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Notes to Accounts of Idea Cellular Ltd.

Mar 31, 2015

1. CORPORATE INFORMATION

Idea Cellular Limited ('the Company'), an Aditya Birla Group company, is currently the third largest pan India telecom service provider in India. The Company is engaged in the business of Mobility and Long Distance services.

2. 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 entitiled to one vote per share. In the event of liquidation of the Company, the holder of equity shares will be entitled to receive remaining assets of the Company, after distribution of preferential amounts, if any. The distribution will be in proportion to the number of equity shares held by the shareholders.

3. Secured Loans are covered by:

Term Loans including current maturities are secured by way of first charge / assignment ranking pari-passu interse the lenders, as under:

i. First charge on all the movable and immovable properties of the Company respectively,

ii. First charge over all intangible assets (excluding Telecom Licenses and Spectrum) of the Company,

iii. Assignment of the rights, titles and interest, on deposits, investments, bank accounts, book debts, insurance covers, other general assets, letters of credit and guarantees, provided in favour of the Company.

Out of the above Loan, Foreign Currency Loan amounting to Rs. Nil (Previous year Rs. 51,938.56 Mn.) additionally have pledge on 60% shareholding of Indus Towers Limited held by wholly owned subsidiary. Further Foreign Currency Loan amounting to Rs. 5,803.22 Mn. (Previous year Rs. 6,764.01 Mn.) & Rupee Loan amounting to Rs. Nil (Previous year Rs. 8,182.25 Mn.) included above, have additional security as first priority charge over certain Telecom Licenses also. NCD amounting to Rs. 3,960.00 Mn. (Previous year Rs. 4,710.00 Mn.) have paripassu charge only on the tangible fixed assets of the Company.

Vehicle Loans including current maturities is secured by hypothecation of Vehicles against which the loans have been taken.

4. Repayment Terms of outstanding long term borrowings (excluding current maturities) as on March 31, 2015 Repayment Terms for Secured Foreign Currency Borrowings

Facility 1 (Rs. 8,928.05 Mn.) -

Tranche 1 - Balance amount is repayable in 7 equal half yearly installments starting September, 2016 Tranche 2 - Balance amount is repayable in 10 equal half yearly installments starting August, 2016 Facility 2 (Rs. 6,084.71 Mn.) - Balance amount is repayable in 11 equal half yearly installments starting June, 2016 Facility 3 (Rs. 4,674.75 Mn.) - Balance amount is repayable in 15 equal half yearly installments starting April, 2016 Facility 4 (Rs. 7,111.12 Mn.) -

Tranche 1 - Balance amount is repayable in 8 equal half yearly installments starting April, 2016 Tranche 2 - Balance amount is repayable in 2 equal half yearly installments starting April, 2020

Facility 5 (Rs. 5,816.05 Mn.) - Balance amount is repayable in 11 equal half yearly installments starting May, 2016 Facility 6 (Rs. 6,584.21 Mn.) -

Tranche 1 - Balance amount is repayable in 13 equal half yearly installments starting July, 2016 Tranche 2 - Balance amount is repayable in 11 equal half yearly installments starting July, 2016 Facility 7 (Rs. 4,944.03 Mn.) - Balance amount is repayable as follows:

1) 13 equal quarterly installments of 4.13% each of the total drawn amount starting July, 2016

2) 4 equal quarterly installments of 4.75% each of the total drawn amount starting July, 2019 Repayment Terms for Secured INR Borrowings

Facility 1 (Rs. 4,025.00 Mn.) - Balance amount is repayable in 4 equal quarterly installments starting June, 2016 Facility 2 (Rs. 9,600.00 Mn.) - Balance amount is repayable in 8 equal quarterly installments starting June, 2016 NCDs (Rs. 3,960.00 Mn.) - Repayable in October, 2019

Vehicle Loans are repayable in equal monthly installments over the term of the loan ranging from 2 to 4 years Repayment Terms for Unsecured Foreign Currency Borrowings Facility 1 (Rs. 4,506.54 Mn.) - Balance amount is repayable in June, 2018 Repayment Terms for Deferred Payment Liability (DPL)

DPL for Spectrum won in November 2012 ( 13,454.82 Mn.) - Balance amount and interest thereon is repayable in 9 equated annual installments starting December, 2016.

DPL for Spectrum won in February 2014 (Rs. 80,086.69 Mn.) - Balance amount and interest thereon is repayable in 10 equated annual installments starting March, 2017.

5. The Department of Telecommunications (DoT) conducted auctions for frequency blocks in the 800, 900, 1800 and 2100 Mhz spectrum bands in March 2015. The frequency blocks that were put to auction in the 900 and 1800 Mhz band in 17 service areas included the blocks that are currently held by existing licensees whose licenses for the respective service areas are due to expire during financial years (FY) 2015-16 and 2016-17. The Company successfully bid for its requirements in the nine service areas of Maharashtra, Madhya Pradesh, Kerala, Gujarat, Andhra Pradesh, Haryana, Punjab, Karnataka and Uttar Pradesh (West) where its licenses are due to expire during FY 2015 - 16 / 2016-17 and also additional spectrum at a total cost of Rs. 301,375.25 Mn as under:

* 54 Mhz of 900 Mhz spectrum in the 9 service areas of Maharashtra, Madhya Pradesh, Kerala, Gujarat, Andhra Pradesh, Haryana, Punjab, Karnataka and Uttar Pradesh (West)

* 20.4 Mhz of 1800 Mhz spectrum in the 6 service areas of Karnataka, Uttar Pradesh (West), Orissa, Tamilnadu, Himachal Pradesh and North East

* 5 Mhz of 2100 Mhz spectrum in Kolkata service area.

The validity of the above spectrum will be for a fresh 20 year period starting from the effective date as mentioned in the Letter of Intent (LOI) when issued, which, in case of spectrum blocks currently held by the existing licensees, should be the date of expiry of existing licenses. As per the payment options available, the Company has chosen the deferred payment option. The upfront payment amount under the deferred payment option due on or before April 9, 2015 was Rs. 77,341.99 Mn. of which Rs. 19,350.00 Mn. was paid on March 31, 2015 and the balance amount of Rs. 57,991.99 Mn. was paid on April 9, 2015. Pending completion of subsequent formalities as per the Notice Inviting Applications (NIA) for the auction and any orders that may be passed by the Hon'ble Supreme Court in related and connected matters currently before it, the amount paid as on March 31, 2015 has been disclosed as Capital Advances and the balance amount of Rs. 282,025.25 Mn. has been disclosed under capital commitments.

6. During the year, the Company has issued and allotted 223,880,597 Equity Shares of face value of Rs. 10/- each to eligible Qualified Institutional Buyers at a price of Rs. 134/- per Equity Share, including a premium of Rs. 124/- per Equity Share, aggregating Rs. 30,000 Mn. The Company also issued and allotted 51,838,540 Equity Shares of face value of Rs. 10/- each to Axiata Investments 2 (India) Limited on a preferential basis at a price of Rs. 144.68 per Equity Share, including a premium of Rs. 134.68 per Equity Share, aggregating Rs. 7,500 Mn.

7. Contingent Liabilities:

(i) In Financial year 2012-13, DoT had issued demand notices towards one time spectrum charges

* for spectrum beyond 6.2 Mhz in respective service areas for retrospective period from July 1, 2008 to December 31, 2012, amounting to Rs. 3,691.30 Mn., and

* for spectrum beyond 4.4 Mhz in respective service areas effective January 1, 2013 till expiry of the period as per respective licenses amounting to Rs. 17,443.70 Mn.

In the opinion of Company, inter-alia, the above demands amount to alteration of financial terms of the licenses issued in the past. The Company had therefore, petitioned the Hon'ble High Court of Bombay, where the matter was admitted and is currently sub-judice. The Hon'ble High Court of Bombay has directed the DoT, not to take any coercive action until the matter is further heard.

(ii) The Company has a contingent obligation to buy compulsorily convertible preference shares issued by Aditya Birla Telecom Limited (ABTL), a subsidiary of the Company, from the holder at a mutually agreed consideration based on the fair value, in the event the holder exercises exit rights.

(iii) Other Matters

Rs. Mn

Particulars As at As at March 31, March 31, 2015 2014

Income Tax Matters not 66,566.75 25,563.22 acknowledged as debts (see a below)

Sales Tax and Entertainment Tax Matters not acknowledged as debts (see b below) 994.34 973.59

Service Tax Matters not 1,364.22 1,538.93 acknowledged as debts (see c below)

Entry Tax and Customs Matters not 386.57 294.76 acknowledged as debts (see d below)

Licensing Disputes (see e below) 5,520.91 19,943.82

Other claims not acknowledged 2.370.12 2,322.46 as debts (see f below)

8. Income Tax Matters:

* Appeals filed by the Company against the demands raised by Income Tax Authorities which are pending before Appellate Authorities include mainly disputes on account of incorrect disallowance of revenue share license fee, disputes on non applicability of tax deduction at source on pre-paid margin allowed to prepaid distributors & roaming settlements, disallowance of interest proportionate to interest free advances given to wholly owned subsidiaries etc.

* Appeals filed for tax demand on the net value of assets and liabilities vested with the company consequent to High Court approved de-merger of telecom undertaking from its wholly owned subsidiary.

* Appeal filed for tax demand on difference between revalued figure of Investment in Indus held through a wholly owned subsidiary and book value of PI assets transferred to stepdown subsidiary through a High Court approved scheme.

9. Sales Tax and Entertainment Tax:

* Sales Tax demands mainly relates to the demands raised by the VAT/Sales Tax authorities of few states on Broadband Connectivity, SIM cards, etc. on which the Company has already paid Service Tax.

* In one state Entertainment tax is being demanded on revenue from value added services. However, the Company has challenged the constitutional validity of the levy.

10. Service Tax:

Service Tax demands mainly relates to the following matters:

* Interpretation issues arising out of Rule 6(3) of the Cenvat Credit Rules, 2004.

* Denial of Cenvat credit related to Towers, Shelters and OFC ducts.

* Disallowance of Cenvat Credit on input services viewed as not related to output service.

11. Entry Tax:

In certain states, Entry Tax is being demanded on receipt of material from outside the state. However, the Company has

challenged the constitutional validity of the levy.

12. Licensing Disputes:

* Demands due to difference in interpretation of definition of Adjusted Gross Revenue (AGR) and other license fee assessment related matters. Most of these demands are currently before the Hon'ble High court. On 23rd of April, 2015, the Hon'ble TDSAT has issued its judgment setting aside demands which were before it and directed the DoT to re-compute basis principles laid down.

* Disputes relating to alleged non compliance of licensing conditions, EMF procedural norms & other disputes with DoT, either filed by or against the Company and pending before Hon'ble Supreme Court / TDSAT.

* Demands on account of alleged violations in license conditions relating to amalgamation of erstwhile Spice Communications Limited currently sub-judice before the Hon'ble TDSAT.

13. Other claims not acknowledged as debts:

Mainly include consumer forum cases, miscellaneous disputed matters with Local Municipal Corporation, Electricity Board and others.

14. Details of Guarantees given:

Bank Guarantees given Rs. 86,472.12 Mn. (Previous year Rs. 42,004.11 Mn.)

15. Capital and other Commitments:

Estimated amount of commitments as on March 31, 2015 towards:

* Spectrum won in auctions Rs. 282,025.25 Mn (Previous year Rs. Nil)

* Contracts remaining to be executed for capital expenditure (net of advances) and not provided for are Rs. 27,661.71 Mn.

(Previous year Rs. 16,874.82 Mn.)

* Long term contracts remaining to be executed including early termination commitments (if any) are Rs. 17,866.22 Mn.

(Previous year Rs. 18,376.07 Mn.)

16. Segment Reporting:

1. Primary Segments:

The Company operates in two business segments:

a) Mobility Services: providing GSM based mobile and related telephony services.

b) International Long Distance (ILD): providing international long distance services.

Transactions between segments are accounted on agreed terms on arm's length basis and have been eliminated at the company level.

17. Related Party Transactions:

As per Accounting Standard 18 on "Related Party Disclosures", related parties of the Company are disclosed below: A. List of related parties:

Promoters

Hindalco Industries Limited (Hindalco)

Grasim Industries Limited (Grasim)

Aditya Birla Nuvo Limited (ABNL)

Birla TMT Holdings Pvt. Limited (Birla TMT)

Subsidiaries

Idea Telesystems Limited (ITL)

Aditya Birla Telecom Limited (ABTL)

Idea Cellular Services Limited (ICSL)

Idea Cellular Infrastructure Services Limited (ICISL)

Idea Mobile Commerce Services Limited (IMCSL)

Joint Venture of Subsidiary (JV)

Indus Towers Limited (Indus)

Entities having significant influence

Axiata Investments 1 (India) Ltd. (AI1)

Axiata Investments 2 (India) Ltd. (AI2)

Axiata Group Berhad (AGB)

Key Management Personnel (KMP)

Mr. Himanshu Kapania, MD Mr. Akshaya Moondra, CFO

18. The Company is one of the members of Aditya Birla Management Corporation Private Limited, a Company limited by guarantee, which has been formed to provide common pool of facilities and resources to its members with a view to optimise the benefits of specialisation and minimize cost to each member. The Company's share of expenses incurred under the common pool has been accounted for at actuals in the respective heads in the Statement of Profit & Loss.

19. The Company has a composite IT outsourcing agreement where in fixed assets and services related to IT has been supplied by the vendor. Such fixed assets received have been accounted for as a finance lease. Correspondingly, such assets are recorded at fair value at the time of receipt and depreciated on the stated useful life applicable to similar IT assets of the Company.

20. The Board of Directors has recommended a dividend at the rate of Rs. 0.60 per share (Previous Year Rs. 0.40) of face value of Rs. 107- aggregating Rs. 2,598.17 Mn. including Rs. 439.46 Mn. Dividend Distribution Tax (Previous Year Rs. 1,553.52 Mn., including Rs. 225.67 Mn. Dividend Distribution Tax) for the year ended March 31, 2015. The payment of dividend is subject to the approval of the shareholders at the ensuing annual general meeting of the Company.

21. Previous year's figures have been regrouped/rearranged wherever necessary to conform to the current year grouping..


Mar 31, 2014

1. CORPORATE INFORMATION

Idea Cellular Limited (''the Company''), an Aditya Birla Group company, is one of the leading national telecom service providers in India. The Company is engaged in the business of Mobility and Long Distance services.

2. The Department of Telecommunications (DoT) conducted auction for the 900 and 1800 Mhz spectrum in February 2014. The Company successfully bid for its requirements in the 11 service areas of Maharashtra, Madhya Pradesh, Kerala, Gujarat, Andhra Pradesh, Haryana, Punjab, Karnataka, Mumbai, Delhi and North East in the 1800 Mhz band and for Delhi service area also in the 900 Mhz band at a total cost of Rs. 104,242.15 Mn. As per the payment options available as part of the auction, the Company has chosen the deferred payment option by making an upfront payment of Rs. 31,436.07 Mn. and balance amount is recognized as "Deferred Payment Liabilities towards Spectrum" under Unsecured Loans. This spectrum which is yet to be earmarked and allotted to the company as on March 31, 2014 is for a twenty year period.

3. In the pending matter of transfer of licenses for service areas of Punjab & Karnataka, pursuant to amalgamation of erstwhile Spice Communications Limited with the Company, DoT has transferred these licenses in the name of the Company upon submission of an undertaking as directed by Hon''ble Supreme Court in its order dated January 29, 2014.

4. Contingent Liabilities:

i) DoT has issued demand notices towards one time spectrum charges

- for spectrum beyond 6.2 Mhz in respective service areas for retrospective period from 1st July 2008 to 31st December 2012, amounting to Rs. 3,691.30 Mn. and

- for spectrum beyond 4.4 Mhz in respective service areas effective 1st January 2013 till expiry of the period as per respective licenses amounting to Rs. 17,443.70 Mn.

In the opinion of Company, inter-alia, the above demands amount to alteration of financial terms of the licenses issued in the past. The Company had therefore, petitioned the Hon''ble High Court of Bombay, where the matter was admitted and is currently sub-judice. The Hon''ble High Court of Bombay has directed the DoT, not to take any coercive action until the matter is further heard.

ii) The Company has a contingent obligation to buy compulsorily convertible preference shares issued by Aditya Birla Telecom Limited (ABTL) a subsidiary of the Company, from the holder at fair market value plus agreed consideration in case ABTL is not able to redeem the same.

iii) Other Matters

a) Income Tax Matters:

- Appeals filed by the Company against the demands raised by Income Tax Authorities which are pending before Appellate Authorities include mainly disputes on account of incorrect disallowance of revenue share license fee, disputes on non applicability of tax deduction at source on pre-paid margin allowed to prepaid distributors & roaming settlements, disallowance of interest proportionate to interest free advances given to wholly owned subsidiaries etc.

- Appeals filed for tax demand on the net value of assets and liabilities vested with the company consequent to High Court approved de-merger of telecom undertaking from its wholly owned subsidiary.

b) Sales Tax and Entertainment Tax:

- Sales Tax demands mainly relates to the demands raised by the VAT/Sales Tax authorities of few states on Broadband Connectivity, SIM cards etc. on which the Company has already paid Service Tax.

- In one state entertainment tax is being demanded on revenue from value added services. However, the Company has challenged the constitutional validity of the levy.

c) Service Tax:

Service Tax demands mainly relates to the following matters:

- Interpretation issues arising out of Rule 6(3) of the Cenvat Credit Rules, 2004.

- Denial of Cenvat credit related to Towers, Shelters and OFC ducts.

- Disallowance of Cenvat Credit on input services viewed as not related to output service.

d) Entry Tax:

In certain states, Entry Tax is being demanded on receipt of material from outside the state. However, the Company has challenged the constitutional validity of the levy.

e) Licensing Disputes:

- 3G Intra Circle Roaming Arrangements (ICR) – The Company had entered into roaming arrangements with other operators to provide 3G services in service areas where it did not win 3G spectrum. DoT has sent notices to stop the 3G services in these service areas and also imposed penalty for providing 3G services in select service areas under roaming arrangements. The matter is currently pending before the Hon''ble TDSAT.

- Demands due to difference in interpretation of definition of Revenue and other license fee assessment related matters.

- Disputes relating to alleged non compliance of licensing conditions, EMF procedural norms & other disputes with DoT, either filed by or against the Company and pending before Hon''ble Supreme Court/TDSAT.

- Demands on account of alleged violations in license conditions relating to amalgamation of erstwhile Spice Communications Limited currently sub-judice before the Hon''ble TDSAT (Refer Note 30).

f) Other claims not acknowledged as debts:

Mainly include miscellaneous disputed matters with Local Municipal Corporation, Electricity Board and others.

5. Details of Guarantees given:

- Bank Guarantees given Rs. 42,004.11 Mn. (Previous year Rs. 25,832.11 Mn.)

- Corporate Guarantee given to Bank for limits sanctioned in a subsidiary Rs. 550.00 Mn.

6. Capital and other Commitments:

Estimated amount of commitments as on March 31, 2014 towards- - Contracts remaining to be executed for capital expenditure (net of advances) and not provided for are Rs. 16,874.82 Mn. (Previous year Rs. 17,495.40 Mn.)

- Long term contracts remaining to be executed including early termination commitments (if any) are Rs. 18,376.07 Mn. (Previous year Rs. 18,076.12 Mn.)

7. Personnel Expenditure includes Rs. 43.07 Mn. (Previous year Rs. 0.32 Mn.), being the amortisation of intrinsic value of ESOPs for the year ending March 31, 2014.

8. Segment Reporting:

1. Primary Segments:

The Company operates in two business segments:

a) Mobility Services: providing GSM based mobile and related telephony services.

b) International Long Distance (ILD): providing international long distance services.

Transactions between segments are accounted on agreed terms on arm''s length basis and have been eliminated at the company level.

2. Secondary Segment:

The Company caters only to the needs of Indian market representing a singular economic environment with similar risks and rewards and hence there are no reportable geographical segments

Primary Business Information (Business Segments) for the year ended March 31, 2014

9. Related Party Transactions

As per Accounting Standard-18 on "Related Party Disclosures", related parties of the Company are disclosed below: A. List of related parties:

Promoters

Hindalco Industries Limited (Hindalco)

Grasim Industries Limited (Grasim)

Aditya Birla Nuvo Limited (ABNL)

Birla TMT Holdings Pvt. Limited (Birla TMT)

Subsidiaries

Idea Telesystems Limited (ITL)

Aditya Birla Telecom Limited (ABTL)

Idea Cellular Services Limited (ICSL)

Idea Cellular Infrastructure Services Limited (ICISL)

Idea Cellular Towers Infrastructure Limited (ICTIL) (upto June 11, 2013)

Idea Mobile Commerce Services Limited (IMCSL)

Joint Venture of Subsidiary (JV) Indus Towers Limited (Indus)

Entities having significant influence

Axiata Investments 1 (India) Ltd. (AI1) (Formerly known as TMI Mauritius Ltd)

Axiata Investments 2 (India) Ltd. (AI2)

Axiata Group Berhad

Key Management Personnel (KMP)

Mr. Himanshu Kapania, MD

Mr. Akshaya Moondra, CFO

10. The Company is one of the members of Aditya Birla Management Corporation Private Limited, a Company limited by guarantee, which has been formed to provide common pool of facilities and resources to its members with a view to optimise the benefits of specialisation and minimize cost to each member. The Company''s share of expenses incurred under the common pool has been accounted for at actuals in the respective heads in the Statement of Profit & Loss.

11. Operating Lease: As a Lessee

The Company has entered into non-cancellable operating leases for offices, switches and cell sites for periods ranging from 36 months to 240 months.

Operating Lease: As a Lessor

The Company has leased certain Optical Fibre Cables (OFC) on Indefeasible Rights of Use ("IRU") basis under operating lease arrangements. The gross block, accumulated depreciation and depreciation expense of the assets given on IRU basis is not separately identifiable and hence not disclosed.

Rental income of Rs. 260.79 Mn. (Previous year Rs. 191.49 Mn.) in respect of such leases has been recognized in the Statement of Profit and Loss during the current year.

12. The Company has a composite IT outsourcing agreement wherein fixed assets and services related to IT has been supplied by the vendor. Such fixed assets received have been accounted for as a finance lease. Correspondingly, such assets are recorded at fair value at the time of receipt and depreciated on the stated useful life applicable to similar assets of the Company.

13. The Board of Directors has recommended a dividend at the rate of Rs. 0.40 per share (Previous year Rs. 0.30) of face value of Rs. 10/- aggregating Rs. 1,553.52 Mn. including Rs. 225.67 Mn. Dividend Distribution Tax (Previous year Rs. 1,163.28 Mn., including Rs. 168.98 Mn. Dividend Distribution Tax) for the year ended March 31, 2014. The payment of dividend is subject to the approval of the shareholders at the ensuing annual general meeting of the Company.

14. Previous year''s figures have been regrouped/rearranged wherever necessary to conform to the current year grouping.


Mar 31, 2013

1. CORPORATE INFORMATION

Idea Cellular Limited (''the Company''), an Aditya Birla Group company, is one of the leading national telecom service providers in India. The Company is engaged in the business of Mobility and Long Distance services.

2. The Department of Telecommunications (DoT) conducted auction for the 1800 Mhz spectrum in November 2012 as required by the Hon''ble Supreme Court''s judgment dated 2nd February 2012, quashing the licenses granted to private operators on or after 10th January 2008 pursuant to two press releases issued on 10th January 2008 and subsequent allocation of spectrum to the licensees. As the Company was impacted by the said judgment in seven operating licenses, the Company participated in the said auction and was successful in winning back the spectrum for these impacted service areas at a price of Rs. 19,848.80 Mn. DoT then adjusted Rs. 6,845.90 Mn. paid by the Company for licenses applied in 2008 and as per the payment options available as part of the auction, the Company has chosen the deferred payment option for the balance amount.

DoT has issued LOI''s earmarking the spectrum won in these seven service areas and award of unified licenses. The Company has applied to DoT for the issue of new licenses in these seven service areas and paid the license fee on the basis of LOI''s. While services in these seven service areas continue, the effects provided in these financial statements for the year ended 31st March 2013 are:

a) Out of the above Rs. 6,845.90 Mn. adjusted by DoT,

- License fee amounting to Rs. 3,260.10 Mn. paid for the seven operational licenses has been de capitalized.

- License fee amounting to Rs. 3,585.80 Mn. paid earlier for overlapping licenses which was impaired in FY2009-10 and set off by withdrawal of an equivalent amount from the Securities Premium Account has been credited to Securities Premium Account.

b) Reversal of accumulated amortization on the seven operational licenses amounting to Rs. 482.30 Mn., thereby the current year amortization charge stands reduced to that extent.

c) Capitalisation of the the new licenses and earmarked spectrum.

3. The Division bench of Hon''ble Delhi High Court, vide its Order dated 13th July 2012, reaffirmed amalgamation of erstwhile Spice Communications Limited (Spice) with the Company. The said order also re-vested unto the Company the telecom licenses which were transferred to and vested unto DoT pursuant to order dated 4th July 2011, passed by single Judge of Hon''ble Delhi High Court. Vide a separate order dated 13th July 2012, the said Division bench also directed the DoT to decide on transfer of licenses to the Company within a period of 3 months and dispute if any, between the Company and DoT relating to such transfer should be referred to Hon''ble TDSAT for resolution. Vide its letter dated 28th September 2012, DoT requested the Company to submit a fresh application to consider transfer of licenses, which the Company has since complied. Meanwhile the DoT made an application to the said division bench of Hon''ble Delhi High Court to extend the period of three months, which expired on 12th October 2012, by a further period of four months. The division bench of Hon''ble Delhi High Court, vide its order passed on 17th October 2012 gave further time to the DoT till 11th November 2012 to take final decision on transfer of licenses. Thereafter, DoT again filed another application, to further extend the period by three months. The said application of DoT was disposed off by Hon''ble Delhi High Court vide order dated 11th December 2012, wherein DoT was directed to convey the final decision by 5th January 2013. The final decision of the DoT in the matter is awaited.

4. Contingent Liabilities:

i. DoT has issued demand notices towards one time spectrum charges -

- for spectrum beyond 6.2 Mhz in respective service areas for retrospective period from 1st July 2008 to 31st December 2012, amounting to Rs. 3,691.30 Mn., and

- for spectrum beyond 4.4 Mhz in respective service areas effective 1st January 2013 till expiry of the period as per respective licenses amounting to Rs. 17,443.70 Mn.

In the opinion of Company, inter-alia, the above demand amounts to alteration of financial terms of the licenses issued in the past. The Company therefore, petitioned the Hon''ble High Court of Bombay, which directed DoT to respond and not to take any coercive action until next date of hearing, which is scheduled for 6th May 2013.

ii. The Company has a contingent obligation to buy compulsorily convertible preference shares issued by ABTL from the holder at Rs. 21,548.16 Mn. (Previous year Rs. 20,982.50 Mn. ).

iii. Other Matters -

a. Income Tax Matters:

- Appeals filed by the Company against the demands raised by Income Tax Authorities which are pending before Appellate Authorities include mainly, disputes on account of incorrect disallowance of revenue share license fee, disputes on non applicability of tax deduction at source on pre-paid margin allowed to prepaid distributors & roaming settlements, disallowance of interest proportionate to interest free advances given to wholly owned subsidiaries etc.

- Appeals filed for tax demand on the net value of assets and liabilities vested with the company consequent to High Court approved de-merger of telecom undertaking from its wholly owned subsidiary.

b. Sales Tax:

Sales Tax demands as at 31st March 2013 mainly relate to the demands raised by the VAT/Sales Tax authorities of few states on Broadband Connectivity, SIM cards etc. on which the Company has already paid Service Tax.

c. Service Tax:

Service Tax demands as at 31st March 2013 mainly relate to the following matters:

- Interpretation issues arising out of Rule 6(3) of the Cenvat Credit Rules, 2004.

- Denial of Cenvat credit related to Towers, Shelters and OFC ducts.

- Disallowance of Cenvat Credit on input services viewed as not related to output service.

d. Entry Tax:

In certain states, Entry Tax is being demanded on receipt of material from outside the state. However, the Company has challenged the constitutional validity of the levy.

e. Licensing Disputes:

- 3G Intra Circle Roaming Arrangements (ICR) - The Company had entered into roaming arrangements with other operators to provide 3G services in service areas where it did not win 3G spectrum. DoT has sent notices to stop the 3G services in these service areas and also imposed penalty for providing 3G services in select service areas under roaming arrangements. The matter is currently pending before the Hon''ble High Court of Delhi.

- Demands due to difference in interpretation of definition of Revenue and other license fee assessment related matters

- Disputes relating to alleged non compliance of licensing conditions & other disputes with DoT, either filed by or against the Company and pending before Hon''ble Supreme Court / TDSAT.

f. Other claims not acknowledged as debts:

Mainly include miscellaneous disputed matters with Local Municipal Corporation, Electricity Board and others.

5. Capital and other Commitments:

Estimated amount of commitments as on 31st March, 2013 towards -

- Contracts remaining to be executed for capital expenditure (net of advances) and not provided for are Rs. 17,495.40 Mn. (Previous year Rs. 10,467.51 Mn.)

- Long term contracts remaining to be executed including early termination commitments (if any) is Rs. 18,076.12 Mn. (Previous year Rs. 7,439.13 Mn.)

6. Personnel Expenditure includes Rs. 0.32 Mn. (Previous year Rs. 35.88 Mn.), being the amortisation of intrinsic value of ESOPs for the year ending 31st March 2013.

Had the compensation cost for the Company''s stock based compensation plan been determined as per fair value approach (calculated using Black & Scholes Option Pricing Model), the Company''s net income would be lower by Rs. 38.44 Mn. (Previous year Rs. 115.23 Mn.) and earnings per share would be as indicated below:

7. Segment Reporting:

1. Primary Segments:

The Company operates in two business segments:

a) Mobility Services: providing GSM based mobile and related telephony services.

b) International Long Distance (ILD): providing international long distance services.

Transactions between segments are accounted on agreed terms on arm''s length basis and have been eliminated at the company level.

2. Secondary Segment:

The Company caters only to the needs of Indian market representing a singular economic environment with similar risks and rewards and hence there are no reportable geographical segments.

8. Related Party Transactions:

As per Accounting Standard-18 on "Related Party Disclosures", related parties of the Company are disclosed below:

A. List of related parties:

Promoters

Hindalco Industries Limited (Hindalco)

Grasim Industries Limited (Grasim)

Aditya Birla Nuvo Limited (ABNL)

Birla TMT Holdings Pvt. Limited (Birla TMT)

Subsidiaries

Idea Telesystems Limited (ITL)

Aditya Birla Telecom Limited (ABTL)

Idea Cellular Services Limited (ICSL)

Idea Cellular Infrastructure Services Limited (ICISL)

Idea Cellular Towers Infrastructure Limited (ICTIL)

Idea Mobile Commerce Services Limited (IMCSL)

Joint Venture of Subsidiary (JV)

Indus Towers Limited (Indus)

Entities having significant influence

TMI Mauritius Ltd

Axiata Investments 2 (India) Ltd.

Axiata Group Berhad

Key Management Personnel (KMP)

Mr. Himanshu Kapania, MD

Mr. Akshaya Moondra, CFO

9. Operating Lease: As a Lessee

The Company has entered into non-cancellable operating leases for offices, switches and cell sites for periods ranging from 36 months to 240 months.

10. During the financial year 2007-08, Company had entered into a composite IT outsourcing agreement wherein fixed assets and services related to IT has been supplied by the vendor. Such fixed assets received have been accounted for as a finance lease. Correspondingly, such assets are recorded at fair value at the time of receipt and depreciated on the stated useful life applicable to similar assets of the Company.

11. Asset Retirement Obligation:

The Company installs equipments on lease premises and lays down optical fibre cables (OFC) to provide seamless connectivity to its customers. In certain cases, the Company may have to incur some cost to remove such equipment and OFC. Estimated costs to be incurred for restoration is capitalised along with the assets. The movement of provision as required in AS-29 "Provisions, Contingent Liabilities and Contingent Assets" is given below:

12. The Board of Directors has recommended a dividend at the rate of Rs. 0.30 per share of face value of Rs. 10/- aggregating Rs. 1,163.28 Mn. (including Rs. 168.98 Mn. Dividend Distribution Tax) for the year ended 31st March 2013. The payment of dividend is subject to the approval of the shareholders at the ensuing annual general meeting of the Company.

13. Previous year''s figures have been regrouped / rearranged wherever necessary to conform to the current year grouping.


Mar 31, 2012

A) Secured Loans are covered by:

Term Loans including current maturities are secured by way of first charge/assignment ranking pari-passu interse the lenders, as under:

(i) First charge on all the movable and immovable properties of the Company respectively,

(ii) First charge over all intangible assets (excluding Telecom Licenses) of the Company,

(iii) Assignment of the rights, titles and interest, on deposits, investments, bank accounts, book debts, insurance covers, other general assets, letters of credit and guarantees, provided in favour of the Company.

Out of the above Loan, Foreign Currency Loan amounting to Rs 43,698.74 Mn (Previous year Rs 18,349.02 Mn) & Rupee Loan amounting to Rs 21,506.00 Mn (Previous year Rs 40,531.98 Mn) additionally have pledge on 60% shareholding of Indus Towers Limited held by wholly owned subsidiary. Further Foreign Currency Loan amounting to Rs 8,660.71 Mn (Previous year Rs 8,733.34 Mn) & Rupee Loan amounting to Rs 21,506.08 Mn (Previous year Rs 40,531.98 Mn) included above, have additional security as first priority charge over Telecom Licenses also.

Vehicle Loans including current maturities is secured by hypothecation of Vehicles against which the loans have been taken.

b) Repayment Terms of outstanding long term borrowings (excluding current maturities) as on March 31, 2012 Repayment Terms for Secured Foreign Currency Borrowings:

Facility 1 (Rs 1,541.14 Mn) - Balance amount is repayable in 2 equal annual installments starting August, 2013

Facility 2 (Rs 316.08 Mn) - Repayable in April, 2013

Facility 3 (Rs 11,320.23 Mn) -

Tranche 1 - Balance amount is repayable in 13 equal half yearly installments starting September, 2013

Tranche 2 - Balance amount is repayable in 16 equal half yearly installments starting August, 2013

Facility 4 - (Rs 3,992.35 Mn) - Balance amount is repayable in 17 equal half yearly installments starting June, 2013

Facility 5 (Rs 8,745.94 Mn) -

Tranche 1 - Balance amount is repayable in 14 equal half yearly installments starting April, 2013

Tranche 2 - Balance amount is repayable in 2 equal half yearly installments starting April, 2020

Facility 6 (Rs 6,959.75 Mn) - Balance amount is repayable in 17 equal half yearly installments starting May, 2013

Facility 7 (Rs 897.00 Mn) -

Tranche 1 - 19 equal half yearly installments starting July, 2013

Tranche 2 - 17 equal half yearly installments starting July, 2013

Facility 8 (Rs 4,966.90 Mn) - Balance amount is repayable as follows:

1) 9 equal quarterly installments of 1.25% each of the total drawn amount starting April, 2013

2) 16 equal quarterly installments of 4.13% each of the total drawn amount starting July, 2015

3) 4 equal quarterly installments of 4.75% each of the total drawn amount starting July, 2019

Repayment Terms for Secured INR Borrowings:

Facility 1 (Rs 15,902.21 Mn) - Balance amount is repayable as follows:

1) 8 equal quarterly installments of 6.25% each of the total drawn amount starting April, 2013

2) 4 equal quarterly installments of 5.00% each of the total drawn amount starting April, 2015 Facility 2 (Rs 16,000.00 Mn) - Balance amount is repayable as follows:

1) 8 equal quarterly installments of Rs 400 mn each starting June, 2013

2) 4 equal quarterly installments of Rs 800 mn each starting June, 2015

3) 8 equal quarterly installments of Rs 1,200 mn each starting June, 2016

Repayment Terms for Unsecured Foreign Currency Borrowings:

Facility 1 (Rs 6,762.30 Mn) - 5 years from drawdown date ending October, 4, 2015

Facility 2 (Rs 2,370.90 Mn) - Balance amount is repayable as follows:

1) 35% of the total drawn amount in February, 2014

2) 35% of the total drawn amount in February, 2015

Facility 3 (Rs 6,112.32 Mn) - Balance amount is repayable as follows:

1) 20% in June, 2013

2) 20% in June, 2014

3) 60% in June, 2018

Vehicles Loans are repayable in equal monthly installments over the term of the loan ranging from 2 to 4 years.

1. Plant & Machinery includes assets held for disposal- Gross Block Rs 66.09 Mn (Previous year K 175.98 Mn) and Net Block Rs 1.29 Mn (Previous year Rs 1.16 Mn).

2. Plant & Machinery includes Gross Block of assets capitalised under finance lease Rs 7,046.64 Mn (Previous year K 5,194.53 Mn) and corresponding Accumulated Depreciation being Rs 4,664.16 Mn (Previous year K 3,055.16 Mn).

3. Exchange loss amounting to K 5,635.25 Mn(Previous year exchange gain Rs 75.54 Mn) capitalised as per transitional provisions of notification under AS-11, issued by the Ministry of Corporate Affairs.

4. Depreciation charge for the year includes accelerated depreciation of Rs 149.13 Mn due to change in estimated useful life of certain fixed assets.

1. Computer - Software include Gross Block of assets capitalised under finance lease K 1,965.26 Mn (Previous year X 1,751.21 Mn) and corresponding Accumulated Amortisation being Rs 1,311.98 Mn (Previous year K 758.81 Mn).

2. The remaining amortisation period of license/ spectrum fees as at March 31, 2012 ranges between 4 to 19 years based on the respective Telecom Service License period.

2. The revised Schedule VI as notified under the Companies Act, 1956, has become applicable to the Company for presentation of its financial statements for the year ending March 31, 2012. The adoption of the revised Schedule VI requirements has significantly modified the presentation and disclosures which have been complied with in these financial statements. Previous year figures have been reclassified in accordance with current year requirements.

3. The Hon'ble Supreme Court, while pronouncing its judgment dated February 2, 2012 in the Writ Petition filed, inter alia, by the Centre for Public Interest Litigations & others, quashed the Press Release dated January 10, 2008 issued by the Department of Telecommunications and consequent grant of 122 licenses including operational licenses held by the Company for 7 (seven) service areas and 6 (six) non operational licenses, (four out of the said six non operational licenses having been granted to erstwhile Spice Communications Limited) and allocation of related spectrum. This directive of the Hon'ble Supreme Court, which was originally to have come into effect after four months from February 2, 2012 has now been further extended till September 7, 2012 pursuant to the order dated April 24, 2012 passed while disposing off the clarificatory applications filed, inter alia, by the Union of India. As part of the judgment of February 2, 2012, the Hon'ble Supreme Court had directed TRAI to make fresh recommendations for grant of license and allocation of spectrum in 2G band in 22 service areas by auction as was done for allocation of spectrum in 3G band. The Hon'ble Supreme Court has on April 24, 2012, further directed the DoT to ensure that the auction is necessarily finalized on or before August 31, 2012. The Company is committed to take all necessary steps to safeguard its interests in this matter. As the impact, if any, on the operations in the said seven service areas and on the carrying values of these licenses as on March 31, 2012 amounting to Rs 2,777.8 Mn is dependent upon the steps to be taken by the DoT and outcome of the auction, operations in these seven service areas continue and accordingly the financial statements include the operational results of these service areas on a going concern basis.

4. The Company has challenged, along with other Telecom Operators, the order of DoT dated December 23, 2011, ordering Telecom Operators to stop provision of services under 3G Intra Circle Roaming Agreements where it has not won 3G Spectrum. The Hon'ble Telecom Dispute Settlement Appellate Tribunal (TDSAT) has passed a "no coercive action" order till the time the dispute is decided. The final hearing on the matter has concluded and final judgment is awaited.

5. The erstwhile Spice Communications Limited (Spice) was amalgamated with the Company effective March 1, 2010 pursuant to sanction of the Scheme of Amalgamation by Hon'ble High Court of Gujarat and Hon'ble High Court of Delhi. However, upon an application made by the DoT on March 30, 2011 for recall of the order dated February 5, 2010, sanctioning the above scheme, the Hon'ble High Court of Delhi while pronouncing its judgment on July 4, 2011, reaffirmed the amalgamation of Spice with the Company. However, the said judgment transferred and vested unto the DoT, the six licenses granted to erstwhile Spice along with the spectrum (including the two operational licenses for Punjab & Karnataka service areas), till the time permission of DoT is granted for transfer thereof upon an application from the Company to that effect.

The Company then filed an appeal, before the Appellate Bench of the Hon'ble High Court of Delhi, challenging the above judgment of July 4, 2011. The final judgment in the said matter has been reserved. Meanwhile, the position under interim orders, passed on various dates by the Appellate Bench remains as follows:-

(i) DoT has been directed to accept the License Fee from the Company without prejudice, as the Company is continuing to operate the licenses for Punjab & Karnataka service areas granted to erstwhile Spice;

(ii) DoT to maintain status quo in relation to the aforesaid two operating licenses and not to take any coercive steps in relation to any demand pertaining to the four non operating licenses.

Pending the final disposal of the appeal, the consequential financial impact, if any, cannot be ascertained.

6. Contingent Liabilities:

Rs Mn

Particulars As on As on March 31, 2012 March 31, 2011

Income Tax matters not acknowledged as debts (see i below) 1,332.16 765.09

Sales Tax matters not acknowledged as debts (see ii below) 2,757.84 3,124.01

Service Tax matters not acknowledged as debts (see iii below) 4,241.74 3,906.72

Entry Tax and Customs matters not acknowledged as debts (see iv below) 390.19 353.91

Licensing Disputes (see v below) 4,760.08 5,038.58

Other claims not acknowledged as debts (see vi below) 2,011.54 1,388.03

(i) Income Tax Matters:

The appeals which are pending before various Appellate Authorities include mainly, the appeals filed by the Company against the demands raised by various Income Tax Authorities on account of non deduction of tax on discount allowed to prepaid distributors, non deduction of tax on roaming charges etc.

(ii) Sales Tax:

The Sales Tax demands as at March 31, 2012 mainly relate to the demands raised by the VAT/Sales Tax authorities of few states on Broadband Connectivity, SIM cards etc. on which the Company has already paid Service Tax.

(iii) Service Tax:

The Service Tax demands as at March 31, 2012 mainly relate to the following matters:

- Interpretation issues arising out of Rule 6(3) of the Cenvat Credit Rules, 2004;

- Denial of Cenvat credit related to Towers, Shelters and OFC ducts.

- Disallowance of Cenvat Credit on input services viewed as not related to output service.

(iv) Entry Tax:

In certain states, Entry Tax is being demanded on receipt of material from outside the state. However, the Company has challenged the constitutional validity of the levy.

(v) Licensing Disputes:

Disputes relating to alleged non compliance of licensing conditions & other disputes with DoT, either filed by or against the Company and pending before Hon'ble Supreme Court/TDSAT.

(vi) Other claims not acknowledged as debts:

Mainly include miscellaneous disputed matters with Local Municipal Corporation, Electricity Board and others.

7. The Company has a contingent obligation to buy compulsorily convertible preference shares issued by ABTL, from the holder at the original issue price of Rs 20,982.50 Mn.

8. Capital and other Commitments:

Estimated amount of commitments as on March 31, 2012 towards:

- Contracts remaining to be executed for capital expenditure (net of advances) and not provided for is Rs 10,467.51 Mn (Previous year Rs 20,246.02 Mn)

- Long term contracts remaining to be executed including early termination commitments (if any) is Rs 7,439.13 Mn

9. Personnel Expenditure includes Rs 35.88 Mn (Previous year Rs 150.34 Mn) being the amortisation of intrinsic value of ESOPs for the year ending March 31, 2012.

10. Segment Reporting:

1. Primary Segments:

The Company operates in two business segments:

a) Mobility Services: providing GSM based mobile and related telephony services.

b) International Long Distance (ILD): providing international long distance services.

2. Secondary Segment:

The Company caters only to the needs of Indian market representing a singular economic environment with similar risks and rewards and hence there are no reportable geographical segments

11. Related Party Transactions:

As per Accounting Standard-18 on "Related Party Disclosures", related parties of the Company are disclosed below: A. List of related parties:

Promoters

Hindalco Industries Limited (Hindalco)

Grasim Industries Limited (Grasim)

Aditya Birla Nuvo Limited (ABNL)

Birla TMT Holdings Pvt. Limited (Birla TMT)

Subsidiaries

Idea Telesystems Limited (ITL) (Formerly known as Swinder Singh Satara & Co. Ltd.)

Aditya Birla Telecom Limited (ABTL)

Idea Cellular Services Limited (ICSL)

Idea Cellular Infrastructure Services Limited (ICISL)

Idea Cellular Towers Infrastructure Limited (ICTIL)

Idea Mobile Commerce Services Limited (IMCSL)

Joint Venture

Indus Towers Limited (Indus)

Entities having significant influence TMI Mauritius Ltd.

Axiata Investments 2 (India) Ltd. (AI2) (Formerly known as TMI India Ltd.)

Axiata Group Berhad Key Management Personnel (KMP)

Mr. Himanshu Kapania, MD Mr. Akshaya Moondra, CFO Mr. Sanjeev Aga, MD (Upto March 31, 2011)

12. Operating Lease: As a Lessee

The Company has entered into non-cancellable operating leases for offices, switches and cell sites for periods ranging from 36 months to 240 months.

Operating Lease: As a Lessor

The Company has leased under operating lease arrangements certain Optical Fibre Cables (OFC) on Indefeasible Rights of Use ("IRU") basis. The gross block, accumulated depreciation and depreciation expense of the assets given on IRU basis is not separately identifiable and hence not disclosed.

Rental income of Rs 107.45 Mn (Previous year Rs 56.45 Mn) in respect of such leases has been recognized in the statement of Profit and Loss during the current year.

13. During the financial year 2007-08, Company had entered into a composite IT outsourcing agreement wherein fixed assets and services related to IT has been supplied by the vendor. Such fixed assets received have been accounted for as a finance lease. Correspondingly, such assets are recorded at fair value of these assets at the time of receipt and depreciated on the stated useful life applicable to similar assets of the Company.

14. Previous year's figures have been regrouped / rearranged wherever necessary to conform to the current year grouping.


Mar 31, 2011

1. The company successfully bid for 11 service areas in the 3G Spectrum auction held by the Department of Telecommunications (DoT) during the year for a total cost of Rs. 57,685.90 Mn Spectrum in the 2100 MHz band has been allotted to the Company for a period of twenty years in the 11 service areas, viz. Maharashtra, Gujarat, Andhra Pradesh, Kerala, Punjab, Haryana, Uttar Pradesh (East),

Uttar Pradesh (West), Madhya Pradesh & Chattisgarh, Himachal Pradesh and Jammu & Kashmir.

As of 31st March, 2011, the Company has launched 3G services in select towns in the service areas of Gujarat, Himachal Pradesh, Madhya Pradesh & Chattisgarh, Haryana, Maharashtra and Uttar Pradesh (West). In the service areas of Andhra Pradesh, Kerala and Uttar Pradesh (East), 3G services in select towns have been launched in April, 2011.

In the Punjab service area, the Company has not been given clearance for commercial use of the allotted spectrum band. The Company had approached Hon'ble TDSAT for direction to DoT to allow commercial use of the allotted 3G spectrum band. The Hon'ble TDSAT has directed the Company to approach it again, if required, upon the final disposal of the matters mentioned in point 2 below by the Appellate Bench of Hon'ble High Court of Delhi.

2. The erstwhile Spice Communications Limited (Spice) was amalgamated with the Company effective 1st March, 2010 pursuant to sanction of the Scheme of Amalgamation by Hon'ble High Court of Gujarat and Hon'ble High Court of Delhi. However, upon an application made by DoT on 30th March, 2011 for recall of the order dated 5th February, 2010, sanctioning the above scheme, the Hon'ble High Court of Delhi while pronouncing its judgment on 4th July, 2011, reaffirmed the amalgamation of Spice with the Company. However, the said judgment transferred and vested unto the DoT, the six licenses granted to erstwhile Spice along with the spectrum (including the two operational licenses for Punjab & Karnataka service areas), till the time permission of DoT is granted for transfer thereof upon an application from the Company to that effect.

The Company then filed an appeal, before the Appellate Bench of the Hon'ble High Court of Delhi, challenging the above judgment of 4th July, 2011. Through interim orders, Appellate Bench has directed DoT to :- (i) Accept the License Fee from the Company without prejudice, as the Company is continuing to operate the licenses for Punjab & Karnataka service areas granted to erstwhile Spice;

(ii) Till the next date of hearing, maintain status quo in relation to the aforesaid two operating licenses and no coercive steps in relation to any demand pertaining to the four non operating licenses.

Pending the final disposal of the appeal, the consequential financial impact, if any, cannot be ascertained.

3. Secured Loans

a) Foreign Currency and Rupee Loans

Foreign Currency Loans amounting to Rs. 20,776.22 Mn (Previous year Rs. 14,048.96 Mn) and Rupee Loans amounting to Rs. 56,531.97 Mn (Previous year Rs. 42,606.41 Mn) are secured by way of first charge / assignment ranking pari-passu interse the lenders, as under:

i. First charge by hypothecation / mortgage on all the movable and immovable properties of the Company respectively,

ii. A first priority charge over all intangible assets (excluding Telecom Licenses) of the Company,

iii. Assignment of the rights, titles and interest, on deposits, investments, bank accounts, book debts, insurance covers, other general assets, letters of credit and guarantee or performance bond, provided in favour of the Company.

Out of the above Loan, Foreign Currency Loan amounting to Rs. 18,349.02 Mn (Previous year Rs. 11,791.96 Mn) & Rupee Loan amounting to Rs. 40,531.98 Mn (Previous year Rs. 42,106.41 Mn) additionally have pledge on 60% shareholding of Indus Towers Limited held by wholly owned subsidiary. Further Foreign Currency Loan amounting to Rs. 8,733.34 Mn (Previous year Rs. 8,782.34 Mn) & Rupee Loan amounting to Rs. 40,531.98 Mn (Previous year Rs. 42,106.41 Mn) included above, have additional security as first priority charge over Telecom Licenses also.

b) Vehicle Loan

Vehicle Loan amounting to Rs. 292.20 Mn (Previous year Rs. 309.05 Mn) is secured by hypothecation of Vehicles against which the loans have been taken.

4. Contingent Liabilities

a) Due to the DoT's alleged contention that the acquisition of erstwhile Spice Communications Limited and its subsequent amalgamation with the company violates certain license conditions/ guidelines, the company has received the following demands / notices:

(i) Demand notices dated 24th February, 2011 and 1st June, 2011 of Rs. 500 Mn each in respect of UAS licenses for Punjab and Karnataka service areas respectively held by erstwhile Spice Communications Limited.

Demand notices dated 1st June, 2011 of Rs. 500 Mn each in respect of CMTS licenses of Delhi, Andhra Pradesh, Haryana and Maharashtra service areas held by the company.

The above demands were challenged by the Company before the Hon'ble TDSAT and stay has been granted.

(ii) Show Cause notices for termination of six UAS licenses issued in 2008, which have not been rolled out;

i. Dated 24th February, 2011 and dated 1st June, 2011 for violation of license conditions in respect of Punjab & Karnataka service areas respectively granted to the Company.

ii. Dated 1st June, 2011 for violation of license conditions in respect of Delhi, Maharashtra, Haryana and Andhra Pradesh service areas granted to erstwhile Spice Communications Limited, which have not been rolled out.

iii. Dated 11th May, 2011 for termination due to non fulfillment of rollout obligations in respect of UAS license for Karnataka service area granted to Company and for Andhra Pradesh service area granted to erstwhile Spice Communications Limited.

The Company had challenged the show cause notice dated 24th February, 2011 above before Hon'ble TDSAT. The same has been disposed off by Hon'ble TDSAT, terming it as premature with a liberty to approach the Hon'ble TDSAT afresh, in case the company is aggrieved by any final orders of DoT in this matter.

(iii) Demands for liquidated damages amounting to Rs. 276.50 Mn for non fulfillment of roll out obligations in respect of UAS licenses issued in 2008 to the Company for Punjab and Karnataka service areas and to the erstwhile Spice Communications Limited for the service areas of Maharashtra, Haryana and Andhra Pradesh.

The company has filed appropriate petitions before the Hon'ble TDSAT for quashing these demands. Vide interim orders dated 8th June, 2011, the Hon'ble TDSAT has directed the Company to deposit 60% of the amount within a week for securing interest of both the parties without prejudice to their respective rights and contentions, which the Company has since complied with.

b) During the financial year 2006-07, the WPC wing of DoT had raised demands towards monthly compounded interest and penalty on WPC charges for the period upto financial year 2002-03 in respect of the telecom service areas of the erstwhile Idea Mobile Communication Limited, BTA Cellcom Limited and Spice Communications Limited amounting to Rs. 844.88 Mn, which were deposited under protest and reflected as advances. Following the favourable decision of TDSAT on petition No. 123 of 2008, these amounts have been adjusted against spectrum dues as of 31st March, 2011. Subsequently, DoT has filed an appeal in Hon'ble Supreme Court.

i. Income Tax matters:

The appeals which are pending before various Appellate Authorities includes mainly the appeals filed by the company against the demands raised by various income tax authorities on account of non deduction of tax on discount allowed to prepaid distributors, non deduction of tax on roaming charges etc.

ii. Sales Tax:

The Sales Tax demands as at 31st March, 2011 mainly relates to the demands raised by the VAT/Sales Tax authorities at few states on SIM cards, prepaid cards and recharge coupons, airtime revenue etc. on which the Company has already paid service tax.

iii. Service Tax:

The service tax demands as at 31st March, 2011 mainly relates to the following matters:

- Interpretation issues arising out of Rule 6(3) of the Cenvat Credit Rules, 2004;

- Denial of Cenvat Credit related to Towers & Shelters

- Disallowance of Cenvat Credit on input services viewed as not related to output service.

iv. Entry Tax:

In certain states entry tax is being demanded on receipt of material from outside the state. However, the Company has challenged the constitutional validity of the levy.

v. Other claims not acknowledged as debts:

Mainly include matters appealed by BSNL in Hon'ble Supreme Court, commitments under EPCG, miscellaneous disputed matters with DoT and other consumer court cases.

5. The Company has a contingent obligation to buy compulsory convertible preference shares issued by ABTL, from the holder at the original issue price of Rs. 20,982.50 Mn.

6. During the year, under ESOS 2006, 2,524,500 options have been granted as 'Tranche IV' to the eligible employees as on 24th January 2011. Each option when exercised would be converted into one equity share of Rs. 10/- each, fully paid up, of the Company. The options will vest in 4 equal annual installments after one year of the grant. The maximum period of exercise is 5 years from the date of vesting.

The compensation costs of stock options granted to employees have been accounted by the Company using the intrinsic value method.

7. Segment Reporting 1. Primary Segment:

The Company operates in two business segments:

a) Mobility Services: providing GSM based mobile and related telephony services.

b) Long Distance (LD): providing national and international long distance services.

8. Related Party Transactions

As per Accounting Standard - 18 on "Related Party Disclosures", related parties of the Company are disclosed below:

A. List of Related Parties: Promoters

Hindalco Industries Limited (Hindalco) Grasim Industries Limited (Grasim) Aditya Birla Nuvo Limited (ABNL) Birla TMT Holdings Pvt. Limited (Birla TMT)

Subsidiaries

Swinder Singh Satara & Co. Limited (SSS & Co)

Aditya Birla Telecom Limited (ABTL)

Idea Cellular Services Limited (ICSL)

Idea Cellular Infrastructure Services Limited (ICISL)

Idea Cellular Towers Infrastructure Limited (ICTIL)

Idea Mobile Commerce Services Limited (IMCSL) (Formerly known as Carlos Towers Limited)

Joint Venture

Indus Towers Limited (ITL)

Spice Communications Limited (SCL) ( Upto February 28th, 2010)

Entities having significant Influence

TMI Mauritius Ltd TMI India Ltd (TMI) Axiata Group Berhad

Key Management Personnel (KMP)

Mr. Sanjeev Aga, MD

Mr. Akshaya Moondra, CFO

9. During the financial year 2007-08, company had entered into a composite IT outsourcing agreement wherein fixed assets and services related to IT has been supplied by the vendor. Such fixed assets received have been accounted for as a finance lease. Correspondingly, such assets are recorded at fair value of these assets at the time of receipt and depreciated on the stated useful life applicable to similar assets of the company.

As at 31st March, 2011, an amount of Rs. 1,195.18 Mn towards the supply of fixed assets during the year stands outstanding and will be paid during financial year 2011-12.

10. Previous year's figures have been regrouped / rearranged wherever necessary to conform to the current year grouping. Figures for the current year are not comparable with that of the previous year due to merger of Spice Communications Limited during the previous year.

 
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