabilitiesâ (refer note 16).

2. The Company had given corporate guarantee of USD 5.95 million (31 March 2020: USD 5.95 million) for the loan availed by AGC Networks Pte. Limited, wholly owned subsidiary and a guarantee commission @ 1.75% (31 March 2020: 1.75%) per annum is charged thereon. The aforesaid guarantee has been subsequently discharged on 28 April 2021.

Notes:

1. Rate of interest is 18.00% p.a. (31 March 2020: 18.00% p.a.) on inter corporate deposit.

2. This inter corporate deposit is unsecured and has been given for meeting business requirements.

3. No inter corporate deposit has been given during the year ended 31 March 2021.

4. During the year ended 31 March 2021, the Company has realised the outstanding inter corporate deposit including accrued interest.

41 As per Ind AS 12 âIncome Taxesâ, a deferred tax asset (DTA) shall be recognised for the carry forward of unused tax loss, unused tax credits and taxable timing differences to the extent it is probable that future taxable profit will be available against which the unused tax loss, unused tax credits and taxable timing differences can be utilised. Accordingly, DTA has been recognised only to the extent of deferred tax liability.

42 As per the transfer pricing rules, the Company has examined international transactions and documentation in respect thereof to ensure compliance with the said rules. The management does not anticipate any material adjustments with regard to the transactions involved.

44 As on 1 April 2020, the Company had not appointed at least one independent woman director on the board. Company had appointed independent woman director in the board meeting held on 10 September 2020.

45 The outstanding balance of trade payables and other financial assets as appearing in the balance sheet as at 31 March 2021 includes amount payable aggregating to '' 2.10 Crores and amount receivable aggregating to '' 4.56 Crores, respectively, to / from the companies situated outside India. These balances are pending for settlement and have resulted in delay in remittance / collection beyond the timeline stipulated under the Foreign Exchange Management Act, 1999. The Company has filed necessary application with AD Category - I bank (âAD Bankâ) for extension of time limit on payables aggregating to '' 1.16 Crores during the financial year and on payables aggregating to '' 0.94 Crores subsequent to 31 March 2021. Similarly, the Company has filed application with AD Bank for extension of time limit for the aforementioned receivables aggregating to '' 4.56 Crores subsequent to 31 March 2021. For all the cases, approval is pending from AD Bank.

Pending conclusion of the aforesaid matter, the amount of penalty, if any, that may be levied, is not ascertainable but not expected to be material and accordingly, the financial statements do not include any adjustments that may arise due to such delays.

46 COVID-19 pandemic has impacted most economies and businesses globally, including India. The nation-wide lockdown in first half of financial year 2020 substantially impacted economic activity. The easing of lockdown measures subsequently led to gradual improvement in economic activity and progress towards normalcy. However, the extent to which the COVID-19 pandemic, including the current âsecond waveâ that has significantly increased the number of cases in India, impact the financial statement, will depend on future developments, which are highly uncertain, including among other things, any new information concerning the severity of the COVID-19 pandemic and action to contain its spread or mitigate its impact. The Company has considered the possible effects on the carrying amounts of trade receivables, inventories, property, plant and equipment, other intangible assets, tax assets, investments and other financial assets and continues to monitor changes in economic conditions. In developing the assumptions relating to the possible future uncertainties in the economic conditions because of this pandemic, the Company, as at the date of approval of these financial statements, has used internal and external sources of information and based on current estimates, expects that the carrying amount of these assets will be recovered. The eventual outcome of the impact of the pandemic may be different from those estimated as on the date of approval of these financial statements.

47 The Company had filed claim before National Company Law Tribunal (âNCLTâ) Mumbai, by way of reply to Monitoring Agency representing EPC Constructions India Limited (âEPCCILâ) for recovery of '' 6.51 Crores (excluding taxes) along with interest of '' 1.49 Crores towards IT Infrastructure and IT services provided during the Corporate Insolvency Resolution Process (âCIRPâ) period of EPCCIL. Out of the aforementioned amount, '' 1.00 Crore (excluding taxes) had been received by the Company on 19 September 2020 pursuant to the order of the National Company Law Appellate Tribunal (âNCLATâ) dated 30 July 2020 in Company Appeal (AT) (Insolvency) No. 660 of 2020. Proceedings i.e. IA 1013/2020 in CP No. 1832/2017 are pending and subjudice before NCLT Mumbai, for recovery of balance amount of '' 5.51 Crores (excluding taxes) plus interest of '' 1.49 Crores from Monitoring Agency representing EPCCIL.

48 Previous year figures have been regrouped / reclassified, where necessary, to confirm to this yearâs classification.

Mar 31, 2018

1 Corporate Information

AGC Networks Limited (âthe Companyâ) or âAGCâ is a public company domiciled in India and incorporated under the provisions of the Companies Act,1956. Its shares are listed on two stock exchanges in India. The Companyâs registered office is located at Equinox Business Park, Off Bandra Kurla Complex, LBS Marg, Kurla (West), Mumbai - 400 070. The Company, along with its foreign subsidiaries, is a global information, communications technology (ICT) solutions provider and Integrator seamlessly delivering technology based solutions across global markets and verticals layered with a spectrum of applications and services. The Company is the leader in Enterprise Communications in India with global footprint in locations spanning India, Middle East/Africa, North America and Australia/New Zealand.

2 Basis of Preparation and Presentation

a. Statement of Compliance

These financial statements have been prepared in accordance with Indian Accounting Standards (âInd ASâ) notified under the Companies (Indian Accounting Standards) Rules, 2015 and Companies (Indian Accounting Standards) Amendment Rules, 2016, as applicable. For all the periods upto the year ended 31 March 2017, the Company had earlier prepared and presented its financial statements in accordance with accounting standards notified under section 133 of the Companies Act 2013 (Indian GAAP). These standalone financial statements for the year ended 31 March 2018 are the first financial with comparatives, prepared under Ind AS. The adoption was carried out in accordance with Ind AS 101, First Time adoption of Indian Accounting Standards. The transition was carried out from Indian Accounting Principle generally accepted in India as prescribed under Section 133 of the Act read with the Rule 7 of the Companies (Accounts) Rules, 2014 (Indian GAAP), which was the previous GAAP. Reconciliations and description of the effect of the transition from Indian GAAP to Ind AS is given in Note 40. This financial statement of the Company as at and for the year ended 31 March 2018 (including Comparatives) were approved and authorised by the Companyâs board of directors as on 29 May 2018.

All amounts included in the financial statements are reported in Indian rupees (in Crores) except share and per share data unless otherwise stated and â0â denotes amounts less than fifty thousand rupees.

b. Basis of Preparation

The financial statements have been prepared on a historical cost convention and on an accrual basis, except for the following material items that have been measured at fair value as required by relevant Ind AS:

i. Certain financial assets and liabilities measured at fair value (refer accounting policy on financial instruments);

ii. Share based payment transactions and

iii. Defined benefit and other long-term employee benefits

c. Use of estimate and judgment

The preparation of standalone financial statements in conformity with Ind AS requires management to make judgments, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates. Estimates and underlying assumptions are reviewed on a periodic basis. Revisions to accounting estimates are recognised in the period in which the estimates are revised and in any future periods affected. In particular, information about significant areas of estimation, uncertainty and critical judgments in applying accounting policies that have the most significant effect on the amounts recognised in the standalone financial statements is included in the following notes:

(i) Income tax: Significant judgments are involved in determining the provision for income tax, including the amount expected to be paid or recovered in connection with uncertain tax positions.

(ii) Defined benefit plans and compensated absences: The cost of the defined benefit plans, compensated absences and the present value of the defined benefit obligations are based on actuarial valuation using the projected unit credit method.

An actuarial valuation involves making various assumptions that may differ from actual developments in the future. These include the determination of the discount rate, future salary increases and mortality rates. Due to the complexities involved in the valuation and its long-term nature, a defined benefit obligation is highly sensitive to changes in these assumptions. All assumptions are reviewed at each reporting date.

(iii) Property, plant and equipment: Property, plant and equipment represent a significant proportion of the asset base of the Company. The change in respect of periodic depreciation/amortisation is derived after determining an estimate of an assets expected useful life and the expected residual at the end of its life. Depreciation of fixed assets is calculated on straight-line-basis over the useful life estimated by the management, based on technical evaluation or those prescribed under schedule II of the Companies Act, 2013, whichever is higher.

(iv) Expected credit losses on financial assets: On application of Ind AS 109, the impairment provisions of financial assets are based on assumptions about risk of default and expected timing of collection. The Company uses judgments in making these assumptions and selecting the inputs to the impairment calculation, based on the Companyâs past history of collections, customerâs credit-worthiness, existing market conditions as well as forward looking estimates at the end of each reporting period.

(v) Deferred taxes: Deferred tax is recorded on temporary differences between the tax bases of assets and liabilities and their carrying amounts, at the rates that have been enacted or substantively enacted at the reporting date. The ultimate realisation of deferred tax assets is dependent upon the generation of future taxable profits during the periods in which those temporary differences and tax loss carry forwards become deductible. The Company considers the expected reversal of deferred tax liabilities and projected future taxable income in making this assessment. The amount of the deferred tax assets considered realisable, however, could be reduced in the near term if estimates of future taxable income during the carry forward period are reduced.

(vi) Provisions: Provisions are recognised when the Company has a present obligation as a result of past event and it is probable that an outflow of resources will be required to settle the obligation, in respect of which a reliable estimate can me made. Provisions (excluding retirement obligation and compensated expenses) are not discounted to its present value and are determined based on best estimate required to settle obligation at the balance sheet date. These are reviewed at each balance sheet date adjusted to reflect the current best estimates.

(vii) Share-based payments: The grant date fair value of options granted to employees is recognised as employee expense, with corresponding increase in equity, over the period that the employee become unconditionally entitled to the option. The increase in equity recognised in connection with share based payment transaction is presented as a separate component in equity under âshare option outstanding accountâ. The amount recognised as expense is adjusted to reflect the impact of the revision estimates based on number of options that are expected to vests, in the statement of profit and loss with a corresponding adjustment to equity.

Notes

1 Building includes those constructed on leasehold land.

2 Above assets include those offered as security for borrowings availed by the Company (refer note 17.1).

3 Leasehold land is completely depreciated / adjusted and net book value for the year ended 31 March 2018 is Nil (31 March 2017 : Nil, 1 April 2016 : Nil) (refer note 42)

4 In accordance with Schedule II to the Companies Act, 2013, the Company has reassessed the estimated useful life of certain class of asset through technical evaluation during the year (refer note 41).

* refer note 42

During the year ended 31 March 2015, the Company issued 1,500,000 1% non-cumulative, non-convertible, redeemable preference shares having face value of Rs. 100 each at par for a total consideration of Rs. 15.00 Crores to Essar Information Technology Limited.

At the meeting of Board of Directors of the Company held on 29 April 2017, it was resolved to approve and pay interim dividend on preference shares at their coupon rate.

(b) Rights, preference and restriction on shares

The Company has only one class of equity share having par value of Rs. 10 per share. Each holder of equity share is entitled to one vote per share. The Company declares and pays dividends in Indian rupees. The dividend if proposed by the Board of Directors is subject to the approval of the shareholders in the Annual General Meeting.

The Company has one class of preference share i.e. 1% non-cumulative, non-convertible redeemable preference shares. The preference shares have preferred right on payment of dividend and repayment of capital over equity shareholders. As per Companies Act, 2013 the preference shareholders has right to vote on all resolution placed before the Company if preference dividend is not paid for a period of 2 years or more.

The preference shares shall be redeemed at the option of Investor in one or more tranches at any time between 10th year from the date of allotment (12 August 2014) and before expiry of 12th year from the date of allotment and the shares shall be redeemed at par. If the option is not exercised by the investor these shares will be automatically redeemed at par at the end of the 12th year from the date of allotment.

With effect from 30 March 2018, the Company received approval from the preference shareholder for extention of term by 5 years post original expiry of 7 years.

The Company has recognised these preference shares as a compound financial instrument and the Equity component of compound financial instrument is presented as a part of âOther Equityâ (refer note 13) and the liability component of compound financial instrument is disclosed under âOther financial liabilityâ (refer note 14).

(d) Aggregate number of bonus shares issued during the period of five years immediately preceding the reporting date:

14,233,232 Equity shares allotted as fully paid bonus shares by capitalisation of securities premium during the year ended 31 March 2013

(e) Details of shareholders holding more than 5% shares in the Company

Provision for warranties

A provision is recognized for expected warranty claims on products sold during the last one year, based on past experience of the level of repairs and returns. It is expected that significant portion of these costs will be incurred in the next financial year and all will have been incurred within a year after the reporting date. Assumptions used to calculate the provision for warranties were based on current sales levels and current information available about returns based on the one-year warranty period for all products sold. The table below gives information about movement in warranty provisions.

Footnotes:

1. Working capital loan from bank is secured against first pari-passu charge on Lease hold land and buildings situated at Gandhinagar, Gujarat, second pari-passu charge on entire current assets (present and future) including stocks of materials and components, work-in-progress, stock-in-trade, trade receivables, etc. During the year ended 31 March 2015, the Company transferred its Gandhinagar properties vide deed of assignment (refer note 42). However, the loan is considered as secured since all properties have not been discharged as securities by the lender and continuance of the other assets as security.

As per the original payment schedule loan is repayable in 14 quarterly installments starting from 9 February 2016 viz 6 installments of Rs. 2.25 Crores each, 4 installments of Rs. 3.38 Crores each and 4 installments of Rs. 4.50 Crores each. The same has been classified under âShort term borrowingsâ in view of the intention of the Company to extinguish the borrowing either by way of assignment to the buyer of the aforesaid properties or by way of repayment of the loan from the sale consideration. The effective rate of interest is the base rate of the lending bank which is 10.25% p.a. (31 March 2017 10.25% to 10.75% p.a.; 1 April 2016 10.25% to 10.75% p.a.) plus spread 1.5%. Hence effective rate for the current year 11.75% p.a. (31 March 2017 11.75% to 12.25% p.a.; 1 April 2016 11.75% to 12.25% p.a.).

During previous year ended 31 March 2018, the Company had additionally paid Rs. 1.95 Crores in addition to the above repayment schedule. This repayment is through redemption of DSRA FD of Rs. 1.88 Crores kept for this facility with Yes Bank.

During the year ended 31 March 2016, the Company had additionally paid Rs. 3.20 Crores in addition to the above repayment schedule as the amount of (in part) received from sale of one of the property, forming part of the security.

2. Cash credits from banks are secured by first pari-passu charge on entire current assets of the Company (present and future) including stocks of materials and components, work-in-progress, stock-in-trade, trade receivables, insurances, etc. and by second pari-passu charge on all moveable Property, plants and equipments of the Company.

Cash credit carry an effective interest rate of 13.00% to 14.80% p.a. (31 March 2017 : 13.00% to 14.50% p.a. 1 April 2016 13.00% to 14.75% p.a.).

3. Buyers credits from banks are secured by first exclusive pari-pasu charge on entire current assets of the Company (present and future) including stocks of materials and components, work-in-progress, stock-in-trade, trade receivables, insurances, etc. and by second pari-pasu charge on all moveable property, plant and equipment of the Company.

Buyerâs credit are availed against import dues and carry an effective interest @ LIBOR Plus 0.25% to LIBOR Plus 2.00% (31 March 2017 LIBOR Plus 0.29% to LIBOR Plus 0.50%, 1 April 2016: LIBOR Plus 0.35% to LIBOR Plus 0.50%)

# There is no amount due and outstanding to be transferred to the Investor Education and Protection Fund (IEPF) as on 31 March 2018, 31 March 2017 and 1 April 2016 respectively. Unclaimed dividend, if any, shall be transferred to IEPF as and when they become due.

* Expenses / payments incurred/made by related parties on behalf of the group.

Note:

The Company is a global ICT solution provider and integrator operating in various quadrants and the solutions sold to customers are configured as per specific customer requirements. The heterogeneous mix of components in solutions offered to customers makes it difficult to establish a meaningful/homogenous relationship for providing breakup of goods purchased/sold during the year and the stock position. Consequently, it is neither feasible nor meaningful to give the category-wise details of goods purchased and sold during the year and stock position for all its product solutions.

Notes

(a) Represents reversal of inventory provisions made in earlier years to reflect lower of cost and net realisable value. The Company has entered into an agreement with the buyer for sale of these inventories.

(b) Represents liability towards rent pertaining to earlier years, reversed on account of settlement with the lessor during the year.

(c) Represents interest income recognised on sale consideration receivable from the buyer towards assignment of properties situated at Gandhinagar (refer note 42).

During the year ended 31 March 2018, 471,120 potential equity shares granted, as share option under the ESOP Scheme 2015 (refer note 32), are considered for calculation of diluted EPS.

The effect of 556,520 potential equity shares, granted during the year ended 31 March 2017 are anti-dilutive and thus these share are not considered in determining diluted loss per share.

3 Employee benefits plan

(a) Defined contribution plan - The following amount is recognised in the statement of profit and loss for the year ended:

Above amount has been included in the line item ''Contribution to provident and other fundsâ in note 25.

(b) Defined benefit plan - The Company has an unfunded defined benefit plan, i.e. Gratuity, for its employees. Under the gratuity plan, every employee who has completed at least five years of service gets a gratuity on departure at 15 days of last drawn salary for each completed year of service.

The following tables summarises the components of benefit expense recognised in the statement of profit and loss and the amounts recognised in the balance sheet for the gratuity plan.

Sensitivity analysis:

Significant actuarial assumptions for the determination of the defined benefit obligation are discount rate, expected salary increase, attrition rate and mortality. The sensitivity analysis below have been determined based on reasonably possible changes of the assumptions occurring at the end of the reporting period, while holding all other assumptions constant. The result of the sensitivity analysis is given below:

The sensitivity analysis presented above may not be a representative of the actual change in the defined benefit obligation as it is unlikely that the change in assumptions would occur in isolation of one another, as some of the assumptions may be correlated.

The estimates of future salary increases, considered in actuarial valuation, take account of inflation, seniority, promotion and other relevant factors, such as supply and demand in the employment market.

The overall expected rate of return on assets is determined based on the market prices prevailing on that date, applicable to the period over which the obligation is to be settled. There has been significant change in expected rate of return on assets due to change in the market scenario.

(c) Compensated absences: With effect from 1 January 2017, the Company has decided to restrict the balance of unavailed privilege leave (PL) balance to a maximum of 42 days from existing limit of 90 days. Further, PL cannot be en-cashed or accumulated and shall lapse every year in the month of December. The balance as of 31 December 2016 is entitled to be en-cashed only during separation from the Company based on basic salary as of December 2016. Accordingly, during the previous year excess provision of Rs. 0.92 Crores has been written back based on actuarial valuation report and net reversal in excess of charge for the previous year has been grouped under âother operating incomeâ in the statement of profit and loss.

4 Employees Stock Option:-

The Company provides share based payment schemes to its employees. Since the year ended 31 March 2016 an employee stock option plan (ESOP) was in existence i.e ESOP scheme 2015. The relevant details of the scheme and the grant are as below.

On 14 May 2015 the Board of Directors approved the equity settled ESOP scheme 2015 for issue of stock options to key employees and directors of the Company setting aside 1,423,323 options under this scheme. Subsequently on 19 May 2016 the company granted 320,248. The contractual life (comprising vesting period and exercise period) of options granted is 6.12 years. According to the scheme, the employees selected by the remuneration committee from time to time will be entitled to options, subject to satisfaction of the prescribed vesting conditions. The other relevant terms of the grants are as below:

The options are granted at an exercise price, which is in accordance with the relevant SEBI guidelines in force, at the time of such grants. Each option entitles the holder to exercise the right to apply for and seek allotment of equity share by paying exercise price of Rs. 55 for ESOP granted on 19 May 2016 and Rs. 80 for ESOP granted on 14 May 2015 each.

The share option outstanding at the end of the year had a weighted average exercise price of Rs. 63.00 (as at 31 March 2017: Rs. 65.61), and a weighted average remaining contractual life of 4.12 to 5.12 years (as at 31 March 2017 : 5.12 to 6.12 years) The weighted average fair value of the share options granted is Rs. 32.85 and Rs. 42.84 of options granted on 14 May 2015 and 19 May 2016 respectively. Option were priced using Black Scholes valuation model:

Volatility : Volatility is a measure of the amount by which a price has fluctuated or is expected to fluctuate during the period. The measure of volatility is used in Black Scholes option pricing model is the annualised standard deviation of the continuously compounded rates of return on the stock over a period of time. Company considered the daily historical volatility of Companyâs stock price on NSE over a period prior to the date of grant, corresponding with the expected life of the options.

Expected life of the options : Expected life of the options is the period for which the Company expects the options to be live. The minimum life of stock options is the minimum period before which the options can not be exercised and the maximum life of the option is the maximum period after which the options canât be exercised. The Company have calculated expected life as the average of the minimum and the maximum life of the options.

Dividend yield: Expected dividend yield has been calculated by dividing the last declared dividend per share by the market price per share as on the date of grant.

5 Leases

Operating lease: Company as lessee

The Company has entered into various leasing agreements classified as operating leases for residential, office and warehouse premises which are renewable by mutual consent on mutually agreeable terms. These agreement generally range between 11 months to 5 years. The Group does not have sub-leasing agreements or any contingent arrangements. Lease payments are recognised in the statement of profit and loss under âRentâ in note 28.

The future minimum lease payments under non-cancellable operating leases are:-

6 Segment information

The Company has presented data related to its segments in its consolidated financial statements which are included in the same annual report as AGC Network Limited in terms of provisions of Indian Accounting Standards, no disclosures regarding segments are therefore presented in these standalone financial statement.

7 Related Party Disclosure:

(I) List of related parties and relationship.

(i) Ultimate Holding Company:

Essar Global Fund Limited

(ii) Holding Company:

Essar Telecom Limited

(iii) Subsidiary (including step down subsidiaries):

AGC Networks and Cyber Solutions Limited AGC Networks Australia Pty. Limited AGC Networks Inc.

AGC Networks Philippines, Inc.

AGC Networks Pte. Limited AGCN Solutions Pte. Limited AGC Networks LLC., Dubai

AGC Networks LLC., Abu Dhabi (w.e.f. 06 June 2017)

Related party with whom transactions have taken place

(iv) Fellow Subsidiary:

Aegis Limited (upto 22 November 2017)

Aegis Services Lanka Private Limited Equinox Business Parks Private Limited Essar Bulk Terminal (Salaya) Limited Essar Bulk Terminal Limited Essar Oil Limited Essar Oil UK Limited Essar Power Gujarat Limited Essar Projects (India) Limited Essar Shipping Limited Essar Steel India Limited Essar Telecom Kenya Limited Essar Power Hazira Limited Essar Steel Algoma Inc.

The MobileWallet Private Limited The Mobile Store Limited Vadinar Oil Terminal Limited Vadinar Ports & Terminals Limited Ibrox Aviation And Trading Private Limited

(v) Key Managerial Personnel:

Mr. Sanjeev Verma, Whole-time Director (w.e.f. 15 February 2016)*

Mr. Sujay R Sheth, Non Executive Director

Mr. Dilip Thakkar, Non Executive Director (w.e.f. 8 February 2018)

Ms. Suparna Singh, Non Executive Director

Mr. Jangoo M. Dalal, Non Executive Director (Up to 21 November 2017)

Mr. Manhar T. Mandaliya, Non Executive Director (Up to 13 July 2017)

Mr. Shuvabrata Mandal, Non Executive Director (Up to 8 August 2017)

Mr. Deepak Kumar Bansal, Chief financial officer (w.e.f. 8 February 2018)

Mr. Angshu Sengupta, Chief financial officer (Up to 8 February 2018)

Mr. Pratik Bhanushali, Company Secretary (Up to 12 January 2018)

Mr. Aditya Goswami, Company Secretary (w.e.f. 8 February 2018)

* The shareholders of the Company have approved the appointment of Mr. Sanjeev Verma as a whole-time director. The Company had filed an application seeking approval of the central government for the appointment since the whole-time director was not resident in India on the date of his appointment for which approval was received on 17 May 2017.

Foreign currency balance are restated at year end rates

** These amounts includes trade payables, other liabilities and advance from customers.

# Aegis Limited - Balances as on 30 November 2017 has been shown since on that day party ceases to be a related party.

@ Vadinar Ports & Terminals Limited merged with the Vadinar Oil Terminal Limited and hence the opening balance of the Vadinar Ports & Terminals Limited of Rs. 0.06 Crores transferred to the amount owed to related parties of Vadinar Oil Terminal Limited.

(d) Key Management Personnel (KMP) compensation:

The following table provides the total amount of transactions that have been entered into with related parties for the relevant financial year:

During the year, Nil (31 March 2017: 320,248) equity shares options are granted to key managerial personnel and NIL (31 March 2017: 113,865) equity shares options lapsed.

Note: The remuneration to the key managerial personnel does not include the provisions made for gratuity and leave benefits, as they are determined on an actuarial basis for the Company as a whole.

The Company is contesting all of the above demands in respect of Income tax, Excise duty, Service tax, Custom duty and Sales tax and the management, believes that its positions are likely be upheld at the appellate stage. No expense has been accrued in the financial statements for the aforesaid demands. The management believes that the ultimate outcome of these proceedings are not expected to have a material adverse effect on the Companyâs financial position and results of operations and hence no provision has been made, in this regard.

(B) Commitments

Estimated amount of contracts remaining to be executed on capital account and not provided for is Rs. 0.42 Crores (31 March 2017 Rs. Nil, 1 April 2016: Rs. 0.03 Crores)

The management has identified enterprises which qualify under the definition of micro and small enterprises, as defined under Micro,Small and Medium Enterprises Development Act, 2006 (MSMED). Accordingly, the disclosure in respect of the amounts payable to such enterprises as at year end has been made in the financial statements based on the information received and available with the Company and has been relied upon by the statutory auditors.

9.1 Financial Instruments

a) Categories of financial instruments

Fair value of Cash and cash equivalent, other bank balances, loans, trade receivables, trade payable, other financial assets and liabilities, and current borrowings approximate their carrying amounts largely due to the short term maturities of these instruments.

b) Fair Value Hierarchy and Method of Valuation

1. Fair value of cash and cash equivalents, trade receivables, trade payables, other financial assets/liabilities, short term loans from banks approximate their carrying amounts largely due to short term maturities of these instruments.

2. Financial instruments with fixed and variable interest rates are evaluated by the Company based on parameters such as interest rates and individual credit worthiness of the counter-party. Based on this evaluation, allowances are taken to account for expected losses of these receivables. Accordingly, fair value of such instruments is not materially different from their carrying amounts. The fair values for loans, security deposits and investment in preference shares were calculated based on cash flows discounted using a current lending rate. They are classified as level 3 fair values in the fair value hierarchy due to the inclusion of unobservable inputs including counter party credit risk.

3. The fair values of non-current borrowings are based on discounted cash flows using a current borrowing rate. They are classified as level 3 fair values in the fair value hierarchy due to the use of unobservable inputs, including own credit risk. For financial assets and liabilities that are measured at fair value, the carrying amounts are equal to the fair values.

The Company uses the following hierarchy for determining and disclosing the fair value of financial instruments by valuation technique:

Level 1: quoted (unadjusted) prices in active markets for identical assets or liabilities.

Level 2: other techniques for which all inputs which have a significant effect on the recorded fair value are observable, either directly or indirectly.

Level 3: techniques which use inputs that have a significant effect on the recorded fair value that are not based on observable market data.

9.2 Financial risk management objectives and policies

The Companyâs activities expose it to a variety of financial risks: market risk, credit risk and liquidity risk. The Companyâs primary focus is to foresee the unpredictability of financial markets and seek to minimize potential adverse effects on its financial performance. The primary market risk to the Company is foreign exchange risk. The Board of Directors reviews and agrees policies for managing each of these risks, which are summarised below:

Market risk

Market risk is the risk of loss of future earnings, fair values or future cash flows that may result from a change in the price of a financial instrument. The value of a financial instrument may change as a result of changes in the interest rates, foreign currency exchange rates, and other market changes that affect market risk sensitive instruments. Market risk is attributable to all market risk sensitive financial instruments including deposits, foreign currency receivables, payables and loans and borrowings.

Interest rate risk

Interest rate sensitivity

The following table demonstrates the sensitivity to a reasonably possible change in interest rates on that portion of loans and borrowings affected. With all other variables held constant, the Groupâs profit before tax is affected through the impact on floating rate borrowings, as follows:

Credit risk

Credit risk is the risk of financial loss to the Company if a customer or counterparty to a financial instrument fails to meet its contractual obligations, and arises principally from the Companyâs receivables from customers. Credit risk arises credit exposure to clients, including outstanding accounts receivable. The maximum exposure to credit risk is equal to the carrying value of the financial assets. The objective of managing counter party credit risk is to prevent losses in financial assets. The Company assesses the credit quality of the counterparties, taking into account their financial position, past experience and other factors.

The Companyâs exposure to credit risk is influenced mainly by the individual characteristics of each customer. The demographics of the customer, including the default risk of the industry and country in which the customer operates, also has an influence on credit risk assessment. Most of the Company doubtful debt pertains to the Public Sector which is undergoing through restructuring and therefore, the Company evaluates every receivable in the geography and creates adequate provision after analysing specific risk. Trade receivables are non-interest bearing and are generally on credit term in line with respective industry norms. Outstanding customer receivables are regularly monitored. The Company has no concentration of credit risk as the customer base is widely distributed both economically and geographically.

There is no other class of financial assets that is past due but not impaired, except for trade receivables.

Customer credit risk is managed by each geogrophical segments subject to the Companyâs established policy, procedures and controls relating to customer credit risk management. Trade receivables are non-interest bearing and are generally on credit term in line with respective industry norms. Outstanding customer receivables are regularly monitored. The Company has no concentration of credit risk as the customer base is widely distributed both economically and geographically.

The following table gives details in respect of percentage of revenues generated from top customer and top five customers

Liquidity risk

9.3 Foreign currency risk

Foreign currency risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in foreign exchange rates. The Company procures goods and services in their respective local currency and in case of imports, it primarily deals in US Dollars. The Company has mainly foreign currency trade payables and other receivable which are unhedged and exposed to foreign currency risk.

Sensitivity to foreign currency risk

The following table demonstrates the sensitivity in the USD, CAD, GBP and other currencies with all other variables held constant. The below impact on the Company''s profit before tax is based on changes in the fair value of unhedged foreign currency monetary assets and liabilities at balance sheet date:

10 Capital Management

The Companyâs objectives when managing capital are to

- safeguard their ability to continue as a going concern, so that they can continue to provide returns for shareholders and benefits for other stakeholders, and

- maintain an optimal capital structure to reduce the cost of capital.

#Debt for the above purpose includes non-current borrowings, current borrowings, current maturities of non current borrowings and interest accrued but not due on borrowings (net of cash and cash equivalents).

During the current year, there is an improvement in Gearing ratio from 284% to 142% mainly attributable to reduction in borrowings and improvement in profitability.

11 First time adoption of IND-AS First Ind AS Financial statements

The Companyâs standalone financial statements for the year ended 31 March 2018 are prepared in accordance with Ind AS notified under the Companies (Indian Accounting Standards) Rules, 2015.

The adoption of Ind AS was carried out in accordance with Ind AS 101, using 1 April 2016 as the transition date. Ind AS 101 requires that all Ind AS standards and interpretations that are effective for the Ind AS Financial Statements for the year ended 31 March 2018, be applied consistently and retrospectively for all fiscal years presented.

All applicable Ind AS have been applied consistently and retrospectively wherever required. The resulting difference between the carrying amounts of the assets and liabilities in the standalone financial statements under both Ind AS and Indian GAAP as of the Transition Date have been recognized directly in equity at the Transition Date.

In preparing these financial statements, the Company has availed itself of certain exemptions and exceptions in accordance with Ind AS 101 as explained below:

a) Applicable mandatory exceptions:

Estimates

Upon an assessment of the estimates made under previous GAAP, the management is of the opinion that there was no need to revise such estimates under Ind AS, except where estimates were required by Ind AS and not required by previous GAAP. Classification and measurement of financial assets/liabilities

As required under Ind AS 101 the Company has assessed the classification and measurement of financial assets on the basis of the facts and circumstances that exist at the date of transition to Ind AS.

b) Optional exemption availed Deemed cost

The Company has elected to continue with the carrying value of all its property, plant and equipment including asset held for sale as recognised in standalone financial statements as at April l, 2016 (transition date) to Ind AS measured as per the Previous GAAP and use that as its deemed cost as at the transition date.On transition to Ind AS, the Company has elected to continue with the carrying value of all of its intangible assets recognised as at April l, 2016, measured as per the Previous GAAP, and use that carrying value as the deemed cost of such intangible assets.

Investment in subsidiaries

In accordance with Ind AS 101, the Company has elected to measure all of its investments in subsidiaries at deemed cost i.e. previous GAAP carrying amount on transistion date.

c) Reconciliations:

The following reconciliations provide a quantification of the effect of significant differences arising from the transition from Indian GAAP to Ind AS in accordance with Ind AS 101:

Equity as at 1 April 2016;

Equity as at 31 March 2017;

Notes

1 Under Ind AS, Preference share being financial liability are classified as equity or liability or combination of both as compared to previous GAAP. This adjustment includes the reversal of preference share capital and recognising equity and liability components. Further, the liability has been carried at amortised cost.

2 Under Ind AS, deposits are valued at amortised cost as compared to being carried at transaction value in the previous GAAP The adjustment includes the difference between the book value and amortised value of security deposits which has been recognised as rent expense. Further, interest income computed on the amortised value of the security deposit is recognised over the tenure of the security deposit using the EIR method.

3 Under Ind AS, loans are valued at amortised cost as compared to being carried at cost in the previous GAAP. This adjustment includes the difference between the book value and the amortised value of an loan which recognised as interest expense. The interest on the amortised value of these loans is recognised over the tenure of the loans using the EIR method.

4 Under Ind AS, Share based compensation expenses are computed based on the fair valuation of ESOP scheme, whereas in the previous GAAP the ESOP scheme were valued at instrinsic value.

5 Under the previous GAAP, actuarial gains and losses were recognised in the statement profit and loss. Under Ind AS, the actuarial gains and losses form part of remeasurement of the net defined benefit liability / asset which is recognised in other comprehensive income.

12 During the quarter ended 30 June 2016, based on an internal technical evaluation, the management reassessed the remaining useful lives of certain Property, plant and equipment with effect from 1 April 2016. Accordingly the useful lives of such plant and equipment have been revised from 3 to 5 years to 15 years.

Had the Company continued with the previously assessed useful lives, depreciation expense for the year 31 March 2018 would have been higher by Rs. 2.12 Crores (31 March 2017 : Rs. 2.12 Crores). Further the revision of the useful lives will result in the following changes in depreciation expense as compared to depreciation expense based on earlier useful lives.

13 Sale of Gandhinagar properties

During the year ended 31 March 2015, the Company entered into deeds of assignment to transfer all the rights, title and obligations of its land and building situated at Gandhinagar to another company for a consideration of Rs. 50.52 Crores. During April 2015, the lender to whom these assets were provided as security provided its in-principal approval for the said transfer subject to fulfilment of conditions stated therein. The said transfer was pending approval from the relevant government authority and transfer of legal title that were considered to be procedural in nature. Accordingly, the Company had recognised profit on sale of property, plant and equipment of Rs. 46.04 Crores (net of incidental expenses Rs. 3.39 Crores) during the year ended 31 March 2015. During the year ended 31 March 2016, the Company received approval from the lender for sale of one of the property sold for consideration of Rs. 5.89 Crores and also realised part consideration of Rs. 3.20 Crores from the buyer. During April 2016, approval from the requisite authorities have also been received and sale deed has been executed between the Company and the buyer for transfer of legal title for one of the property. The Company has also obtained the requisite approvals for the other property and during the year ended 31 March 2018 has realised further consideration of Rs. 23.77 Crores. The sale deed for the other property will be executed on simultaneous settlement of balance consideration by the buyer.

14 As per the transfer pricing rules, the Company has examined domestic and international transactions and documentation in respect thereof to ensure compliance with the said rules. The management does not anticipate any material adjustments with regard to the transactions involved.

15 Corporate social responsibility

As per section 135 of the Companies Act, 2013, a corporate social responsibility (CSR) Committee has been formed by the Company. The Company has average net loss for the last 3 financials years so the amount of CSR expenditure required as per the Companies Act is Rs. Nil (31 March 2017: Rs. Nil) and the Company has not undertaken any CSR activity during the year.

16 Previous year figures have been regrouped / reclassified, where necessary, to confirm to this yearâs classification.

Mar 31, 2016

(b) Right, preference and restriction on shares

The Company has only one class of equity shares having par value of Rs, 10 per share. Each holder of equity shares is entitled to one vote per share. The Company declares and pays dividends in Indian rupees. The dividend if proposed by the Board of Directors is subject to the approval of the shareholders in the Annual General Meeting.

The Company has one class of preference shares i.e. 1% non-cumulative, non-convertible, redeemable preference shares. The preference shares have preferred right on payment of dividend and repayment of capital over equity shareholders. As per Companies Act, 2013 the preference shareholders has right to vote on all resolution place before the Company if preference dividend is not paid for a period of 2 years or more.

The preference shares shall be redeemed at the option of Investor in one or more tranches at any time between 5th year from the date of allotment and before expiry of 7th year from the date of allotment and the shares shall be redeemed at par. If the option is not exercised by the investor these shares will be automatically redeemed at par at the end of the 7th year from the date of allotment.

Footnotes:

1. Working capital loan from bank is secured against first pari-passu charge on Lease hold land, Free hold land and buildings situated at Gandhinagar, Gujarat, second pari-passu charge on entire current assets (present and future) including stocks of materials and components, work-in-progress, stock-in-trade, trade receivables, etc. and corporate guarantee from a fellow subsidiary. During the previous year, the Company transferred its Gandhinagar properties vide deed of assignment (refer note 28 (b)). However, the loan is considered as secured since all properties have not been discharged as securities by the lender and continuance of the other assets as security.

As per the original payment schedule loan is repayable in 14 quarterly installments starting from 9 February, 2016. 6 installments of Rs, 2.25 Crore each, 4 installments of Rs, 3.375 Crore each and 4 installments of Rs, 4.50 Crore each. The same has been classified under âShort-term borrowingsâ in view of the intention of the Company to expire the borrowing either by way of assignment to the buyer of the aforesaid properties or by way of repayment of the loan from the sale consideration. The effective rate of interest is the base rate of the lending bank which ranges from 10.25% to 10.75% p.a. (31 March 2015 10.75% p.a.) plus spread 1.5%. Hence current effective rate range is 11.75% to 12.25% p.a. (31 March, 2015 12.25%).

During the year ended 31 March 2016, the Company has additionally paid Rs, 3.20 Crore in addition to the above repayment schedule as the amount of consideration (in part) received from sale of one of the property, forming part of the security.

Provision for warranties

* Footnote:

âDisposal / adjustmentsâ under plant and equipment relate to re-classification of spares utilized for servicing maintenance contracts with customers, to inventory. The management believes this to be a more appropriate classification owing to the nature of its usage.

Accordingly, the net carrying value as at 1 April 2014 amounting to Rs, 6.68 Crore has been transferred to inventory and the amount consumed during the year ended 31 March 2015 amounting to Rs, 2.83 Crore, has been disclosed under âConsumption of stores and sparesâ (as a part of âOther Expensesâ), which was disclosed under âDepreciation and amortization expenseâ till the year ended 31 March 2014. There is no impact of the same on the statement of profit and loss account for the year ended 31 March 2015.

Note: The Company is a global ICT solution provider and integrator operating in various quadrants and the solutions sold to customers are configured as per specific customer requirements. The heterogeneous mix of components in solutions are offered to customers makes it difficult to establish a meaningful / homogenous relationship for providing breakup of goods purchased / sold during the year and the stock position. Consequently, it is neither feasible nor meaningful to give the category-wise details of goods purchased and sold during the year and stock position for all its product solutions.

Notes:

a) The Company has made provision for identified obsolete/slow moving/non-moving inventories aggregating Rs, Nil (previous year Rs, 10.69 Crore)

b) During the previous year ended 31 March 2015, the Company entered into deeds of assignment to transfer all the rights, title and obligations of its land and building situated at Gandhinagar to another company for a consideration of Rs, 50.52 Crores. Subsequent to previous year end, the lender to whom these assets were provided as security provided its in-principal approval for the said transfer subject to fulfillment of conditions stated therein. The said transfer is pending approval from the relevant government authority and transfer of legal title that are considered to be procedural in nature. Accordingly the Company had recognized profit on sale of Fixed Assets of Rs, 46.04 Crores (net of incidental expenses Rs, 3.39 Crores) during the year ended 31 March 2015. During the year the Company has received approval from the lender for sale of one of the property sold for consideration of Rs, 5.89 Crores and also realized part consideration of Rs, 3.20 Crores from the buyer. Subsequent to the year ended 31 March 2016, approval from the requisite authorities have also been received and sale deed has been executed between the Company and the buyer for transfer of legal title for one of the property. The Company has applied for requisite approval for the balance properties which are still awaited as of date.

* The effect of 492,469 potential equity shares granted during the year relating to share options awards under the ESOP Scheme 2015 on the attributable loss for the year is anti-dilutive and thus these share are not considered in determining diluted loss per share.

Above amount has been included in the line item ''Contribution to provident and other funds'' in note 23 to the financial statements.

(b) Defined benefit plan - The Company has one defined plan, i.e. Gratuity, for its employees. Under the gratuity plan, every employee who has completed at least five years of service gets a gratuity on departure @ 15 days of last drawn salary for each completed year of service.

The following tables summarize the components of net benefit expense recognized in the statement of profit and loss and the funded status and amounts recognized in the balance sheet for the gratuity plan.

(c) Compensated absences:- Eligible employees can carry forward and encash leave on superannuation, death, permanent disablement and resignation subject to maximum accumulation as per the Company policy. Benefit would be paid at the time of separation based on the last drawn basic salary. Amount recognized as an expenses in respect of compensated absences is Rs, 0.57 Crore (previous year Rs, 1.46 Crore).

5. Employees Stock Option

The Company provides share based payment schemes to its employees. During the year ended 31 March 2016 an employee stock option plan (ESOP) was in existence. The relevant details of the scheme and the grant are as below.

On 14 May, 2015 the Board of Directors approved the equity settled ESOP scheme for issue of stock options to the key employees and directors of the company setting aside 1,004,866 options under this scheme. According to the scheme, the employees selected by the remuneration committee from time to time will be entitled to options, subject to satisfaction of the prescribed vesting conditions. The contractual life (comprising vesting period and exercise period) of options granted is 6.12 years. The other relevant terms of the grant are as below:

The expected life of options is based on historical data and current expectations and is not necessarily indicative of exercise patterns that may occur. The expected volatility reflects the assumptions that the historical volatility over a period similar to the life of the options is indicative of future trends, which may differ from the actual.

The company measures the cost of ESOP using intrinsic value method. Had the company used the fair value model to determine compensation, its profit / (loss) after tax and earnings per share as reported would have changed to amounts indicated below.

The Company incurred Rs, 0.21 Crore (31 March 2015 - Rs, Nil) towards employees stock compensation plan during the year.

6. Leases Operating lease: Company as lessee

The Company has entered into various leasing agreements classified as operating leases for residential, office and warehouse premises which are renewable by mutual consent on mutually agreeable terms. These agreements generally range between 11 months to 6 years. Company does not have sub-leasing agreements or any contingent arrangements. Lease payments are recognized in the statement of profit and loss under âRentâ in note 26.

7. Segment information

The Company is a ICT solution provider and integrator delivering technology based solutions across verticals layered with a spectrum of applications and services. All these solutions fall within a single (primary) business segment of Enterprise Communication Solutions and Integration. All the fixed assets are lying in India and the Companyâs operations are restricted to India, hence there is one geographical segment viz. India. However, segment information for the group has been reported as a part of consolidated financial statements.

8. Related party disclosures

Names of related parties and related party relationships

Related parties where control exists

Holding company Essar Telecom Limited

Ultimate holding company Essar Global Fund Limited

Subsidiaries

(including step down subsidiaries) AGC Networks Australia Pty. Limited

AGC Networks Pte. Ltd.

AGC Networks Philippines, Inc. (w.e.f. 3 March 2015)

AGC Networks Inc.

Related parties with whom transactions have taken place Fellow subsidiaries Aegis Limited

Equinox Business Parks Pvt Limited Essar Bulk Terminal (Salaya) Limited Essar Oil Limited Essar Oil UK Limited

Essar Power Transmission Company Limited Essar Projects (India) Limited Essar Shipping Limited Essar Steel India Limited Essar Telecom Kenya Limited The Mobile Store Limited Vadinar Oil Terminal Limited Vadinar Ports & Terminals Limited Key managerial personnel Managing / Whole-time Directors

Mr. S. K. Jha, Managing Director (upto 22 April 2014)

Mr. Anil Nair, Managing Director and CEO (w.e.f. 16 June, 2014 to 15 February, 2016)

Mr. Sanjeev Verma, Whole-time Director (w.e.f. 15 May 2014 to 19 October, 2014) and (w.e.f. 15 February, 2016) *

Others (as per Companies Act, 2013)

Mr. Amal Thakore, Chief financial officer (w.e.f. 16 June, 2014)

Mr. Srinivasa Raghavan, Chief financial officer (Upto 11 May, 2014)

Mr. Pratik Bhanushali, Company secretary

* Appointment as whole time director of the company subject to shareholdersâ approval at the ensuing Annual General Meeting. On obtaining such approval, the company will seek approval of the central government since the whole-time director was not resident in India on the date of his appointment.

9. Capital and other commitments

(a) Estimated amount of contracts remaining to be executed on capital account and not provided for is Rs, 0.03 Crore (31 March 2015: Nil)

(b) For commitments relating to lease arrangements, refer note 32.

10. Employee benefit expense for the year ended 31 March 2015 includes

(a) Rs, 1.07 Crore towards remuneration payable by the Company to its erstwhile Whole-time Director for a part of the financial year 2014-15, as per the shareholdersRs, sanction, which exceeded the limits specified under Schedule V to the Companies Act, 2013 by Rs, 0.70 Crore and against which the Company paid Rs, 0.82 Crore. In absence of profits, the Company filed an application with the Central Government seeking approval for such excess and the Central Government during the current year has approved the remuneration of Rs, 0.37 Crore. Accordingly, during the current year, the excess amount of Rs, 0.45 Crore has been recovered.

(b) Rs, 0.67 Crore towards remuneration payable to the erstwhile Managing Director for a part of the financial year 2014-15. The remuneration payable as per the shareholdersâ sanction was Rs, 3.19 Crore against which the Company paid Rs, 2.01 Crore during the year 2014-15. In absence of profits, the Company filed an application with the Central Government seeking approval for remuneration sanctioned by the shareholders, which exceeds the limits specified under Schedule V to the Companies Act, 2013. However, it has received an approval, subsequent to the year ended 31 March 2015 for Rs, 0.84 Crore per annum. In view of the same, the excess amount has been reversed and recovered.

The Company has given a corporate guarantee of USD 1.8 Crore, equivalent to Rs, 119.40 Crore (31 March 2015: USD 1.8 Crore, equivalent to Rs, 112.66 Crore) towards the financial obligation of AGC Networks Pte. Ltd., Singapore.

The amount of further interest remaining due and payable even in Included in S. No. 4(b) above is Rs, 0.02 Crore (31 March the succeeding years, until such date when the interest dues as 2015 Rs, 0.02 Crore) being interest on amounts outstanding above are actually paid to the small enterprise, for the purpose of as at the beginning of the accounting year. disallowance as a deductible expenditure under Section 23 of the Micro, Small and Medium Enterprises Development Act, 2006.

The information has been given in respect of such vendors to the extent they could be identified as "Micro and Small Enterprises" on the basis of information available with the Company.

11. As per the transfer pricing rules, the Company is examining domestic and international transactions and documentation in respect thereof to ensure compliance with the said rules. The management does not anticipate any material adjustments with regard to the transactions involved.

12. Corporate social responsibility

As per section 135 of the Company Act, 2013, a corporate social responsibility (CSR) Committee has been formed by the Company. The Company has average net loss for the last 3 financials years so the amount of CSR expenditure required as per the Companies Act is Nil and the Company has not undertaken any CSR activity during the year.

13. Previous year figures have been regrouped / reclassified, where necessary, to conform to this yearâs classification.

14. All amounts are in Rupees (in Crore) except otherwise stated specifically and â0.00â denotes amounts less than fifty thousand Rupees.

Mar 31, 2015

1. Corporate Information

AGC Networks Limited ('the Company') or 'AGC' is a public company domiciled in India and incorporated under the provisions of the Companies Act, 1956. Its shares are listed on two stock exchanges in India. The Company, along with its foreign subsidiaries, is a global information, communications technology (ICT) solutions provider and integrator seamlessly delivering technology based solutions across global markets and verticals layered with a spectrum of applications and services. The Company is the leader in Enterprise Communications in India with global footprint in locations spanning India, Middle East/Africa, North America and Australia/New Zealand.

2. Basis of preparation of financial statements

The financial statements of the Company have been prepared in accordance with accounting principles generally accepted in India (Indian GAAP). The financial statements have been prepared to comply in all material respects with the accounting standards specified under section 133 of the Companies Act, 2013 read together with Rule 7 of the Companies (Accounts) Rules, 2014 and guidelines issued by the Securities and Exchange Board of India (SEBI). The financial statements are prepared under the historical cost convention, on an accrual basis of accounting. The accounting policies applied are consistent with those used in the previous year.

All assets and liabilities are classified as current if they are expected to be realised or settled within the operating cycle, which is up to 12 months.

(b) Right, preference and restriction on shares

The Company has only one class of equity shares having par value of Rs. 10 per share. Each holder of equity shares is entitled to one vote per share. The Company declares and pays dividends in Indian rupees. The dividend if proposed by the Board of Directors is subject to the approval of the shareholders in the Annual General Meeting.

In the event of liquidation of the Company, the holders of equity shares will be entitled to receive assets of the Company remaining after distribution of all preferential amounts. The distribution will be in proportion to the number of equity shares held by the shareholders.

The Company has one class of preference shares i.e. 1% non-cumulative non-convertible redeemable preference shares. The preference shares have preferred right on payment of dividend and repayment of capital over equity shareholders.

The preference shares shall be redeemed at the option of Investor in one or more tranches at any time between 5th year from the date of allotment and before expiry of 7th year from the date of allotment and the shares shall be redeemed at par. If the option is not exercised by the investor it will automatically redeem at par at the end of the 7th year from the date of allotment.

As per records of the Company, including its register of shareholders / members and other declarations received from shareholders regarding beneficial interest, the above shareholding represents both legal and beneficial ownership of shares.

Footnotes:

1. Working capital loan from bank is secured against first pari-passu charge on Lease hold land, Free hold land and buildings situated at Gandhinagar, Gujarat, second pari-passu charge on entire current assets (present and future) including stocks of materials and components, work-in-progress, stock- in-trade, trade receivables, etc. and corporate guarantee from a fellow subsidiary. The Company has transferred its Gandhinagar properties vide deed of assignment (Refer Note 28 (d)). However, the loan is considered as secured since these properties have not been discharged as securities by the lender and continuance of the other assets as security.

As per the original payment schedule loan is repayable in 14 quarterly installments starting from 9 February, 2016. 6 installments of Rs. 2.25 Crore each, 4 installments of Rs. 3.375 Crore each and 4 installments of Rs. 4.50 Crore each. The same has been classified under "Short term borrowings" in view of the intention of the Company to expire the borrowing either by way of assignment to the buyer of the aforesaid property or by way of repayment of the loan from the sale consideration. The effective rate of interest is base rate of the lending bank which is 10.75% plus spread 1.5%. Hence current effective rate is 12.25% p.a..

2. Cash credits from banks are secured by first exclusive pari-pasu charge on entire current assets of the Company (present and future) including stocks of materials and components, work in progress, stock- in-trade, trade receivables, insurances, etc. and by second pari-pasu charge on all moveable fixed assets of the Company, and corporate guarantee from a fellow subsidiary. The cash credit is repayable on demand and carries average interest @ 13.5% p.a.

Provision for warranties

A provision is recognized for expected warranty claims on products sold during the last one year, based on past experience of the level of repairs and returns. It is expected that significant portion of these costs will be incurred in the next financial year and all will have been incurred within a year after the reporting date. Assumptions used to calculate the provision for warranties were based on current sales levels and current information available about returns based on the one-year warranty period for all products sold. The table below gives information about movement in warranty provisions.

3 Deferred tax assets (net)

The Company does not have any deferred tax liability as at 31 March 2015 and as at 31 March 2014. The Company has not recognised deferred tax assets in the absence of virtual certainty that sufficient future taxable income will be available against which such deferred tax assets can be realised.

Footnote:

"Disposal / adjustments" under plant and equipment relate to re-classification of spares utilised for servicing maintenance contracts with customers, to inventory. The management believes this to be a more appropriate classification owing to the nature of its usage.

Accordingly, the net carrying value as at 1 April 2014 amounting to Rs. 6.94 Crore has been transferred to inventory and the amount consumed during the year ended 31 March 2015 amounting to Rs. 2.83 Crore, has been disclosed under "Consumption of stores and spares" (as a part of "Other Expenses"), which was disclosed under "Depreciation and amortisation expense" till the earlier year (Rs. 3.16 Crore for the year ended 31 March 2014). There is no impact of the same on the statement of profit and loss account for the year or the previous year except that the respective expenses are not comparable to this extent.

Note: During the year, the Company has reversed the sales pertaining to earlier years aggregating Rs. Nil (31 March 2014 : Rs. 18.00 Crore).

# Excise duty on sales amounting to Rs. 1.15 Crore (31 March 2014 : Rs. 0.96 Crore) has been reduced from sales in the statement of profit and loss and excise duty on increase/decrease in stock amounting to Rs. 0.16 Crore (31 March 2014 : Rs. 0.14 Crore) has been considered as expense in the statement of profit and loss.

* The Company is an global ICT solution provider and integrator operating in various quadrants and the solutions sold to customers are configured as per specific customer requirements. The heterogeneous mix of components in solution are offered to customers makes it difficult to establish a meaningful/homogenous relationship for providing break up of goods purchased/sold during the year and the stock position. Consequently, it is neither feasible nor meaningful to give the category-wise details of goods purchased and sold during the year and stock position for all its product solutions.

Note: The Company is an global ICT solution provider and integrator operating in various quadrants and the solutions sold to customers are configured as per specific customer requirements. The heterogeneous mix of components in solution are offered to customers makes it difficult to establish a meaningful/homogenous relationship for providing break up of goods purchased/sold during the year and the stock position. Consequently, it is neither feasible nor meaningful to give the category-wise details of goods purchased and sold during the year and stock position for all its product solutions.

Notes:

a) The Company has made provision for identified obsolete/slow moving/non-moving inventories aggregating to Rs. 10.69 Crore (previous year Rs. 11 Crore).

b) During the previous year, the Company has provided the amounts arising out of vendor reconciliations aggregating to Rs. 5.4 Crore pertaining to earlier years.

c) During the previous year, the Company entered into an agreement with another company, whereby it sold certain trade receivables totaling to Rs. 17.84 Crore at a discounted value for cash consideration of Rs. 14.54 Crore on a fully non-recourse basis. Of the total receivables sold, Rs. 10.24 Crore represented old overdue balances for which the Company had previously recorded an allowance for doubtful debts. Accordingly, the Company has reversed the doubtful debt provision and recorded Rs. 6.94 Crore (net of discount of Rs. 3.30 Crore).

d) During the year the Company has entered into deeds of assignment to transfer all the rights, title and obligations of its land and building situated at Gandhinagar to another company for a consideration of Rs. 50.52 Crore. Subsequent to the year end, the lender to whom these assets were provided as security, has provided its in-principal approval for the said transfer subject to fulfillment of conditions stated therein. The said transfer is pending approval from the relevant government authority and transfer of legal title, that are considered to be procedural in nature. Company has recognised profit on sale of Fixed Assets of Rs. 46.04 Crore (net of incidental expenses Rs. 3.39 Crore).

(b) Defined benefit plan - The Company has one defined plan, i.e. Gratuity, for its employees. Under the gratuity plan, every employee who has completed at least five years of service gets a gratuity on departure @ 15 days of last drawn salary for each completed year of service. The scheme is funded with an insurance company in the form of qualifying insurance policy.

The following tables summarize the components of net benefit expense recognized in the statement of profit and loss and the funded status and amounts recognized in the balance sheet for the respective plans.

Eligible employees can carry forward and encash leave on superannuation, death, permanent disablement and resignation subject to maximum accumulation as per the Company policy. Benefit would be paid at the time of separation based on the last drawn basic salary. Amount recognised as an expenses in respect of compensated absences is Rs. 1.46 Crore (previous year Rs. 1.71 Crore).

4. Leases

Operating lease: Company as lessee

The Company has entered into various leasing agreements classified as operating leases for residential, office and warehouse premises which are renewable by mutual consent on mutually agreeable terms. These agreements generally range between 11 months to 5 years. Company does not have sub-leasing agreements or any contingent arrangements. Lease payments are recognised in the statement of profit and loss under 'Rent' in note 26.

5. Segment information

The Company is a ICT solution provider and integrator delivering technology based solutions across verticals layered with a spectrum of applications and services. All these solutions fall with in a single (primary) business segment of Enterprise Communication Solutions and Integration. All the fixed assets are lying in India and the Company's operations are restricted to India, hence there is one geographical segment viz. India. However, segment information for the group has been reported as a part of consolidated financial statements.

6. Capital and other commitments

(a) Estimated amount of contracts remaining to be executed on capital account and not provided for is Rs. Nil (31 March 2014: Rs. 0.10 Crore)

(b) For commitments relating to lease arrangements, refer note 31.

7. Employee benefit expense for the year ended 31 March 2015 includes:-

(a) Rs. 1.07 Crore towards remuneration payable by the Company to its erstwhile whole-time Director (now a Non-executive Director) for a part of the financial year 2014-15, as per the shareholders' sanction, which exceeds the limits specified under Schedule V to the Companies Act, 2013 by Rs. 0.72 Crore and against which the Company has paid Rs. 0.82 Crore. In absence of profits, the Company filed an application with the Central Government seeking approval for such excess which is awaited till date. Until such time the excess has not been adjusted and is held in trust for the Company by the Director.

(b) Rs. 0.67 Crore towards remuneration payable to the Managing Director for a part of the financial year 2014- 15. The remuneration payable as per the shareholders' sanction was Rs. 3.19 Crore against which the Company has paid Rs. 2.01 Crore during the year. In absence of profits, the Company filed an application with the Central Government seeking approval for remuneration sanctioned by the shareholders, which exceeds the limits specified under Schedule V to the Companies Act, 2013. However, it has received an approval, subsequent to the year end for Rs. 0.84 Crore per annum. In view of the same, the excess amount has been reversed and disclosed as excess remuneration recoverable under "Other current assets".

8. Contingent liabilities

31 March 31 March Rs. in Crore Rs. in Crore

Contingent liabilities

I) In respect of disputed demands of:

(a) Income tax authorities (refer note (i) below) 21.00 26.25

(b) Excise, service tax and customs authorities 24.21 24.21 (refer note (ii) below)

(c) Sales tax matters (refer note (iii) below) 2.15 1.44

II) Corporate Guarantee 112.66 108.18

The Company has given a corporate guarantee of USD 1.8 Crore,

equivalent to Rs. 112.66 Crore (31 March 2014: USD 1.8 Crore, equivalent to Rs. 108.18 Crore) towards the financial obligation of M/s AGC Networks Pte. Ltd., Singapore.

III) Claims against the Company not acknowledge as debt - 1.00

(i) Income tax:

The demand is raised mainly on deferred profit due to change in revenue recognition policy and other cases for the assessment years 2005-06 till 2011-12 for Rs. 21.00 Crore (31 March 2014: Rs. 26.25 Crore). This is a timing difference liability and appeal is filed before Commissioner of appeals and other adjudicating authorities as required.

(ii) Excise, Service tax and Customs

The amount is reported as contingent liability as an abundant caution for :

Rs. 6.60 Crore (31 March 2014: Rs. 6.60 Crore) for applicability of Custom duty on royalty remittance, appeal is filed by the Customs department with CESTAT, the order from the lower authority is issued in favour of the Company.

Rs. 0.74 Crore (31 March 2014: Rs. 0.74 Crore) for demand of Service tax on Royalty payments, the matter is pending before the Commissioner Appeals.

Rs. 0.40 Crore (31 March 2014: Rs. 0.40 Crore) for Service tax Demand on RTU Charges, the matter is remanded back by Commissioner Appeals for fresh adjudication.

Rs. 0.47 Crore (31 March 2014: Rs. 0.47 Crore) related to Excise duty demand on sales of Software. The Company has filed appeal before CESTAT.

Rs. 4.17 Crore (31 March 2014: Rs. 4.17 Crore) for Service tax Demand on RTU Charges, the matter is pending before the CESTAT.

Rs. 4.73 Crore (31 March 2014: Rs. 4.73 Crore) related to order passed by Commissioner of Central Excise towards excise duty on CT3 cases and incorrect input tax credit of service tax paid on foreign service providers for which the matter is pending before CESTAT.

Rs. 7.04 Crore (31 March 2014: Rs. 7.04 Crore) related to incorrect utilization of Input Credit of Service tax, the CESTAT has remanded back the matter to the Commissioner for fresh adjudication.

Rs. 0.06 Crore (31 March 2014: Rs. 0.06 Crore) related to interest and penalty demand on Foreign Service Provider, the matter is pending before the Commissioner Appeals, Ahmedabad.

(iii) Sales tax:

This represents Rs. 0.83 Crore (31 March 2014: Rs. 0.83 Crore) on account of non-receipt of 'F' form which is treated as contingent liability as an abundant caution. 'F' forms are to be received from Company's own branches. Balance amount of Rs. 1.32 Crore (31 March 2014: Rs. 0.61 Crore) is sales tax liability in the state of Kerala, West Bengal, Uttar Pradesh, Maharashtra and Gujarat against which the Company has filed appeal before the competent authority.

The Company is contesting all of the above demands in respect of Income tax, Excise, Service tax, Custom duty and Sales tax and the management, believes that its position will likely be upheld in the appellate process. No tax expense has been accrued in the financial statements for the tax demand raised. The management believes that the ultimate outcome of this proceeding will not have a material adverse effect on the Company's financial position and results of operations and hence no provision has been made.

The amount of further interest remaining due and payable Included in S. No. 4(b) above is Rs. 0.02 Crore even in the succeeding years, until such date when the (31 March 2014Rs.0.03 Crore) being interest on interest dues as above are actually paid to the small amounts outstanding as at the beginning of enterprise, for the purpose of disallowance as a deductible the accounting year. expenditure under Section 23 of the Micro, Small and Medium Enterprises Development Act, 2006.

The information has been given in respect of such vendors to the extent they could be identified as "Micro and Small Enterprises" on the basis of information available with the Company.

9. As per the transfer pricing rules, the Company is examining domestic and international transactions and documentation in respect thereof to ensure compliance with the said rules. The management does not anticipate any material adjustments with regard to the transaction involved.

10. Persuant to the shareholders approval dated 21 April 2015, the Nomination and Remuneration Committee of the Board of Directors granted 1,004,866 stock options equivalent to 3.53% of equity paid-up capital of the Company on 14 May, 2015 as per the terms of ESOP Scheme 2015.

11. Year figures have been regrouped / reclassified, where necessary, to conform to this year's classification.

Mar 31, 2014

1. Corporate information

AGC Networks Limited (''the Company'') or ''AGC is a public company domiciled in India and incorporated under the provisions of the Companies Act, 1956. Its shares are listed on two stock exchanges in India. The Company is engaged in manufacturing, trading and integrating network solutions and selling reputed brand of Video Conference, Voice and Data Products. The Company caters to both domestic and international markets. The Company also provides annual maintenance service for telecom, networking and electronic products.

2. Basis of preparation of financial statements

The financial statements of the Company have been prepared in accordance with generally accepted accounting principles in India (Indian GAAP). The Company has prepared these financial statements to comply in all material respects with the accounting standards notified under the Companies (Accounting Standards) Rules, 2006, (as amended) and the relevant provisions of the Companies Act, 1956 (the ''Act''), read with General Circular 8/2014 dated 04 April 2014 issued by the Ministry of Corporate Affairs. The financial statements have been prepared on an accrual basis and under the historical cost convention except in case of assets for which provision for impairment is made. The accounting policies adopted in preparation of financial statements are consistent with those used in the previous year.

3. Share capital

(b) Terms / rights attached to equity shares

The Company has only one class of equity shares having par value of Rs. 10 per share. Each holder of equity shares is entitled to one vote per share. The Company declares and pays dividends in Indian rupees. The dividend if proposed by the Board of Directors is subject to the approval of the shareholders in the Annual General Meeting.

In the event of liquidation of the Company, the holders of equity shares will be entitled to receive remaining assets of the Company, after distribution of all preferential amounts. The distribution will be in proportion to the number of equity shares held by the shareholders.

Provision for warranties

A provision is recognized for expected warranty claims on products sold during the last one year, based on past experience of the level of repairs and returns. It is expected that significant portion of these costs will be incurred in the next financial year and all will have been incurred within a year after the reporting date. Assumptions used to calculate the provision for warranties were based on current sales levels and current information available about returns based on the one-year warranty period for all products sold. The table below gives information about movement in warranty provisions.

4. Employee benefits plan

(b) Defined benefit plan - The Company has one defined plan, i.e. Gratuity, for its employees. Under the gratuity plan, every employee who has completed at least five years of service gets a gratuity on departure @ 15 days of last drawn salary for each completed year of service. The scheme is funded with an insurance company in the form of qualifying insurance policy.

The following tables summarize the components of net benefit expense recognized in the statement of profit and loss and the funded status and amounts recognized in the balance sheet for the respective plans.

5. Leases

Operating lease: company as lessee

The Company has entered into various leasing agreement classified as operating leases for residential, office, warehouse premises and vehicles which are renewable by mutual consent on mutually agreeable terms. These agreement generally range between 11 months to 5 years. The Company does not have sub-leasing agreements. Lease payments are recognised in the statement of profit and loss under ''Rent'' in note 25.

6. Segment information

The Company operates as technology and network solution integrators and thus there is only one business segment i.e., technology and networks solution. All the fixed assets are lying in India and the Company operates its facilities from India, hence there is one geographical segment viz. India.

7. Heiatea party disclosures

Names of related parties and related party relationship Related parties where control exists

Holding company

Essar Telecom Limited (Subsidiary of Essar Global Fund Limited) (w.e.f. 28 March 2014) Aegis Limited (upto 28 February 2014)

Ultimate holding company Subsidiaries

Essar Global Fund Limited

AGC Networks Australia Pty. Limited

AGC Networks Pte. Ltd.

AGC Networks Inc.

Related parties with whom transactions have taken place

Fellow subsidiaries

Aegis Tech Limited

Actionline De Argentina S.A.

Aegis Communication Group LLC

Aegis Services Australia Pty Ltd

Aegis Services Philippines Inc.

Aegis Aspire Consultancy Services Ltd

Aegis BPO (Costa Rica) SRL

Aegis Outsourcing UK Ltd

Global Vantedge Private Limited

Equinox Business Parks Pvt Limited

Essar Oil Limited

Essar Projects (India) Limited

Essar Power (Orissa) Limited

Essar Bulk Terminal (Salaya) Limited

Essar Steel India Limited

Essar Telecom Kenya Limited

Essar Power Transmission Company Limited

Vadinar Power Company Limited

Key management personnel

Mr. S. K. Jha - Managing Director (upto 22 April 2014)

Related party transactions

The following table provides the total amount of transactions that have been entered into with related parties for the relevant financial year:

8. Capital and other commitments

(a) Estimated amount of contracts remaining to be executed on capital account and not provided for Rs. 1 Million (31 March 2013:Rs. Nil Million)

(b) For commitments relating to lease arrangements, please refer note 29.

9. Remuneration to Managing Director

Approval from the Central Government of India is awaited for the amount of Rs. 5 Millions paid/payable to the Managing Director of the Company for the period ended 31 March 2011 in excess of the limits specified under the Companies Act, 1956. The Company had filed the application on 20 May 2011.

10. Contingent liabilities

31st March 2014 31st March 2013 Rs. Millions Rs. Million

Contingent liabilities

I. In respect of disputed demands of:

(a) Income tax authorities (refer note (i) below) 262 194

(b) Excise and Customs authorities (refer note (ii) below) 237 242

(c) Sales tax matters (refer note (iii) below) 14 16

II. Corporate Guarantee 1,082 The Company has given a corporate guarantee of USD 18 Millions equivalent to Rs. 1,082 Millions (31 March 2013 : Nil Millions) towards the financial obligation of M/s AGC Networks Pte. Limited, Singapore.

III. Claims against the Company not acknowledge as debt 10 10 (i) Income tax:

The demand is raised mainly on deferred profit due to change in revenue recognition policy and other cases for the assessment years 2005-06 till 2010-11 for Rs. 262 Millions (31 March 2013 Rs. 194 Millions). This is a timing difference liability and appeal is filed before Commissioner of appeals and other adjudicating authorities as required. (ii) Excise, Service tax and Customs:

The amount is reported as contingent liability as an abundant caution for:

Rs. 67 Millions (31 March 2013 Rs. 67 Millions) for applicability of Custom duty on royalty remittance, appeal is filed by the Customs department with CESTAT, the order from the lower authority is issued in favour of the Company.

Rs. 7 Millions (31 March 2013 Rs. 7 Millions) for demand of Service tax on Royalty payments, the matter is pending before the Commissioner Appeals.

Rs. 4 Millions (31 March 2013 Rs. 4 Millions) for Service tax Demand on RTU Charges, the matter is remanded back by Commissioner Appeals for fresh adjudication.

Rs. 0 Million (31 March 2013 Rs. 5 Millions) related to Excise duty demand on sales of Software. The Company has filed appeal before CESTAT.

Rs. 42 Millions (31 March 2013 Rs. 42 Millions) for Service tax Demand on RTU Charges, the matter is pending before the CESTAT.

Rs. 47 Millions (31 March 2013 Rs. 47 Millions), related to order passed by Commissioner of Central Excise towards excise duty on CT3 cases and incorrect input tax credit of service tax paid on foreign service providers for the matter is pending before CESTAT.

Rs. 70 Millions (31 March 2013 Rs. 70 Millions), related to incorrect utilization of Input Credit of Service tax, the CESTAT has remanded back the matter to the Commissioner for fresh adjudication.

(iii) Sales tax:

This represents Rs. 8 Millions (31 March 2013 Rs. 8 Millions) on account of non-receipt of ''F'' form which is out of abundant precaution. ''F'' forms are to be received from Company''s own branches. Balance amount of Rs. 6 Millions (31 March 2013 Rs. 8 Millions) is sales tax liability in the state of Kerala, West Bengal, Uttar Pradesh and Gujarat against which the Company has filed appeal before competent authority.

The Company is contesting all of the above demands in respect of Income tax, Excise, Service tax, Custom duty and Sales tax and the management, believe that its position will likely be upheld in the appellate process. No tax expense has been accrued in the financial statements for the tax demand raised. The management believes that the ultimate outcome of this proceeding will not have a material adverse effect on the Company''s financial position and results of operations and hence no provision has been made.

11. As per the transfer pricing rules, the Company is examining domestic and international transactions and documentation in respect thereof to ensure compliance with the said rules. The management does not anticipate any material adjustments with regard to the transaction involved.

12. Previous year figures

Previous year figures have been regrouped / reclassified, where necessary, to conform to this year''s classification.

13. All amounts are in Rupees (in Million) except otherwise stated specifically - ''0'' denotes amounts less than a Million rupees.

Mar 31, 2013

1. Corporate information

AGC Networks Limited (''the Company'') or ''AGC is a public company domiciled in India and incorporated under the provisions of the Companies Act, 1956. Its shares are listed on two stock exchanges in India. The company is engaged in manufacturing, trading and integrating network solutions and selling reputed brand of Video Conference, Voice and Data Products. The Company caters to both domestic and international markets. The Company also provides annual maintenance service for telecom, networking and electronic products.

2. Basis of Preparation of Financial Statements

The financial statements of the company have been prepared in accordance with generally accepted accounting principles in India (Indian GAAP). The company has prepared these financial statements to comply in all material respects with the accounting standards notified under the Companies (Accounting Standards) Rules, 2006, (as amended) and the relevant provisions of the Companies Act, 1956 (the ''Act''). The financial statements have been prepared on an accrual basis and under the historical cost convention except in case of assets for which provision for impairment is made. The accounting policies adopted in preparation of financial statements are consistent with those used in the previous year.

3. Leases

Operating lease: company as lessee

The company has entered into various leasing agreement classified as operating leases for residential, office, warehouse premises and vehicles which are renewable by mutual consent on mutually agreeable terms. These agreement generally range between 11 months to 4 years. The company does not have sub-leasing agreements. Lease payments are recognised in the statement of profit and loss under ''Rent'' in note 25.

4. Segment information

The Company operates as technology and network solution integrators and thus there is only one business segment i.e., technology and networks solution. All the fixed assets are lying in India and the company operates its facilities from India, hence there is one geographical segment viz. India.

5. Related party disclosures

Names of related parties and related party relationship

Related parties where control exists

Holding company Aegis Limited (w.e.f. 03 June 2011)

Aegis Limited - Subsidiary of holding company (w.e.f. 20 January 2011 till 02 June 2011)

AGC Holdings Limited [(formerly known as Essar Services Holdings Limited)] upto 02 June 2011]

Essar Telecom Limited (Subsidiary of Essar Global Limited) Ultimate holding company Essar Global Limited Subsidiaries AGC Networks Australia Pty. Limited

AGC Networks Pte. Ltd. (w.e.f. 01 May 2011, fellow subsidiary upto 30 April 2011)

AGC Networks Inc. (w.e.f. 22 February 2012)

Related parties with whom transactions have taken place during the year Fellow subsidiaries Aegis Tech Limited

Actionline De Argentina S.A.

Aegis Communication Group LLC

Aegis Services Australia Pty Ltd

Aegis Services Philippines Inc

Aegis Aspire Consultancy Services Ltd

Aegis BPO (Costa Rica) SRL

Aegis Outsourcing UK Ltd

Global Vantedge Private Limited

Equinox Business Parks Pvt Limited

Essar Oil Limited

Essar Projects (India) Limited

Essar Power MP Limited

Essar Power Gujarat Limited

Essar Power (Jharkhand) Limited

Essar Steel India Limited

Essar Telecom Kenya Limited

Essar Power Transmission Company Limited

Vadinar Power Company Limited

Key management personnel Mr. S. K. Jha Managing director (w.e.f. 31 August 2010)

Remuneration (w.e.f. 01 December 2011)

Mr. Anil Nair (upto 31 August 2011)

6. Capital and other commitments

(a) Estimated amount of contracts remaining to be executed on capital account and not provided for X Nil (31 March 2012: Rs.32 Million)

(b) For commitments relating to lease arrangements, please refer note 29.

7. Remuneration to Managing Director

Approval from the Central Government of India is awaited for the amount of Rs. 5 Million paid to the Managing Director for the period ended 31 March 2011 in excess of the limits specified under the Companies Act 1956. The Company had filed the application on 20 May 2011 however approval is awaited.

8. As per the transfer pricing rules prescribed under the Income Tax Act, 1961, the Company is examining domestic and international transactions and documentation in respect thereof to ensure compliance with the said rules. The management does not anticipate any material adjustments with regard to the transaction involved.

9. During the previous year ended 31 March 2012

a) The Company has entered into a 60:40 joint venture agreement with a Saudi Arabian Company for developing the Saudi Arabian market for the products and services of AGC or any of its affiliates.

b) The Company, through its wholly owned subsidiary in Singapore has entered into a 42:40:18 joint venture agreement with an enterprise in UAE for execution of implementation projects in Dubai offering technology, infrastructure, integration, operation and management services.

10. Previous year figures

Previous year figures have been regrouped / reclassified, where necessary, to conform to this year''s classification.

11. All amounts are in Rupees (in Million) except otherwise stated specifically - ''0'' denotes amounts less than a Million rupees.

Mar 31, 2012

1. Corporate information

AGC Networks Limited (the company) is a public company domiciled in India and incorporated under the provisions of the Companies Act, 1956. Its shares are listed on two stock exchanges in India. The Company is engaged in the manufacturing and integrating network solutions and selling reputed brand of Video Conference, Voice and Data Products and electronic appliances. The Company caters to both domestic and international markets. The Company also provides annual maintenance service for electronics products.

2. Basis of Preparation of Financial Statements

The financial statements have been prepared to comply in all material respects with the Accounting Standards notified by Companies (Accounting Standards) Rules, 2006, (as amended) and the relevant provisions of the Companies Act, 1956 (the 'Act'). The financial statements have been prepared under the historical cost convention on an accrual basis except in case of assets for which provision for impairment is made. The accounting policies have been consistently applied by the Company and except for the changes in accounting policy discussed more fully below, are consistent with those used in the previous year.

(a) Terms / rights attached to equity shares

The Company has only one class of equity shares having par value of Rs. 10 per share. Each holder of equity shares is entitled to one vote per share. In the event of liquidation of the Company, the holders of equity shares will be entitled to receive remaining assets of the Company, after distribution of all preferential amounts. The distribution will be in proportion to the number of equity shares held by the shareholders.

The Company declares and pays dividends in Indian rupees. The dividend proposed by the Board of Directors is subject to the approval of the shareholders in the ensuing Annual General Meeting. During the year ended 31 March 2012, the amount of per share dividend recognized as distributions to equity shareholders was Rs. 15.00 (31 March 2011: Rs. 2.25).

Provision for warranties

A provision is recognized for expected warranty claims on products sold during the last one year, based on past experience of the level of repairs and returns. It is expected that significant portion of these costs will be incurred in the next financial year and all will have been incurred within a year after the reporting date. The table below gives information about movement in warranty provisions.

Cash credit and Buyers credit from banks is secured against hypothication of inventories and sundry debtors. The cash credit is repayable on demand and Buyers credit is repayable on due date.

-Margin money deposits given as security

Margin money deposits with a carrying amount of Rs. 7 Millions (31 March 2011: Rs. 7 Millions) are given against bank guarantees issued.

It includes deposit with the original maturity of less than 12 months which is rolled over till the maturity of the bank guarantee.

# Excise duty on sales amounting to Rs. 30 Million (Period ended 31 March 2011: Rs.17 Million) has been reduced from sales in statement of profit & loss and excise duty on increase/decrease in stock amounting to Rs. 1 Million (Period ended 31 March 2011: Rs. 7 Million) has been considered as expense in the statement of profit and loss.

Note: The accounting policy in relation to Revenue Recognition has been reiterated and re-framed during the year in-order to clarify and to be more specific for better understanding for the users of the financial statements. The revenues are accounted consistently as were accounted during the previous year and reiterating the accounting policy has no impact on the revenues accounted for the year.

(b) Defined benefit plan - The company has one defined plan, i.e. Gratuity, for its employees. Under the gratuity plan, every employee who has completed at least five years of service gets a gratuity on departure @ 15 days of last drawn salary for each completed year of service. The scheme is funded with an insurance company in the form of qualifying insurance policy.

The following tables summarize the components of net benefit expense recognized in the statement of profit and loss and the funded status and amounts recognized in the balance sheet for the respective plans.

3. Segment information

The Company operates as technology and network solution integrators and thus there is only one business segment i.e., technology and network solutions and there is only one geographical segment viz. India.

4. Capital and other commitments

(a) Estimate amount of contracts remaining to be executed on capital account and not provided for Rs. 32 Million (Period ended 31 March 2011: Rs. 44 Million)

(b) For commitments relating to lease arrangements, please refer note 28.

5. Remuneration to Managing Director

Approval from the Central Government of India is awaited for the amount of Rs.5 Million paid/payable to the Managing Director for the period ended March 31, 2011 in excess of the limits specified under the Companies Act 1956. The company had filed the application on 20 May 2011.

6. Contingent liabilities

01 April 2011 01 October 2010 to 31 March 2012 to 31 March 2011 Rs. Millions Rs. Millions

Contingent liabilities in respect of disputed demands of:

(a) Income tax authorities 236 170

(b) Excise and Customs authorities 83 83

(c) Sales tax matters 14 9

(d) Bills Discounted 19 46

Income tax:

The demand is raised mainly on deferral profit due to change in revenue recognition policy and other cases for Rs. 236 Million (31 March 2011 Rs. 170 Million). This is a timing difference liability and appeal is filed before Commissioner of appeals.

Excise :

The amount is reported as contingent liability as an abundant caution for the appeal filed by the department with higher authority for applicability of custom duty on royalty remittance for Rs. 67 Million (31 March 2011 Rs. 67 Millions). The order from the lower authority is issued in favour of the company. Rs. 11 Million (31 March 2011 Rs. 11 Million) relate to Service tax on RTU activation charges & penalty thereon. AGC has filed appeal before commissioner in this case. Rs. 5 Million (31 March 2011 Rs. 5 Million) related to Excise duty demand on sales of Software. AGC has filed appeal before tribunal.

Sales tax:

This represents Rs. 8 Million (31 March 2011 Rs. 8 Million) on account of non-receipt of 'F' form which is based on abundant precaution. 'F' forms are to be received from AGC's own branches. Balance amount of Rs. 6 Million (31 March 2011 Rs. 1 Million) is sales tax liability in the state of Kerala & West Bengal against which we have filed appeal before competent authority.

Bills Discounted:

Bill discounted represents sales bills discounted with banks against receivables from customers.

7. During the year ended 31 March 2012

a) The Company has entered into a 60:40 joint venture agreement with a Saudi Arabian Company for developing the Saudi Arabian market for the products and services of AGC or any of its affiliates.

b) The Company, through its wholly owned subsidiary in Singapore has entered into a 42:40:18 joint venture agreement with an enterprise in UAE for execution of implementation projects in Dubai offering technology, infrastructure, integration, operation and management services.

8. Previous year figures

Till the period ended 31 March 2011, the company was using pre-revised Schedule VI to the Companies Act 1956, for preparation and presentation of its financial statements. During the year ended 31 March 2012, the revised Schedule VI notified under the Companies Act 1956, has become applicable to the company. The company has reclassified previous year figures to conform to this year's classification. The adoption of revised Schedule VI does not impact recognition and measurement principles followed for preparation of financial statements. However, it significantly impacts presentation and disclosures made in the financial statements, particularly presentation of balance sheet.

Since the company had changed its year end from September end to March end in the previous year, current year statement of profit and loss is for twelve months ended 31 March 2012 and is not comparable to previous period figures which is for six months period ended 31 March 2011.

9. All amounts are in Rupees (in Million) except otherwise stated specifically - '0' denotes amounts less than a Million rupees.

Mar 31, 2011

Oct 01, 2009 to Sep 30, 2010 Rupees in million Rupees in million

1 Estimated amounts of contracts remaining to be executed on capital account and not provided for 44 22

2 Contingent liabilities in respect of disputed demands of:

(a) Income tax authorities 170 183

(b) Excise and Customs authorities 83 94

(c) Sales tax matters 9 9

(d) Bills Discounted 63 1

Income tax:

The demand is raised mainly on deferral profit due to change in revenue recognition policy for Rs.98 million. This is a timing difference liability and appeal is filed before Commissioner of appeals.

Excise :

The amount is reported as contingent liability as an abundant caution for the appeal filed by the department with higher authority for applicability of custom duty on royalty remittance for Rs.66 million. The order from the lower authority is issued in favour of the Company.

3 (b) Approval from the Central Government of India is awaited for the amount of Rs.5 million paid/payable to the Managing Director for the year ended March 31, 2011 in excess of the limits specified under the Companies Act 1956.

4 During the 6 months year ended March 31, 2011, the Company has changed its revenue recognition policy consistent with practice followed in the industry. Had the Company continued with the earlier policy i.e. income from sale of goods/installation & commissioning was recognised on completion of sale/installation and commissioning, the Gross Sales/Income from operations would have been lower by Rs.210 million and Profit after tax would bave been lower by Rs.51 million.

5 Segment Reporting

The Company operates in one business segment i.e., Business Communication Solutions and there is only one geographical segment viz. India.

6 Related Party Disclosures

(a) Related party disclosures as required by Accounting Standard -18 (AS-18), "Related Party Disclosures" issued by the Institute of Chartered Accountants of India

Nature of Relationship Name of Party

Where control exists Essar Services Holdings Limited - Holding Company (w.e.f. 01.09.2010)

Essar Capital Finance Private Limited - (upto 19.01.2011)

Aegis Limited - Subsidiary of Holding Company - (w.e.f. 20.01.2011)

Essar Global Limited - Ultimate Holding Company (w.e.f. 01.09.2010)

Avaya Inc., USA - Ultimate Holding Company (upto 31.08.2010) through its 100% subsidiaries

1) Sierra Communication International LLC (formerly Avaya International, LLC, USA) (upto 31.08.2010)

2) Avaya Mauritius Limited(upto 31.08.2010) Subsidiaries GlobalConnect Australia Pty Limited

Fellow Subsidiaries Essar Steel Limited (w.e.f. 01.09.2010)

(where transactions occurred during the year) Essar Oil Limited (w.e.f. 01.09.2010)

Aegis Limited (w.e.f. 01.09.2010)

Aegis Tech Ltd

Aegis Tech Singapore Pte. Ltd

Aegis Communication Group LLC.

Aegis Aspire Consultancy Services Ltd

Essar House Ltd

Essar Infrastructure Services Ltd

Essar Investment Ltd

Essar Power Ltd

Essar Power Gujarat Ltd

Essar Power MP Ltd

Essar Projects (India) Ltd

Essar Technology Park BKC Pvt. Ltd

Global Vantedge Private Ltd

Essar Information Technology Ltd

Equinox Business Parks Pvt. Ltd

Avaya India Private Limited (upto 31.08.2010)

Avaya Singapore Pte Ltd (upto 31.08.2010) Avaya International Sales Ltd., Ireland (upto 31.08.2010)

Key Management Personnel Mr. Anil Nair (w.e.f. 01.01.2009)

Mr. S. K. Jha (w.e.f. 01.09.2010)

7 Lease transactions

Operating leases

(i) The Company has taken various residential, office, warehouse premises and vehicles under operating lease or leave and licence agreements. These range between 11 months to 4 years under leave and licence, or longer for other leases and are renewable by mutual consent on mutually agreeable terms.

(ii) Lease payments are recognised in the Profit and Loss Account under Rent and Lease rentals in Schedule 15.

8 The figures of previous year were audited by a firm of Chartered Accountants other than S. R. Batliboi & Associates. Previous year figures have been re-grouped and reclassified, wherever necessary, to correspond to those of the current period classification.

Since the Company has changed its year end from September end to March end, current period Profit and Loss Account is for six months period ended March 31, 2011 and is not comparable to previous year figures which is for the year ended September 30, 2010.

9 All amounts are Rupees (In million) except otherwise stated specifically - "0" denotes amounts less than a million rupees.

Sep 30, 2010

1) Other Long-term Employee Benefits:

Liability for Compensated Absences is provided on the basis of valuation, as at the Balance Sheet date, carried out by an independent actuary. Encashment of leave benefit is payable on death whilst in service, withdrawal from service such as resignation, termination or early retirement or from retirement from service at normal retirement date. In view of increase in salary taking place, salary growth rates have been used to project the salary at the time when encashment of leave is assumed to take place. The assumptions with regard to Mortality rates, Withdrawal rates and Retirement age have been used to construct a suitable multiple decrement service/mortality table which determines the expected time when leave encashment is likely to take place. The accumulated leave may be reduced on account of in-service utilization or encashment if permissible under the rules of leave encashment, or increase on account of leave entitlement every year. The effect of in service utilization or encashment and entitlement will be reflected in year to year balance and the liability will be adjusted accordingly at every periodic actuarial valuation.

2) Termination benefits are recognised as an expense as and when incurred.

3) The actuarial gains and losses arising during the year are recognised in the Profit and Loss Account of the year without resorting to any amortisation.

Previous year Rupees in 000 Rupees in 000

1 Estimated amounts of contracts remaining to be executed on capital account and not provided for 22,029 1,565

2 Contingent liabilities in respect of disputed demands of:

(a) Income tax authorities 182,731 155,316

(b) Excise and Customs authorities 93,863 159,492

(c) Sales tax matters 8,744 7,898

(d) Bills Discounted 714 39,768

3 (b) Approval from the Central Government of India is awaited for the amount of Rs. 5,323 (000) paid to the Managing Director for the year ended September 30, 2009 in excess of the limits specified under the Companies Act, 1956.

4 Exceptional item for the year ended September 30, 2010 pertains to profit on sale of land of Rs. 9,701 (000) and for the year ended September 30, 2009 pertains to employees separation costs of Rs. 53,405 (000).

5 Segment Reporting

The Company operates in one business segment i.e., Business Communication Solutions and there are no reportable geographical segments.

6 Related Party Disclosures (Refer Note No. 2 of Schedule 1)

(a) Related party disclosures as required by Accounting Standard - 18 (AS-18), "Related Party Disclosures" issued by the Institute of Chartered Accountants of India

Nature of Relationship Name of Party

Where control exists Essar Services Holdings Limited - Holding Company (w.e.f. 01.09.2010)

Essar Capital Finance Private Limited- (w.e.f. 01.09.2010)

Essar Global Limited-Ultimate Holding Company (w.e.f. 01.09.2010)

Avaya Inc., USA - Ultimate Holding Company (upto 31.08.2010)

Through its 100% subsidiaries -

1) Sierra Communication International LLC (formerly Avaya International, LLC, USA) (upto 31.08.2010)

2) Avaya Mauritius Limited (upto 31.08.2010) Subsidiaries Global Connect Australia Pty Limited

Fellow Subsidiaries Avaya India Private Limited (upto 31.08.2010) (where transactions occurred during the year) Avaya Singapore Pte Ltd (upto 31.08.2010)

Avaya International Sales Ltd., Ireland (upto 31.08.2010)

Essar Steel Limited (w.e.f. 01.09.2010)

Essar Oil Limited (w.e.f. 01.09.2010)

Aegis Limited (w.e.f. 01.09.2010)

Key Management Personnel Mr. Niru Mehta (upto 31.12.2008)

Mr. Anil Nair (w.e.f. 01.01.2009)

Mr. S. K. Jha (w.e.f. 01.09.2010)

7 Lease transactions

Operating leases

(i) The Company has taken various residential, office, warehouse premises and vehicles under operating lease or leave and licence agreements. These range between 11 months to 4 years under leave and licence, or longer for other leases and are renewable by mutual consent on mutually agreeable terms.

(ii) Lease payments are recognised in the Profit and Loss Account under Rent and Lease rentals in Schedule 15.

8 Previous year figures have been re-grouped and reclassified, wherever necessary, to correspond to those of the current year.

Sep 30, 2009

Previous year Rupees in Crores Rupees in Crores

1 Estimated amounts of contracts remaining to be executed on capital account and not provided for 0.16 3.42

2 Contingent liabilities in respect of disputed demands of:

(a) Income tax authorities 15.52 17.52

(b) Excise and Customs authorities 15.95 12.43

(c) Sales tax matters 0.79 0.82

(d) Bills Discounted 3.98 6.50

3 (a) Managerial Remuneration

Salary 0.19 -

Perquisites & Allowances (includes Rs. NIL (previous year Rs. 0.21 crore) in respect of earlier year) 1.24 1.69

Contribution to provident fund, superannuation and other funds 0.06 -

Total 1.49 1.69

3 (b) Managerial remuneration for the year ended September 30, 2009 includes Rs. 0.53 crore, paid/payable to the Manager / Managing Director, subject to the approval of the Central Government of India, for which an application has been made. The appointment and remuneration of the Manager / Managing Director from April 1, 2009 is also subject to the approval of the shareholders.

Managerial remuneration for the year ended September 30, 2008 excludes Rs. 0.72 crore, being the amount paid to the Director in excess of the limits specified under the Companies Act, 1956, for the year ended September 30, 2008 for which an application has been made by the Company to the Central Government. In the event the approval is not received, Avaya Inc., the ultimate holding company, has agreed to pay this amount to the Company.

4 In respect of contracts, for the provision / supply of services / goods, with a private company in which a then Director of the Company was Director, the Company is of the view that the provisions of section 297 of the Companies Act, 1956 are not applicable. However, as a matter of abundant caution, the Board of Directors of the Company in their meeting held on 26th October, 2007 resolved to make an application seeking the approval of the Central Government.

Pursuant to above, Company filed application under section 621 (A) for compounding of offence committed under the section 297 of the Companies Act, 1956, for the transactions entered in 2006-07 and in 2007-08 (upto February 24, 2008) for which approval is pending. The Company has obtained Central Government approval for entering into transactions with the above mentioned Company from the date of approval February 25, 2008 to September 30, 2010.

5 (b) Advances include a loan of Rs. 5.70 Crores granted to a trust formed pursuant to an engagement and retention plan for the benefit of certain employees of the Company. The trust has invested the amount borrowed in the equity shares of the Company.

6 Segment Reporting

The Company operates in one business segment i.e., Business Communication Solutions and there are no reportable geographical segments.

7 Related Party Disclosures

(a) Related party disclosures as required by Accounting Standard -18 (AS-18), "Related Party Disclosures" issued by the Institute of Chartered Accountants of India

Nature of Relationship Name of Party

Where control exists Avaya Inc., USA - Ultimate Holding Company

Through its 100% subsidiaries -

1) Avaya International, LLC, USA

2) Avaya Mauritius Limited

Subsidiaries GlobalConnect Australia Pty Limited

Fellow Subsidiaries Avaya India Private Limited

(where transactions occurred during the year) Avaya Singapore Pte Ltd

Avaya Licensing Corporation

Avaya U. K.

Avaya International Sales Ltd., Ireland

Avaya Australia Pty. Ltd

Avaya Asia Pacific Inc., Bangkok

Avaya Asia Pacific Inc., Taiwan

Key Management Personnel Mr.Niru Mehta (Vice-Chairman and Managing Director) (Upto 31.12.2008)

Mr. Anil Nair (Manager) (w.e.f. 01.01.2009 upto 27.04.2009)

Mr. Anil Nair (Managing Director) (w.e.f. 28.04.2009)

1) Avaya Inc. and Avaya Singapore Pte. Ltd. have reimbursed the Company a sum of Rs. 0.22 Crores & Rs. 0.13 Crores (previous year Rs. 1.03 Crores & Rs. 0.06 Crores) and Rs. NIL & Rs. 0.18 Crores (previous year Rs. 1.51 Crores & Rs. 0.29 Crores) is recoverable as on September 30, 2009 towards Avaya Technical Assistance Center (ATAC) project in accordance with agreements dated September 17, 2004 and October 1, 2007 respectively.

2) Consists of reimbursement of Advertisement costs and other expenses.

3) Consists of reimbursement of Rent & other expenses.

Recovery of above expenses/cost of fixed assets aggregating to Rs. 3.42 Crores (previous year Rs. 4.65 Crores) have been netted off against the respective accounts in the Profit and Loss Account/Fixed Assets.

4) Figures in brackets are in respect of previous year.

5) Previous year figures have been re-grouped and reclassified, wherever necessary, to correspond to those of the current year.

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