Mar 31, 2016
26. BACKGROUND AND SIGNIFICANT ACCOUNTING POLICIES
1. Background
(a) Nature of business and ownership
Quadrant Televentures Limited (Formerly known as HFCL Infotel Limited) (''the Company'' or ''QTL''), Unified Access Services Licensee for Punjab Telecom Circle (including Chandigarh and Panchkula), is providing complete telecommunication services, which includes voice telephony, both wireline and fixed wireless, CDMA and GSM based mobiles, internet services, broadband data services and a wide range of value added service viz., Centrex, Leased lines, VPNs, Voice mail, etc. The services were commercially launched in October 2000. As on March 31, 2016, the Company has an active subscriber base of over 3,861,039.
The Company was incorporated on August 2, 1946 with the name of The Investment Trust of India Limited (ITI) which was subsequently changed to HFCL Infotel Limited on May 12, 2003. This was done pursuant to a Scheme of amalgamation (the Scheme), approved by the Hon'' ble High Court of the Punjab and Haryana at Chandigarh and Hon'' ble High Court of the State of Tamil Nadu at Chennai on March 6, 2003 and March 20, 2003, respectively, whereby the erstwhile HFCL Infotel Limited (name earlier allotted to the transferor Company) (''erstwhile HFCL Infotel'') was merged with the Company with effect from September 1, 2002. As per the Scheme envisaged, the Company''s then existing business of hire purchase, leasing and securities trading was transferred by way of slump sales to its wholly owned subsidiary, Rajam Finance & Investments Company (India) Limited (''Rajam Finance'') with effect from September 1, 2002. Rajam Finance was renamed as The Investment Trust of India Limited with effect from June 17, 2003 and it ceased to be the subsidiary of the Company with effect from September 30, 2003, due to allotment of fresh equity by Rajam Finance to other investors.
The Company, during the year ended March 31, 2004, surrendered its license granted by Reserve Bank of India (''RBI'') to carry out NBFC business. RBI confirmed the cancellation of the NBFC license as per their letter dated May 24, 2004.
On September 24, 2010 the name of Company was changed From HFCL Infotel Limited to Quadrant Televentures Limited.
(b) License Fees
The Company obtained license for Basic Telephony Service for the Punjab Telecom Circle (including Chandigarh and Panchkula) by way of amalgamation of the erstwhile HFCL Infotel with the Company. Erstwhile HFCL Infotel had obtained this license under fixed license fee regime under National Telecom Policy (''NTP'') 1994, valid for a period of 20 years from the effective date, and subsequently migrated from the fixed license fee regime to revenue sharing regime upon implementation of NTP 1999. Further to the Telecom Regulatory Authority of India''s (''TRAI'') recommendations of October 27, 2003 and the Department of Telecommunications (''DoT'') guidelines on Unified Access (Basic & Cellular) Services Licence (''UASL'') dated November 11, 2003, the Company migrated its licence to the UASL regime with effect from November 14, 2003. A fresh License Agreement was signed on May 31, 2004. Pursuant to this migration, the Company became additionally entitled to provide full mobility services. Quadrant Televentures Limited also entered into Unified License Agreement No. 821-125/2014-DS dated January 6, 2015, and amendments thereto, with DoT to establish maintain and operate internet service in all India basis (Pan India).
During the year ended March 31, 2008, the Company has deposited the entry fee to the Department of Telecommunication (''DOT'') for the use of GSM Technology in addition to CDMA technology being used under the existing (UASL) for the Punjab Service Area. The UASL has since been amended to incorporate the license for use of GSM technology on January 15, 2008 vide DOT''s letter number F.No.10-15/2004/BS.II/ HITL/ Punjab/17 dated January 15, 2008. The Company has launched its GSM services on March 29, 2010 in Punjab Circle.
With effect from August 1, 1999, the Company is required to pay revenue share license fees as a fraction of Adjusted Gross Revenue (''AGR'') on UASL, The revenue share fraction other than income from Internet Services was set at 10 per cent of AGR with effect from August 1, 1999 and was reduced to 8 per cent of AGR with effect from April 1, 2004. In addition, spectrum charges calculated at 3.55% per cent of the AGR earned through the wireless technology is payable under the license agreement.
With effect from July 01, 2012 Income from internet services is included as the service revenue for the purpose of the calculation of AGR under Internet Services License as it is governed by a separate ISP license between the Company and the Department of Telecommunications (''DoT'').The revenue share fraction is set at 4% for July 01, 2012 to March 31, 2013 and 8% from April 1, 2013 onwards of income from internet revenue except revenue from pure internet services (''AGR'' under Internet Service License).
2. Summary of significant accounting policies
2.1 Basis of preparation of Financial Statements
The financial statements are prepared and presented under historical cost convention using the accrual system of accounting in accordance with the accounting principles generally accepted in India (Indian GAAP) and the requirements of the Companies Act, 2013, including the mandatory Accounting Standards as prescribed by the Companies (Accounting Standards) Rules 2006.
2.2 Fixed Assets
Fixed assets are stated at cost (net of cenvat credit if availed) less impairment loss, if any, and accumulated depreciation. The Company capitalizes direct costs including taxes (excluding cenvat), duty, freight and incidental expenses directly attributable to the acquisition and installation of fixed assets. Capital work-in-progress is stated at cost.
Telephone instruments having useful life lying with deactivated customers for more than 90 days since disconnection are written off.
2.3 Inventory
Inventory is valued at cost or net realizable value whichever is low. Cost for the purchase is calculated on FIFO basis
2.4 Depreciation
Depreciation is provided pro-rata to the period of use (except for Telephone Instruments, being ready for use are depreciated from the beginning of the month, following the month of purchase), on the straight line method based on the estimated useful life of the assets, as follows:
(i) For these classes of assets based on internal assessment and technical evaluation, the management believes that the useful lives as given above best represent the period over which the Management expects to use these assets. Hence the useful lives for these assets is different from the useful lives as prescribed under Part C of Schedule II of Companies Act 2013.
(ii) Depreciation on the amount capitalized on up-gradation of the existing assets is provided over the balance life of the original asset.
2.5 Borrowing Costs
Borrowing costs that are attributable to the acquisition and construction of a qualifying asset are capitalized as a part of the cost of the asset. Other borrowing costs are recognized as an expense in the year in which they are incurred.
2.6 Impairment
The carrying amounts of assets are reviewed at each balance sheet date if there is any indication of impairment based on internal/external factors. An impairment loss is recognized wherever the carrying amount of an asset exceeds its recoverable amount. The recoverable amount is the greater of the assets net selling price and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value at the weighted average cost of capital. After impairment, depreciation is provided on the revised carrying amount of the assets over its remaining useful life.
A previously recognized impairment loss is increased or reversed depending on changes in circumstances. However the carrying value after reversal is not increased beyond the carrying value that would have prevailed by charging usual depreciation if there was no impairment.
2.7 Intangibles
All expenditure on intangible items are expensed as incurred unless it qualifies as an intangible asset as defined in Accounting Standard 26. The carrying value of intangible assets is assessed for recoverability by reference to the estimated future discounted net cash flows that are expected to be generated by the asset. Where this assessment indicates a deficit, the assets are written down to the market value or fair value as computed above.
2.8 License Fees
(i) License Entry Fee
The License Entry Fee has been recognized as an intangible asset and is amortized equally over the remainder of the license period from the date of commencement of commercial operations. License entry fees includes interest on funding of license entry fees, foreign exchange fluctuations on the loan taken up to the date of commencement of commercial operations.
The carrying value of license entry fees are assessed for recoverability by reference to the estimated future discounted net cash flows that are expected to be generated by the asset. Where this assessment indicates a deficit, the assets are written down to the market value or fair value as computed above.
(ii) Revenue Sharing Fee
Revenue Sharing Fee, currently computed at the prescribed rate of Adjusted Gross Revenue (''AGR'') is expensed in the Statement of Profit and Loss in the year in which the related income from providing unified access services and Internet Services are recognized.
An additional revenue share towards spectrum charges is computed at the prescribed rate of the service revenue earned from the customers who are provided services through the CDMA and GSM technology. This is expensed in the Statement of Profit and Loss in the year in which the related income is recognized.
2.9 Investments
Investments that are readily realizable and intended to be held for not more than a year are classified as current investments. All other investments are classified as long-term investments. Long term investments are stated at cost. However, provision for diminution in value is made to recognize a decline other than temporary in the value of the investments. Current investments are carried at lower of cost and fair value and determined on an individual investment basis.
2.10 Provisions
A provision is recognized when an enterprise has a present obligation as a result of past event; it is probable that an outflow of resources will be required to settle the obligation, in respect of which a reliable estimate can be made. Provisions are not discounted to its present value and are determined based on best estimate required to settle the obligation at the balance sheet date. These are reviewed at each balance sheet date and adjusted to reflect the current best estimates.
2.11 Revenue Recognition
Revenue from unified access services are recognized on services rendered and is net of rebates, discounts and service tax. Unbilled revenues resulting from unified access services provided from the billing cycle date to the end of each month are estimated and recorded. Revenues from unified access services rendered through prepaid cards are recognized based on actual usage by the customers. Billings made but not expected to be collected, if any, are estimated by the management and not recognized as revenues in accordance with Accounting Standard on Revenue Recognition (''AS 9'').
Revenue on account of internet services and revenue from infrastructure services are recognized as services are rendered, in accordance with the terms of the related contracts.
2.12 Interconnection Usage Revenue and Charges
The TRAI issued Interconnection Usage Charges Regulation 2003 (''IUC regime'') effective May 1, 2003 and subsequently amended the same twice with effect from February 1, 2004 and February 1, 2005. Under the IUC regime, with the objective of sharing of call revenues across different operators involved in origination, transit and termination of every call, the Company pays interconnection charges (prescribed as Rs per minute of call time) for all outgoing calls originating in its network to other operators, depending on the termination point of the call i.e. mobile, fixed line, and distance i.e. local, national long distance and international long distance. The Company receives certain interconnection charges from other operators for all calls terminating in its network
Accordingly, interconnect revenue are recognized on those calls originating in another telecom operator network and terminating in the Company''s network. Interconnect cost is recognized as charges incurred on termination of calls originating from the Company''s network and terminating on the network of other telecom operators. The interconnect revenue and costs are recognized in the financial statement on a gross basis and included in service revenue and network operation expenditure, respectively.
2.13 Foreign Currency Transactions
Initial Recognition
Foreign currency transactions are recorded in the reporting currency, by applying to the foreign currency amount the exchange rate between the reporting currency and the foreign currency at the date of the transaction.
Conversion
Foreign currency monetary items are reported using the closing rate. Non-monetary items which are carried in terms of historical cost denominated in a foreign currency are reported using the exchange rate at the date of the transaction; and non-monetary items which are carried at fair value or other similar valuation denominated in a foreign currency are reported using the exchange rates that existed when the values were determined.
Exchange Differences
Exchange differences arising on the settlement or on reporting Company''s monetary items at rates different from those at which they were initially recorded during the year, or reported in previous financial statements, are recognized as income or as expenses in the year.
2.14 Employee Benefits
Effective April 1, 2007, the Company has adopted the Revised Accounting Standard - 15 ''Employee Benefits''. The relevant policies are:
Short Term Employee Benefits
Short term employee benefits are recognized in the period during which the services have been rendered.
Long Term Employee Benefits
Provident Fund and employees'' state insurance schemes
All employees of the Company are entitled to receive benefits under the Provident Fund, which is a defined contribution plan. Both the employee and the employer make monthly contributions to the plan at a predetermined rate (presently 12%) of the employees'' basic salary. These contributions are made to the fund administered and managed by the Government of India. In addition, some employees of the Company are covered under the employees'' state insurance schemes, which are also defined contribution schemes recognized and administered by the Government of India.
The Company''s contributions to both these schemes are expensed in the Statement of Profit and Loss. The Company has no further obligations under these plans beyond its monthly contributions.
Leave Encashment
The Company has provided for the liability at period end on account of unveiled earned leave as per the actuarial valuation as per the Projected Unit Credit Method.
Gratuity
The Company provides for gratuity obligations through a defined benefit retirement plan (the ''Gratuity Plan'') covering all employees. The Gratuity Plan provides a lump sum payment to vested employees at retirement or termination of employment based on the respective employee salary and years of employment with the Company. The Company provides for the Gratuity Plan based on actuarial valuation in accordance with Accounting Standard 15 (revised), "Employee Benefits " The Company makes annual contributions to the LIC for the Gratuity Plan in respect of employees. The present value of obligation under gratuity is determined based on actuarial valuation at period end using Project Unit Credit Method, which recognizes each period of service as giving rise to additional unit of employee benefit entitlement and measures each unit separately to build up the final obligation.
a) Short term compensated absences are provided for on based on estimates.
b) Actuarial gains and losses are recognized as and when incurred
2.15 Taxation
Tax expense comprises of current, deferred and fringe benefit tax. Current income tax and fringe benefit tax is measured at the amount expected to be paid to the tax authorities in accordance with the Indian Income Tax Act. Deferred income taxes reflects the impact of current year timing differences between taxable income and accounting income for the year and reversal of timing differences of earlier years.
Deferred tax is measured based on the tax rates and the tax laws enacted or substantively enacted at the balance sheet date. Deferred tax assets are recognized only to the extent that there is reasonable certainty that sufficient future taxable income will be available against which such deferred tax assets can be realized. If the Company has carry forward of unabsorbed depreciation and tax losses, deferred tax assets are recognized only if there is virtual certainty supported by convincing evidence that such deferred tax assets can be realized against future taxable profits. Unrecognized deferred tax assets of earlier years are re-assessed and recognized to the extent that it has become reasonably certain or virtually certain, as the case may be, that future taxable income will be available against which such deferred tax assets can be realized.
2.16 Operating Leases
Where the Company is the lessee
Leases of assets under which the lessor effectively retains all the risks and rewards of ownership are classified as operating leases. Lease payments under operating leases are recognized as an expense on a straight-line basis over the lease term.
Where the Company is the lessor
Assets subject to operating leases are included in fixed assets. Lease income is recognized in the Statement of Profit and Loss on a straight-line basis over the lease term. Costs, including depreciation are recognized as an expense in the Statement of Profit and Loss. Initial direct costs such as legal costs, brokerage costs, etc. are recognized immediately in the Statement of Profit and Loss.
2.17 Earning Per Share
Basic earnings per share is calculated by dividing the net profit for the year attributable to equity shareholders by the weighted average number of equity shares outstanding during the year.
For calculating diluted earnings per share, the number of shares comprises the weighted average shares considered for deriving basic earnings per share, and also the weighted average number of shares, if any which would have been used in the conversion of all dilutive potential equity shares. The number of shares and potentially dilutive equity shares are adjusted for the bonus shares and the sub-division of shares, if any.
2.18 Segment Reporting
Identification of segments:
The primary reporting of the Company has been performed on the basis of business segments. The analysis of geographical segments is based on the areas in which the Company''s products are sold or services are rendered.
Allocation of common costs:
Common allocable costs are allocated to each segment according to the relative contribution of each segment to the total common costs.
Unallocated items:
The Corporate and other segment include general corporate income and expense items, which are not allocated to any business segment.
2.19 Cash & Cash Equivalents
Cash comprises cash on hand and demand deposits with banks. Cash equivalents are short-term balances (with an original maturity of three months or less from the date of acquisition), highly liquid investments that are readily convertible into known amounts of cash and which are subject to insignificant risk of changes in value.
2.20 Provision, Contingent Liabilities and Contingent Assets
Provisions involving substantial degree of estimation in measurement are recognized when there is a present obligation as a result of past events and it is provable that there will be an out flow of resources. Contingent liabilities are not recognized but are disclosed in the notes. Contingent assets are neither recognized nor disclosed in the Financial Statements.
Mar 31, 2015
1.1 Basis of preparation of Financial Statements
The Financial Statements are prepared and presented under historical
cost convention using the accrual system of accounting in accordance
with the accounting principles generally accepted in India (Indian
GAAP) and the requirement of Companies Act 2013, including the
mandatory Accounting Standards as prescribed by the Companies
(Accounting Standards) Rule 2006.
1.2 Fixed Assets
Fixed assets are stated at cost (net of cenvat credit if availed) less
impairment loss, if any, and accumulated depreciation. The Company
capitalises direct costs including taxes (excluding cenvat), duty,
freight and incidental expenses directly attributable to the
acquisition and installation of fixed assets. Capital work- in-progress
is stated at cost.
Telephone instruments having useful life lying with deactivated
customers for more than 90 days since disconnection are written off.
1.3 Inventory
Inventory is valued at cost or net realisable value which ever is low.
Cost for the purchase is calculated on FIFO basis
1.4 Depreciation
Depreciation is provided pro-rata to the period of use (except for
Telephone Instruments, being ready for use are depreciated from the
beginning of the month, following the month of purchase), on the
straight line method based on the estimated useful life of the assets,
as follows:
(i) For these classes of assets based on internal assessment and
technical evaluation, the management believes that the useful lives as
given above best represent the period over which the Management experts
to use these assets. Hence the useful lives for these assets is
different from the useful lives as prescribed under Part C of Schedule
II of Companies Act 2013.
(ii) Depreciation on the amount capitalized on up-gradation of the
existing assets is provided over the balance life of the original
asset.
1.5 Borrowing Costs
Borrowing costs that are attributable to the acquisition and
construction of a qualifying asset are capitalised as a part of the
cost of the asset. Other borrowing costs are recognised as an expense
in the year in which they are incurred.
1.6 Impairment
The carrying amounts of assets are reviewed at each balance sheet date
if there is any indication of impairment based on internal/external
factors. An impairment loss is recognized wherever the carrying amount
of an asset exceeds its recoverable amount. The recoverable amount is
the greater of the assets net selling price and value in use. In
assessing value in use, the estimated future cash flows are discounted
to their present value at the weighted average cost of capital. After
impairment, depreciation is provided on the revised carrying amount of
the assets over its remaining useful life.
A previously recognized impairment loss is increased or reversed
depending on changes in circumstances. However the carrying value
after reversal is not increased beyond the carrying value that would
have prevailed by charging usual depreciation if there was no
impairment.
1.7 Intangibles
All expenditure on intangible items are expensed as incurred unless it
qualifies as an intangible asset as defined in Accounting Standard 26.
The carrying value of intangible assets is assessed for recoverability
by reference to the estimated future discounted net cash flows that are
expected to be generated by the asset. Where this assessment indicates
a deficits, the assets are written down to the market value or fair
value as computed above.
1.8 Licence Fees
(i) Licence Entry Fee
The Licence Entry Fee has been recognised as an intangible asset and is
amortised equally over the remainder of the licence period from the
date of commencement of commercial operations. Licence entry fees
includes interest on funding of licence entry fees, foreign exchange
fluctuations on the loan taken upto the date of commencement of
commercial operations.
The carrying value of license entry fees are assessed for
recoverability by reference to the estimated future discounted net cash
flows that are expected to be generated by the asset. Where this
assessment indicates a deficits, the assets are written down to the
market value or fair value as computed above.
(ii) Revenue Sharing Fee
Revenue Sharing Fee, currently computed at the prescribed rate of
Adjusted Gross Revenue ('AGR') is expensed in the Statement of Profit
and Loss in the year in which the related income from providing unified
access services and Internet Services are recognised.
An additional revenue share towards spectrum charges is computed at the
prescribed rate of the service revenue earned from the customers who
are provided services through the CDMA and GSM technology. This is
expensed in the Statement of Profit and Loss in the year in which the
related income is recognised.
1.9 Investments
Investments that are readily realisable and intended to be held for not
more than a year are classified as current investments. All other
investments are classified as long- term investments. Long term
investments are stated at cost. However, provision for diminution in
value is made to recognise a decline other than temporary in the value
of the investments. Current investments are carried at lower of cost
and fair value and determined on an individual investment basis.
1.10 Provisions
A provision is recognised when an enterprise has a present obligation
as a result of past event; it is probable that an outflow of resources
will be required to settle the obligation, in respect of which a
reliable estimate can be made. Provisions are not discounted to its
present value and are determined based on best estimate required to
settle the obligation at the balance sheet date. These are reviewed at
each balance sheet date and adjusted to reflect the current best
estimates.
1.11 Revenue Recognition
Revenue from unified access services are recognised on services
rendered and is net of rebates, discounts and service tax. Unbilled
revenues resulting from unified access services provided from the
billing cycle date to the end of each month are estimated and recorded.
Revenues from unified access services rendered through prepaid cards
are recognised based on actual usage by the customers. Billings made
but not expected to be collected, if any, are estimated by the
management and not recognised as revenues in accordance with Accounting
Standard on Revenue Recognition ('AS 9').
Revenue on account of internet services and revenue from infrastructure
services are recognised as services are rendered, in accordance with
the terms of the related contracts.
1.12 Interconnection Usage Revenue and Charges
The TRAI issued Interconnection Usage Charges Regulation 2003 ('IUC
regime') effective May 1,2003 and subsequently amended the same twice
with effect from February 1, 2004 and February 1, 2005. Under the IUC
regime, with the objective of sharing of call revenues across different
operators involved in origination, transit and termination of every
call, the Company pays interconnection charges (prescribed as Rs per
minute of call time) for all outgoing calls originating in its network
to other operators, depending on the termination point of the call i.e.
mobile, fixed line, and distance i.e. local, national long distance and
international long distance. The Company receives certain
interconnection charges from other operators for all calls terminating
in its network
Accordingly, interconnect revenue are recognised on those calls
originating in another telecom operator network and terminating in the
Company's network. Interconnect cost is recognised as charges incurred
on termination of calls originating from the Company's network and
terminating on the network of other telecom operators. The interconnect
revenue and costs are recognised in the financial statement on a gross
basis and included in service revenue and network operation
expenditure, respectively.
1.13 Foreign Currency Transactions
Initial Recognition
Foreign currency transactions are recorded in the reporting currency,
by applying to the foreign currency amount the exchange rate between
the reporting currency and the foreign currency at the date of the
transaction.
Conversion
Foreign currency monetary items are reported using the closing rate.
Non-monetary items which are carried in terms of historical cost
denominated in a foreign currency are reported using the exchange rate
at the date of the transaction; and non-monetary items which are
carried at fair value or other similar valuation denominated in a
foreign currency are reported using the exchange rates that existed
when the values were determined.
Exchange Differences
Exchange differences arising on the settlement or on reporting
Company's monetary items at rates different from those at which they
were initially recorded during the year, or reported in previous
financial statements, are recognised as income or as expenses in the
year.
1.14 Employee Benefits
Effective April 1, 2007, the Company has adopted the Revised Accounting
Standard - 15 'Employee Benefits'. The relevant policies are:
Short Term Employee Benefits
Short term employee benefits are recognised in the period during which
the services have been rendered.
Long Term Employee Benefits
Provident Fund and employees' state insurance schemes
All employees of the Company are entitled to receive benefits under the
Provident Fund, which is a defined contribution plan. Both the employee
and the employer make monthly contributions to the plan at a
predetermined rate (presently 12%) of the employees' basic salary.
These contributions are made to the fund administered and managed by
the Government of India. In addition, some employees of the Company are
covered under the employees' state insurance schemes, which are also
defined contribution schemes recognised and administered by the
Government of India.
The Company's contributions to both these schemes are expensed in the
Statement of Profit and Loss. The Company has no further obligations
under these plans beyond its monthly contributions.
Leave Encashment
The Company has provided for the liability at period end on account of
unavailed earned leave as per the actuarial valuation as per the
Projected Unit Credit Method.
Gratuity
The Company provides for gratuity obligations through a defined benefit
retirement plan (the 'Gratuity Plan') covering all employees. The
Gratuity Plan provides a lump sum payment to vested employees at
retirement or termination of employment based on the respective
employee salary and years of employment with the Company. The Company
provides for the Gratuity Plan based on actuarial valuation in
accordance with
Accounting Standard 15 (revised), "Employee Benefits " The Company
makes annual contributions to the LIC for the Gratuity Plan in respect
of employees. The present value of obligation under gratuity is
determined based on actuarial valuation at period end using Project
Unit Credit Method, which recognizes each period of service as giving
rise to additional unit of employee benefit entitlement and measures
each unit separately to build up the final obligation.
a) Short term compensated absences are provided for on based on
estimates.
b) Actuarial gains and losses are recognised as and when incurred
1.15 Taxation
Tax expense comprises of current, deferred and fringe benefit tax.
Current income tax and fringe benefit tax is measured at the amount
expected to be paid to the tax authorities in accordance with the
Indian Income Tax Act. Deferred income taxes reflects the impact of
current year timing differences between taxable income and accounting
income for the year and reversal of timing differences of earlier
years.
Deferred tax is measured based on the tax rates and the tax laws
enacted or substantively enacted at the balance sheet date. Deferred
tax assets are recognised only to the extent that there is reasonable
certainty that sufficient future taxable income will be available
against which such deferred tax assets can be realised. If the Company
has carry forward of unabsorbed depreciation and tax losses, deferred
tax assets are recognised only if there is virtual certainty supported
by convincing evidence that such deferred tax assets can be realised
against future taxable profits. Unrecognised deferred tax assets of
earlier years are re-assessed and recognised to the extent that it has
become reasonably certain or virtually certain, as the case may be,
that future taxable income will be available against which such
deferred tax assets can be realised.
1.16 Operating Leases
Where the Company is the lessee
Leases of assets under which the lessor effectively retains all the
risks and rewards of ownership are classified as operating leases.
Lease payments under operating leases are recognised as an expense on a
straight-line basis over the lease term.
Where the Company is the lessor
Assets subject to operating leases are included in fixed assets. Lease
income is recognised in the Statement of Profit and Loss on a
straight-line basis over the lease term. Costs, including depreciation
are recognised as an expense in the Statement of Profit and Loss.
Initial direct costs such as legal costs, brokerage costs, etc. are
recognised immediately in the Statement of Profit and Loss.
1.17 Earning Per Share
Basic earning per share is calculated by dividing the net profit for
the year attributable to equity shareholders by the weighted average
number of equity shares outstanding during the year.
For calculating diluted earning per share, the number of shares
comprises the weighted average shares considered for deriving basic
earning per share, and also the weighted average number of shares, if
any which would have been used in the conversion of all dilutive
potential equity shares. The number of shares and potentially dilutive
equity shares are adjusted for the bonus shares and the sub-division of
shares, if any.
1.18 Segment Reporting
Identification of segments:
The primary reporting of the Company has been performed on the basis of
business segments. The analysis of geographical segments is based on
the areas in which the Company's products are sold or services are
rendered.
Allocation of common costs:
Common allocable costs are allocated to each segment according to the
relative contribution of each segment to the total common costs.
Unallocated items:
The Corporate and other segment include general corporate income and
expense items, which are not allocated to any business segment.
1.19 Cash & Cash Equivalents
Cash comprises cash on hand and demand deposits with banks. Cash
equivalents are short-term balances (with an original maturity of three
months or less from the date of acquisition), highly liquid investments
that are readily convertible into known amounts of cash and which are
subject to insignificant risk of changes in value.
1.20 Provision, Contingent Liabilities and Contingent Assets
Provisions involving substantial degree of estimation in measurement
are recognized when there is a present obligation as a result of past
events and it is provable that there will be an out flow of resources.
Contingent liabilities are not recognized but are disclosed in the
notes. Contingent assets are neither recognized nor disclosed in the
Financial Statements.
Mar 31, 2014
1. Background
(a) Nature of business and ownership
Quadrant Televentures Limited (Formerly known as HFCL Infotel Limited)
(''the Company'' or ''QTL''), Unifi ed Access Services Licensee for Punjab
Telecom Circle (including Chandigarh and Panchkula), is providing
complete telecommunication services, which includes voice telephony,
both wireline and fi xed wireless, CDMA and GSM based mobiles, internet
services, broadband data services and a wide range of value added
service viz., centrex, leased lines, VPNs, voice mail, etc. The
services were commercially launched in October 2000. As on March 31,
2014, the Company has an active subscriber base of over 1,990,122.
The Company was incorporated on August 2, 1946 with the name of The
Investment Trust of India Limited (ITI) which was subsequently changed
to HFCL Infotel Limited on May 12, 2003. This was done pursuant to a
Scheme of amalgamation (the Scheme), approved by the Hon'' ble High
Court of the Punjab and Haryana at Chandigarh and Hon'' ble High Court
of the State of Tamil Nadu at Chennai on March 6, 2003 and March 20,
2003, respectively, whereby the erstwhile HFCL Infotel Limited (name
earlier allotted to the transferor Company) (''erstwhile HFCL Infotel'')
was merged with the Company with effect from September 1, 2002. As per
the Scheme envisaged, the Company''s then existing business of hire
purchase, leasing and securities trading was transferred by way of
slump sales to its wholly owned subsidiary, Rajam Finance & Investments
Company (India) Limited (''Rajam Finance'') with effect from September 1,
2002. Rajam Finance was renamed as The Investment Trust of India
Limited with effect from June 17, 2003 and it ceased to be the
subsidiary of the Company with effect from September 30, 2003, due to
allotment of fresh equity by Rajam Finance to other investors.
The Company, during the year ended March 31, 2004, surrendered its
license granted by Reserve Bank of India (''RBI'') to carry out NBFC
business. RBI confi rmed the cancellation of the NBFC license as per
their letter dated May 24, 2004.
On September 24, 2010 the name of Company was changed From HFCL Infotel
Limited to Quadrant Televentures Limited.
(b) License Fees
The Company obtained licence for Basic Telephony Service for the Punjab
Telecom Circle (including Chandigarh and Panchkula) by way of
amalgamation of the erstwhile HFCL Infotel with the Company. Erstwhile
HFCL Infotel had obtained this licence under fi xed license fee regime
under National Telecom Policy (''NTP'') 1994, valid for a period of 20
years from the effective date, and subsequently migrated from the fi
xed license fee regime to revenue sharing regime upon implementation of
NTP 1999. Further to the Telecom Regulatory Authority of India''s
(''TRAI'') recommendations of October 27, 2003 and the Department of
Telecommunications (''DoT'') guidelines on Unifi ed Access (Basic &
Cellular) Services
Licence (''UASL'') dated November 11, 2003, the Company migrated its
licence to the UASL regime with effect from November 14, 2003. A fresh
License Agreement was signed on May 31, 2004. Pursuant to this
migration, the Company became additionally entitled to provide full
mobility services. HFCL Infotel also entered into a Licence Agreement
dated June 28, 2000, and amendments thereto, with DoT to establish
maintain and operate internet service in Punjab circle (including
Chandigarh and Panchkula).
During the year ended March 31, 2008, the Company has deposited the
entry fee to the Department of Telecommunication (''DOT'') for the use of
GSM Technology in addition to CDMA technology being used under the
existing (UASL) for the Punjab Service Area. The UASL has since been
amended to incorporate the license for use of GSM technology on January
15, 2008 vide DOT''s letter number F.No.10-15/2004/BS.II/HITL/ Punjab/17
dated January 15, 2008. The Company has launched its GSM services on
March 29, 2010 in Punjab Circle.
With effect from August 1, 1999, the Company is required to pay revenue
share license fees as a fraction of Adjusted Gross Revenue (''AGR'') on
UASL, The revenue share fraction other than income from Internet
Services was set at 10 per cent of AGR with effect from August 1, 1999
and was reduced to 8 per cent of AGR with effect from April 1, 2004. In
addition, spectrum charges calculated at 3 per cent of the AGR earned
through the wireless technology is payable under the license agreement.
With effect from July 01, 2012 Income from internet services is
included as the service revenue for the purpose of the calculation of
AGR under Internet Services Licence as it is governed by a separate ISP
licence between the Company and the Department of Telecommunications
(''DoT'').The revenue share fraction is set at 4% for July 01, 2012 to
March 31, 2013 and 8% from April 1, 2013 onwards of income from
internet revenue (''AGR'' under Internet Service Licence).
(c) Project Financing
The Company''s project was initially appraised by Industrial Development
Bank of India (''IDBI'') during the year ended March 31, 2000.
Pursuant to the migration to UASL regime, the consortium of lenders,
led by IDBI, through the Corporate Debt Restructuring (''CDR'') mechanism
approved an overall restructuring of the liabilities of the Company and
thereby revised the peak funding requirements.
Further, the CDR Empowered Group has approved the proposal of the
Company for expansion of services, change in the scope of the project,
cost of project and means of fi nance and restructuring of debt as per
the reworked restructuring scheme dated June 24, 2005.
During the year ended March 31, 2014, the Company has incurred losses
of Rs 2,611,608,163 resulting into accumulated loss of Rs
19,397,027,202 as at March 31, 2014 which has completely eroded its net
worth and has a net current liability of Rs 9,171,780,281 The ability
of the Company to continue as a going concern is substantially
dependent on its ability to successfully arrange the remaining funding
and achieve financial closure to fund its operating and capital
funding requirements and to substantially increase its subscriber base.
The management in view of its business plans and support from signifi
cant shareholders is confi dent of generating cash fl ows to fund the
operating and capital requirements of the Company. Accordingly, these
statements have been prepared on a going concern basis.
2. Summary of significant accounting policies
2.1 Basis of preparation of Financial Statements
The financial statements have been prepared to comply in all material
respects with the notifi ed accounting standards by Companies
(Accounting Standards) Rules, 2006 (''as amended''), and the relevant
provisions of the Companies Act, 1956. The preparation of financial
statements is in conformity with the Generally Accepted Accounting
Principals. The financial statements have been prepared under the
historical cost convention on an accrual basis of accounting. The
accounting policies have been consistently applied by the Company and
are consistent with those used in the previous year. The signifi cant
accounting policies are as follows:
2.2 Fixed Assets
Fixed assets are stated at cost (net of cenvat credit if availed) less
impairment loss, if any, and accumulated depreciation. The Company
capitalises direct costs including taxes (excluding cenvat), duty,
freight and incidental expenses directly attributable to the
acquisition and installation of fi xed assets. Capital work-
in-progress is stated at cost.
Telephone instruments having useful life lying with deactivated
customers for more than 90 days since disconnection are written off.
2.3 Inventory
Inventory is valued at cost or net realisable value which ever is low.
Cost for the purchase is calculated on FIFO basis
2.4 Depreciation
Depreciation is provided pro-rata to the period of use (except for
Telephone Instruments, being ready for use are depreciated from the
beginning of the month, following the month of purchase), on the
straight line method based on the estimated useful life of the assets,
as follows:
(i) Depreciation rates derived from the above are not less than the
rates prescribed under Schedule XIV of the Companies Act, 1956.
(ii) Depreciation on the amount capitalized on up-gradation of the
existing assets is provided over the balance life of the original
asset.
(iii) Depreciation on the amount capitalised till March 31, 2007 on
account of foreign exchange fl uctuations is provided over the balance
life of the original asset.
2.5 Borrowing Costs
Borrowing costs that are attributable to the acquisition and
construction of a qualifying asset are capitalised as a part of the
cost of the asset. Other borrowing costs are recognised as an expense
in the year in which they are incurred.
2.6 Impairment
The carrying amounts of assets are reviewed at each balance sheet date
if there is any indication of impairment based on internal/external
factors. An impairment loss is recognized wherever the carrying amount
of an asset exceeds its recoverable amount. The recoverable amount is
the greater of the assets net selling price and value in use. In
assessing value in use, the estimated future cash fl ows are discounted
to their present value at the weighted average cost of capital. After
impairment, depreciation is provided on the revised carrying amount of
the assets over its remaining useful life.
A previously recognised impairment loss is increased or reversed
depending on changes in circumstances. However the carrying value
after reversal is not increased beyond the carrying value that would
have prevailed by charging usual depreciation if there was no
impairment.
2.7 Intangibles
All expenditure on intangible items are expensed as incurred unless it
qualifi es as an intangible asset as defi ned in Accounting Standard
26. The carrying value of intangible assets is assessed for
recoverability by reference to the estimated future discounted net cash
fl ows that are expected to be generated by the asset. Where this
assessment indicates a defi cit, the assets are written down to the
market value or fair value as computed above.
2.8 Licence Fees
(i) Licence Entry Fee
The Licence Entry Fee has been recognised as an intangible asset and is
amortised equally over the remainder of the licence period from the
date of commencement of commercial operations. Licence entry fees
includes interest on funding of licence entry fees, foreign exchange fl
uctuations on the loan taken upto the date of commencement of
commercial operations.
The carrying value of license entry fees are assessed for
recoverability by reference to the estimated future discounted net cash
fl ows that are expected to be generated by the asset. Where this
assessment indicates a defi cit, the assets are written down to the
market value or fair value as computed above.
(ii) Revenue Sharing Fee
Revenue Sharing Fee, currently computed at the prescribed rate of
Adjusted Gross Revenue (''AGR'') is expensed in the Statement of Profit
and Loss in the year in which the related income from providing unifi
ed access services and Internet Services are recognised.
An additional revenue share towards spectrum charges is computed at the
prescribed rate of the service revenue earned from the customers who
are provided services through the CDMA and GSM technology. This is
expensed in the Statement of Profit and Loss in the year in which the
related income is recognised.
2.9 Investments
Investments that are readily realisable and intended to be held for not
more than a year are classifi ed as current investments. All other
investments are classifi ed as long- term investments. Long term
investments are stated at cost. However, provision for diminution in
value is made to recognise a decline other than temporary in the value
of the investments. Current investments are carried at lower of cost
and fair value and determined on an individual investment basis.
2.10 Provisions
A provision is recognised when an enterprise has a present obligation
as a result of past event; it is probable that an outfl ow of resources
will be required to settle the obligation, in respect of which a
reliable estimate can be made. Provisions are not discounted to its
present value and are determined based on best estimate required to
settle the obligation at the balance sheet date. These are reviewed at
each balance sheet date and adjusted to refl ect the current best
estimates.
2.11 Revenue Recognition
Revenue from unifi ed access services are recognised on services
rendered and is net of rebates, discounts and service tax. Unbilled
revenues resulting from unifi ed access services provided from the
billing cycle date to the end of each month are estimated and recorded.
Revenues from unifi ed access services rendered through prepaid cards
are recognised based on actual usage by the customers. Billings made
but not expected to be collected, if any, are estimated by the
management and not recognised as revenues in accordance with Accounting
Standard on Revenue Recognition (''AS 9'').
Revenue on account of internet services and revenue from infrastructure
services are recognised as services are rendered, in accordance with
the terms of the related contracts.
2.12 Interconnection Usage Revenue and Charges
The TRAI issued Interconnection Usage Charges Regulation 2003 (''IUC
regime'') effective May 1, 2003 and subsequently amended the same twice
with effect from February 1, 2004 and February 1, 2005. Under the IUC
regime, with the objective of sharing of call revenues across different
operators involved in origination, transit and termination of every
call, the Company pays interconnection charges (prescribed as Rs per
minute of call time) for all outgoing calls originating in its network
to other operators, depending on the termination point of the call i.e.
mobile, fi xed line, and distance i.e. local, national long distance
and international long distance. The Company receives certain
interconnection charges from other operators for all calls terminating
in its network Accordingly, interconnect revenue are recognised on
those calls originating in another telecom operator network and
terminating in the Company''s network. Interconnect cost is recognised
as charges incurred on termination of calls originating from the
Company''s network and terminating on the network of other telecom
operators. The interconnect revenue and costs are recognised in the fi
nancial statement on a gross basis and included in service revenue and
network operation expenditure, respectively.
2.13 Foreign Currency Transactions
Initial Recognition
Foreign currency transactions are recorded in the reporting currency,
by applying to the foreign currency amount the exchange rate between
the reporting currency and the foreign currency at the date of the
transaction.
Conversion
Foreign currency monetary items are reported using the closing rate.
Non-monetary items which are carried in terms of historical cost
denominated in a foreign currency are reported using the exchange rate
at the date of the transaction; and non-monetary items which are
carried at fair value or other similar valuation denominated in a
foreign currency are reported using the exchange rates that existed
when the values were determined.
Exchange Differences
Exchange differences arising on the settlement or on reporting
Company''s monetary items at rates different from those at which they
were initially recorded during the year, or reported in previous fi
nancial statements, are recognised as income or as expenses in the
year.
2.14 Employee Benefits
Effective April 1, 2007, the Company has adopted the Revised Accounting
Standard - 15 ''Employee Benefits''. The relevant policies are:
Short Term Employee Benefits
Short term employee benefits are recognised in the period during which
the services have been rendered.
Long Term Employee Benefits
Provident Fund and employees'' state insurance schemes
All employees of the Company are entitled to receive benefits under
the Provident Fund, which is a defi ned contribution plan. Both the
employee and the employer make monthly contributions to the plan at a
predetermined rate (presently 12%) of the employees'' basic salary.
These contributions are made to the fund administered and managed by
the Government of India. In addition, some employees of the Company are
covered under the employees'' state insurance schemes, which are also
defi ned contribution schemes recognised and administered by the
Government of India.
The Company''s contributions to both these schemes are expensed in the
Statement of Profit and Loss. The Company has no further obligations
under these plans beyond its monthly contributions.
Leave Encashment
The Company has provided for the liability at period end on account of
unavailed earned leave as per the actuarial valuation as per the
Projected Unit Credit Method.
Gratuity
The Company provides for gratuity obligations through a defi ned benefi
t retirement plan (the ''Gratuity Plan'') covering all employees. The
Gratuity Plan provides a lump sum payment to vested employees at
retirement or termination of employment based on the respective
employee salary and years of employment with the Company. The Company
provides for the Gratuity Plan based on actuarial valuation in
accordance with Accounting Standard 15 (revised), "Employee Benefits "
The Company makes annual contributions to the LIC for the Gratuity Plan
in respect of employees. The present value of obligation under gratuity
is determined based on actuarial valuation at period end using Project
Unit Credit Method, which recognizes each period of service as giving
rise to additional unit of employee benefit entitlement and measures
each unit separately to build up the fi nal obligation.
a) Short term compensated absences are provided for on based on
estimates.
b) Actuarial gains and losses are recognised as and when incurred
2.15 Taxation
Tax expense comprises of current, deferred and fringe benefit tax.
Current income tax and fringe benefit tax is measured at the amount
expected to be paid to the tax authorities in accordance with the
Indian Income Tax Act. Deferred income taxes refl ects the impact of
current year timing differences between taxable income and accounting
income for the year and reversal of timing differences of earlier
years.
Deferred tax is measured based on the tax rates and the tax laws
enacted or substantively enacted at the balance sheet date. Deferred
tax assets are recognised only to the extent that there is reasonable
certainty that suffi cient future taxable income will be available
against which such deferred tax assets can be realised. If the Company
has carry forward of unabsorbed depreciation and tax losses, deferred
tax assets are recognised only if there is virtual certainty supported
by convincing evidence that such deferred tax assets can be realised
against future taxable profits. Unrecognised deferred tax assets of
earlier years are re-assessed and recognised to the extent that it has
become reasonably certain or virtually certain, as the case may be,
that future taxable income will be available against which such
deferred tax assets can be realised.
2.16 Operating Leases
Where the Company is the lessee
Leases of assets under which the lessor effectively retains all the
risks and rewards of ownership are classifi ed as operating leases.
Lease payments under operating leases are recognised as an expense on a
straight-line basis over the lease term.
Where the Company is the lessor
Assets subject to operating leases are included in fi xed assets. Lease
income is recognised in the Statement of Profit and Loss on a
straight-line basis over the lease term. Costs, including depreciation
are recognised as an expense in the Statement of Profit and Loss.
Initial direct costs such as legal costs, brokerage costs, etc. are
recognised immediately in the Statement of Profit and Loss.
2.17 Earning Per Share
Basic earning per share is calculated by dividing the net profit for
the year attributable to equity shareholders by the weighted average
number of equity shares outstanding during the year.
For calculating diluted earning per share, the number of shares
comprises the weighted average shares considered for deriving basic
earning per share, and also the weighted average number of shares, if
any which would have been used in the conversion of all dilutive
potential equity shares. The number of shares and potentially dilutive
equity shares are adjusted for the bonus shares and the sub-division of
shares, if any.
2.18 Segment Reporting
Identifi cation of segments:
The primary reporting of the Company has been performed on the basis of
business segments. The analysis of geographical segments is based on
the areas in which the Company''s products are sold or services are
rendered.
Allocation of common costs:
Common allocable costs are allocated to each segment according to the
relative contribution of each segment to the total common costs.
Unallocated items:
The Corporate and other segment include general corporate income and
expense items, which are not allocated to any business segment.
2.19 Cash & Cash Equivalents
Cash & cash equivalents in the Balance Sheet comprise cash in hand and
at bank.
NOTE 27: NOTES FORMING PART OF THE FINANCIAL STATEMENTS
(1). Commitments and contingent liabilities not provided for in respect
of:
(a) The Company has certain income tax related matters pending with
Income Tax Appellate Tribunal for the Assessment Year 2001-02
aggregating to Rs 7,004,687 as Principal amount and Interest amount of
Rs. 7,354,921 (March 31, 2013 Â Rs 7,004,687 as Principal amount and
Interest amount of Rs 6,514,359).
(b) The Wireless Finance Division of Department of Telecommunications
has claimed an outstanding of Rs 29,585,211 towards the Spectrum
Charges dues from year 2001 to year 2005 vide their letter
1020/48/2005- WFD dated October 7, 2005. The Company has submitted its
reply to the department on October 25, 2005 confi rming the total due
of Rs 29,472 only and paid the said amount. The Wireless Finance
Division of Department of Telecommunications has subsequently claimed
Rs 39,310,176 vide letter number 1020/48/2005-WFD dated September 13,
2006 towards the Spectrum Charges dues from year 2001 to year 2006. The
Company has submitted a detailed reply on October 31, 2006. During the
year ended March 31, 2008, out of the above demand, the Company has
deposited Rs 1,801,241 under protest towards the interest due till
August 31, 2006. Wireless Finance Division of Department of
Telecommunications has updated their claim to Rs 70,604,092 towards
Spectrum Charges dues from January 1, 2000 to September 30, 2008 vide
letter number 1020/29/WR/07-08 dated October 24, 2008. The Company has
once again made a written representation vide its letter dated December
8, 2008 and August 12,
2009. Subsequently DOT has revised their demand to Rs 70,528,239 vide
Letter No 1020/48/WFD/2005-06/ Dated September 6, 2010 to which the
Company has made representations vide letter dated September 23,
2010, February 3, 2011 and March 17, 2011. Subsequently DOT has revised
their demand to Rs 149,960,749 vide Letter No 1020/48/WFD/2005-06/
Dated January 3, 2013 to which the Company has made representations
vide letter dated January 18, 2013. The reply of which has not been
received. Based on the legal opinion, the Company is confi dent that no
liability would accrue regarding the same in future.
(c) During the year ended March 31, 2007, Bharat Sanchar Nigam Limited
(''BSNL'') has raised supplementary bill dated August 10, 2006 for Rs
167,614,241 towards Inter-connect Usage Charges (''IUC'') and Access Defi
cit Charges (''ADC'') for the period November 14, 2004 to August 31, 2005
on the Company. BSNL further raised invoices to the tune of Rs
99,346,533 on similar grounds for the period September 1, 2005 to
February 28, 2006. These charges are on account of unilateral
declaration of the Company''s Fixed Wireless and Wire line Phone
services as Limited Mobility Services by BSNL. The Company has
submitted its reply to BSNL on August 23, 2006 asking for the
calculation/basis for the additional amount raised towards IUC and ADC
by BSNL for Rs 167,614,241. Subsequently, BSNL issued a disconnection
notice on August 26, 2006 which required the payment of Rs 208,236,569
(including Rs 167,614,241). The Company has submitted details to BSNL
for payments already made for Rs 40,622,328. The Company has
approached Hon''ble TDSAT on the subject matter and a stay order was
granted on Company''s petition no 232 of 2006 against the disconnection
notice on September 21, 2006. BSNL Jalandhar Office subsequently
raised a supplementary bill dated March 20, 2007 for Rs 5,206,780, to
which the Company has submitted its reply on March 23, 2007 intimating
that the matter being sub- judice and pending decision by the Hon''ble
TDSAT, no coercive action be taken against the Company. The hearing on
the matter has been completed and the Hon''ble TDSAT has pronounced the
judgment on May 21, 2010 in Company''s favour and has directed that BSNL
and the Company should exchange relevant information and reconcile the
differences. In the absence of information from BSNL, the Company is
not in a position to determine the liability with respect to this
matter. The Company, based on expert legal opinion, believes that there
would be no financial liability against such bills and accordingly,
has not recorded any liability towards the IUC and ADC supplementary
bills during the year ended March 31, 2014.
(d) The Company is in receipt of Show Cause Notice dated June 4, 2007
from Department of Telecommunications (''DoT'') for non fulfi lment of fi
rst year''s roll-out obligations of Unifi ed Access Service License
(''UASL'') Agreement for Punjab Service Area, where in the licensee as
per the terms of the license agreement was required to ensure that at
least 10% of the District Headquarter / Towns are covered in the fi rst
year of the date of migration to UASL which commences from the date of
Test certificate issued by Telecom Engineering Centre (''TEC''). As
stated by DoT in the Show Cause Notice issued, the Company has violated
the conditions of UASL and accordingly Liquidated Damages of Rs
70,000,000 has been imposed and DoT has also sought explanation within
21 days as to why they should not take action against the Company under
the UASL Agreement to which the Company has replied on September 27,
2007 that the Company has not violated the conditions of UASL and based
on expert legal advice, the Company believes that there would be no fi
nancial liability against such claims of DoT and accordingly, has not
recorded any liability towards the Liquidated Damages during the year
ended March 31, 2014.
(e) The Company is in receipt of a demand of Rs 433,158,340 from Bharat
Sanchar Nigam Limited (''BSNL'') on December 20, 2008 on account of
unilateral revision of access charges vide its letter dated April 28,
2001 for the period from June 2001 to May 2003, in contravention of the
Interconnect Agreement and TRAI Regulations. The Company, Association
of Unifi ed Service Providers of India ''AUSPI'' (erstwhile Association
of Basic Telephone Operators ''ABTO'') and other Basic Service Operators
contested aforesaid revision in the rates of access charges before
Telecom Dispute Settlement Appellate Tribunal (''TDSAT''). TDSAT vide its
reasoned and detailed judgement dated April 27, 2005 allowed the refund
claims and struck down the unilateral revision in the rates of access
charges by BSNL and held that Telecom Regulatory Authority of India
(''TRAI'') is the fi nal authority for fi xing of access charges and
access charges would be payable as rates prescribed by the TRAI and as
per the Interconnect agreements. BSNL preferred an appeal in Hon''ble
Supreme Court against the order of TDSAT and an interim stay was
granted on October 19, 2006 Therefore aggrieved by such unilateral
action on the part of BSNL by raising aforesaid demand and disturbing
the status-quo, applications were moved by the Company, AUSPI and other
Operators in the Hon''ble Supreme Court vide C.A No.5834-5836 of 2005
that was listed for hearing on February 9, 2009 and Hon''ble Supreme
Court passed an order clarifying its previous order of October 19, 2006
and stayed the refunds claim against the BSNL there by upholding the
TDSAT order dated April 27, 2005 whereby BSNL is refrained from raising
the access charges demand. The Company based on the legal opinion
believes that there would be no financial liability against this
demand and has accordingly not recorded any liability towards access
charges during the year ended March 31, 2014.
(f) The Company is in receipt of demand of Rs. 7,000,000 from
Department of Telecommunications (''DoT''), Licensing Group (Access
Services) vide their letter dated October 21, 2009 for issuance of SIM
cards on fake ID in Punjab Service Area, where in the Licensee was
required to ensure adequate verifi cation of each and every customer
before enrolling him as a subscriber. The Company has replied to DoT
vide letter dated November 14, 2009 that the levy of penalty imposed by
DoT was based on verifi cation done by an agency other than the DOT Â
TERM Cells and the exercise was carried out suo moto and in complete
disregard of the established procedures and guidelines laid by DoT.
Accordingly the Company has requested DoT to have this validation done
by the DOT Â TERM Cell. The Company believes that there would be no fi
nancial liability against this demand and has accordingly not recorded
any liability towards penalty during the year ended March 31, 2014.
(g) As per The Telecommunication Interconnect Usage Charges Regulations
2003, had fi xed intra circle carriage charges payable per minute for
all intra circle calls irrespective of the distance between originating
and terminating points. Bharat Sanchar Nigam Limited (''BSNL'') was
charging additional amounts based on distance for the period October
2007 to March 2009 which was against the telecommunication Interconnect
Usage Charges Regulations 2003 of TRAI. The matter was raised to
Hon''ble TDSAT by service providers to which Hon''ble TDSAT vide it''s
order dated May 21, 2010 upheld the demand of BSNL. The liability of
the Company on basis of BSNL demand amounted to Rs 4,110,959.
Subsequently TRAI appealed against the order of TDSAT in the Hon''ble
Supreme Court. The matter is sub-judice and the fi nal decision of the
Hon''ble Supreme Court in the matter is still awaited.
(h) The Company is in receipt of a Show Cause Notice amounting to Rs
1,020,00,000 dated May 17, 2013 from Department of Telecommunications
(''DOT'') purportedly for the alleged non-compliance of the Electro
Magnetic Frequency Radiation Norms (''EMF Radiation Norms'') prescribed
by DOT in terms of DoT Circular dated 11.10.2012. The Company on May
21, 2013 has represented to DOT that the Company is not only ''fully
compliant'' with the specifi ed limits of the EMF Radiation Norms but
that the Company has also duly submitted the ''Self Certifi cations'' in
respect of all the 204 Base Transceiver Stations (''BTSs'') set up in the
Punjab Telecom Circle as mentioned in the Show Cause Notice well -
within the stipulated last date of March 31, 2011 as prescribed by DOT.
Further, since the company''s representation was rejected by the DoT,
the Company has fi led a Petition before the Hon''ble TDSAT vide Petion
No. 294 of 2013 which has been duly admitted by the Hon''ble TDSAT and
interim protection granted to the company against any coercive
action/steps by DoT under the EMF Norms. DoT has also fi led its reply
in the matter on December 6, 2013 and currently the matter is
sub-judice and the fi nal decision of the Hon''ble TDSAT is awaited. The
matter has been clubbed for being heard together with the similar
Petition No. 271 which has been fi led by the COAI on behalf of the
members on issues pertaining to EMF norms.
The Company is hopeful that no liability would arise on account of the
demand received by the company from DoT or the TERM Cell in this regard
and that the same would be set aside by the Hon''ble TDSAT.
However, the DOT (TERM Cell) Punjab has issued another Show Cause
Notice to the company making a demand for Rs. 3,23,500,000 DOT vide
letter number 8-8/EMR-QTL/TERM-PB/2013/15C dated December 30, 2013,
wherein the TERM Cell, Punjab has imposed a penalty for alleged non
compliance of Emission Magnetic Frequency (''EMF'') radiation norms with
respect to 647 Base Transreceiver Stations (''BTSs'') as per list
attached with the said letter, in terms of the Unifi ed Access Services
(''UAS'') License granted to the company. The Company has since
submitted its response to the TERM Cell vide letter dated January 8,
2014, wherein the Company clearly stated that it has duly complied with
all the obligations under the UAS License, including the compliance
with various guidelines issued by DOT from time to time. We are waiting
for the reply from DOT (TERM-Cell)/Punjab
(i) The Company is in receipt of a Show Cause Notice for assessment of
annual licence fees from Department of Telecommunications (''DOT'')
purportedly for disallowance of deductions claimed in audited AGR for
the year 2007-08 amounting to Rs 70,870,158 vide letter no.
17-89/2013/LF-II-HFCL dated September 23, 2013, for the year 2008-09
amounting to Rs 43,355,118 vide letter no. 17-90/2013/LF-II-HFCL dated
September 24, 2013, for the year 2009-10 amounting to Rs 33,397,359
vide letter no. 17-91/2013/LF-II-HFCL dated September 24, 2013, for the
year 2010-11 amounting to Rs 12,713,140 vide letter no.
17-92/2013/LF-II-HFCL dated September 26, 2013. The Company has made a
written representations for the year 2007-08 vide its letter no
QTL/Reg/06-11/08 dated November 29, 2013, for the year 2008-09 vide its
letter no QTL/Reg/06-11/07 dated November 20, 2013, for the year
2009-10 vide its letter no QTL/Reg/06-11/06 dated November 08, 2013,
for the year 2010-11 vide its letter no QTL/Reg/06-11/03 dated October
30, 2013. The Company is confi dent that no liability would accrue
regarding the same in future.
The above managerial remuneration does not include provision of
gratuity of Rs 479,795 (March 31, 2013 Â Rs 412,123) and leave
encashment of Rs 649,554 (March 31, 2013 Â Rs 607,379)as these
provisions are computed on the basis of an actuarial valuation done for
the Company and are provided in the financials.
Value of perquisites and other allowances has been determined in
accordance with the provision of the Income-tax Act, 1961.
(7). Share Capital
(a) As of date, the entire paid up Equity Share Capital of the company
comprising of 612,260,268 equity shares of Rs 10 each, stands listed on
the Bombay Stock Exchange (BSE) Consequent upon the issuance of
86,743,116 equity shares allotted pursuant to the conversion of
7,551,178 OFCDs along with interest accrued thereon to the Financial
Institution /Banks on July 8, 2009, the non-promoter shareholding in
the Company increased from 38.02% to 46.80%, and the Promoters''
Shareholding decreased from 61.97% to 53.19%, whereupon the Company
requested BSE to grant listing of unlisted shares without insisting
upon the stipulation of the condition for ''Offer for Sale. BSE, vide
its letter DCS / AMAL / RCG/ GEN / 1108 / 2008- 09 dated February 13,
2009, inter-alia, agreed to exempt the condition imposed on the Company
to comply with requirement of making an offer for sale in the domestic
market, subject to compliance of certain procedural requirements
including ''three years lock-in'' period of 25% of equity shares that had
been issued pursuant to the merger on June 17, 2003 i.e. 25% of
432,000,250 shares (108,000,063 equity shares). The Company had - in
compliance with the conditions stipulated by BSE - placed under lock-in
108,000,063 equity shares on May 14, 2009 for a period of 3 years
ending May 15, 2012. The Company has also complied with all other
necessary requirements pursuant to the letter from BSE dated February
13, 2009 related to 83,070,088 equity shares issued pursuant to
corporate debt restructuring scheme. BSE had also agreed to grant
in-principle approval for allotment of 86,743,116 equity shares to be
issued to Banks and financial institutions on conversion upon fi ling
of necessary listing application, which the Company has fi led, vide
its letter no. HITL/S&L/S-01/09/472 and 473 dated March 07, 2009.
Consequently, vide their notice 20090514-12 dated May 14, 2009 hosted
on it''s website BSE had granted Listing and Trading permission in
respect of the 432,000,250 equity shares issued pursuant to scheme of
amalgamation. BSE had also granted Listing approval in respect of the
83,070,088 equity shares allotted as aforesaid vide their letter number
DCS/PREF/DMN/ FIP/239/09-10 dated May 25, 2009 and the shares were
Listed by BSE vide its notice number 20090605-20 dated June 5, 2009.
(b) Out of the total paid up equity share capital comprising of
612,260,268 equity shares of Rs 10 each, 86,743,116 equity shares of
Rs.10/- each (allotted on July 08, 2009, after obtaining in principle
approval from the BSE and MSE. upon the conversion of Optionally Fully
Convertible Debentures (OFCDs) allotted pursuant to the Corporate Debt
Restructuring (CDR Cell) Consequently, the Listing approval in respect
of these shares was granted by Bombay Stock Exchange (BSE) vide its
letter number 20090813-08 dated August 13, 2009 w.e.f. August 14, 2009
and by the Madras Stock Exchange Limited vide its letter
no.MSE/LD/PSK/738/215/09 dated September 01, 2009 w.e.f. September 01,
2009.
Out of the total paid up equity share capital comprising of 612,260,268
equity shares of Rs 10 each, 326,705,000 equity shares of Rs.10/- each
representing 53.3604% of the total Paid up share capital of the Company
 which were earlier held by Himachal Futuristic Communications Limited
 the erstwhile promoter or Holding Company), were acquired by M/s
Quadrant Enterprises Private Limited on 03rd April, 2010 in compliance
with the SEBI Exemption Order in pursuance of the proposal for
settlement / change of management of the Company approved under the New
Restructuring Scheme as approved by the Corporate Debt Restructuring
Cell (CDR Cell) on August 13, 2009.
(c) Pursuant to the Company''s application in this regard, for Voluntary
Delisting pursuant to the provisions of regulation 6(a) and 7(1) of the
Securities and Exchange Board of India (Delisting of Equity Shares)
Regulation, 2009, the Madras Stock Exchange (MSE), MSE has vide its
letter dated March 15, 2011, accepted and accorded its consent to the
Voluntary Delisting of the Company''s shares vide its letter No.
MSE/LD/PSK/731/109/11 dated 15th March, 2011 accepting the Voluntary
delisting of the company''s equity shares from the MSE.
(d) Pursuant to the stipulation of CDR package dated August 13, 2009
with respect to Reduction of Issued, Subscribed & Paid up Equity Share
Capital wherein the face value of the Paid Up Equity Shares would be
reduced to Re. 1 per equity share from the existing face value of Rs.
10 per equity share, i.e. reduction in face value of Issued, Subscribed
& Paid up Equity Share Capital by 90%. The Company had obtained the
approval of shareholders for Reduction of Equity Share Capital in the
Extra Ordinary General Meeting held on July 18, 2012, subject to confi
rmation by Bombay Stock Exchange ''BSE'' and the Hon''ble Bombay High
Court. Subsequently, BSE vide its letter number DCS/AMAL/
RT/24(f)/295/2013-14 dated October 23, 2013 conveyed it''s No Objection
certificate ''NOC'' to fi le the scheme for Reduction of Equity Share
Capital with the Hon''ble Bombay High Court. Accordingly, the Company
has fi led the Reduction of Equity Share Capital Petition with Hon''ble
Bombay High Court on March 20, 2014. The matter is under consideration
of the Hon''ble Bombay High Court.
(8). Secured Loans
(a) As per the CDR Scheme approved on March 10, 2004 and subsequently
approved on June 4, 2005, the Lenders have signed Master Restructuring
Agreement (''MRA'') for restructuring of their Debts and Security
Trusteeship Agreement, whereby the Lenders have entered into an
agreement and appointed IDBI Trusteeship Services Limited (herein after
referred as "ITSL") as their custodian of security. On November 11,
2005, the charges were registered in favour of the ITSL for Rupee Term
Loans, for providing Specifi c Credit Facility, for Working Capital
Assistance and Zero percent Secured
OFCDs. The same are secured by fi rst pari passu charge on immovable
properties of the Company situated at Kandivali (East), Mumbai and
properties situated at Mohali & Jalandhar under equitable mortgage, fi
rst pari passu charge of hypothecation of movable properties of the
Company including movable plant & machinery, machinery spares, tools &
accessories and other movables including book debts by way of
hypothecation, both present and future. Further, the same are also
secured by assignment of all rights, title, benefits, claims and
interest in, under the project documents, insurance policies, all
statutory, government and regulatory approvals, permissions, exemptions
and waivers on pari passu basis. Subsequently, pursuant to the reworked
restructuring scheme approved under CDR mechanism on June 24, 2005, the
Company has entered into amendatory Master Restructuring Agreement and
amendatory Security Trusteeship Agreement (''STA'') on March 9, 2006,
whereby Centurion Bank of Punjab has also joined as one of the lenders
and has agreed to appoint ITSL as their custodian for security and
signed the STA in line with other lenders in consortium.
On the request of the Company, Corporate Debt Restructuring Cell
(''CDR'') vide their letter no CDR (JCP) No 138 / 2009-10 (''CDR Letter'')
dated May 20, 2009 has approved the interim revised restructuring
package. The revised restructuring package inter alia includes funding
of interest from July 1, 2008 to October 31, 2009 on simple interest
basis. Funded Interest on Term Loan (''FITL'') would not carry any
interest and the FITL shall be repaid in 16 equal monthly installments
commencing from December 1, 2009, and has rescheduled the principle
installments from August 1, 2008 to November 1, 2009 so as to be
repayable from December 1, 2009 to March 1, 2011. Corporate Debt
Restructuring (''CDR'') cell vide their letter no CDR (JCP) No 563 /
2009-10 dated August 13, 2009 has approved a new restructuring scheme,
which includes the induction of strategic investor / change of
management and settlement proposal for Term Lenders. All the term
lenders have given their acceptance to the new restructuring scheme.
The new restructuring scheme has been made effective from April 1, 2009
and accordingly an amount of Rs 373,097,077 towards FITL from July 1,
2008 to March 31, 2009 has been considered as term loan.
In pursuant to the new restructuring scheme vide letter no. CDR (JCP)
No 563 / 2009-10 dated August 13, 2009, The Company had allotted
15,984,543, 2 % Cumulative Redeemable Preference Shares of Rs.100 each
aggregating to Rs.1,598,454,300 on November 9, 2010, to Financial
Institution / Banks in conversion of 25% of their outstanding loans as
on April 01, 2009.
In compliance with the aforesaid new restructuring scheme dated August
13, 2009 the Company had repaid on July 06, 2010 and July 07, 2010 an
amount of Rs 1,598,454,522 being 25% of their outstanding loans as on
April 01, 2009
In compliance with the aforesaid new restructuring scheme dated August
13, 2009, the Company had allotted 31,969,088 Redeemable Secured Non
Convertible Debenture (''NCD'') of Rs.100 each aggregating to
Rs.3,196,908,800 on January 21,2013, to Financial Institution / Banks
in conversion of 50% of their outstanding loans as on April 01, 2009.
The Company has compiled the most of the terms and conditions of
Corporate Debt Restructuring Scheme as approved by the CDR Cell letter
dated August 13,2009 and the Company is in process of Reduction of
Equity Share Capital as referred to note 27 (7) (d)
(b) The above mentioned security has been further extended to the
amount of secured loans and working capital assistance, together with
the interest, compound interest, additional interest, default interest,
costs, charges, expenses and any other monies payable by the Company in
relation thereto and in terms with MRA and STA entered into between the
lenders and ITSL.
(9). Unsecured Loans
(a) On October 16, 2004, the Company issued 1,667,761 zero percent Non
Convertible Debentures (''NCDs'') of Rs 100 each in lieu of interest
accrued on term loans from a financial institution and a bank for the
period April 1, 2003 to December 31, 2003. The NCDs earlier redeemable
at par on March 31, 2014, are now redeemable at par on March 31, 2016
after repayment of the term loans as per reworked restructuring scheme
effective from April 1, 2005.
(b) The Company under the terms of the agreement dated May 1, 2007 had
taken convertible loan to facilitate expansion and development of
businesses amounting to Rs 499,499,886 from Infotel Digicomm Private
Limited. The convertible loan was repayable on demand with an option
to convert the Loan into Equity Shares, subject to getting necessary
approvals and subject to applicable pricing guidelines as per SEBI and
other laws and regulations. On September 16, 2009 Infotel Digicomm
Private Limited (''IDPL'') had entered into an assignment agreement with
Domebell Electronics India Private Limited (''DEIPL''), wherein IDPL had
assigned the above convertible loan of Rs 499,499,886 to DEIPL. All
the terms and conditions relating to the convertible loan remained the
same. The interest accrues at the end of each quarter. During the year
ended March 31, 2010 the Company has provided for interest amounting to
Rs 14,984,997 @ 12% to IDIPL for the three months ended June 30, 2009.
DEIPL on the basis of the assignment agreement dated September 16, 2009
has a right on the interest accruing from July 1, 2009 onwards. DEIPL
have agreed to waive off the interest from July 1, 2009 till March 31,
2014, therefore no provision for such interest has been made by the
Company. Consequent to the addendum to the assignment agreement, the
convertible loan from DEIPL is now repayable after 7 years from the
date of assignment agreement dated September 16, 2009.
(c) The Company under the terms of the agreement dated May 1, 2007 had
taken buyer''s credit facility to facilitate funding of the telecom
project amounting to Rs 410,740,832 from Infotel Business Solutions
Limited. The loan carries 12% interest and was repayable on demand.
Infotel Business Solutions Limited had the option to convert the loan
including interest accrued into equity shares, subject to applicable
pricing guidelines as per SEBI and other laws and regulations. On
September 16, 2009 Infotel Business Solutions Limited (''IBSL'') has
entered into an assignment agreement with Domebell Electronics India
Private Limited (''DEIPL''), wherein IBSL has assigned the above buyer''s
credit facility of Rs 410,700,000 to DEIPL. All the terms and
conditions relating to the buyer''s credit facility remained the same.
The interest accrues at the end of each quarter. During the year ended
March 31, 2010 the Company has provided for interest amounting to Rs
12,322,225 @ 12% to IBSL for the three months ended June 30, 2009. and
accordingly DEIPL on the basis of the assignment agreement dated
September 16, 2009 has a right on the interest accruing from July 1,
2009 onwards DEIPL has agreed to waive off the interest from July 1,
2009 till March 31, 2014, therefore no provision for such interest has
been made by the Company. Consequent to the addendum to the assignment
agreement, the convertible loan from DEIPL is now repayable after 7
years from the date of assignment agreement dated September 16, 2009.
(d) The Company had taken an unsecured loan on July 06, 2010 of
Rs.1,598,500,000 @ 8% per annum, the interest accrues at the end of
each quarter. The lender has agreed to waive off the interest from July
06, 2010 to March 31, 2014, therefore no provision for said interest
has been made by the Company. The aforesaid unsecured loan is repayable
on demand after 7 years from the commencement of the unsecured loan.
(10). Fixed Assets and Capital work-in-progress
(a) Capital Work in Progress includes Goods in Transit of Rs. Nil
(March 31, 2013 Rs Nil)
(b) As on March 31,2014 telephone instruments aggregating to a net book
value of Rs 109,135,698 (March 31, 2013 Â Rs 79,675,183) and other
assets aggregating to net book value of Rs 1,018,995,267 (March 31,
2013 Â Rs 1,029,215,214 ) are located at customer premises, other
parties and at other operator''s sites, respectively.
(11). Inventory for Network Maintenance
The Company holds inventory of network maintenance consumables and RUIM
cards amounting to Rs 21,731,869 (March 31, 2013 Â Rs 16,942,837). The
quantity and valuation of inventory is taken as verifi ed, valued and
certifi ed by the management.
(12). Deferred Taxes
During the year , the Company has incurred losses of Rs 2,611,608,163
(accumulated losses of Rs 19,397,027,202) resulting into a tax loss
carry forward situation. The Company is eligible for a tax holiday
under section 80IA of the Income-tax Act, 1961. Though the management
is confi dent of generating profits in the future, there is currently
no convincing evidence of virtual certainty that the Company would
reverse the tax loss carry forwards beyond the tax holiday period.
Accordingly, the Company has not recognized any deferred tax assets
resulting from the carry forward tax losses. Further, no deferred tax
liabilities on account of temporary timing differences have been
recognized since they are expected to reverse in the tax holiday
period.
(13). Trade Payables include amount payable to Micro and Small
Enterprises as at March 31, 2014 of Rs 337,208 (March 31, 2013 Â Rs
816,620). The information as required to be disclosed under the Micro,
Small and Medium Enterprises Development Act, 2006 has been determined
to the extent such parties have been identifi ed on the basis of
information and records available with the Company.
(14). The Company had received advance of Rs 6,846,046,047 (March 31,
2013 Rs. 4,955,927,643) to fund the entry fee for using GSM Technology
under the existing Unifi ed Access Services License (UASL) and business
operations for Punjab Service Area. The same is included in Other
Current Liabilities. No interest is payable on the said advance.
(16). Operating leases A. Company as a Lessee
(a) The Company has entered into various cancelable lease agreements
for leased premises. Gross rental expenses for the year ended March 31,
2014 is Rs 74,465,642 (March 31, 2013 Â Rs 67,334,772).
(b) The Company has entered into site sharing agreements with other
operators for sharing of their infrastructure sites. During the year,
the Company has incurred Rs 540,809,201 (March 31, 2013 Â Rs
452,541,058) towards infrastructure sharing expenses.
The escalation clause includes escalation at various periodic levels
ranging from 0 to 50%, includes option of renewal from 1 to 99 years
and there are no restrictions imposed on lease arrangements.
B. Company as a Lessor
The Company has entered into cancellable site sharing agreements with
other operators for sharing of its infrastructure sites. During the
year, the Company has accrued Rs 13,299,070 (March 31, 2013 Â Rs
9,710,199) towards site sharing revenue.
The Company has entered into a non-cancellable lease arrangement to
provide approximately 8,357.42 Fiber pair kilometers of dark fi ber on
indefeasible right of use (IRU) basis for a period of 15 years. The
gross block, accumulated depreciation and depreciation expense of the
assets given on IRU basis is not readily determinable and hence not
disclosed. In respect of such leases, rental income of Rs
51,380,540(March 31, 2013Â Rs 48,304,476) has been recognized in the
Statement of Profit and Loss for the period ended March 31, 2014.
(17). Segmental Reporting
The primary reporting of the Company has been performed on the basis of
business segments. The Company has only one business segment, which is
provision of unifi ed telephony services. Accordingly, the amounts
appearing in these financial statements relate to this primary
business segment. Further, the Company provides services only in the
State of Punjab (including Chandigarh and Panchkula) and, accordingly,
no disclosures are required under secondary segment reporting.
(18). Related Party Disclosures
As required under Accounting Standard 18 on "Related Party
Disclosures", the disclosure of transactions with related parties as
defi ned in the Accounting Standard are given below:
(19). Unclaimed deposits from public
During the year ended March 31, 2004, the Company surrendered its
licence granted by Reserve Bank of India (''RBI'') to carry out NBFC
business. Accordingly, the Company foreclosed all the unpaid /
unclaimed deposits as on September 15, 2003 and the interest accruing
thereon as on that date, and the same have been transferred to the
Escrow Account in February 2004. On August 10, 2004, the Company has
obtained the approval of the shareholders for the removal of NBFC
related objects from the Memorandum of Association. Further, the
Company submitted a letter dated July 7, 2004 for compliance and RBI
vide its letter dated July 30, 2004 gave some concessions from
compliance and has advised the Company to follow certain instructions
till the balance in the escrow account is settled. The accompanying fi
nancial statements include the following account balances relating to
the NBFC business whose licence granted by RBI was surrendered during
the year ended March 31, 2004:
(20). Debenture redemption reserve
Pursuant to the CDR scheme on October 16, 2004, the Company had issued
unsecured Zero% Non Convertible Debenture (''NCD'') (Erstwhile OFCDs)
aggregating to Rs 166,776,100 repayable as on March 31, 2016. Pursuant
to the new restructuring scheme dated August 13,2009 the Company has to
allot secured Non Convertible Debenture (''NCD'') for Rs 3,196,909,043 to
Financial institution and Banks equivalent to 50% of their outstanding
loans as on April 01,2009 which shall be issued on completion of such
approvals and conditions precedent. As per section 117C (1) of the
Companies Act, 1956, a debenture redemption reserve (''DRR'') is to be
created to which adequate amounts are to be credited out of the profi
ts of each year until such debentures are redeemed.
During the year ended March 31, 2014, the Company has incurred loss of
Rs 2,611,608,163. Hence, in accordance with the clarifi cation received
from the Department of Company Affairs vide circular No 6/3/2001-CL.V
dated April 18, 2002, the Company has not created Debenture redemption
reserve.
Defined Benefit Plans
The employee''s gratuity fund scheme managed by Life Insurance
Corporation of India and ICICI Lombard General Insurance Company
Limited is a defi ned benefit plan and the same is 100% funded. The
present value of obligation is determined based on actuarial valuation
using Project Unit Credit Method, which recognizes each period of
service as giving rise to additional unit of employee benefit
entitlement and measures each unit separately to build up the fi nal
obligation. The obligation for leave encashment is recognised in the
same manner as gratuity.
Experience adjustments are Nil and have not been disclosed as required
under para 120 of Accounting Standard 15 relating to Employee benefi
ts.
d) The expected rate of return on plan assets was based on the average
long-term rate of return expected to prevail over the next 15 to 20
years on the investments made by the LIC. This was based on the
historical returns suitably adjusted for movements in long-term
government bond interest rates. The discount rate is based on the
average yield on government bonds of 20 years.
e) The Company made annual contributions to the LIC of an amount
advised by the LIC. The Company was not informed by LIC of the
investments made by the LIC or the break-down of plan assets by
investment type.
f) The estimates of rate of escalation in salary considered in
actuarial valuation, taken into account infl ation, seniority,
promotion and other relevant factors including demand and supply in the
employment market. The above information is certified by the actuary.
Mar 31, 2013
1.1 Basis of preparation of Financial Statements
The financial statements have been prepared to comply in all material
respects with the notified accounting standards by Companies
(Accounting Standards) Rules, 2006 (''as amended''), and the relevant
provisions of the Companies Act, 1956. The preparation of financial
statements is in conformity with the Generally Accepted Accounting
Principals. The financial statements have been prepared under the
historical cost convention on an accrual basis of accounting. The
accounting policies have been consistently applied by the Company and
are consistent with those used in the previous year. The significant
accounting policies are as follows:
1.2 Fixed Assets
Fixed assets are stated at cost (net of cenvat credit if availed) less
impairment loss, if any, and accumulated depreciation. The Company
capitalises direct costs including taxes (excluding cenvat), duty,
freight and incidental expenses directly attributable to the
acquisition and installation of fixed assets. Capital work- in-progress
is stated at cost.
Telephone instruments having useful life lying with deactivated
customers for more than 90 days since disconnection are written off.
1.3 Inventory
Inventory is valued at cost or net realisable value which ever is low.
Cost for the purchase is calculated on FIFO basis
1.4 Depreciation
Depreciation is provided pro-rata to the period of use (except for
Telephone Instruments, being ready for use are depreciated from the
beginning of the month, following the month of purchase), on the
straight line method based on the estimated useful life of the assets,
as follows:
(i) Depreciation rates derived from the above are not less than the
rates prescribed under Schedule XIV of the Companies Act, 1956.
(ii) Depreciation on the amount capitalized on up-gradation of the
existing assets is provided over the balance life of the original
asset.
(iii) Depreciation on the amount capitalised till March 31, 2007 on
account of foreign exchange fluctuations is provided over the balance
life of the original asset.
1.5 Borrowing Costs
Borrowing costs that are attributable to the acquisition and
construction of a qualifying asset are capitalised as a part of the
cost of the asset. Other borrowing costs are recognised as an expense
in the year in which they are incurred.
1.6 Impairment
The carrying amounts of assets are reviewed at each balance sheet date
if there is any indication of impairment based on internal/external
factors. An impairment loss is recognised wherever the carrying amount
of an asset exceeds its recoverable amount. The recoverable amount is
the greater of the assets net selling price and value in use. In
assessing value in use, the estimated future cash flows are discounted
to their present value at the weighted average cost of capital. After
impairment, depreciation is provided on the revised carrying amount of
the assets over its remaining useful life.
A previously recognised impairment loss is increased or reversed
depending on changes in circumstances. However the carrying value
after reversal is not increased beyond the carrying value that would
have prevailed by charging usual depreciation if there was no
impairment.
1.7 Intangibles
All expenditure'' on intangible items are expensed as incurred unless it
qualifies as an intangible asset as defined in Accounting Standard 26.
The carrying value of intangible assets is assessed for recoverability
by reference to the estimated future discounted net cash flows that are
expected to be generated by the asset. Where this assessment indicates
a deficit, the assets are written down to the market value or fair
value as computed above.
1.8 Licence Fees
(i) Licence Entry Fee
The Licence Entry Fee has been recognised as an intangible asset«and is
amortised equally over the remainder of the licence period from the
date of commencement of commercial operations. Licence entry fees
includes interest on funding of licence entry fees, foreign exchange
fluctuations on the loan taken upto the date of commencement of
commercial operations.
The carrying value of license entry fees are assessed for recoverabiKty
by reference to the estimated future discounted net cash flows that are
expected to be generated by the asset. Where this assessment indicates
a deficit, the assets are written down to the market value or''fair
value as computed above.
(ii) Revenue Sharing Fee
Revenue Sharing Fee, currently computed at the prescribed rate of
Adjusted Gross Revenue (''AGR'') is expensed in the Statement of Profit
and Loss in the year in which the related income from providing unified
access services and Internet Services are recognised.
An additional revenue share towards spectrum charges is computed at the
prescribed rate of the service revenue earned from the customers who
are provided services through the CDMA and GSM technology. This is
expensed in the Statement of Profit and Loss in the year in which the
related income is recognised.
1.9 Investments
Investments that are readily realisable and intended to be held for not
more than a year are classified as current investments. All other
investments are classified as long- term investments. Long term
investments are stated at cost. However, provision for diminution in
value is made to recognise a decline other than temporary in the value
of the investments. Current investments are carried at lower of cost
and fair value and determined on an individual investment basis.
1.10 Provisions
A provision is recognised when an enterprise has a present obligation
as a result of past event; it is probable that an outflow of resources
will be required to settle the obligation, in respect of which a
reliable estimate can be made. Provisions are not discounted to its
present value and are determined based on best estimate required to
settle the obligation at the balance sheet date. These are reviewed at
each balance sheet date and adjusted to reflect the current best
estimates.
1.11 Revenue Recognition
Revenue from unified access services are recognised on services
rendered and is net of rebates, discounts and service tax. Unbilled
revenues resulting from unified access services provided from the
billing cycle date to the end of each month are estimated and recorded.
Revenues from unified access services rendered through prepaid cards
are recognised based on actual usage by the customers. Billings made
but not expected to be collected, if any, are estimated by the
management and not recognised as revenues in accordance with Accounting
Standard on Revenue Recognition (''AS 9'').
Revenue on account of internet services and revenue from infrastructure
services are recognised as services are rendered, in accordance with
the terms of the related contracts.
1.12 Interconnection Usage Revenue and Charges
The'' TRAI issued Interconnection Usage Charges Regulation 2003 (TUC
regime'') effective May 1,2003 and subsequently amended the same twice
with effect from February 1, 2004 and February 1, 2005. Under the IUC
regime, with the objective of sharing of call revenues across different
operators involved in origination, transit and termination of every
call, the Company pays interconnection charges (prescribed as Rs per
minute of call time) for all outgoing calls originating in its network
to other operators, depending on the termination point of the call i.e.
mobile, fixed line, and distance i.e. local, national long distance and
international long distance. The Company receives certain
interconnection charges from other operators for all calls terminating
in its network
Accordingly, interconnect revenue are recognised on those calls
originating in another telecom operator network and terminating in the
Company''s network. Interconnect cost is recognised as charges incurred
on termination of calls originating from the Company''s network and
terminating on the network of other telecom operators. The interconnect
revenue and costs are recognised in the financial statement on a gross
basis and included in service revenue and network operation
expenditure, respectively.
1.13 Foreign Currency Transactions
Initial Recognition
Foreign currency transactions are recorded in the reporting currency,
by applying to the foreign currency amount the exchange rate between
the reporting currency and the foreign currency at the date of the ;
transaction.
Conversion
Foreign currency monetary items are reported using the closing rate.
''Non-monetary items which are carried in terms of historical cost
denominated in a foreign currency are reported using the exchange rate
at the date of the transaction; and non-monetary items which are
carried at fair value or other similar valuation denominated in . a
foreign currency are reported using the exchange rates that existed
when the values were determined. '' ''
Exchange Differences
Exchange differences arising on the settlement or on reporting
Company''s monetary items at rates different from those at which they
were initially recorded during the year, or reported in previous
financial statements, are recognised as income or as expenses in the
year.
1.14 Employee Benefits
Effective April 1, 2007, the Company has adopted the Revised Accounting
Standard - 15 ''Employee Benefits''. The relevant policies are:
Short Term Employee Benefits
Short term employee benefits are recognised in the period during which
the services have been rendered.
Long Term Employee Benefits
Provident Fund and employees'' state insurance schemes
All employees of the Company are entitled to receive benefits under the
Provident Fund, which is a defined contribution plan. Both the employee
and the- employer make monthly contributions to the plan at a
predetermined rate (presently 12%) of the employees'' basic salary.
These contributions are made to the fund administered and managed by
the Government of India. In addition, some employees of the Company are
covered under the employees'' state insurance schemes, which are also
defined contribution schemes recognised and administered by the
Government of India. The Company''s contributions to both these schemes
are expensed.in the''Statement of Profit and Loss. The Company has no
further obligations under these plans beyond its monthly contributions.
Leave Encashment
The Company has provided for the liability at period end on account of
unavailed earned leave as per the actuarial valuation as per the
Projected Unit Credit Method. Gratuity
The Company provides for gratuity obligations through a defined benefit
retirement plan (the ''Gratuity Plan'') covering all employees. The
Gratuity Plan provides a lump sum payment to vested employees at
retirement or termination of employment based on the respective
employee salary and years of employment with the Company. The Company
provides for the Gratuity Plan based on actuarial valuation in
accordance with Accounting Standard 15 (revised), "Employee Benefits "
The Company makes annual contributions to the LIC for the Gratuity Plan
in respect of employees. The present value of obligation under gratuity
is determined based on actuarial valuation at period end using Project
Unit Credit Method, which recognizes each period of service as giving
rise to additional unit of employee benefit entitlement and measures
each unit separately to build up the final obligation.
a) Short term compensated absences are provided for on based on
estimates.
b) Actuarial gains and losses are recognised as and when incurred
1.15 Taxation
Tax expense comprises of current, deferred and fringe benefit tax.
Current income tax and fringe benefit tax is measured at the amount
expected to be paid to the tax authorities in accordance with the
Indian Income Tax Act. Deferred income taxes reflects the impact of
current year timing differences between/ taxable income and accounting
income for the year and reversal of timing differences of earlier
years.
Deferred tax is measured based on the tax rates and the tax laws
enacted or substantively enacted at the balance sheet date. Deferred
tax-assets are recognised only to the extent that there is reasonable
certainty that sufficient future taxable income will be available
against which such deferred tax assets can be realised. If the
Company has carry forward of unabsorbed depreciation and tax losses,
deferred tax assets are recognised only if there is virtual certainty
supported by convincing evidence that such deferred tax assets can be
realised against future taxable profits. Unrecognised deferred tax
assets of earlier years are re-assessed and recognised to the extent
that it has become reasonably certain or virtually certain, as the case
may be, that future taxable income will be available against which such
deferred tax assets can be realised.
1.16 Operating Leases
Where the Company is the lessee
Leases of assets under which the lessor effectively retains all the
risks and rewards of ownership are classified as operating leases.
Lease payments under operating leases are recognised as an expense on a
straight-line basis over the lease term.
Where the Company is the lessor
Assets subject to operating leases are included in fixed assets. Lease
income is recognised in the Statement of Profit and Loss on a
straight-line basis over the lease term. Costs, including depreciation
are recognised as an expense in the Statement of Profit and Loss.
Initial direct costs such as legal costs, brokerage costs, etc. are
recognised immediately in the Statement of Profit and Loss.
1.17 Earning Per Share
Basic earning per share is calculated by dividing the net profit for
the year attributable to equity shareholders by the weighted average
number of equity shares outstanding during the year.
For calculating diluted earning per share, the number of shares
comprises the weighted average shares considered for deriving basic
earning per share, and also the weighted average number of shares, if
any which would have been used in the conversion of all dilutive
potential equity shares. The number of shares and potentially dilutive
equity shares are adjusted for the bonus shares and the sub-division of
shares, if any.
1.18 Segment Reporting
Identification of segments:
The primary reporting of the Company has been performed on the basis of
business segments. The analysis of geographical segments is based on
the areas in which the Company''s products are sold or services are
rendered.
Allocation of common costs:
Common allocable costs are allocated to each segment according to the
relative contribution of each segment to the total common costs.
Unallocated items:
The Corporate and other segment include general corporate income and
expense items, which are not allocated to any business segment.
1.19 Cash & Cash Equivalents
Cash & cash equivalents in the Balance Sheet comprise cash in hand and
at bank.
Mar 31, 2012
1.1 Basis of preparation of Financial Statements
The financial statements have been prepared to comply in all material
respects with the notified accounting standards by Companies
(Accounting Standards) Rules, 2006 ('as amended'), and the relevant
provisions of the Companies Act, 1956. The preparation of financial
statements is in conformity with the Generally Accepted Accounting
Principals. The financial statements have been prepared under the
historical cost convention on an accrual basis of accounting. The
accounting policies have been consistently applied by the Company and
are consistent with those used in the previous year. The significant
accounting policies are as follows:
1.2 Fixed Assets
Fixed assets are stated at cost (net of cenvat credit if availed) less
impairment loss, if any, and accumulated depreciation. The Company
capitalises direct costs including taxes (excluding cenvat), duty,
freight and incidental expenses directly attributable to the
acquisition and installation of fixed assets. Capital work- in-progress
is stated at cost.
Telephone instruments having useful life lying with deactivated
customers for more than 90 days since disconnection are written off.
1.3 Inventory
Inventory is valued at cost or net realisable value which ever is low.
Cost for the purchase is calculated on FIFO basis
1.4 Depreciation
Depreciation is provided pro-rata to the period of use (except for
Telephone Instruments, being ready for use are depreciated from the
beginning of the month, following the month of purchase), on the
straight line method based on the estimated useful life of the assets,
as follows:
(i) Depreciation rates derived from the above are not less than the
rates prescribed under Schedule XIV of the Companies Act, 1956.
(ii) During the year ended March 31, 2009 the Company has decreased the
average life of Batteries considered part of Network equipments from
9.67 years to 5 years. Resultant impact is not material, hence not
disclosed.
(iii) Depreciation on the amount capitalized on up- gradation of the
existing assets is provided over the balance life of the original
asset.
(iv) Depreciation on the amount capitalised till March 31, 2007 on
account of foreign exchange fluctuations is provided over the balance
life of the original asset (refer Note 2.13, below)
1.5 Borrowing Costs
Borrowing costs that are attributable to the acquisition and
construction of a qualifying asset are capitalised as a part of the
cost of the asset. Other borrowing costs are recognised as an expense
in the year in which they are incurred.
1.6 Impairment
The carrying amounts of assets are reviewed at each balance sheet date
if there is any indication of impairment based on internal/external
factors. An impairment loss is recognised wherever the carrying amount
of an asset exceeds its recoverable amount. The recoverable amount is
the greater of the assets net selling price and value in use. In
assessing value in use, the estimated future cash flows are discounted
to their present value at the weighted average cost of capital. After
impairment, depreciation is provided on the revised carrying amount of
the assets over its remaining useful life.
A previously recognised impairment loss is increased or reversed
depending on changes in circumstances. However the carrying value
after reversal is not increased beyond the carrying value that would
have prevailed by charging usual depreciation if there was no
impairment.
1.7 Intangibles
All expenditure on intangible items are expensed as incurred unless it
qualifies as an intangible asset as defined in Accounting Standard 26.
The carrying value of intangible assets is assessed for recoverability
by reference to the estimated future discounted net cash flows that are
expected to be generated by the asset. Where this assessment indicates
a deficit, the assets are written down to the market value or fair
value as computed above.
For accounting policy related to Licence Entry Fees, refer note 2.8(i),
below.
1.8 Licence Fees
(i) Licence Entry Fee
The Licence Entry Fee [See Note 26 (1) (b)] has been recognised as an
intangible asset and is amortised equally over the remainder of the
licence period
from the date of commencement of commercial operations [Refer Note 26
(1) (a)]. Licence entry fees includes interest on funding of licence
entry fees, foreign exchange fluctuations on the loan taken upto the
date of commencement of commercial operations.
The carrying value of license entry fees are assessed for
recoverability by reference to the estimated future discounted net cash
flows that are expected to be generated by the asset. Where this
assessment indicates a deficit, the assets are written down to the
market value or fair value as computed above.
(ii) Revenue Sharing Fee
Revenue Sharing Fee, currently computed at the prescribed rate of
Adjusted Gross Revenue ('AGR') is expensed in the Profit and Loss
Account in the year in which the related income from providing unified
access services is recognised.
An additional revenue share towards spectrum charges is computed at the
prescribed rate of the service revenue earned from the customers who
are provided services through the CDMA and GSM technology. This is
expensed in the Profit and Loss Account in the year in which the
related income is recognised.
1.9 Investments
Investments that are readily realisable and intended to be held for not
more than a year are classified as current investments. All other
investments are classified as long- term investments. Long term
investments are stated at cost. However, provision for diminution in
value is made to recognise a decline other than temporary in the value
of the investments. Current investments are carried at lower of cost
and fair value and determined on an individual investment basis.
1.10 Provisions
A provision is recognised when an enterprise has a present obligation
as a result of past event; it is probable that an outflow of resources
will be required to settle the obligation, in respect of which a
reliable estimate can be made. Provisions are not discounted to its
present value and are determined based on best estimate required to
settle the obligation at the balance sheet date. These are reviewed at
each balance sheet date and adjusted to reflect the current best
estimates.
1.11 Revenue Recognition
Revenue from unified access services are recognised on services
rendered and is net of rebates, discounts and service tax. Unbilled
revenues resulting from unified access services provided from the
billing cycle date to the end of each month are estimated and recorded.
Revenues from unified access services rendered through prepaid cards
are recognised based on actual usage by the customers. Billings made
but not expected to be collected, if any, are estimated by the
management and not recognised as revenues in accordance with Accounting
Standard on Revenue Recognition ('AS 9').
Revenue on account of internet services and revenue from infrastructure
services are recognised as services are rendered, in accordance with
the terms of the related contracts.
1.12 Interconnection Usage Revenue and Charges
The TRAI issued Interconnection Usage Charges Regulation 2003 ('IUC
regime') effective May 1, 2003 and subsequently amended the same twice
with effect from February 1, 2004 and February 1, 2005. Under the IUC
regime, with the objective of sharing of call revenues across different
operators involved in origination, transit and termination of every
call, the Company pays interconnection charges (prescribed as Rs per
minute of call time) for all outgoing calls originating in its network
to other operators, depending on the termination point of the call i.e.
mobile, fixed line, and distance i.e. local, national long distance and
international long distance. The Company receives certain
interconnection charges from other operators for all calls terminating
in its network
Accordingly, interconnect revenue are recognised on those calls
originating in another telecom operator network and terminating in the
Company's network. Interconnect cost is recognised as charges incurred
on termination of calls originating from the Company's network and
terminating on the network of other telecom operators. The interconnect
revenue and costs are recognised in the financial statement on a gross
basis and included in service revenue and network operation
expenditure, respectively.
1.13 Foreign Currency Transactions
Initial Recognition
Foreign currency transactions are recorded in the reporting currency,
by applying to the foreign currency amount the exchange rate between
the reporting currency and the foreign currency at the date of the
transaction.
Conversion
Foreign currency monetary items are reported using the closing rate.
Non-monetary items which are carried in terms of historical cost
denominated in a foreign currency are reported using the exchange rate
at the date of the transaction; and non-monetary items which are
carried at fair value or other similar valuation denominated in a
foreign currency are reported using the exchange rates that existed
when the values were determined.
Exchange Differences
Exchange differences arising on the settlement or on reporting
Company's monetary items at rates different from those at which they
were initially recorded during the year, or reported in previous
financial statements, are recognised as income or as expenses in the
year.
1.14 Employee Benefits
Effective April 1, 2007, the Company has adopted the Revised Accounting
Standard - 15 'Employee Benefits'. The relevant policies are:
Short Term Employee Benefits
Short term employee benefits are recognised in the period during which
the services have been rendered.
Long Term Employee Benefits
Provident Fund and employees' state insurance schemes
All employees of the Company are entitled to receive benefits under the
Provident Fund, which is a defined contribution plan. Both the employee
and the employer make monthly contributions to the plan at a
predetermined rate (presently 12%) of the employees' basic salary.
These contributions are made to the fund administered and managed by
the Government of India. In addition, some employees of the Company are
covered under the employees' state insurance schemes, which are also
defined contribution schemes recognised and administered by the
Government of India.
The Company's contributions to both these schemes are expensed in the
Profit and Loss Account. The Company has no further obligations under
these plans beyond its monthly contributions.
Leave Encashment
The Company has provided for the liability at period end on account of
unavailed earned leave as per the actuarial valuation as per the
Projected Unit Credit Method.
Gratuity
The Company provides for gratuity obligations through a defined benefit
retirement plan (the 'Gratuity Plan') covering all employees. The
Gratuity Plan provides a lump sum payment to vested employees at
retirement or termination of employment based on the respective
employee salary and years of employment with the Company. The Company
provides for the Gratuity Plan based on actuarial valuation in
accordance with Accounting Standard 15 (revised), "Employee Benefits "
The Company makes annual contributions to the LIC for the Gratuity Plan
in respect of employees. The present value of obligation under gratuity
is determined based on actuarial valuation at period end using Project
Unit Credit Method, which recognizes each period of service as giving
rise to additional unit of employee benefit entitlement and measures
each unit separately to build up the final obligation.
a) Short term compensated absences are provided for on based on
estimates.
b) Actuarial gains and losses are recognised as and when incurred
1.15 Income-Tax
Tax expense comprises of current, deferred and fringe benefit tax.
Current income tax and fringe benefit tax is measured at the amount
expected to be paid to the tax authorities in accordance with the
Indian Income Tax Act. Deferred income taxes reflects the impact of
current year timing differences between taxable income and accounting
income for the year and reversal of timing differences of earlier
years.
Deferred tax is measured based on the tax rates and the tax laws
enacted or substantively enacted at the balance sheet date. Deferred
tax assets are recognised only to the extent that there is reasonable
certainty that sufficient future taxable income will be available
against which such deferred tax assets can be realised. If the Company
has carry forward of unabsorbed depreciation and tax losses, deferred
tax assets are recognised only if there is virtual certainty supported
by convincing evidence that such deferred tax assets can be realised
against future taxable profits. Unrecognised deferred tax assets of
earlier years are re-assessed and recognised to the extent that it has
become reasonably certain or virtually certain, as the case may be,
that future taxable income will be available against which such
deferred tax assets can be realised.
1.16 Operating Leases
Where the Company is the lessee
Leases of assets under which the lessor effectively retains all the
risks and rewards of ownership are classified as operating leases.
Lease payments under operating leases are recognised as an expense on a
straight-line basis over the lease term.
Where the Company is the lessor
Assets subject to operating leases are included in fixed assets. Lease
income is recognised in the Profit and Loss Account on a straight-line
basis over the lease term. Costs, including depreciation are recognised
as an expense in the Profit and Loss Account. Initial direct costs such
as legal costs, brokerage costs, etc. are recognised immediately in the
Profit and Loss Account.
1.17 Loss Per Share
Basic loss per share is calculated by dividing the net loss for the
year attributable to equity shareholders by the weighted average number
of equity shares outstanding during the year.
For calculating diluted loss per share, the number of shares comprises
the weighted average shares considered for deriving basic loss per
share, and also the weighted average number of shares, if any which
would have been used in the conversion of all dilutive potential equity
shares. The number of shares and potentially dilutive equity shares are
adjusted for the bonus shares and the sub-division of shares, if any.
1.18 Segment Reporting
Identification of segments:
The primary reporting of the Company has been performed on the basis of
business segments. The analysis of geographical segments is based on
the areas in which the Company's products are sold or services are
rendered.
Allocation of common costs:
Common allocable costs are allocated to each segment according to the
relative contribution of each segment to the total common costs.
Unallocated items:
The Corporate and other segment include general corporate income and
expense items, which are not allocated to any business segment.
1.19 Cash & Cash Equivalents
Cash & cash equivalents in the Balance Sheet comprise cash in hand and
at bank.
Mar 31, 2011
1.1 Basis of preparation of Financial Statements
The financial statements have been prepared to comply in all material
respects with the notified accounting standards by Companies
(Accounting Standards) Rules, 2006 ('as amended'), and the relevant
provisions of the Companies Act, 1956. The preparation of financial
statements is in conformity with the Generally Accepted Accounting
Principals. The financial statements have been prepared under the
historical cost convention on an accrual basis of accounting. The
accounting policies have been consistently applied by the Company and
are consistent with those used in the previous year. The significant
accounting policies are as follows:
2.2 Fixed Assets
Fixed assets are stated at cost (net of cenvat credit if availed) less
impairment loss, if any, and accumulated depreciation. The Company
capitalises direct costs including taxes (excluding cenvat), duty,
freight and incidental expenses directly attributable to the
acquisition and installation of fixed assets. Capital work-in-progress
is stated at cost.
Telephone instruments having useful life lying with deactivated
customers for more than 90 days since disconnection are written off.
2.3 Inventory
Inventory is valued at cost or net realisable value which ever is low.
Cost for the purchase is calculated on FIFO basis.
2.4 Depreciation
Depreciation is provided pro-rata to the period of use (except for
Telephone Instruments, being ready for use are depreciated from the
beginning of the month, following the month of purchase), on the
straight line method based on the estimated useful life of the assets,
as follows:
(i) Depreciation rates derived from the above are not less than the
rates prescribed under Schedule XIV of the Companies Act, 1956.
(ii) During the year ended March 31, 2009 the Company has decreased the
average life of Batteries considered part of Network equipments from
9.67 years to 5 years. Resultant impact is not material, hence not
disclosed.
(iii) Depreciation on the amount capitalized on up-gradation of the
existing assets is provided over the balance life of the original
asset.
(iv) Depreciation on the amount capitalised till March 31, 2007 on
account of foreign exchange fluctuations is provided over the balance
life of the original asset (refer Note 2.13, below)
2.5 Borrowing Costs
Borrowing costs that are attributable to the acquisition and
construction of a qualifying asset are capitalised as a part of the
cost of the asset. Other borrowing costs are recognised as an expense
in the year in which they are incurred.
2.6 Impairment
The carrying amounts of assets are reviewed at each balance sheet date
if there is any indication of impairment based on internal/external
factors. An impairment loss is recognised wherever the carrying amount
of an asset exceeds its recoverable amount. The recoverable amount is
the greater of the assets net selling price and value in use. In
assessing value in use, the estimated future cash flows are discounted
to their present value at the weighted average cost of capital. After
impairment, depreciation is provided on the revised carrying amount of
the assets over its remaining useful life.
A previously recognised impairment loss is increased or reversed
depending on changes in circumstances. However the carrying value
after reversal is not increased beyond the carrying value that would
have prevailed by charging usual depreciation if there was no
impairment.
2.7 Intangibles
All expenditure on intangible items are expensed as incurred unless it
qualifies as an intangible asset as defined in Accounting Standard 26.
The carrying value of intangible assets is assessed for recoverability
by reference to the estimated future discounted net cash flows that are
expected to be generated by the asset. Where this assessment indicates
a deficit, the assets are written down to the market value or fair
value as computed above.
For accounting policy related to Licence Entry Fees, refer Note 2.8(1),
below.
2.8 Licence Fees
(i) Licence Entry Fee
The Licence Entry Fee [See Note 1 (b)] has been recognised as an
intangible asset and is amortised equally over the remainder of the
licence period from the date of commencement of commercial operations
[Refer Note 1 (a)]. Licence entry fees includes interest on funding of
licence entry fees, foreign exchange fluctuations on the loan taken
upto the date of commencement of commercial operations.
The carrying value of license entry fees are assessed for
recoverability by reference to the estimated future discounted net cash
flows that are expected to be generated by the asset. Where this
assessment indicates a deficit, the assets are written down to the
market value or fair value as computed above.
(ii) Revenue Sharing Fee
Revenue Sharing Fee, currently computed at the prescribed rate of
Adjusted Gross Revenue ('AGR') is expensed in the Profit and Loss
Account in the year in which the related income from providing unified
access services is recognised.
An additional revenue share towards spectrum charges is computed at the
prescribed rate of the service revenue earned from the customers who
are provided services through the CDMA, GSM and technology. This is
expensed in the Profit and Loss Account in the year in which the
related income is recognised.
Z) Investments
Investments that are readily realisable and intended to be held for not
more than a year are classified as current investments. All other
investments are classified as long-term investments. Long term
investments are stated at cost. However, provision for diminution in
value is made to recognise a decline other than temporary in the value
of the investments. Current investments are carried at lower of cost
and fair value and determined on an individual investment basis.
2.10 Provisions
A provision is recognised when an enterprise has a present obligation
as a result of past event; it is probable that an outflow of resources
will be required to settle the obligation, in respect of which a
reliable estimate can be made. Provisions are not discounted to its
present value and are determined based on best estimate required to
settle the obligation at the balance sheet date. These are reviewed at
each balance sheet date and adjusted to reflect the current best
estimates.
2.11 Revenue Recognition
Revenue from unified access services are recognised on services
rendered and is net of rebates, discounts and service tax. Unbilled
revenues resulting from unified access services provided from the
billing cycle date to the end of each month are estimated and recorded.
Revenues from unified access services rendered through prepaid cards
are recognised based on actual usage by the customers. Billings made
but not expected to be collected, if any, are estimated by the
management and not recognised as revenues in accordance with Accounting
Standard on Revenue Recognition ('AS 9').
Revenue on account of internet services and revenue from infrastructure
services are recognised as services are rendered, in accordance with
the terms of the related contracts.
2.12 Interconnection Usage Revenue and Charges
The TRAI issued Interconnection Usage Charges Regulation 2003 (TUC
regime') effective May 1, 2003 and subsequently amended the same twice
with effect from February 1, 2004 and February 1, 2005. Under the IUC
regime, with the objective of sharing of call revenues across different
operators involved in origination, transit and termination of every
call, the Company pays interconnection charges (prescribed as Rs. per
minute of call time) for all outgoing calls originating in its network
to other operators, depending on the termination point of the call i.e.
mobile, fixed line, and distance i.e. local, national long distance and
international long distance. The Company receives certain
interconnection charges from other operators for all calls terminating
in its network.
Accordingly, interconnect revenue are recognised on those calls
originating in another telecom operator network and terminating in the
Company's network. Interconnect cost is recognised as charges incurred
on termination of calls originating from the Company's network and
terminating on the network of other telecom operators. The interconnect
revenue and costs are recognised in the financial statement on a gross
basis and included in service revenue and network operation
expenditure, respectively.
2.13 Foreign Currency Transactions
Initial Recognition
Foreign currency transactions are recorded in the reporting currency,
by applying to the foreign currency amount the exchange rate between
the reporting currency and the foreign currency at the date of the
transaction.
Conversion
Foreign currency monetary items are reported using the closing rate.
Non-monetary items which are carried in terms of historical cost
denominated in a foreign currency are reported using the exchange rate
at the date of the transaction; and non-monetary items which are
carried at fair value or other similar valuation denominated in a
foreign currency are reported using the exchange rates that existed
when the values were determined.
Exchange Differences
Exchange differences arising on the settlement or on reporting
Company's monetary items at rates different from those at which they
were initially recorded during. the year, or reported in previous
financial statements, are recognised as income or as expenses in the
year.
2.14 Employee Benefits
Effective April 1, 2007, the Company has adopted the Revised Accounting
Standard -15 'Employee Benefits'. The relevant policies are:
Short Term Employee Benefits
Short term employee benefits are recognised in the period during which
the services have been rendered.
Long Term Employee Benefits
Provident Fund and employees' state insurance schemes
All employees of the Company are entitled to receive benefits under the
Provident Fund, which is a defined contribution plan. Both the employee
and the employer make monthly contributions to the plan at a
predetermined rate (presently 12%) of the employees' basic salary.
These contributions are made to the fund administered and managed by
the Government of India. In addition, some employees of the Company are
covered under the employees' state insurance schemes, which are also
defined contribution schemes recognised and administered by the
Government of India.
The Company's contributions to both these schemes are expensed in the
Profit and Loss Account. The Company has no further obligations under
these plans beyond its monthly contributions.
Leave Encashment
The Company has provided for the liability at period end on account of
unavailed earned leave as per the actuarial valuation as per the
Projected Unit Credit Method.
Gratuity
The Company pro vides f or gratuity obligations through a defined
benefit retirement plan (the 'Gratuity Plan') covering all employees.
The Gratuity Plan provides a lump sum payment to vested employees at
retirement or termination of employment based on the respective
employee salary and years of employment with the Company. The Company
provides for the Gratuity Plan based on actuarial valuation in
accordance with * Accounting Standard 15 (revised), "Employee Benefits"
The Company makes annual contributions to the LIC for the Gratuity Plan
in respect of employees. The present value of obligation under
gratuity is determined based on actuarial valuation at period end using
Project Unit Credit Method, which recognizes each period of service as
giving rise to additional unit of employee benefit entitlement and
measures each unit separately to build up the final obligation.
a) Short-term compensated absences are provided for on based on
estimates.
b) Actuarial gains and losses are recognised as and when incurred.
2.15 Income-Tax
Tax expense comprises of current, deferred and fringe benefit tax.
Current income tax and fringe benefit tax is measured at the amount
expected to be paid to the tax authorities in accordance with the
Indian Income Tax Act. Deferred income taxes reflects the impact of
current year timing differences between taxable income and accounting
income for the year and reversal of timing differences of earlier
years.
Deferred tax is measured based on the tax rates and the tax laws
enacted or substantively enacted at the balance sheet date. Deferred
tax assets are recognised only to the extent that there is reasonable
certainty that sufficient future taxable income will be available
against which such deferred tax assets can be realised. If the Company
has carry forward of unabsorbed depreciation and tax losses, deferred
tax assets are recognised only if there is virtual certainty supported
by convincing evidence that such deferred tax assets can be realised
against future taxable profits. Unrecognised deferred tax assets of
earlier years are re-assessed and recognised to the extent that it has
become reasonably certain or virtually certairi,' as the case may be,
that future taxable income will be available against which such
deferred tax assets can be realised.
2.16 Operating Leases
Where the Company is the lessee
Leases of assets under which the lessor effectively retains all the
risks and rewards of ownership are classified as operating leases.
Lease payments under operating leases are recognised as an expense on a
straight-line basis over the lease term.
Where the Company is the lessor
Assets subject to operating leases are included in fixed assets. Lease
income is recognised in the Profit and Loss Account on a straight-line
basis over the lease term. Costs, including depreciation are recognised
as an expense in the Profit and Loss Account. Initial direct costs such
as legal costs, brokerage costs, etc. are recognised immediately in
the Profit and Loss Account.
2.17 Loss Per Share
Basic loss per share is calculated by dividing the net loss for the
year attributable to equity shareholders by the weighted average number
of equity shares outstanding during the year.
For calculating diluted loss per share, the number of shares comprises
the weighted average shares considered for deriving basic loss per
share, and also the weighted average number of shares, if any which
would have been used in the conversion of all dilutive, potential
equity shares. The number of shares and potentially dilutive equity
shares are adjusted for the bonus shares and the sub-division of
shares, if any.
2.18 Segment Reporting
Identification of segments:
The primary reporting of the Company has been performed on the basis of
business segments. The analysis of geographical segments is based on
the areas in which the Company's products are sold or services are
rendered.
Allocation of common costs:
Common allocable costs are allocated to each segment according to the
relative contribution of each segment to the total common costs.
Unallocated items:
The Corporate and other segment include general corporate income and
expense items, which are not allocated to any business segment.
2.19 Cash and Cash Equivalents
Cash and cash equivalents in the Balance Sheet comprise cash in hand
and at bank.
Mar 31, 2010
1. Background
(a) Nature of business and ownership
HFCL Infotel Limited (the Company or HIL), Unified Access Services
Licensee for Punjab Circle (including Chandigarh and Panchkula), is
providing complete telecommunication services, which includes voice
telephony, both wireline and fixed wireless, CDMA and GSM based
mobiles, internet services, broadband data services and a wide range of
value added service viz., centrex, leased lines, VPNs, voice mail,
video conferencing etc. The services were commercially launched in
October 2000 and as on March 31, 2010, the Company has an active
subscriber base of over 501,885.
The Companv is a subsidiary Company of Himachal Futuristic
Communications Limited (the Holding Company or HFCL). The Company
was incorporated on August 2,1946 with the name of The Investment Trust
of India Limited (ITI) which was subsequently changed to HFCL Infotel
Limited on May 12,2003. This was done pursuant to a Scheme of
amalgamation (the Scheme), approved by the Hon able High Court of the
State of Punjab and Harvana and the State of Tamil Nadu on March 6,2003
and March 20,2003, respectively, whereby the erstwhile HFCL Infotel
Limited (name earlier allotted to the transferor Company) (erstwhile
HFCL Infotel) was merged with the Company with effect from September
1, 2002. As per the Scheme envisaged, the Companys then existing
business of hire purchase, leasing and securities trading was
transferred by way of slump sales to its wholly owned subsidiary, Rajam
Finance & Investments Company (India) Limited (Rajam Finance) with
effect from September 1, 2002. Rajam Finance was renamed as The
Investment Trust of India Limited with effect from June 17, 2003 and it
ceased to be the subsidiary of the Company with effect from September
30, 2003, due to allotment of fresh equity by Rajam Finance to other
investors.
The Company, during the year ended March 31, 2004, surrendered its
license granted by Reserve Bank of India (RBI) to carrv out NBFC
business. RBI confirmed the cancellation of the NBFC license as per
their letter dated May 24, 2004.
On August 15, 2008, the Company has incorporated one wholly owned
Subsidiary Company Infotel Tower Infrastructure Private Limited
(TTIPL) with an Investment of Rs 99,800. The principal business of the
Company is building, establishing, setting-up, accruing,
developing, advising on, managing, providing, operating and/or
maintaining, facilitating conduct of, fully or partially infrastructure
facilities and services thereof for all kinds of value added services
including Broadband Towers for telecom operations/services, payment
gateway services and international gateway services.
(b) License Fees
The Company obtained licence for Basic Telephony Service for the Punjab
circle (including Chandigarh and Panchkula) by way of amalgamation of
the erstwhile HFCL Infotel with the Company. Erstwhile HFCL Infotel had
obtained this licence under fixed license fee regime under National
Telecom Policy (NTP) 1994, valid for a period of 20 years from the
effective date, and subsequently migrated from the fixed license fee
regime to revenue sharing regime upon implementation of NTP 1999.
Further to the Telecom Regulator} Authority of Indias (TRAI)
recommendations of October 27, 2003 and the Department of
Telecommunications (DoT) guidelines on Unified Access (Basic &
Cellular) Services Licence (UASI.) dated November 11, 2003, the
Company migrated its licence to the UASL regime with effect from
November 14, 2003. A fresh License Agreement was signed on May 31,
2004. Pursuant to this migration, the Companv became additionally
entitled to provide full mobility services. HFCL Infotel also entered
into a Licence Agreement dated June 28, 2000, and amendments thereto,
with DoT to establish maintain and operate internet service in Punjab
circle (including Chandigarh and Panchkula).
Fixed license fees of Rs 1,775,852,329 paid under the old license fee
regime from inception till July 31,1999, were considered as the License
Entry Fees of the Punjab circle (including Chandigarh and Panchkula) as
part of the migration package to NTP 1999.
With effect from August 1, 1999, the Company is required to pay revenue
share license fees as a fraction of Adjusted Gross Revenue (AGR),
which is defined as total income including service revenues, finance
income and non-operating income, reduced by interconnection costs,
service tax and/or sales tax, if applicable. The revenue share fraction
was set at 10 per cent of AGR with effect from August 1,1999 and was
reduced to 8 per cent of AGR with effect from April 1, 2004. In
addition, spectrum charges calculated at 2 per cent of the AGR earned
through the wireiess technology is payable under the license agreement.
Income from internet services is excluded from the service revenue for
the purpose of the calculation of AGR.
During the year ended March 31, 2008, the Company has deposited the
entry fee of Rs 1,517,500,000 with The Department of Telecommunication
(DOT) for the use of GSM Technology in addition to CDMA technology
being used under the existing Unified Access Services Licence (UASL)
for the Punjab Service Area. The UASL has since been amended to
incorporate the license for use of GSM technology on January 15, 2008
vide DOTs letter number F.No.lO-15/2004/BS.II/HITL/ Punjab/17 dated
January 15,2008. DOT had provided the allocation of radio spectrum on
trial basis for a period of three months till December 9, 2008 vide
their letter number L14047/20/2006-NTG (Pt) dated September 10, 2008.
The Company had submitted the spectrum trial reports to DOT vide letter
number HFCL/DOT/2009-10/38A dated November 18, 2009. DOT has
regularized the GSM Spectrum earmarked for Unified Access Services in
Punjab Telecom Service Area vide letter number L-14043/37/2009-NTG
(Pt-1) dated December 7, 2009 with immediate effect. The Company has
launched its GSM services on March 29,2010 in Punjab Circle.
(c) Project Financing
The Companys project was initially appraised by Industrial Development
Bank of India (IDBI) during the year ended March 31, 2000 for an
estimated peak fund requirement of Rs 11,800,000,000. The appraised
means of finance for the project was to be funded by way of equity
capital of Rs 5,240,000,000 and debt of Rs 6,560,000,000.
Pursuant to the migration to UASL regime, the consortium of lenders,
led by IDBI, through the Corporate Debt Restructuring (CDR) mechanism
approved an overall restructuring of the liabilities of the Company and
thereby revised the peak funding requirements from Rs 11,800,000,000 to
Rs 13,450,000,000 up to March 31, 2006, with peak funding gap of Rs
1,650,000,000.
Further, the CDR Empowered Group has approved the proposal of the
Company for expansion of services, change in the scope of the project,
cost of project and means of finance and restructuring of debt as per
the letter dated June 24, 2005. As per the said proposal, the peak
funding requirement has been further revised to Rs 15,470,000,000 and
the principal repayment of existing term loan was rescheduled and the
same will be repaid between May 1, 2008 and April 1, 2016. Moreover,
the rate of interest on existing term loan, secured OFCDs and working
capital shall be 9.3 per cent per annum monthly compounding. The
secured OFCD were to be converted into equity shares at par subject to
applicable provisions of SEBI guidelines and other relevant Acts during
financial year ended March 31,2006.
Further, the project cost is to be funded by way of Equity share
capital of Rs 6,020,000,000, preference share capital of Rs
650,000,000, term loan of Rs 7,000,000,000, Buyers
credit facility of Rs 1,630,000,000 and Unsecured OFCD of Rs
170,000,000.
During the year, the Company has incurred losses of Rs 206,447,324
resulting into accumulated loss of Rs 11,400,327,594 as at March
31,2010 which has completely eroded its net worth and has a net current
liability of Rs 3,973,000,819 including capital liability of Rs
1,041,973,880 and subscriber and distributors security deposits of Rs
76,411,107. The ability of the Company to continue as a going concern
is substantially dependent on its ability to successfully arrange the
remaining funding and achieve financial closure to fund its operating
and capital funding requirements and to substantially increase its
subscriber base. The management in view of its business plans and
support from significant shareholders is confident of generating cash
flows to fund the operating and capital requirements of the Company.
Accordingly, these statements have been prepared on a going concern
basis.
2. Summary of significant accounting policies
2.1 Basis of preparation of Financial Statements
The financial statements have been prepared to comply in all material
respects with the notified accounting standards by Companies
(Accounting Standards) Rules, 2006 (as amended), and the relevant
provisions of the Companies Act, 1956. The preparation of financial
statements is in conformity with the Generally Accepted Accounting
Principals. The financial statements have been prepared under the
historical cost convention on an accrual basis of accounting. The
accounting policies have been consistently applied by the Company and
are consistent with those used in the previous year. The significant
accounting policies are as follows:
2.2 Fixed Assets
Fixed assets are stated at cost (net of cenvat credit if availed) less
impairment loss, if any, and accumulated depreciation. The Company
capitalises direct costs including taxes (excluding cenvat), duty,
freight and incidental expenses directly attributable to the
acquisition and installation of fixed assets. Capital work- in-progress
is stated at cost.
Telephone instruments having useful life lying with deactivated
customers for more than 90 days since disconnection are written off.
2.3 Inventory
Inventory is valued at cost or net realisable value which ever is low.
Cost for the purchase is calculated on FIFO basis
2.4 Depreciation
(i) Depreciation is provided pro-rata to the period of use (except for
Telephone Instruments, being ready for use are depreciated from the
beginning of the month, following the month of purchase), on the
straight line
(ii) Depreciation rates derived from the above are not less than the
rates prescribed under Schedule XIV of the Companies Act, 1956.
(iii) During the year ended March 31, 2009 the Company has detreased
the average life of Batteries considered part of Network equipments
from 9.67 years to 5 years. Resultant impact is not material, hence
not disclosed.
(iv) Depreciation on the amount capitalized on up-gradation of the
existing assets is provided over the balance life of the original
asset.
(v) Depreciation on the amount capitalised till March 31, 2007 on
account of foreign exchange fluctuations is provided over the balance
life of the original asset (refer Note 2.13, below)
2.5 Borrowing Costs
Borrowing costs that are attributable to the acquisition and
construction of a qualifying asset are capitalised as a part of the
cost of the asset. Other borrowing costs are recognised as an expense
in the year in which they are incurred.
2.6 Impairment
The carrying amounts of assets are reviewed at each balance sheet date
if there is any indication of impairment based on internal/external
factors. An impairment loss is recognised wherever the carrying amount
of an asset exceeds its recoverable amount. The recoverable amount is
the greater of the assets net selling price and value in use. In
assessing value in use, the estimated future cash flows are discounted
to their present value at the weighted average cost of capital. After
impairment, depreciation is provided on the revised carrying amount of
the assets over its remaining useful life.
A previously recognised impairment loss is increased or reversed
depending on changes in circumstances. However the carrying value
after reversal is not increased beyond the carrying value that would
have prevailed by charging usual depreciation if there was no
impairment.
2.7 Intangibles
All expenditure on intangible items are expensed as incurred unless it
qualifies as an intangible asset as defined in Accounting Standard 26.
The carrying value of intangible assets is assessed for recoverability
by reference to the estimated future discounted net cash flows that are
expected to be generated by the asset. Where this assessment indicates
a deficit, the assets are written down to the market value or fair
value as computed above.
For accounting policy related to Licence Entry Fees, refer note 2.8(i),
below.
2.8 Licence Fees
ft) Licence Entry Fee
The Licence Entry Fee [See Note 1 (b)] has been recognised as an
intangible asset and is amortised equally over the remainder of the
licence period from the date of commencement of commercial operations
[Refer Note 1 (a)]. Licence entry fees includes interest on funding of
licence entry fees, foreign exchange fluctuations on the loan taken
upto the date of commencement of commercial operations.
The carrying value of license entry fees are assessed for
recoverability by reference to the estimated future discounted net cash
flows that are expected to be generated by the asset. Where this
assessment indicates a deficit, the assets are written down to the
market value or fair value as computed above.
(ii) Revenue Sharing Fee
Revenue Sharing Fee, currently computed at the prescribed rate of
Adjusted Gross Revenue (AGR) is expensed in the Profit and Loss
Account in the year in which the related income from providing unified
access services is recognised.
An additional revenue share towards spectrum charges is computed at the
prescribed rate of the service revenue earned from the customers who
are provided services through the CDMA, GSM and CorDect wireless
technology. This is expensed in the Profit and Loss Account in the year
in which the related income is recognised.
2.9 Investments
Investments that are readily realisable and intended to be held for not
more than a year are classified as current investments. All other
investments are classified as long- term investments. Long term
investments are stated at cost. However, provision for diminution in
value is made to recognise a decline other than temporary in the value
of the investments. Current investments are carried at lower of cost
and fair value and determined on an individual investment basis.
2.10 Provisions
A provision is recognised when an enterprise has a present obligation
as a result of past event; it is probable that an outflow of resources
will be required to settle the obligation, in respect of which a
reliable estimate can be made. Provisions are not discounted to its
present value and are determined based on best estimate required to
settle the obligation at the balance sheet date. These are reviewed at
each balance sheet date and adjusted to reflect the current best
estimates.
2.11 Revenue Recognition
Revenue from unified access services are recognised on services
rendered and is net of rebates, discounts and service tax. Unbilled
revenues resulting from unified access services provided from the
billing cycle date to the end of each month are estimated and recorded.
Revenues from unified access services rendered through prepaid cards
are recognised based on actual usage by the customers. Billings made
but not expected to be collected, if any, are estimated by the
management and not recognised as revenues in accordance with Accounting
Standard on Revenue Recognition (AS 9).
Revenue on account of internet services and revenue from infrastructure
services are recognised as services are rendered, in accordance with
the terms of the related contracts.
2.12 Interconnection Usage Revenue and Charges
The TRAI issued Interconnection Usage Charges Regulation 2003 (IUC
regime) effective May 1,2003 and subsequently amended the same twice
with effect from February 1, 2004 and February 1, 2005. Under the IUC
regime, with the objective of sharing of call revenues across different
operators involved in origination, transit and termination of every
call, the Company pays interconnection charges (prescribed as Rs per
minute of call time) for all outgoing calls originating in its network
to other operators, depending on the termination point
of the call i.e. mobile, fixed line, and distance i.e. local, national
long distance and international long distance. The Company receives
certain interconnection charges from other operators for all calls
terminating in its network
Accordingly, interconnect revenue are recognised on those calls
originating in another telecom operator network and terminating in the
Companys network. Interconnect cost is recognised as charges incurred
on termination of calls originating from the Companys network and
terminating on the network of other telecom operators. The interconnect
revenue and costs are recognised in the financial statement on a gross
basis and included in service revenue and network operation
expenditure, respectively.
2.13 Foreign Currency Transactions
Initial Recognition
Foreign currency transactions are recorded in the reporting currency,
by applying to the foreign currency amount the exchange rate between
the reporting currency and the foreign currency at the date of the
transaction.
Conversion
Foreign currency monetary items are reported using the closing rate.
Non-monetary items which are carried in terms of historical cost
denominated in a foreign currency are reported using the exchange rate
at the date of the transaction; and non-monetary items which are
carried at fair value or other similar valuation denominated in a
foreign currency are reported using the exchange rates that existed
when the values were determined.
Exchange Differences
Exchange differences arising on the settlement or on reporting
Companys monetary items at rates different from those at which they
were initially recorded during the year, or reported in previous
financial statements, are recognised as income or as expenses in the
year.
2.14 Employee Benefits
Effective April 1, 2007, the Company has adopted the Revised Accounting
Standard -15 Employee Benefits. The relevant policies are:
Short Term Employee Benefits
Short term employee benefits are recognised in the period during which
the services have been rendered.
Long Term Employee Benefits
Provident Fund and employees state insurance schemes
All employees of the Company are entitled to receive benefits under the
Provident Fund, which is a defined contribution plan. Both the employee
and the employer make monthly contributions to the plan at a
predetermined rate (presently 12%) of the employees
basic salary. These contributions are made to the fund administered and
managed by the Government of India. In addition, some employees of the
Company are covered under the employees state insurance schemes, which
are also defined contribution schemes recognised and administered by
the Government of India.
The Companys contributions to both these schemes are expensed in the
Profit and Loss Account. The Company has no further obligations under
these plans beyond its monthly contributions.
Leave Encashment
The Company has provided for the liability at period end on account of
unav ailed earned leave as per the actuarial valuation as per the
Projected Unit Credit Method.
Gratuity
The Company provides for gratuity obligations through a defined benefit
retirement plan (the Gratuity Plan) covering all employees. The
Gratuity Plan provides a lump sum payment to vested employees at
retirement or termination of employment based on the respective
employee salary and years of employment with the Company. The Company
provides for the Gratuity Plan based on actuarial valuation in
accordance with Accounting Standard 15 (revised), "Employee Benefits "
The Company makes annual contributions to the LIC for the Gratuity Plan
in respect of employees. The present value of obligation under gratuity
is determined based on actuarial valuation at period end using Project
Unit Credit Method, which recognizes each period of service as giving
rise to additional unit of employee benefit entitlement and measures
each unit separately to build up the final obligation.
a) Short term compensated absences are provided for on based on
estimates.
b) Actuarial gains and losses are recognised as and when incurred
2.15 Income-Tax
Tax expense comprises of current, deferred and fringe benefit tax.
Current income tax and fringe benefit tax is measured at the amount
expected to be paid to the tax authorities in accordance with the
Indian Income Tax Act. Deferred income taxes reflects the impact of
current year timing differences between taxable income and accounting
income for the year and reversal of timing differences of earlier
years.
Deferred tax is measured based on the tax rates and the tax laws
enacted or substantively enacted at the balance sheet date. Deferred
tax assets are recognised only to the extent that there is reasonable
certainty that sufficient future taxable income will be available
against which such deferred tax assets can be realised. If the Company
has carry forward of unabsorbed depreciation and tax losses, deferred
tax assets are recognised only if there is virtual certainty supported
by convincing evidence that
such deferred tax assets can be realised against future taxable
profits. Unrecognised deferred tax assets of earlier years are
re-assessed and recognised to the extent that it has become reasonably
certain or virtually certain, as the case may be, that future taxable
income will be available against which such deferred tax assets can be
realised.
2.16 Operating Leases
Where the Company is the lessee
Leases of assets under which the lessor effectively retains all the
risks and rewards of ownership are classified as operating leases.
Lease payments under operating leases are recognised as an expense on a
straight-line basis over the lease term.
Where the Company is the lessor
Assets subject to operating leases are included in fixed assets. Lease
income is recognised in the Profit and Loss Account on a straight-line
basis over the lease term. Costs, including depreciation are recognised
as an expense in the Profit and Loss Account. Initial direct costs such
as legal costs, brokerage costs, etc. are recognised immediately in the
Profit and Loss Account.
2.17 Loss Per Share
Basic loss per share is calculated by dividing the net loss for the
year attributable to equity shareholders by the weighted average number
of equity shares outstanding during the year.
For calculating diluted loss per share, the number of shares comprises
the weighted average shares considered for deriving basic loss per
share, and also the weighted average number of shares, if any which
would have been used in the conversion of all dilutive potential equity
shares. The number of shares and potentially dilutive equity shares are
adjusted for the bonus shares and the sub-division of shares, if any.
2.18 Segment Reporting
Identification of segments:
The primary reporting of the Company has been performed on the basis of
business segments. The analysis of geographical segments is based on
the areas in which the Companys products are sold or services are
rendered.
Allocation of common costs:
Common allocable costs are allocated to each segment according to the
relative contribution of each segment to the total common costs.
Unallocated items:
The Corporate and other segment include general corporate income and
expense items, which are not allocated to any business segment.
2.19 Cash & Cash Equivalents
Cash & cash equivalents in the Balance Sheet comprise cash in hand and
at bank.
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