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Notes to Accounts of Future Retail Ltd.

Mar 31, 2016

1. Leases

The Company has entered into operating lease arrangements for fixed assets and premises. The future minimum lease rental obligation under non-cancellable operating leases in respect of these assets and Lease term for which the company intend to occupy the premises is the Lease Rent payable not later than one year is Rs. 863.00 Crore (2015: Rs. 73.52 Crore), payable later than one year but not later than five year is Rs. 2,761.33 Crore (2015: Rs. 303.28 Crore) and payable later than five years is Rs. 1,457.26 Crore (2015: Rs. 1,378.52 Crore).

C. Significant Related Party Transactions

i. Sale of Goods and Services includes Bharti Enterprises Limited Rs. 0.01 Crore (2015: Rs. Nil), Bharti AXA General Insurance Company Limited Rs. Nil (2015: Rs. 0.10 Crore), Bharti Airtel Limited Rs. Nil (2015: Rs. 0.19 Crore).

ii. Purchases of Goods and Services includes Bharti Enterprises (Holding) Private Limited Rs. Nil (2015: Rs. 10.62 Crore), Bharti Enterprises Limited Rs. Nil (2015: Rs. 0.55 Crore), Bharti Airtel Limited Rs. Nil (2015: Rs. 6.12 Crore), Nile Tech Limited Rs. Nil (2015: Rs. 4.61 Crore), Bharti Reality Holding Limited Rs. Nil (2015: Rs. 1.16 Crore), Bharti Airtel Services Limited Rs. Nil (2015: Rs. 0.11 Crore), Bharti AXA General Insurance Company Limited Rs. Nil (2015: Rs. 0.88 Crore), Airtel M Commerce Services Limited Rs. Nil (2015: Rs. 0.00 Crore), Nxtra Data Limited Rs. Nil (2015: Rs. 1.94 Crore), Field Fresh Foods Private Limited Rs. Nil (2015: Rs. 2.16 Crore).

iii. Purchase of Fixed Assets includes Nxtra Data Limited Rs. Nil (2015: Rs. 0.17 Crore), Bharti Airtel Limited Rs. Nil (2015: Rs. 0.00 Crore).

iv. Repayment of Unsecured Loan includes Bharti Ventures Limited Rs. Nil (2015: Rs. 133.00 Crore).

v. Refund of Security Deposit Bharti Airtel Limited Rs. Nil (2015: Rs. 0.53 Crore),

vi. Managerial Remuneration includes Mr. Craig Wadsworth Wimsatt Rs. 1.56 Crore (2015: Rs. 0.73 Crore), Mr. Raj Kumar Jain Rs. Nil (2015: Rs. 2.52 Crore), Mr. Manish Sabnis Rs. 0.64 Crore (2015: Rs. Nil).

2. capital and Other commitments

Estimated amount of contracts remaining to be executed on capital account and not provided for (net of advances) Rs. Nil Crore (2015: Rs. 23.70 Crore).

3. Deferred Tax

The Company follows Accounting Standard (AS-22) "Accounting for taxes on Income", as notified under section 133 of the Companies Act 2013, read together with paragraph 7 of the Companies (Accounts) Rules 2014. The significant component of deferred tax includes timing difference on account of unabsorbed depreciation and losses. In view of virtual certainty as laid down by the Standard, the Company has not recognized deferred tax assets (net) in its books as on the balance sheet date.

There are various labour, legal metrology, food adulteration and cases under other miscellaneous acts pending against the Company, the liability of which cannot be ascertained. However, management does not expect significant or material liability devolving on the Company.

4. Pursuant to the levy of service tax on renting of immovable properties given for commercial use, retrospectively with effect from June 1, 2007 by the Finance Act, 2010, the company based on legal advice, challenged the levy through Retailers Association of India and its retrospective application. The Hon''ble Supreme Court had passed an interim order dated October 14, 2011. In compliance of this order company has made an aggregate deposit of Rs. 39.60 Crore in respect of the liability for such service tax for the period from June 1, 2007 up to September 30, 2011. From October 1, 2011, the company is accounting and paying for such service tax regularly as per directives of the Supreme Court. Accordingly the company has not made provision of Rs. 79.20 Crore for the period June 1, 2007 to September 30, 2011 which would be appropriately recognized on final determination.

5. Security clause in respect to Secured Long Term Borrowings includes Term Loans from Banks

Rs. Nil (2015: Rs. 54.00 Crore) are secured by First Pari-Passu charge on Fixed Assets (excluding specific fixed assets charged in favour of exclusive charge lenders), carries coupon rate of 10.90% per annum.

6. Security clause in respect to Secured Short Term Borrowings includes Working Capital Loans from Banks

i) Rs. 918.20 Crore (2015: Rs. Nil) is transferred as part of the Retail Business Undertaking and is proposed to be secured by (a) First Pari-Passu Charge on Current Assets (excluding credit/debit card receivables) (b) Second Pari-Passu charge on Credit / Debit Card Receivables of all the Stores. Currently the borrowings are secured by the second charge on Fixed Assets of Future Enterprises Limited as assets are acquired subject to prior charge.

ii) Rs. Nil (2015: Rs. 240.00 Crore) are secured by first Pari-Passu charge on current assets. Further secured by corporate guarantee from erstwhile parent company, Bharti Ventures Limited and carries an interest rate of 10.30%.

7. Unsecured Short Term Loans from Bank Rs. 50.00 Crore (2015: Rs. 96.40 Crore) carries interest rate 9.80% (2015-10.35%).

8. Composite Scheme of Arrangement

The Composite Scheme of Arrangement between the Company and erstwhile Future Retail Limited (now known as Future Enterprises Limited) ("FEL") and their respective shareholders and creditors under the Sections 391 to 394 read with Sections 100 to 104 of the Companies Act, 1956 and Section 52 of the Companies Act, 2013 (''the Scheme''), for Demerger of Retail Business Undertaking of FEL into the Company and Demerger of the Retail Infrastructure Business Undertaking of the Company into FRL with effect from Appointment Date of October 31, 2015 (as defined in the Scheme) has been given effect on May 01, 2016 (Effective Date).

Pursuant to the Scheme, the paid up equity share capital has been reduced and reorganized to 4,34,78,261 Equity shares of Rs. 2/- each. Further, all the assets and liabilities pertaining to Retail Business Undertaking of FEL has been transferred to and vested in the Company. Accordingly, on May 18, 2016 the Company issued 42,78,60,296 Equity Shares to the shareholders holding shares on May 12, 2016 in FEL as per the Scheme. Further, all the assets and liabilities pertaining to Retail Infrastructure Business Undertaking of the Company has been transferred to and vested in FEL and accordingly, on May 18, 2016 FEL issued 4,34,78,261 equity shares to the shareholders holding shares on May 12, 2016 in the Company as provided in the Scheme.

9. As per the provisions of the Scheme, the Company issued new Optionally Convertible Debentures having coupon rate of 10% p.a. as on Effective Date of Scheme, convertible at the option of the Company within a period of 18 months from the date of allotment at a price which shall be determined in accordance with Preferential issue guidelines under SEBI (ICDR) Regulations.

10. The Shareholders and OCD holders of Bharti Group have agreed to share with the respective companies (i.e. Company & FEL) an upside on the realization out of the shares of the two companies, subject to certain broad terms and conditions.

11. a. The Company uses foreign currency forward contracts to hedge its risks associated with foreign currency exposures relating to the underlying transactions and firm commitments. The Company does not enter into any derivative instruments for trading and speculative purposes. Forward contracts (In USD & EURO) outstanding as at March 31, 2016 are Rs. 60.09 Crore (2015: Rs. Nil).

b. As of balance sheet date, the company has net foreign currency exposures (In USD & EURO) that are not hedged by derivative instruments or otherwise amounting to Rs. 59.00 Crore (2015: Rs. 0.90 Crore).

12. Figures for the previous year have been reworked, regrouped, rearranged and reclassified wherever necessary without any restatement on account of demerged business and merger effect given in the current year, figures are not comparable with the previous year.

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