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Notes to Accounts of Bharti Infratel Ltd.

Mar 31, 2016

1. Employee Stock/Cash Option Plans

Pursuant to the board resolution dated July 22, 2008 and the resolution of the shareholders in extraordinary general meeting dated August 28, 2008, the Company instituted the Employee Stock Option Scheme 2008 (The 2008 Scheme).

In FY 2013-14 & 2014-15, the Company has announced new performance unit plan (cash settled payment) for its employees.

During the year ended March 31, 2016, the Company has announced Long term incentive plan (LTIP) 2015 for its employees.

2. Leases

(a) Operating lease: Company as a lessee

The lease rentals paid under non-cancelable leases relating to rent of building premises and sites as per the agreements with escalations rates ranging from 0% to 25 % per annum and the maximum obligation on long-term non-cancellable operating leases are as follows:

(b) Operating lease: Company as a lessor

The Company has given sites on operating lease to telecom operators. As per the agreements with the operators the escalation rates range from 0% to 2.5% per annum. The service charges recognised as income during the year ended March 31, 2016 and March 31, 2015 for non-cancelable arrangements relating to provision for passive infrastructure sites as per the agreements is Rs. 34,951 Mn and Rs. 32,151 Mn respectively.

3. Asset Retirement Obligation

The Company uses various premises on lease to install plant and equipment. A provision is recognised for the costs to be incurred for the restoration of these premises at the end of the lease period. It is expected that this provision will be utilised at the end of the lease period of the respective sites as per the respective lease agreements. The movement of provision in accordance with AS-29 on ''Provisions, Contingent liabilities and Contingent Assets'' is given below:

4. Interest in Joint Venture

The Company holds 42% interest in Indus Towers Limited, a jointly controlled entity which is involved in providing passive infrastructure to telecom companies.

The Company''s share of the assets, liabilities, income and expense of the jointly controlled entity as at and for the year ended March 31, 2016 and March 31, 2015 respectively are as follows:

5. Related Party Disclosures

In accordance with the requirements of Accounting Standards (AS) -18 on Related Party Disclosures, the names of the related parties where control exists and/ or with whom transactions have taken place during the year and description of relationships, as identified and certified by the management are as below:

A. List of Related Parties

1. Key management personnel (KMP) Akhil Kumar Gupta, Chairman

D.S. Rawat, Managing Director and CEO

2. Related parties where control exists irrespective of whether transactions have occurred or not Holding company Bharti Airtel Limited

Subsidiary companies Bharti Infratel Services Limited (Refer Note-1)

Subsidiary companies Smartx Services Limited (w.e.f. September 21, 2015)

6. Since the Company''s business activity falls within a single business and geographical segment of providing passive infrastructure, there are no additional disclosure to be provided under Accounting Standard - 17 ''Segment reporting'' other than those already provided in the financial statements.

41. During the year ended March 31, 2008, pursuant to the Scheme of Arrangement with Bharti Airtel Limited (''the Scheme'') under sections 391 to 394 of the Companies Act, 1956, the telecom infrastructure undertaking of Bharti Airtel Limited was transferred to the Company. Pursuant to the Scheme, the depreciation charged by the Company on the excess of the fair values over the original book values of the assets transferred by Bharti Airtel Limited is being off-set against General Reserve. Had the Company followed generally accepted accounting principles in India, General Reserve as at March 31, 2016 and March 31, 2015 would have been higher by Rs. 8,302 Mn and Rs. 7,724 Mn, respectively. Depreciation for the year ended March 31, 2016 would have been higher by Rs. 571 Mn (March 31, 2015 - Rs. 606 Mn), other expenses for the year ended March 31, 2016 would have been higher by Rs. 8 Mn (March 31, 2015 - Rs. 55 Mn) and profit for the year ended March 31, 2016 would have been lower by Rs. 579 Mn (March 31, 2015 - Rs. 661 Mn), respectively.

7. The Scheme of Arrangement (''Indus Scheme'') under Section 391 to 394 of the Companies Act, 1956 for transfer of all assets and liabilities, as defined in Indus scheme, from Bharti Infratel Ventures Limited (BIVL), erstwhile wholly owned subsidiary company, to Indus Towers Limited (Indus), was approved by the Hon''ble High Court of Delhi vide order dated April 18, 2013 and filed with the Registrar of Companies on June 11, 2013 with appointed date April 1, 2009 i.e. effective date of Indus Scheme and accordingly, effective June 11, 2013, the erstwhile subsidiary company has ceased to exist and has become part of Indus. The Company was carrying investment in BIVL at Rs. 59,921 Mn. Pursuant to Indus Scheme, the Company has additionally got 504 shares in Indus in lieu of transfer of its investment in BIVL to Indus and recorded these additional shares at their fair value of Rs. 60,419 Mn in accordance with the requirements of Accounting Standard - 13. The resultant gain of Rs. 385 Mn (net of taxes Rs. 116 Mn) has been disclosed as adjustment to carryforward balance of Statement of Profit and Loss as at April 1, 2009. This being non cash transaction, has not been considered for disclosure in cash flow statement for the year ended March 31, 2014.

8. The Company has classified its investments in mutual funds as current and non-current at the time of initial recognition, based on its plan of future utilisation of funds within 12 months and after 12 months, respectively. These investments are reclassified and disclosed as at year end based on balance utilisation period.

9. During the year 2014-15, the Company has re-assessed the useful life and residual value of all its assets, accordingly, effective April 1, 2014, it has revised the useful life of certain class of shelters from 15 years to 10 years and revised the residual value of certain plant and machineries (batteries and DG sets) from Nil and 5% to 25% and 10%, respectively. The net impact thereof is not material and hence, not disclosed in these financial statements.

10. On April 27, 2015, the Board of Directors had proposed a dividend of Rs. 6.50 per equity share to all the existing shareholders for the year ended March 31, 2015. The dividend proposed by the Board of Directors had approved by the shareholders in the annual general meeting held on August 11, 2015 and paid during the financial year ended March 31, 2016.

11. The Company has received interim dividend of Rs. 19,000 per equity share, Rs. 5,380 per equity share and Rs. 8,400 per equity share from Joint Venture Company totalling to Rs. 9,510 Mn, Rs. 2,693 Mn and Rs. 4,204 Mn during quarter ended June 30, 2014, quarter ended September 30, 2014 and quarter ended March 31, 2015 respectively, which has been disclosed under Other Income.

12. Charity and donation includes Nil (FY 2014-15 - Rs. 60 Mn) paid to Satya Electoral Trust for political purposes.

13. The Company has recognised write back of over aged liabilities and provisions amounting to Rs. 162 Mn (FY 2014-15-^367 Mn), related to fixed assets transferred to Joint Venture Company, equally over the period starting from October 1, 2014 to June 30, 2015 and disclosed under "Miscellaneous Income".

14. The Company was required to spend Rs. 255 Mn towards CSR expenditure in current year as per the requirement of the Act. During the year, Rs. 269 Mn were committed towards 5 long-term CSR projects basis approval from the Board. The disbursement of committed funds is based on the individual project work plans and milestones achieved over the project duration. All projects are being monitored on the progress made and impact created during the routine course of the business. The CSR fund disbursement in current year was Rs. 209 Mn.

15. During the year ended March 31, 2016, the Company has re-classified the termination charges w.r.t. cancellation of contracts by operators of Rs. 47 Mn, from ''Other income'' to ''Revenue from operations''. Previous year figures have not been reclassified being not material in relation to these financial statements.

16. The Central Government in consultation with National Advisory Committee on Accounting Standards has amended Companies (Accounting Standards) Rules, 2006 (''principal rules''), vide notification issued by Ministry of Corporate Affairs dated March 30, 2016. The Company believes that as the original notification dated 7 December 2006 for notifying accounting standard states that the accounting standards shall come into effect in respect of accounting periods commencing on or after the publication of these Accounting Standards. Therefore the Company has not applied these amendments during the year.

17. Previous year figures have been regrouped/ reclassified where necessary to conform to the current year''s classifications.


Mar 31, 2009

1. Contingent Liability

(a) Total guarantees outstanding as at March 31, 2009 amounting to Rs 1,185 thousand (March 31, 2008 - Nil) have been issued by banks and financial institutions on behalf of the Company,

(b) Claims against the Company not. Acknowledged as debt : (Excluding cases where the possibility of any outflow/in settlement is remote):

(Rs'0Q0) Particulars As at As at March 31, 2009 March 31, 2008

(i) Taxes, Duties and Other demands (under adjudication / appeal / dispute)

-Sales Tax (Refer to c below) 2,861 2,861

-Stamp Duty (Refer to d below) 237,746 266,438

-Entry Tax (Refer to e below) 438,605 455,281

-Municipal Taxes 333 333

(ii) Claims under legal cases including arbitration matters 105,787 48,983

(Refer to below) 795,332 773,896



Unless otherwise stated below, the management believes that, based on legal advice, the outcome of these contingencies will be favorable and that a loss is not probable.

(c) Sales tax

The claims for sales tax as of March 31, 2009 comprised the cases relating to the sales tax demand on purchase of equipment's against 'C Form.

(d) Stamp Duty

The Company has received demand in certain states for stamp duty on execution of Leave and License Agreement of Cell Sites.

(e) Entry tax

In certain states an entry tax Is levied on receipt of material from outside the state. This position has been challenged by the Company in the respective states, on the grounds that the specific entry tax is ultra vires the constitution. Classification issues have been raised whereby, in view of the Company, the material proposed to be taxed is not covered under the specific category. The amount under dispute as of March 31, 2009 was Rs 438,605 thousand (March 31, 2QQ8- Rs 455,281 thousand).

(f) Others

Others mainly include site related legal disputes. The management believes that, based on legal advice, the outcome of these contingencies will be favorable and that a loss is not probable. No amounts have been paid or accrued towards these demands.

2. Estimated amount of contracts to be executed on capital account and not provided for (net of advances) Rs 10,449,451 thousand (March 31, 2008 - Rs 15,232,436 thousand) as at March 31, 2009.

(b) The Company has entered into a non-cancelable lease arrangement to provide access to the Passive Infrastructure located at 12 Circles on indefeasible right of use (IRU) basis for a period of 6 months to its Joint Venture Company, Indus Tower Limited from January 1, 2009. The lease rental receivable is credited to the Profit and Loss Account on a straight-line basis over the lease term.

Refer schedule 5 on 'Fixed assets' for gross block, accumulated depreciation and depreciation charge for the current period.

Finance Lease - as a Lessee

The Company has entered into a composite IT outsourcing agreement, whereby the vendor supplied fixed assets and IT related services to the Company. Based on the risks and rewards incident to the ownership, the fixed assets received are accounted for as a finance lease transaction. Accordingly, the asset and liability are recorded at the fair value of the leased assets at the inception. These assets are depreciated over their useful lives as in the case of the Company's own assets.

Since the entire amount payable to the vendor towards the supply of fixed assets during the year is accrued, there are no minimum lease payments outstanding as at the year-end in relation to these assets and accordingly, other disclosures as per AS 19 are not applicable.

There are no restrictions imposed on lease arrangements.

3. The Company uses various premises on lease to install the equipment. A provision is recognized for the costs to be incurred for the restoration of these premises at the end of the lease period. It is expected that this provision will be utilized at the end of the lease period of the respective sites as per the respective lease agreements. The movement of Provision in accordance with AS---29 'Provisions, Contingent liabilities and Contingent Assets' as per Companies Accounting Standard Rules, 2006, is given below:

4. Employee benefits

During the year, the Company has recognized the following amounts in the Profit and Loss Account

A) Defined Contribution Plans

Employer's Contribution to Provident Fund of Rs 13,159 thousand (March 31, 2008 - Rs 5,213 thousand),

5. The Company had entered into a joint venture agreement with Vodafone Essar Limited and Aditya Bitia Telecom Limited to provide passive infrastructure services in 16 circles of India- The Company and Vodafone Essar Limited are holding approximately 42% each in the Indus Tower Limited and the balance 16% is held by Idea Cellular Limited. Indus Tower Limited is incorporated in India.

6. In accordance with the requirements of Accounting Standards (AS) -18 on Related Party Disclosures, the names of the related parties where control exists and/or with whom transactions have taken place during the year and description of relationships, as identified and certified by the management are as below:

7. Since the Company's business activity falls within a single business and geographical segment of providing passive infrastructure, there are no additional disclosure to be provided under Accounting Standard- 17 'Segment reporting' other than those already provided in financial statement.

8. Additional information pursuant to paragraph 3, 4C and 4D of part II, Schedule VI to the Companies Act, 1956 to the extent, either NIL or not applicable, has not been furnished,

9. Infrastructure operating expenses is net of prior period reversal of expenses amounting to Rs 318,446 thousand (March 31, 2.008 - Nil).

Further depreciation charge in the Profit and Loss Account includes Rs 108,509 thousand pertaining to previous financial years on account of change in multiple capitalization dates of assets to ready for installation date of the respective sites.

10. During the year ended March 31, 2009, the Company instituted an employee stock option plan where 2,450,000 options were awarded to BIL employees and directors,

The weighted average fair value per option based on Lattice valuation model is Rs. 374.81. The fair value is being amortized over the vesting period of 48 and 60 months, respectively on a graded vesting basis.

11. The Company issued 3,025,575 number of compulsorily convertible, unsecured and interest free Indian Rupee denominated debentures (Interest free Unsecured Convertible Debentures'), having a face value of Rs 10,000 each.

These Interest Free Unsecured Convertible Debentures are convertible into equity shares of the Company at September 30, 2009 or earlier, subject to certain events occurring, at a valuation determined on the basis of Company's actual operating performance from March 31, 2009 in the range of USD 10 to USD 12.5 billion,

12. During the year, the Company has reassessed the economic useful fives and residual value of fixed assets and based thereon has changed the depreciable life and depreciable value of certain assets effective January 1, 2009, Had this change in estimate not been done, depreciation charged for the year ended March 31, 2009 and accumulated depreciation as at March 31, 2009 would have been lower by Rs 132,249 thousand and profit would have been higher by the same amount

13. Previous year figures have been regrouped/reclassified, wherever necessary, to conform to the current year's classification.