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Notes to Accounts of Indus Towers Ltd.

Mar 31, 2023

Repayment of term loans and Non-convertible debentures

(i) Loan outstanding Rs. 583 Mn

As per the repayment schedule in the facility sanction letter, the Company has to repay loans amounting to Rs. 7,000 Mn availed from bank in 12 equated quarterly instalments which have commenced from August 2020.

(ii) Loan outstanding Rs. 2,969 Mn

As per the repayment schedule in the facility sanction letter, the Company has to repay loans amounting to Rs. 17,000 Mn availed from bank in 12 equated quarterly instalments which have commenced from December 2020.

(iii) Loan outstanding Rs. 1,000 Mn

As per the repayment schedule in the facility sanction letter, the Company has to repay loans amounting to Rs. 3,000 Mn availed from bank in 12 equated quarterly instalments which will commence from April 2021.

(iv) Loan outstanding Rs. 4,166 Mn

As per the repayment schedule in the facility sanction letter, the Company has to repay loans amounting to Rs. 10,000 Mn availed from bank in 12 equated quarterly instalments which will commence from September 2021.

(v) Loan outstanding Rs. 4,375 Mn

As per the repayment schedule in the facility sanction letter, the Company has to repay loans amounting to Rs. 7,500 Mn availed from bank in 12 equated quarterly instalments which will commence from January 2022.

(vi) Loan outstanding Rs. 6,667 Mn

As per the repayment schedule in the facility sanction letter, the Company has to repay loans amounting to Rs. 10,000 Mn availed from bank in 12 equated quarterly instalments which will commence from June 2022.

(vii) Loan outstanding Rs. 5,000 Mn

As per the repayment schedule in the facility sanction letter, the Company has to repay loans amounting to Rs. 5,000 Mn availed from bank in 12 equated quarterly instalments which will commence from May 2023.

Weighted average effective cost of debt as at March 31,2023 is 8.05% per annum (March 31,2022 : 5.60% per annum) on term loans from banks.

For all the above loans, the Company may voluntarily prepay all or any portion of the disbursed loans based on certain specified clauses and subject to the conditions laid out in the loan agreement.

The borrowings were used for the purpose for which they were taken from the banks and financial institutions.

(viii) Non-convertible debentures

The Company has issued 15,000 rated, listed, unsecured, redeemable non-convertible debentures (Series I - 7,500, Series II - 3,750 and Series III - 3,750) of face value of Rs. 10,00,000 each in three series (Series I - Rs. 7,500 Mn, Series II - Rs. 3,750 Mn and Series III - Rs. 3,750 Mn) aggregating upto Rs. 15,000 Mn on private placement basis at a fixed Coupon rate of 8.20% per annum payable annually and payable on the maturity along with principal. The series I, II and III will be due for maturity on December 07, 2024, June 07, 2025 and December 07, 2025 respectively.

v. The discount rate is based on the average yield on government bonds at the reporting date with a term that matches that of the liabilities.

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

vii. Estimated amounts of expense to be recognized within next year is Rs. 194 Mn (March 31, 2022 : Rs. 210 Mn).

The above sensitivity analysis is based on a change in an assumption by a percentage while holding all other assumptions constant. In practice, this is unlikely to occur, and changes in some of the assumptions may be correlated. While calculating the sensitivity of the defined benefit obligation to significant actuarial assumption, same method i.e. Projected Unit Credit method has been applied as when calculating the gratuity liability recognized within the balance sheet.

34 Employee stock/cash settled option plans

(a) Employee stock/cash settled option plans - issued by the Company

Pursuant to the board resolution dated July 22, 2008 and the resolution of the shareholders in extraordinary general meeting dated August 28, 2008, the Company instituted the Employee Stock Option Scheme 2008 (the 2008 Scheme). In FY 2013-14 and 2014-15, the Company had announced new performance unit plan (cash settled option plan) for its employees. In FY 2015-16, 2016-17, 2017-18, 2018-19, 2019-20, 2020-21, 2021-22 and 2022-23, the Company has announced Long term incentive plan (LTIP) 2015 for its employees.

(i) Total employees stock/cash options expense recognised for the year ended March 31,2023 and March 31,2022 is Rs. 77 Mn and Rs. 108 Mn respectively.

(ii) The Company had decided to issue equity shares on exercise of ESOPs through ESOP trust and with this objective, Indus Towers Employee’s Welfare Trust (formerly Bharti Infratel Employee’s Welfare Trust) [a trust set up for administration of Employee Stock Option Plan (‘ESOP’) of the Company] was formed in FY 2014-15.

The loan has been given to ESOP trust time to time for purchase the Equity Shares of the Company from open market as permitted by SEBI (Share Based Employee Benefits) Regulations, 2014 and the same is being adjusted against the shares issued by the trust to the employees of the company.

During the year ended March 31,2023, Trust has acquired 525,000 shares at a price of Rs. 142.31 per share and 401,647 equity shares of exercise price of Rs. 10 each and 743 equity shares of exercise price of Rs. 109.67 each have been transferred to employees upon exercise of stock options. As of March 31,2023, the Trust holds 676,322 shares (of Face Value of Rs. 10 each) (March 31, 2022 - 553,712 shares) of the Company.

36 Contingencies & Capital commitments

a)

Guarantees

Particulars

As at March 31, 2023

As at March 31, 2022

Guarantees issued by banks and financials institutions on behalf of the Company

1,177

1,107

Total

1,177

1,107

The financial bank guarantees have been issued to regulatory authorities.

b)

Contingent liabilities

Particulars

As at March 31, 2023

As at March 31, 2022

(i) Taxes, duties and other demands (under adjudication / appeal / dispute)

Stamp duty {refer to (i) below}

226

224

Entry tax {refer to (ii) below}

1,945

1,949

Sales tax/VAT/GST {refer to (iii) below}

21,221

21,753

Municipal taxes {refer to (iv) below}

11,326

10,375

Service tax {refer to (v) below}

39,344

40,590

(ii) Income tax matters {refer to (vi) below}

37,949

37,978

(iii) Other claims {refer to (viii) below}

1,854

2,021

Total

113,865

114,890

The management of the Company assesses all material claims in the nature of demands against the Company and based on legal advice in certain cases evaluates whether it is probable, possible or remote (PPR).

Further, the management of the Company makes an assessment for uncertain tax positions for direct tax matters and records a provision if it is probable and disclose it as part of contingent liabilities when it is assessed as possible in nature.

The show cause notices (SCN) including intimation prior to SCN relating to direct and indirect taxes have neither been acknowledged as claims nor considered as contingent liability and hence, not disclosed.

Contingent liability amount disclosed above includes interest and penalty only to the extent such amounts are demanded by various tax authorities through demand order.

The Company discloses voluntarily for the material cases that are assessed as remote as part of PPR analysis and are included in the above amount.

i) Stamp duty

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

ii) Entry tax

Hon’ble Apex Court on November 11, 2016 while upholding the constitutional validity of entry tax levied by few States wherever its applicable, referred all the cases back to regular benches of the Court/s to decide all existing cases on merits while testing inter alia that whether the present levies in each such case/State is discriminatory in nature or not.

Accordingly, all the said cases were listed before the regular bench of Supreme Court wherein after taking up all pending cases on State by State basis court have found that prima facie inter alia discrimination issues still exists and all the listed petitions have been remanded back with direction, to file fresh writ petitions before respective High Courts on the ground of discrimination as well as other directions as laid down in the aforesaid judgment of nine member bench of Hon’ble Supreme Court. The Company has filed fresh writ petition in the state of Orissa, Madhya Pradesh, Chhattisgarh, Rajasthan and Assam and amended the pending petitions in Bihar and Jammu & Kashmir. Pending disposition of each case by the High Courts, the company has decided to maintain ‘Status Quo’ on its position/assessment.

iii) Sales tax/VAT/GST

The claims for Sales tax comprise mainly of the case relating to levy of VAT on right to use in goods & non submission of concessional forms. The demand for GST pertains to disallowance of Input tax credit availed by the Company on passive infrastructure assets other than towers.

iv) Municipal taxes

The Company based on its assessment of the applicability and tenability of certain municipal levies, which is an industry wide phenomenon, does not consider the impact of such levies to be material. Further, in the event these levies are confirmed by the respective government authorities, the Company would recover these amounts from its customers in accordance with the terms of Master Service Agreement.

v) Service tax

The service tax department had issued certain orders for the disallowance of CENVAT credit availed on Inputs, Capital Goods and Input Services under pre- GST regime. The Company has filed writ petition before Hon’ble High Court of Delhi which was decided in favour of the Company vide order dated October 31,2018 wherein it was held that towers are movable in nature and CENVAT credit can be availed on receipt of such goods. Further, Department has filed SLP before Hon’ble Supreme Court against the favourable order of Delhi High Court. The Hon’ble Supreme Court has tagged the SLP with pending matter on similar issue of telecom operators.

On the similar matter, there are contrary judgements by the Hon’ble High Court of Bombay in the case of telecom operators against which, such operators have filed SLP before Hon’ble Supreme Court. These matters are pending before Supreme Court for hearing.

In another issue department has raised demand alleging difference in turnover in 26AS vs ST 3 against which company had filed appeal before CESTAT, pending for hearing. Further, on the similar issue demand has also been confirmed for FY’16 & FY’18 for which the company has filed an appeal against the order.

In a separate proceeding before Directorate General of Central Excise Intelligence, the department had issued order for payment of excise duty on removal of scrap under pre- GST regime against which the Company has filed appeal before CESTAT, pending for hearing. The company has received favourable order from CESTAT, Chandigarh on issue of reversal of CENVAT credit on removal of scrap for FY’14 & FY’15.

vi) Income tax matters

This pertains to tax demands mainly on account of disallowance of depreciation on PIA assets transfer under merger scheme, provision for expenditure, Depreciation on Provisional capitalization, expenditure u/s 14A related to exempt income, short credit of taxes deducted etc.

vii) Other claims mainly include site and vendors related legal disputes

Amount assessed as contingent liability includes interest and penalty as demanded by various authorities and vendors and doesn’t include interest liability that could be claimed by authorities in case of unfavorable orders.

viii) One of the State Electricity Board (‘Board’) revised the electricity tariff and has demanded Industrial to Commercial (I2C) tariff difference in respect of the electricity consumed by the Company for the operation of its towers and same was challenged before Appellate Tribunal by the Industry including the Company. The Appellate tribunal has decided in favor of Appellants including the Company in February 2020. The said order has been challenged by the Board before Hon’ble Supreme Court and in October 2020, the Hon’ble Supreme Court stayed the recovery of refund amount by the Appellant. Further, effective April 1, 2020, the Board has issued a circular where tower sites have been classified under Industrial tariff category. The Company believes that the outcome of the case will be favorable and the likelihood of outflow of resources is remote. Further, in case of unfavorable decision, which is not likely, the Company has obtained necessary undertakings from the customers for payment/reimbursement of differential cost.

The following methods / assumptions were used to estimate the fair values:

i) The carrying value of cash and cash equivalents, other bank balances, trade receivables, short term borrowings, trade payables approximate their fair value mainly due to the short-term maturities of these instruments/being subject to floating rates.

ii) The fair values of financial assets classified as fair value through profit or loss like investment in mutual funds, and government securities is based on net asset values/quoted market price at the reporting date.

iii) The fair value of security deposits included in other financial assets & other financial liabilities and variable and fixed rate long term borrowings is estimated by discounting future cash flows using rates applicable to instruments with similar terms, currency, credit risk and remaining maturities. The fair values of other financial assets and other financial liabilities (other than security deposits) are assessed by the management to be same as their carrying value and is not expected to be significantly different if estimated by discounting future cash flows using rates currently available for debt on similar terms, credit risk and remaining maturities.

There are no significant unobservable inputs used in the fair value measurement.

38 Fair value hierarchy

All financial instruments for which value is recognized or disclosed are categorized within the fair value hierarchy, described as follows,

based on the lowest level input that is significant to the fair value measurement as a whole;

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

Level 2: Inputs other than quoted price included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices)

or indirectly (i.e. derived from prices).

Level 3: Inputs for assets or liabilities that are not based on observable market data (unobservable inputs).

Terms and conditions of transactions with related parties:

The transactions with related parties are made on terms equivalent to those that prevail in arm’s length transactions. Outstanding balances at the end of the year are unsecured and settlement occurs in cash and there have been no guarantees provided or received for any related party receivables or payables except in case of one of the related party referred in Note 48.

40 Segment Reporting

The Company was set-up with the object of, inter alia, establishing, operating and maintaining wireless communication towers. This is the only activity performed and is thus also the main source of risks and returns. The Company’s segments as reviewed by the Chief Operating Decision Maker (CODM) does not result into identification of different ways / sources into which they see the performance of the Company. Accordingly, the Company has a single reportable and geographical segment. Hence, the relevant disclosures as per Ind AS 108, “Operating Segments” are not applicable to the Company.

42 As per transitional provisions specified in Ind AS 101, “First time Adoption of Indian Accounting Standards”. The Company has continued to apply the accounting prescribed under the scheme with respect to mergers listed below.

a) Scheme accounting - Bharti Airtel Scheme

During the year ended March 31,2008, pursuant to the Scheme of Arrangement with Bharti Airtel Limited (‘BAL Scheme’) under sections 391 to 394 of the Companies Act, 1956, the telecom infrastructure undertaking of Bharti Airtel Limited was transferred to the Company. As per provisions of the Scheme, the Company has created a General reserve equivalent to the amount of fair value of such telecom infrastructure which shall be constituted as free reserve available for all purposes at the discretion of the Company. Pursuant to the Scheme, the depreciation charged by the Company on the excess of the fair values over the original book values of the assets transferred by Bharti Airtel Limited is being off-set against General Reserve. Accordingly, depreciation charges on the excess of fair value over the original book values are charged to General Reserve.

b) Scheme accounting - Indus Scheme

Pursuant to the Scheme of Arrangement (‘Indus Scheme’) under sections 391 to 394 of the Companies Act, 1956, Vodafone Infrastructure Limited (formerly known as Vodafone Essar Infrastructure Limited), Bharti Infratel Ventures Limited and Idea Cellular Tower Infrastructure Limited (collectively referred to as ‘The Transferor Companies’) and erstwhile Indus Towers Limited (referred to as ‘erstwhile Indus’ or ‘The Transferee Company’), jointly filed an application for sanctioning a scheme of arrangement (‘the Scheme’) under Section 391 to 394 of the Companies Act, 1956. The Scheme was sanctioned by the Hon’ble High Court of Delhi vide its order dated April 18, 2013. The Scheme had become operative from June 11,2013 upon filing of certified copy of the order of the Hon’ble High Court with the Registrar of Companies, Delhi with an appointed date of April 1, 2009.

General Reserve arising out of the Scheme

Pursuant to the terms of the Scheme, with effect from the appointed date, the Transferee Company recorded all assets of the Transferor Companies at fair value, all the liabilities and reserves at their book value and issued its equity shares to the shareholders. The excess of net value of assets, liabilities and reserves taken over and the consideration payable, has been transferred to a General Reserve account arising out of the Scheme. Accordingly, the General Reserve of Rs. 73,792 Mn was recognised on account of fair value adjustments as on April 1,2009. Further, the General reserve amounting to Rs. 71,050 Mn was transferred from Bharti Infratel Ventures Limited and Idea Cellular Towers Infrastructure Limited to erstwhile Indus Towers Limited under the Scheme. The resultant total General Reserve recorded in erstwhile Indus Towers Limited amounted to Rs. 144,842 Mn as on April 1,2009.

The General Reserve account of the Transferee Company created pursuant to the Scheme shall be treated as free reserve for all intents and purposes, including, without limitation, as may be decided by the Board of Directors, including for amortisation of any merger related expenses or losses, issuance of bonus shares, off-setting any additional or accelerated depreciation related to the fixed assets transferred to the transferee company pursuant to the Scheme, lease equalization reserve, asset retirement obligations, deferred tax assets or liabilities, as the case may be, any other expenses, impairment, losses or write-offs and any other permitted purposes and shall form part of the net worth of the Transferee company.

Further, pursuant to merger of erstwhile Indus with the Company (refer note 3), such General Reserve amounting to Rs. 73,257 Mn has been recognised in the Company at the carrying value on the effective date of merger i.e. November 19, 2020. As prescribed under the scheme, such general reserve had been utilised for additional or accelerated depreciation related to the fixed assets transferred pursuant to the Scheme. Had the scheme approved by the Hon’ble High Court of Delhi did not prescribe the accounting treatment mentioned above, these amounts would have been recognized in the statement of profit and loss.

The wholly owned subsidiary of the Company erstwhile Bharti Infratel Ventures Limited (‘BIVL’) had acquired certain assets and liabilities from the Company as a going concern on slump sale basis for no consideration as on December 31, 2011. Pursuant to this, BIVL had recognised total assets amounting to Rs. 4,695 Mn, total liabilities of Rs 159 Mn and the resultant difference of Rs 4,536 Mn has been recognised as a Capital Reserve. Further, pursuant to Indus Scheme (refer note 42(b)), and thereafter merger of erstwhile Indus Towers Limited (‘erstwhile Indus’) with the Company (refer note 3) and upon transfer of all the assets, liabilities and reserves of BIVL to erstwhile Indus and from erstwhile Indus to the Company such capital reserve has been recognised at the carrying value in the books of the Company.

(v) Reason for shortfall: The amount has been incurred/spent on the ongoing projects through the eligible partners.

(vi) The CSR amount has been spent on : Education and skill development; Environment sustainability and Swachh Bharat initiatives; Community Empowerment and livelihood; monitoring and administration and Impact assessment.

* The budgeted spent for the year ended March 31,2023 is Rs. 984 Mn increased by Rs. 62 Mn on account of unspent obligation of financial 2021-22. The budgeted spent for the year ended March 31,2022 was Rs. 573 Mn less excess spent of Rs. 155 Mn pertaining to financial year 2020-21.

The remaining unspent money of Rs. 69 Mn (March 31, 2022: 62 Mn) has been (was) transferred to a separate bank account as per section 135 (6) of the Companies Act, 2013.

(ii) No political contribution was made for the financial year ended March 31,2023 (March 31, 2022: Nil). Further, the Company has spent Rs. Nil (March 31,2022: 4 Mn) on Non-CSR projects during the year ended March 31,2023.

44 Financial risk management objectives and policies

The Company’s principal financial liabilities comprise loans and borrowings, lease liabilities, trade payables, security deposits received, etc. The main purpose of these financial liabilities is to manage finances for the Company’s operations. The Company’s principal financial assets include investment in mutual funds and Government Securities, trade receivables, unbilled revenue, cash and cash equivalents, security deposits paid, etc. that derive directly from its operations.

The Company is exposed to market risk, credit risk and liquidity risk. The Company’s senior management oversees the management of these risks. The senior professionals working to manage the financial risks and the appropriate financial risk governance frame work for the Company are accountable to the Board of Directors and Audit & Risk Management Committee. This process provides assurance to the Company’s senior management that the Company’s financial risk-taking activities are governed by appropriate policies and procedures and that financial risks are identified, measured and managed in accordance with Company’s policies and Company’s risk appetite. The Company has not entered into any derivative transactions. It is the Company’s policy that no trading in derivatives for speculative purposes shall be undertaken. The Board of Directors reviews and agrees policies for managing each of these risks which are summarised below:

Market Risk

Market risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in market prices. Market prices comprise three types of risk: interest rate risk, foreign currency risk and price risk. Financial instruments affected by market risk include interest bearing investment in mutual funds, Government Securities, fixed deposits and loans and borrowings etc.

The sensitivity of the relevant profit or loss item is the effect of the assumed changes in respective market risks. This is based on the financial assets and financial liabilities held at March 31, 2023 and March 31,2022.

The Company’s exposure to financial risks is to a variety of financial risks, including the effect of changes in foreign currency exchange rates, if any. The Company uses derivative financial instruments such as foreign exchange contracts to manage its exposures and foreign exchange fluctuations, if any.

Interest rate risk

Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates.

The Company has invested in Government securities which will fetch a fixed rate of interest, hence, the income and operating cash flows are substantially independent of changes in market interest rates. The Company’s exposure to the risk of changes in market interest rates relates primarily to the Company’s long-term debt obligations with floating interest rates, which are included in interest bearing loans and borrowings in these financial statements. Further, the short-term borrowings of the Company do not have a significant fair value or cash flow interest rate risk due to their short tenure.

Foreign currency risk

Foreign currency risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in foreign exchange rates.

The Indian Rupee is the Company’s functional currency. As a consequence, the Company’s results are presented in Indian Rupee and exposures are managed against Indian Rupee accordingly. The Company has very limited foreign currency exposure mainly due to incurrence of some expenses. The Company may use foreign exchange option contracts or forward contracts towards operational exposures resulting from changes in foreign currency exchange rates exposure. These foreign exchange contracts, carried at fair value, may have varying maturities depending upon the primary host contract requirement.

The Company manages its foreign currency risk if any, by hedging appropriate percentage of its foreign currency exposure, as per approved established risk management policy.

The foreign currency exposures that have not been hedged are Rs. 6 Mn (USD 0.07 Mn) included in trade payable as at March 31, 2023 (March 31,2021 : Nil* (JPY 0.22 Mn)). The Company has not entered into any derivative arrangements during the year ended March 31,2023.

* Amount is less than 1 Mn Price risk

The Company invests its surplus funds in various Government securities, taxable and tax free quoted debt bonds, liquid & Money Market schemes of mutual funds (liquid investments) and higher duration short term debt funds.

These are susceptible to market price risk, mainly arising from changes in the interest rates or market yields which may impact the return and value of such investments. The Company manages the price risk through diversification from time to time.

Credit risk

Credit risk is the risk that counterparty will not meet its obligations under a financial instrument or customer contract, leading to a financial loss. The Company is exposed to credit risk from its operating activities (primarily for trade and other receivables) and from its financing activities, including deposits with banks and financial institutions, and other financial instruments. Management has a credit policy in place and the exposure to credit risk is monitored on an ongoing basis.

Bank balances and cash deposits

Credit risk from balances with banks and financial institutions is managed by Company’s treasury in accordance with the approved policy. Investment of surplus funds are made only with approved counterparties who meet the minimum threshold requirements under the counterparty risk assessment process. Based on its on-going assessment of counterparty risk, the Company adjusts its exposure to various counterparties. The Company’s maximum exposure to credit risk for the components of the Balance Sheet at March 31,2023 and March 31, 2022 is the carrying amounts as given in Note 37.

Liquidity risk

Liquidity risk is the risk that the Company may not be able to meet its present and future cash and collateral obligations without incurring unacceptable losses. The Company’s objective is to, at all times maintain optimum levels of liquidity to meet its cash and collateral requirements. The Company principal sources of liquidity are cash and cash equivalents and the cash flow generated from operations. The Company closely monitors its liquidity position and deploys a robust cash management system.

The Company manages its capital structure and makes adjustments to it, in light of changes in economic conditions. To maintain or adjust the capital structure, the Company may adjust the dividend payment to shareholders, return capital to shareholders or issue new shares.

In order to achieve this overall objective, the Company’s capital management, amongst other things, aims to ensure that it meets financial covenants attached to the interest-bearing loans and borrowings that define capital structure requirements. There have been no breaches in the financial covenants of any interest-bearing loans and borrowing in the year ended March 31,2023.

47 The Code on Social Security, 2020 (‘code’) relating to employee benefits during employment and post-employment benefits received Presidential assent in September 2020. The Code has been published in the Gazette of India. However, the date on which the Code will come into effect has not been notified. The Ministry of Labour and Employment has released draft rules for the Code on Social Security, 2020 on November 13, 2020, and has invited the suggestions from stakeholders. The Company will assess the impact of the Code when it comes into effect and will record any related impact in the period the Code becomes effective.

48 A large customer of the Company accounts for substantial part of revenue from operations for the year ended March 31,2023 and constitutes a significant part of outstanding trade receivables and unbilled revenue as at March 31,2023.

(a) The said customer in its latest published unaudited financial results for the quarter and nine months ended December 31, 2022, had indicated that its ability to continue as a going concern is dependent on its ability to raise additional funds as required, successful negotiations with lenders and vendors for continued support and generation of cash flow from operations for settling its liabilities as they fall due. The said customer had also disclosed in the aforesaid results that so far it has met all debt obligations to its lenders / banks and financial institutions along with applicable interest till date.

During the quarter ended March 31,2023, the said customer in its recent filing with Stock Exchanges informed that it has allotted 16,133,184,899 equity shares of face value of Rs. 10/- each at an issue price of Rs. 10/- per equity share aggregating to Rs. 161,331 Mn to the Department of Investment and Public Asset Management, Government of India (acting through President of India) on account of conversion the Net Present Value of the interest amount related to deferment of spectrum auction instalments and AGR dues.

(b) The Company, subject to the terms and conditions agreed between the parties, has a secondary pledge over the remaining shares held by one of the customer’s promoters in the Company and a corporate guarantee provided by said customer’s promoter which could be triggered in certain situations and events in the manner agreed between the parties. However, these securities are not adequate to cover the total outstanding with the said customer.

(c) During the quarter ended June 30, 2022 through the quarter ended September 30, 2022, the said customer had informed the Company that a funding plan was under discussion with its lenders and it had agreed to a payment plan with the Company to pay part of the monthly billing till December 2022 and 100% of the amounts billed from January 2023 onwards, which will be adjusted by the Company against the outstanding trade receivables. As regards, the dues outstanding as at December 31,2022, the customer had agreed to pay the dues between January 2023 and July 2023.

(d) During the last quarter of the financial year, the funding plan of the said customer did not materialize and the said customer indicated challenges in making the committed payments pertaining to the outstanding amount due as at December 31, 2022. However, the said customer has been paying an amount equivalent to monthly billing from January 2023, hence, the Company continues to recognize revenue from operations relating to the said customer for the services rendered.

Further, the Company had assessed the recoverability of amounts receivable from said customer and recorded necessary allowances as at December 31,2022 which covers all the overdue outstanding till December 31,2022. The incremental provision recorded during the quarter ended March 31,2023 was Rs. 434 Mn and the Company carries an allowance for doubtful receivables of Rs. 54,527 Mn as at March 31,2023 relating to the said customer.

(e) Further, as per Ind AS 116 “Leases”, the Company has recognised revenue on the basis of straight lining of rentals over the contractual period and also created revenue equalization asset in the books of accounts. During the year, the Company had recorded an impairment charge relating to the revenue equalization assets of Rs. 4,928 Mn up to September 30, 2022 for the said customer and presented it as an exceptional item in the statement of profit and loss. Further, the revenue amounting to Rs. 1,433 Mn on account of straight lining of lease rentals is not recognized in the revenue from operations due to uncertainty of collection.

(f) It may be noted that the potential loss of the said customer (whose statutory auditors have reported material uncertainty related to going concern in its report on latest published unaudited results) due to its inability to continue as a going concern or the Company’s failure to attract new customers could have an adverse effect on the business, results of operations and financial condition of the Company and amounts receivable (including unbilled revenue) and carrying amount of property, plant and equipment related to the said customer.

49 No funds have been advanced or loaned or invested (either from borrowed funds or share premium or any other sources or kind of funds) by the Company to or in any other person(s) or entity(ies), including foreign entities (“Intermediaries”) with the understanding that the Intermediary shall lend or invest in party identified by or on behalf of the Company (Ultimate Beneficiaries). The Company has not received any fund from any party(s) (Funding Party) with the understanding that the Company shall whether, directly or indirectly lend or invest in other persons or entities identified by or on behalf of the Company (“Ultimate Beneficiaries”) or provide any guarantee, security or the like on behalf of the Ultimate Beneficiaries.

No funds have been received by the Company from any person(s) or entity(ies), including foreign entities (Funding Parties), with the understanding (whether recorded in writing or otherwise) that the Company shall (i) directly or indirectly, lend or invest in other persons or entities identified in any manner whatsoever by or on behalf of the Funding Party (Ultimate Beneficiaries) or (ii) provide any guarantee, security or the like on behalf of the Ultimate Beneficiaries.


Mar 31, 2021

1. Corporate information

Indus Towers Limited (formerly Bharfi Infrafel Limited) (‘the Company'' or ‘Indus'') was incorporated on November 30, 2006 with the object of, inter-alia, setting up, operating and maintaining wireless communication towers. The Company received the certificate of commencement of business on April 10, 2007 from the Registrar of Companies. The Company is publicly traded on National Stock Exchange of India (NSE) and BSE Limited. The Registered office of the Company is situated at 901, Park Centra, Sector-30 NH-8, Gurugram Haryana-122001.

The Scheme of amalgamation and arrangement between the Company and erstwhile Indus Towers Limited (a joint venture company) became effective on November 19, 2020. Upon implementation of the Scheme, the joint venture company (i.e. erstwhile Indus Towers Limited) merged into the Company on a going concern basis. Further, the name of the Company was changed from Bharti Infratel Limited to Indus Towers Limited w.e.f. December 10, 2020 vide fresh certificate of incorporation issued by Registrar of Companies.

Upon implementation of the Scheme and allotment of shares to indirect wholly owned subsidiaries of Vodafone Group Plc., in addition to existing promoters (representing Bharti Airtel Limited along with its wholly owned subsidiary Nettle Infrastructure Investments Limited), the aforesaid indirect wholly owned subsidiaries of Vodafone Group Plc. have also been classified as promoters of the Company. Bharti Airtel Limited along with its wholly owned subsidiary holds 41.73% shares and Vodafone Group Plc. through its indirect wholly owned subsidiary companies holds 28.12% shares in the Company as on March 31,2021.

The financial statements are approved for issuance by the Company''s Board of Directors on April 22, 2021.

2. a) Statement of Compliance

The Standalone financial statements (“financial statements”) have been prepared to comply in all material aspects with the Indian Accounting Standards (Ind AS) notified under section 133 of the Companies Act, 2013, read together with Rule 3 of the Companies (Indian Accounting Standards) Rules, 2015 and other relevant provisions of the Companies Act, 2013 (the Act) as amended from time to time.


b) Basis of preparation

The financial statements have been prepared under historical cost convention on accrual and going concern basis, except for the certain financial instruments which have been measured at fair value as required by relevant Ind ASs.

Accounting policies have been consistently applied except where a newly issued accounting standard is initially adopted or a revision to an existing accounting standard requires a change in the accounting policy hitherto in use.

All the amounts included in the financial statements are reported in millions of Indian Rupees (‘Rupees'' or ‘h'') and are rounded to the nearest million (Mn) except per share data and unless stated otherwise.

3. Merger of ‘erstwhile Indus Towers Limited’ with ‘the Company’

On April 25, 2018, Indus Towers Limited (formerly Bharti Infrafel Limited) (‘the Company'' or ‘Transferee Company'') and its Joint Venture Company erstwhile Indus Towers Limited (‘erstwhile Indus'' or ‘Transferor Company'') and their respective shareholders and creditors entered into a scheme of amalgamation and arrangement (under section 230 to 232 and other applicable provisions of the Companies Act, 2013) (‘Scheme'') to create a pan-India tower company operating across all 22 telecom service areas. The Scheme has received requisite approvals from Competition Commission of India, Securities Exchange Board of India through BSE Limited and National Stock Exchange of India Limited and FDI approval from Department of Telecommunications (‘DoT''). The Company has also received approval from National Company Law Tribunal (‘NCLT''), Chandigarh on May 31,2019 read with the order dated October 22, 2020. Furthermore, the Company has filed the certified copy of the NCLT order with the Registrar of Companies on November 19, 2020 i.e. the effective date of merger. Upon the Scheme becoming effective the erstwhile Indus stood dissolved without being wound-up.

As a result of above scheme, Bharti Airtel group through its subsidiary i.e Bharti Infratel Limited and Vodafone group through its joint venture i.e. erstwhile Indus Towers Limited contributed assets and liabilities to form a Joint arrangement in the name of Bharti Infratel Limited. Furthermore, the name of the Company has been changed from Bharti Infratel Limited to Indus Towers Limited w.e.f. December 10, 2020.

In compliance with the Scheme, 845,328,704 equity shares of the Company were issued to the shareholders of erstwhile Indus which have been recorded at face value of H 10 per equity share and H 37,642 Mn (inclusive of 41 Mn paid after effective date of merger) was paid to Vodafone Idea Limited (in lieu of cash option exercised for its shareholding of 11.15% in erstwhile Indus) by the Company. The stamp duty paid on issue of shares amounting to H 8 Mn has been debited to Securities Premium Account.

As per Indian Accounting Standards as prescribed under section 133 of the Companies Act, 2013, no specific accounting guidance is given in case of formation of a joint arrangement, hence, the Company had an option to either account for such business combination using ‘Pooling of interest'' method or adopt the ‘fair value'' method. The Company has adopted ''Pooling of interest'' method. Accordingly, all the assets, liabilities and reserves of erstwhile Indus have been recorded at their carrying amounts and in the form in which they appeared in the financial statements as at the date of merger. The financial information in the financial statement in respect of prior periods are not restated as the business combination was not involving entities under common control.

On the date of Scheme becoming effective, the Company has combined assets, liabilities and components of other equity of the erstwhile Indus on line by line basis. Furthermore, the Company has recognised impact of alignment of accounting practices a nd estimates of H 589 Mn through General Reserve and H 123 Mn (net of tax) through the Statement of profit and loss for the year ended March 31,2021.

A) The carrying balances of the erstwhile Indus which have been added to the respective line items in the Balance Sheet of the Company are as under:

Particulars

Amount as on the effective date of merger

Current assets

Financial assets

Trade receivables

57,917

Cash and cash equivalents

2

Other financial assets

22,044

Other current assets

1,970

81,933

Total assets

357,242

Equity and liabilities

Equity

Equity share capital

1

Other equity

146,043

146,044

Liabilities

Non-current liabilities

Financial liabilities

Borrowings

9,101

Lease liabilities

89,007

Other financial liabilities

3,965

Provisions

11,812

Deferred tax liabilities (net)

2,216

Other non-current liabilities

1,970

118,071

Current liabilities

Financial liabilities

Borrowings

22,416

Trade payables

Total outstanding dues of

98

micro enterprises and small

enterprises

Total outstanding dues of

25,173

creditors other than micro

enterprises and small

enterprises

Lease liabilities

17,765

Other financial liabilities

17,099

Other current liabilities

7,972

Provisions

552

Current tax liabilities (net)

2,052

93,127

Total liabilities

211,198

Total equity and liabilities

357,242

Particulars

Amount as on the effective date of merger

Assets

Non current assets

Property, plant and equipment

164,884

Right of use assets

82,228

Capital work-in-progress

2,429

Intangible assets

109

Financial assets

Other financial assets

9,166

Income tax assets (net)

6,432

Other non-current assets

10,061

275,309

B) The impact on other equity on the effective date of merger is as follows:

Reserves and surplus

Other

comprehensive

income

Total equity J in Mn)

Particulars

Capital

reserve

General

reserve

Merger

capital

reserve

Retained

earnings

Reserves of erstwhile Indus

4,536

73,257

—

68,366

(116)

146,043

Investment of the Company into erstwhile Indus*

—

(58,033)

(1,888)

(382)

—

(60,303)

Cash paid to Vodafone Idea Limited (in lieu of cash option exercised for its shareholding of 11.15% in erstwhile Indus) by the Company

(37,642)

(37,642)

Share capital of erstwhile Indus less share capital issued by the Company

—

—

(8,452)

—

—

(8,452)

Total

4,536

15,224

(47,982)

67,984

(116)

39,646

’During the year ended March 31, 2014, under the Scheme of Arrangement (‘Indus Scheme’) under Section 391 to 394 of the Companies Act, 1956 for transfer of all assets and liabilities, as defined in Indus scheme, from Bharti Infratel Ventures Limited (BIVL), erstwhile wholly owned subsidiary Company, to erstwhile Indus was approved by the Hon’ble High Court of Delhi vide order dated April 18, 2013 and filed with the Registrar of Companies on June 11,2013 with appointed date April 1,2009 i.e. effective date of Indus Scheme and accordingly, effective June 11,2013, the erstwhile subsidiary Company has ceased to exist and had become part of erstwhile Indus. The Company was carrying investment in BIVL at H 59,921 Mn. Pursuant to Indus Scheme, the Company has additionally got 504 shares in erstwhile Indus in lieu of transfer of its investment in BIVL to erstwhile Indus and recorded these additional shares at their fair value of H 60,419 Mn in accordance with the scheme. The resultant gain of H 382 Mn (net of taxes H 116 Mn) has been disclosed as adjustment to carry forward balance of the Statement of Profit and Loss as at April 1, 2009.

The merger of erstwhile Indus with the Company has been accounted as per ‘Pooling of interest’ method according to which the identity of the reserves (of the transferor) shall be preserved and shall appear in the financial statements of the transferee in the same form in which they appeared in the financial statements of the transferor. Consequently, all the reserves of the transferor (erstwhile Indus) have been recorded at their respective book values and their identity has been preserved.

Upon the merger becoming effective, the investment in Joint Venture (erstwhile Indus) has been cancelled by debiting the General Reserve to the extent available (i.e. H 58,033 Mn) in the books of the Transferee Company, which was created out of the “BAL Scheme” (refer Note 44(a) for details of BAL scheme). There is no restriction for making adjustment to the reserves in the books of the transferee, and in accordance with the BAL scheme, such “General Reserve shall constitute free reserve available for all purposes of the Company and to be utilised by the Company at its own discretion as it considers proper including in particular for off-setting any additional depreciation that may be charged by the Company”. Further, earlier recognised gain of H 382 Mn and deferred tax liability of H 116 Mn have been reversed

and the balance amount of investment in joint venture i.e. H 1,888 Mn has been debited to the merger Capital Reserve on account of cancellation of such investment.

In addition to above, difference between share capital of erstwhile Indus of H 1 Mn and shares issued by the Company of H 8,453 Mn and cash paid of H 37,642 Mn to the shareholders of the erstwhile Indus have resulted into debit balance of Merger Capital Reserve.

4. Significant accounting policies, judgements, estimates and assumptions

4.1 Significant accounting policies

a) Property, Plant and Equipment

Property, plant and equipment including Capital work in progress is stated at cost, except assets acquired under Schemes of Arrangement, which are stated at fair values as per the Schemes, net of accumulated depreciation and accumulated impairment losses, if any. Such cost includes the cost of replacing part of the Property, plant and equipment and borrowing costs for long term construction projects if the recognition criteria are met. When significant parts of property, plant and equipment

are required to be replaced in intervals, the Company recognizes such parts as separate component of assets with specific useful lives and provides depreciation over their useful life. Subsequent costs are included in the asset''s carrying amount or recognized as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the entity and the cost of the item can be measured reliably. The carrying amount of the replaced part is derecognized. All other repair and maintenance costs are recognised in the Statement of Profit and Loss as incurred.

The present value of the expected cost for the decommissioning of the asset after its use is included in the cost of the respective asset if the recognition criteria for a provision are met. Refer note 4.2 regarding significant accounting judgements, estimates and assumptions and provisions for further information about the recorded decommissioning provision.

An item of property, plant and equipment and any significant part initially recognised is derecognised upon disposal or when no future economic benefits are expected from its use or disposal. Any gain or loss arising on derecognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is recognised in the Statement of Profit and Loss when the asset is derecognised.

Assets are depreciated to the residual values on a straight-line basis over the estimated useful lives. Estimated useful lives of the assets are as follows:

Particulars

Useful lives

Office Equipment

2 years / 5 years

Computer

3 years

Vehicles

5 years

Furniture and Fixtures

5 years

Plant and Machinery

3 to 20 Years

Leasehold Improvement

Period of Lease or useful life, whichever is less

The existing useful lives and residual value of tangible assets are different from the useful lives as prescribed under Part C of Schedule II to the Companies Act, 2013 and the Company believes that this is the best estimate on the basis of technical evaluation and actual usage period.

The existing residual values of tangible assets are different from 5% as prescribed under Part C of Schedule II to the Companies Act, 2013 and the Company believes that this is the best estimate on the basis of actual realization.

The assets'' residual values and useful lives are reviewed at each financial year end or whenever there are indicators for impairment, and adjusted prospectively.

On transition to Ind AS, the Company has elected to continue with the carrying value of all its property, plant and equipment (including assets acquired under Schemes of Arrangement) except with an adjustment in decommissioning cost recognised as at April 1, 2015 measured as per the previous GAAP and use that carrying value as the cost of the property, plant and equipment.

b) Intangible Assets

Intangible assets are recognized when the entity controls the asset, it is probable that future economic benefits attributed to the asset will flow to the entity and the cost of the asset can be reliably measured.

At initial recognition, the separately acquired intangible assets are recognised at cost. Intangible assets with finite useful lives are carried at cost less accumulated amortisation and accumulated impairment losses, if any.

Intangible assets are amortised over the useful economic life and assessed for impairment whenever there is an indication that the intangible asset may be impaired. The amortisation period and the amortisation method for an intangible asset are reviewed at least at the end of each financial year. Changes in the expected useful life or the expected pattern of consumption of future economic benefits embodied in the asset are considered to modify the amortisation period or method, as appropriate, and are treated as changes in accounting estimates. The amortisation expense on intangible assets is recognised in the Statement of Profit and Loss unless such expenditure forms part of carrying value of another asset.

Software is capitalized at the amounts paid to acquire the respective license for use and is amortised over the period of license, generally not exceeding three years.

Gains or losses arising from derecognition of an intangible asset are measured as the difference between the net disposal proceeds and the carrying amount of the asset and are recognised in the Statement of Profit and Loss when the asset is derecognised.

c) Impairment of non-financial assets

The Company assesses, at each reporting date, whether there is an indication that an asset may be impaired. If any indication exists, or when annual impairment testing for an asset is required, the Company estimates the asset''s recoverable amount. An asset''s recoverable amount Is the higher of an asset''s or cash-generating unit''s (CGU) fair value less costs of disposal and its value in use. Recoverable amount is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or groups of assets. When the carrying amount of an asset or CGU exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount.

In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. In determining fair value less costs of disposal, recent market transactions are taken into account. If no such transactions can be identified, an appropriate valuation model is used. Impairment losses, if any, are recognized in the Statement of Profit and Loss as a component of depreciation and amortisation expense.

A previously recognised impairment loss is reversed only if there has been a change in the assumptions used to determine the asset''s recoverable amount since the last impairment loss was recognised. The reversal is limited to the extent the carrying amount of the asset does not exceed its recoverable amount, nor exceed the carrying amount that would have been determined, net of depreciation or amortisation, had no impairment loss been recognised for the asset in prior years. Such reversal is recognized in the Statement of Profit and Loss when the asset is carried at the revalued amount, in which case the reverse is treated as a revaluation increase.

d) Current versus non-current classification

The Company presents assets and liabilities in the balance sheet based on current/ non-current classification. An asset is treated as current when it is:

• Expected to be realised or intended to be sold or consumed in normal operating cycle

• Held primarily for the purpose of trading

• Expected to be realised within twelve months after the reporting period, or

• Cash or cash equivalent unless restricted from being exchanged or used to settle a liability for at least twelve months after the reporting period

Current assets include the current portion of non-current assets. All other assets are classified as non-current.

A liability is current when:

• It is expected to be settled in normal operating cycle

• It is held primarily for the purpose of trading

• It is due to be settled within twelve months after the reporting period, or

• There is no unconditional right to defer the settlement of the liability for at least twelve months after the reporting period

Current liabilities include the current portion of long-term liabilities. The Company classifies all other liabilities as non-current.

Deferred tax assets and liabilities are classified as noncurrent assets and liabilities.

The operating cycle is the time between the acquisition of assets for processing and their realisation in cash and cash equivalents. The Company has identified twelve months as its operating cycle.

e) Leases

The company assesses whether a contract contains a lease, at inception of a contract. A contract is, or contains, a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. To assess whether a contract conveys the right to control the use of an identified asset, the Company assesses whether: (i) the contract involves the use of an identified asset (ii) the Company has substantially all of the economic benefits from use of the asset through the period of the lease and (iii) the Company has the right to direct the use of the asset.

Company as a lessee

The Company recognizes right-of-use asset (ROU) representing its right to use the underlying asset for the lease term and a corresponding lease liability at the

lease commencement date. The cost of the right-of-use asset measured at inception shall comprise of the amount of the initial measurement of the lease liability adjusted for any lease payments made at or before the commencement date less any lease incentives received, plus any initial direct costs incurred. The right-of-use assets is subsequently measured at cost less any accumulated depreciation, accumulated impairment losses, if any and adjusted for any remeasurement of the lease liability. The right-of-use asset is depreciated from the commencement date on a straight-line basis over the shorter of the lease term and useful life of the underlying asset. Right-of-use assets are tested for impairment whenever there is any indication that their carrying amounts may not be recoverable. Impairment loss, if any, is recognised in the statement of profit and loss.

The Company measures the lease liability at the present value of the lease payments that are not paid at the commencement date of the lease. The lease payments are discounted using the interest rate implicit in the lease, if that rate can be readily determined. If that rate cannot be readily determined, the Company uses incremental borrowing rate. For leases with reasonably similar characteristics, the Company may adopt the incremental borrowing rate for the entire portfolio of leases as a whole. The lease payments shall include fixed payments, variable lease payments, residual value guarantees, exercise price of a purchase option where the Company is reasonably certain to exercise that option and payments of penalties for terminating the lease, if the lease term reflects the lessee exercising an option to terminate the lease. The lease liability is subsequently remeasured by increasing the carrying amount to reflect interest on the lease liability, reducing the carrying amount to reflect the lease payments made and remeasuring the carrying amount to reflect any reassessment or lease modifications or to reflect revised in-substance fixed lease payments.

The Company recognises the amount of the remeasurement of lease liability as an adjustment to the right-of-use asset. Where the carrying amount of the right-of-use asset is reduced to zero and there is a further reduction in the measurement of the lease liability, the Company recognizes any remaining amount of the remeasurement in the statement of profit and loss.

The Company may elect not to apply the requirements of Ind AS 116 to leases for which the underlying asset is

of low value. The lease payments associated with these leases are recognized as an expense on a straight-line basis over the lease term.

The Company has opted to recognize the asset retirement obligation liability as part of the cost of an item of property, plant and equipment in accordance with Ind AS 16.

Company as a lessor

At the inception date, leases are classified as a finance lease or an operating lease. Leases are classified as finance leases when substantially all of the risks and rewards of ownership transfer from the Company to the lessee. Amounts due from lessees under finance leases are recorded as receivables at the Company''s net investment in the leases. Finance lease income is allocated to accounting periods so as to reflect a constant periodic rate of return on the net investment outstanding in respect of the lease.

Leases where the Company does not transfer substantially all the risks and rewards incidental to ownership of the asset are classified as operating leases. Lease rentals under operating leases are recognized as income on a straight-line basis over the lease term. Contingent rents are recognized as revenue in the period in which they are earned.

As a lessor, in accordance with Ind AS 116 the Company has created Revenue equalisation reserve (RER) for fixed escalation clauses present in non-cancellable lease agreements with the customers on prospective basis effective April 1, 2019.

f) Share-based payments

The Company issues equity-settled and cash-settled share-based options to certain employees. These are measured at fair value on the date of grant.

The fair value determined at the grant date of the equity-settled share-based options is expensed over the vesting period, based on the Company''s estimate of the shares that will eventually vest.

The fair value determined on the grant date of the cash settled share based options is expensed over the vesting period, based on the Company''s estimate of the shares that will eventually vest. At the end of each reporting period, until the liability is settled, and at the date of settlement, the fair value of the liability is recognized,

with any changes in fair value pertaining to the vested period recognized immediately in the Statement of Profit and Loss.

At the vesting date, the Company''s estimate of the shares expected to vest is revised to equal the number of equity shares that ultimately vest.

Fair value is measured using Black-Scholes framework and is recognized as an expense, together with a corresponding increase in equity/ liability as appropriate, over the period in which the options vest using the graded vesting method. The expected life used in the model is adjusted, based on management''s best estimate, for the effects of non-transferability, exercise restrictions and behavioral considerations. The expected volatility and forfeiture assumptions are based on historical information.

Where the terms of a share-based payments are modified, the minimum expense recognized is the expense as if the terms had not been modified, if the original terms of the award are met. An additional expense is recognized for any modification that increases the total fair value of the share-based payment transaction, or is otherwise beneficial to the employee as measured at the date of modification.

Where an equity-settled award is cancelled, it is treated as if it is vested on the date of cancellation, and any expense not yet recognized for the award is recognized immediately. This includes any award where nonvesting conditions within the control of either the entity or the employee are not met. However, if a new award is substituted for the cancelled award, and designated as a replacement award on the date that it is granted, the cancelled and new awards are treated as if they were a modification of the original award, as described in the previous paragraph.

The dilutive effect of outstanding options if any, is reflected as additional share dilution in the computation of diluted earnings per share.

g) Cash and Cash equivalents

Cash and cash equivalents in the balance sheet comprise cash at banks and in hand and short-term deposits with an original maturity of three months or less, which are subject to an insignificant risk of changes in value. Bank overdrafts that are repayable on demand and form an integral part of the Company''s cash management are

included as a component of cash and cash equivalents for the purpose of the Statement of Cash Flows.

h) Financial Instruments

A financial instrument is any contract that gives rise to a financial asset of one entity and a financial liability or equity instrument of another entity.

Financial Assets

Initial Recognition and Measurement

All financial assets are recognised initially at fair value plus, in the case of financial assets not recorded at fair value through profit or loss, transaction costs that are attributable to the acquisition of the financial asset.

Subsequent Measurement

For purposes of subsequent measurement, financial assets are classified in four categories:

• Debt instruments at amortised cost

• Debt instruments at fair value through other comprehensive income (FVTOCI)

• Debt instruments, derivatives and equity instruments at fair value through Profit or Loss (FVTPL)

• Equity instruments measured at fair value through other comprehensive income (FVTOCI)

Debt Instruments at Amortised Cost

This category applies to the Company''s trade receivables, unbilled revenue, security deposits etc.

A ‘debt instrument'' is measured at the amortised cost if both the following conditions are met:

a) The asset is held within a business model whose objective is to hold assets for collecting contractual cash flows and

b) Contractual terms of the asset give rise on specified dates to cash flows that are solely payments of principal and interest (SPPI) on the principal amount outstanding

After initial measurement, such financial assets are subsequently measured at amortised cost using the effective interest rate (EIR) method. Amortised cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral part

of the EIR. The EIR amortisation is included in finance income in the Statement of Profit and Loss. The losses arising from impairment are recognised in the Statement of Profit and Loss.

Debt instrument at fair value through other comprehensive income (FVTOCI)

A ‘debt instrument'' is classified at FVTOCI if both of the following criteria are met:

a) The objective of the business model is achieved both by collecting contractual cash flows and selling the financial assets, and

b) The asset''s contractual cash flows represent SPPI.

Debt instruments included within the FVTOCI category are measured initially as well as at each reporting date at fair value. Fair value movements are recognized in the other comprehensive income (OCI). However, the Company recognizes interest income, impairment losses and reversals in the Statement of Profit and Loss. On derecognition of the asset, cumulative gain or loss previously recognised in OCI is reclassified from the equity to the Statement of Profit and Loss.

Interest earned whilst holding FVTOCI debt instrument is reported as interest income.

The Company has classified investment in tax free bonds within this category.

Debt instrument at fair value through profit or loss (FVTPL)

FVTPL is a residual category for debt instruments. Any debt instrument, which does not meet the criteria for categorization at amortized cost or at FVTOCI, is classified at FVTPL.

Debt instruments included within the FVTPL category are measured at fair value with all changes recognized in the Statement of Profit and Loss. This category applies to the Company''s investment in government securities, mutual funds, taxable bonds and non convertible debentures.

In addition, the Company may elect to designate a debt instrument, which otherwise meets amortized cost or FVTOCI criteria, as at FVTPL. However, such election is allowed only if doing so reduces or eliminates a

measurement or recognition inconsistency (referred to as ‘accounting mismatch''). The Company has not designated any debt instrument at FVTPL.

Equity investments

All equity investments in scope of Ind AS 109 are measured at fair value. Equity instruments which are held for trading and contingent consideration recognised by an acquirer in a business combination, if any to which Ind AS 103 applies are classified as at fair value through Profit or loss. There are no such equity investments measured at fair value through profit or loss or fair value through other comprehensive income in the company.

De-recognition:- A financial asset (or, where applicable, a part of a financial asset) is primarily derecognised (i.e. removed from the Company''s balance sheet) when:

a) The contractual rights to receive cash flows from the asset have expired, or

b) The Company has transferred its contractual rights to receive cash flows from the financial asset or has assumed an obligation to pay the received cash flows in full without material delay to a third party under a ‘pass-through'' arrangement; and either (a) the Company has transferred substantially all the risks and rewards of the asset, or (b) the Company has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset.

Impairment of Financial Assets

In accordance with Ind AS 109, the Company applies expected credit loss (ECL) model for measurement and recognition of impairment loss on the Financial assets that are debt instruments and are initially measured at fair value with subsequent measurement at amortised cost e.g Trade receivables, unbilled revenue etc.

The Company follows ‘simplified approach'' for recognition of impairment loss allowance for trade receivables.

The application of simplified approach does not require the Company to track changes in credit risk. Rather, it recognises impairment loss allowance based on lifetime ECLs at each reporting date, right from its initial recognition.

For recognition of impairment loss on other financial assets and risk exposure, the Company determines whether there has been a significant increase in the credit risk since initial recognition. If credit risk has not increased significantly, twelve month ECL is used to provide for impairment Ioss. However, if credit risk has increased significantly, lifetime ECL is used. If, in the subsequent period, credit quality of the instrument improves such that there is no longer a significant increase in credit risk since initial recognition, then the entity reverts to recognising impairment loss allowance based on a twelve month ECL.

ECL is the difference between all contractual cash flows that are due to the Company in accordance with the contract and all the cash flows that the entity expects to receive (i.e., all cash shortfalls), discounted at the original EIR.

Financial Liabilities

Initial Recognition and Measurement

Financial liabilities are classified, at initial recognition, as financial liabilities at fair value through profit or loss, loans and borrowings or payables, as appropriate.

All financial liabilities are recognised initially at fair value and, in the case of loans and borrowings and payables, net of directly attributable transaction costs. The Company''s financial liabilities include borrowings, trade and other payables, security deposits, lease liabilities etc.

Subsequent measurement

The measurement of financial liabilities depends on their classification, as described below:

Financial liabilities at fair value through profit or loss (FVTPL)

Financial liabilities at fair value through profit or loss include financial liabilities held for trading and financial liabilities designated upon initial recognition as at fair value through profit or loss. Financial liabilities are classified as held for trading if they are incurred for the purpose of repurchasing in the near term.

Financial liabilities designated upon initial recognition at fair value through profit or loss are designated as such at the initial date of recognition, and only if the criteria in Ind

AS 109 are satisfied. For liabilities designated as FVTPL, fair value gains/ losses attributable to changes in own credit risk are recognized in OCI. These gains/ losses are not subsequently transferred to the Statement of Profit and Loss. However, the Company may transfer the cumulative gain or loss within equity. All other changes in fair value of such liability are recognised in the Statement of Profit or Loss.

Financial Liabilities at Amortised cost

This category includes security deposit received, trade payables etc. After initial recognition, such liabilities are subsequently measured at amortised cost using the EIR method. Gains and losses are recognised in the Statement of Profit and Loss when the liabilities are derecognised as well as through the EIR amortisation process. Amortised cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral part of the EIR. The EIR amortisation is included as finance costs in the Statement of Profit and Loss.

De-recognition

A financial liability is derecognised when the obligation under the liability is discharged or cancelled or expires. When an existing financial liability is replaced by another from the same lender on substantially different terms or the terms of an existing liability are substantially modified, such an exchange or modification is treated as the derecognition of the original liability and the recognition of a new liability. The difference in the respective carrying amounts is recognised in the Statement of Profit and Loss.

Reclassification of Financial Assets

The Company determines classification of financial assets and liabilities on initial recognition. After initial recognition, no reclassification is made for financial assets which are equity instruments and financial liabilities. For financial assets which are debt instruments, a reclassification is made only if there is a change in the business model for managing those assets. Changes to the business model are expected to be infrequent. The Company''s senior management determines change in the business model as a result of external or internal changes which are significant to the Company''s operations. Such changes are evident to external parties. A change in the business model occurs when the Company either begins or ceases to perform an

activity that is significant to its operations. If the Company reclassifies financial assets, it applies the reclassification prospectively from the reclassification date which is the first day of the immediately next reporting period following the change in business model. The Company does not restate any previously recognised gains, losses (including impairment gains or losses) or interest.

Offsetting of Financial Instruments

Financial assets and financial liabilities are offset and the net amount is reported in the balance sheet if there is a currently enforceable legal right to offset the recognised amounts and there is an intention to settle on a net basis, to realise the assets and settle the liabilities simultaneously.

i) Revenue Recognition

The Company earns revenue primarily from rental services by leasing of passive infrastructure and energy revenue by the provision of energy for operation of sites.

Revenue is recognized when the Company satisfies the performance obligation by transferring the promised services to the customers. Services are considered performed when the customer obtains control, whereby the customer gets the ability to direct the use of such services and substantially obtains all benefits from the services. When there is uncertainty as to measurement or ultimate collectability, revenue recognition is postponed until such uncertainty is resolved.

In order to determine, if it is acting as principal or as an agent, the entity shall determine whether the nature of its promise is a performance obligation to provide the specified services itself (i.e. the entity is a principal) or to arrange for those services to be provided by the other party (i.e. the entity is an agent) for all its revenue arrangements.

Service revenue

Service revenue includes rental revenue for use of sites and energy revenue for the provision of energy for operation of sites.

Rental revenue is recognized as and when services are rendered on a monthly basis as per the contractual terms prescribed under master service agreement entered with customer. The Company has ascertained that the lease payment received are straight lined over the period of the

r*nntrar*t

Exit Charges on site exit and equipment de-loading is recognised when uncertainty relating to such exit and deloading is resolved and it is probable that a significant reversal relating to recoverability of these charges will not occur.

Interest on delayed payment from operators is recognized as income when uncertainty relating to amount receivable is resolved and it is probable that a significant reversal relating to this amount will not occur.

Energy revenue is recognized over the period on a monthly basis upon satisfaction of performance obligation as per contracts with the customers. The transaction price is the consideration received from customers based on prices agreed as per the contract with the customers. The determination of standalone selling prices is not required as the transaction prices are stated in the contract based on the identified performance obligation.

Unbilled revenue represents revenues recognized for the services rendered for the period falling after the last invoice raised to customer till the period end. These are billed in subsequent periods based on the prices specified in the master service agreement with the customers, whereas invoicing in excess of revenues are classified as unearned revenues. The Company collects GST on behalf of the government and therefore, it is not an economic benefit flowing to the Company, hence it is excluded from revenue.

Use of significant judgements in revenue recognition

The Company''s contracts with customers include promises to transfer services to a customer which are energy and rentals. Rentals are not covered within the scope of Ind AS 115, hence identification of distinct performance obligation within Ind AS 115 do not involve significant judgement.

Judgement is required to determine the transaction price for the contract. The transaction price could be either a fixed amount of customer consideration or variable consideration with elements such as discounts, service level credits, waivers etc. The estimated amount of variable consideration is adjusted in the transaction price only to the extent that it is highly probable that a significant reversal in the amount of cumulative revenue recognised will not occur and is reassessed at the end of each reporting period.

In evaluating whether a significant revenue reversal will not occur, the Company considers the likelihood and magnitude of the revenue reversal and evaluates factors which results in constraints such as historical experience of the Company with a particular type of contract, and the regulatory environment in which the customers operates which results in uncertainty which is less likely to be resolved in near future.

The Company provides volume discount to its customers based on slab defined in the revenue contracts. Contract also contains clause on Service Level Penalty/ rewards in case the Company is not able to maintain uptime level mentioned in the agreement. These discount/penalties are called variable consideration.

There is no additional impact of variable consideration as per Ind AS 115 since maximum discount is already being given to customer and the same is deducted from revenue.

There is no additional impact of SLA penalty as the Company already estimates SLA penalty amount and the same is provided for at each month end. The SLA penalty is presented as net off with revenue in the Statement of profit and loss.

Determination of standalone selling price does not involve significant judgement for the Company. The Company exercises judgement in determining whether the performance obligation is satisfied at a point in time or over a period of time. The Company considers the indicators on how customer consumes benefits as services are rendered in making the evaluation. Contract fulfillment costs are generally expensed as incurred. The assessment of this criteria requires the application of judgement, in particular when considering if costs generate or enhance resources to be used to satisfy future performance obligations and whether costs are expected to be recovered.

Dividend Income

Dividend Income is recognized when the right to receive payment is established, which is generally on the date when shareholders approve the dividend in case of final dividend and approval by Board of Directors in case of interim dividend.

j) Finance income

Finance income comprises interest income on funds invested and changes in the fair value of financial assets

at fair value through profit or loss, and that are recognised in the Statement of Profit and Loss. Interest income is recognised as it accrues in the Statement of Profit and Loss, using the effective interest rate (EIR) which is the rate that exactly discounts the estimated future cash receipts through the expected life of the financial instrument or a shorter period, where appropriate, to the net carrying amount of the financial asset.

Finance income does not include dividend income, interest on income tax refund etc. which is included in other income.

k) Other income

Other income includes dividend income, interest on income tax refund, gain on sale of property, plant and equipment etc. Any gain or loss arising on derecognition of property, plant and equipment is calculated as the difference between the net disposal proceeds and the carrying amount of the asset.

l) Finance cost

Finance costs comprise Borrowing cost, interest expense on lease obligations, accretion of interest on site restoration obligation and security deposits received.

m) Income Taxes

The income tax expense comprises of current and deferred income tax. Income tax is recognised in the statement of profit and loss, except to the extent that it relates to items recognised in the other comprehensive income or directly in equity, in which case the related income tax is also recognised accordingly.

Current tax

The current tax is calculated on the basis of the tax rates, laws and regulations, which have been enacted or substantively enacted as at the reporting date. The payment made in excess / (shortfall) of the Company''s income tax obligation for the period are recognised in the balance sheet as current income tax assets / liabilities. Any interest, related to accrued liabilities for potential tax assessments are not included in Income tax charge or (credit), but are rather recognised within finance costs. The management periodically evaluates positions taken in the tax returns with respect to situations in which applicable tax regulations are subject to interpretation and establishes provisions where appropriate.

The expense on dividends are linked directly to past transactions or events that generated distributable profits than to distribution to owners. Therefore the company shall recognise the income tax on dividends in profit or loss, other comprehensive income or equity according to where the entity originally recognised those past transactions or events.

Deferred tax

Deferred tax is recognised, using the balance sheet approach, on temporary differences arising between the tax bases of assets and liabilities and their carrying values in the financial statements. However, deferred fax is not recognised if it arises from initial recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither accounting nor taxable profit or loss.

Deferred tax assets are recognised only to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilized. The unrecognised deferred tax assets / carrying amount of deferred tax assets are reviewed at each reporting date for recoverability and adjusted appropriately.

Deferred tax is determined using tax rates (and laws) that have been enacted or substantively enacted by the reporting date and are expected to apply when the related deferred income tax asset is realised or the deferred income tax liability is settled.

Deferred tax assets and liabilities are off-set against each other and the resultant net amount is presented in the balance sheet, if and only when, (a) the Company currently has a legally enforceable right to set-off the current income tax assets and liabilities, and (b) when it relates to income tax levied by the same taxation authority.

n) Dividend Payments

Final dividend is recognized, when it is approved by the shareholders and the distribution is no longer at the discretion of the Company. However, Interim dividends are recorded as a liability on the date of declaration by the Company''s Board of Directors.

o) Retirement and other employee benefits

Short term employee benefits are recognised in the period during which the services have been rendered. All

employee benefits expected to be settled wholly within twelve months of rendering the service are classified as short-term employee benefits. When an employee has rendered service to the Company during an accounting period, the Company recognises the undiscounted amount of short-term employee benefits expected to be paid in exchange for that service as an expense unless another Ind AS requires or permits the inclusion of the bene


Mar 31, 2019

1. Corporate Information

Bharti Infratel Limited (‘the Company’ or ‘BIL’) was incorporated on November 30, 2006 with the object of, inter-alia, setting up, operating and maintaining wireless communication towers. The Company received the certificate of commencement of business on April 10, 2007 from the Registrar of Companies. The Registered office of the Company is situated at 901, Park Centra, Sector-30 NH-8, Gurugram Haryana-122001.

Bharti Infratel Limited is a subsidiary of Bharti Airtel Limited (‘BAL’) and BAL holds 33.57% shares in the Company. Nettle Infrastructure Investments Limited, Wholly owned Subsidiary of BAL also holds 19.94% shares in the Company as on March. 31, 2019.

The Company is publicly traded on National Stock Exchange of India (NSE) and BSE Limited.

The Company had entered into a joint venture agreement with Vodafone Group and Aditya Birla Telecom Limited (now merged with Vodafone Idea Limited (formerly known as Idea Cellular Limited)) to provide passive infrastructure services in 15 Telecom circles of India and formed Indus Towers Limited for such purpose which is a Company incorporated in India. The Company and Vodafone Group are holding 42% each in Indus Towers Limited, 11.15% is held by Vodafone Idea Limited and 4.85% is held by P5 Asia Holding Investments (Mauritius) Limited.

During the year ended March. 31, 2019, Bharti Infratel Limited and Indus Towers Limited and their respective shareholders and creditors have entered into a proposed scheme of amalgamation and arrangement (under section 230 to 232 and other applicable provisions of the Companies Act, 2013) (‘Scheme’) to create a pan-India tower company operating across all 22 telecom service areas. The combined company, which will fully own the respective businesses of Bharti Infratel and Indus Towers, will change its name to Indus Towers Limited and will continue to be listed on the Indian Stock Exchanges. The scheme will be accounted for on receipt of regulatory and other approvals. The Scheme has received approval from Competition Commission of India and No Objection from the Securities Exchange Board of India through BSE Limited and National Stock Exchange of India Limited. The approval from National Company Law Tribunal (NCLT) and Department of Telecommunications for FDI approval is awaited. The Scheme has been approved by the shareholders and creditors of the Company by requisite majority on February 2, 2019. The second motion petition filed with NCLT has been admitted. The matter is listed for hearing before the NCLT on May 14, 2019.

A wholly owned subsidiary, Smartx Services Limited, was incorporated on September 21, 2015 with the object of transmission through Optic Fibre Cables and setting up WiFi hotspots for providing services to telecom operators and others on sharing basis.

The financial statements are approved for issuance by the Company’s Board of Directors on April 24, 2019

2. Basis of Preparation

The Standalone financial statements (“financial statements”) have been prepared to comply in all material aspects with the Indian Accounting Standard (Ind AS) notified under section 133 of the Companies Act, 2013, read together with Rule 3 of the Companies (Indian Accounting Standards) Rules, 2015 and as amended by the Ministry of Corporate Affairs (‘MCA’) from time to time.

The financial statements have been prepared under historical cost convention on accrual and going concern basis, except for the certain financial instruments which have been measured at fair value as required by relevant Ind ASs.

Accounting policies have been consistently applied except where a newly issued accounting standard is initially adopted or a revision to an existing accounting standard requires a change in the accounting policy hitherto in use.

All the amounts included in the financial statements are reported in millions of Indian Rupees (‘Rupees’ or ‘Rs.’), and are rounded to the nearest millions (Mn) except per share data and unless stated otherwise.

(i) ”Plant and equipment” comprise of assets given on operating lease.

(ii) Depreciation charge for the year includes Rs. 382 Mn (FY 2017 - 18-Rs. 671 Mn) being the amount provided for asset obsolescence/impairment with respect to assets not in active use. (iii) Disposal/adjustment includes cost and accumulated depreciation for assets sold and the assets for which insurance claims are made by the Company.

(iv) Net book value of computers of Rs. 23 Mn (March. 31, 2018: Rs. 68 Mn) are under finance lease.

Deferred tax assets and deferred tax liabilities have been offset wherever the Company has a legally enforceable right to set off current tax assets against current tax liabilities and where the deferred tax assets and deferred tax liabilities relate to income taxes levied by the same taxation authority.

Current tax expense includes tax reversal of RS. 46 Mn (March. 31, 2018 - tax reversal of RS. 64 Mn) and deferred tax expense includes tax expense of RS. 30 Mn (March. 31, 2018 - tax expense of RS. 53 Mn), respectively relating to earlier periods.

b. Terms/ Rights Attached to Equity Shares:

The Company has only one class of equity shares having par value of RS. 10 per share. Each holder of equity shares is entitled to one vote per share. The Company declares and pays dividend in Indian rupees.

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

The Board of Directors, in its meeting held on April 23, 2018, proposed a final dividend of RS. 14 per equity share for FY 2017-18 and the same was approved by the shareholders at the ensuing Annual General Meeting.

The Board of Directors, in its meeting held on October 24, 2018 had approved an interim dividend of RS.7.50 per equity share for FY 2018-19.

e. Aggregate Number of Bonus Shares Issued and Shares Issued for Consideration other than Cash During the Period of Five Years Immediately Preceding the Reporting Date:

During the year ended March. 31, 2013, the Company allotted 1,161,605,820 equity shares as fully paid bonus shares by capitalization of securities premium account.

During the year ended March. 31, 2016, the Company allotted 2,897,776 equity shares (F.Y 2014-15, 2013-14 and 2012-13 -4,468,180, 558,059 and 100,212 equity shares respectively) of RS. 10 each to its employees on exercise of stock options under the Employee Stock Option Plan 2008 wherein part consideration was received in form of employee services. (refer note 37).

f. Aggregate Number and Class of Shares Bought Back During the Period of Five Years Immediately Preceding the Reporting Date:

During the year ended March. 31, 2017, the Company brought back 47,058,824 equity shares of RS. 10 each by way of tender offer through stock exchange mechanism for cash at price of RS. 425 per equity share.

g. Shares Reserved for Issue Under Options:

For details of shares reserved for issue under the employee stock option plan (ESOP) of the Company, refer note 37.

a) Securities Premium

Securities premium is used to record the premium on issue of shares. The reserve is utilised in accordance with the provisions of the Companies Act, 2013.

b) Share Based Payment reserves

This relates to share options granted by the Company to its employees under its employee share options plan.

c) General Reserve

General reserve was created out of Composite Scheme of arrangement with Bharti Airtel Limited.

d) Capital redemption reserve

Capital redemption reserve was created on buy back of shares. A company may issue fully paid up bonus shares to its members out of Capital redemption reserve account.

The Company uses various premises on lease to install plant and equipment. Provision is recognised for the costs to be incurred for the restoration of these premises at the end of the lease period. It is expected that this provision will be utilized at the end of the lease period of the respective sites as per the respective lease agreements. The movement of Provision in accordance with Ind AS 37 on ‘Provisions, Contingent liabilities and Contingent Assets’ is given below:

3. Trade Payables

a) Trade Payable include RS. 84 Mn (March. 31, 2018 - RS. 80 Mn) payable to Parent company, fellow subsidiary and Group Company. Further RS. 74 Mn (March. 31, 2018- RS. 140 Mn) payable to related parties. For details, refer note 42.

b) Details of dues to micro and small enterprises as defined under the MSMED Act, 2006

4. Exceptional Items

Aircel was one of the leading customer of the Company. During the previous year ended March. 31, 2018, Aircel filed for bankruptcy with NCLT. Pursuant to the same, the Company had assessed the recoverability of dues and has taken a charge of RS. 260 Mn as an exceptional item.

Defined benefit plan

Gratuity liability is defined benefit obligation and is provided for on the basis of an actuarial valuation on projected unit credit method made at the end of each reporting period. The plan is not funded by the Company. Such liability is included in salaries, wages and bonus, refer note 29.

ii. Due to its Defined Benefit Plans, the Company is Exposed to the Following Significant Risks:

Changes in bond yields - A decrease in bond yields will increase plan liability.

Salary risk - The present value of the defined benefit plans liability is calculated by reference to the future salaries of the plan participants. As such, an increase in the salary of the plan participants will increase the plan’s liability.

v. The discount rate is based on the average yield on government bonds at the reporting date with a term that matches that of the liabilities.

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

vii. Estimated amounts of expense to be recognized within next year is RS. 47 Mn (March. 31, 2018- RS. 46 Mn).

The above sensitivity analysis is based on a change in an assumption by a percentage while holding all other assumptions constant. In practice, this is unlikely to occur, and changes in some of the assumptions may be correlated. While calculating the sensitivity of the defined benefit obligation to significant actuarial assumption, same method i.e. Projected Unit Credit method has been applied as when calculating the gratuity liability recognized within the Balance sheet.

5. Employee Stock/Cash Settled Option Plans

Pursuant to the board resolution dated July 22, 2008 and the resolution of the shareholders in extraordinary general meeting dated August 28, 2008, the Company instituted the Employee Stock Option Scheme 2008 (the 2008 Scheme). In FY 2013-14 and 201415, the Company had announced new performance unit plan (cash settled option plan) for its employees. In FY 2015-16, 2016-17, 2017-18 and 2018-19, the Company had announced Long term incentive plan (LTIP) 2015, Long term incentive plan (LTIP) 2016, Long term incentive plan (LTIP) 2017 and Long term incentive plan (LTIP) 2018 respectively for its employees.

Total employee stock/cash options expense recognised for the year ended March. 31, 2019 and March. 31, 2018 is RS. 25 Mn and RS. 65

Mn respectively.

Notes:

(i) The Company has decided to issue equity shares on exercise of ESOPs through ESOP trust. The loan of RS. 625 Mn has been given to ESOP trust during F.Y 2014-15 to purchase the Equity Shares of the Company from open market as permitted by SEBI (Share Based Employee Benefits) Regulations, 2014.

(ii) During the FY 2014-15 Bharti Infratel Employee Welfare Trust (a trust set up for administration of Employee Stock Option Plan (‘ESOP’) of the Company) has acquired 1,652,000 equity shares of the Company from the open market at an average price of RS. 377.72 per share. As of March. 31, 2019, Bharti Infratel Employee Welfare Trust (‘the Trust’) holds 636,660 shares (of Face Value of RS. 10 each) (March. 31, 2018- 762,110 equity shares) of the Company.

6. Leases

(a) Operating Lease: Company as a Lessee

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

(b) Operating Lease: Company as a Lessor

The Company has given sites on operating lease to telecom operators. As per the agreements with the operators the escalation rates range from 0% to 2.5% per annum. The service charges recognised as income during the year for non-cancellable arrangements relating to provision for passive infrastructure sites as per the agreements is RS. 39,844 Mn and RS. 40,649 Mn for the year ended March. 31, 2019 and March. 31, 2018 respectively.

@ the amount includes demand amount and interest till the date of demand.

# Includes RS. 2 Mn (Sales tax) (March. 31, 2018 - RS. 2 Mn) and RS. 5 Mn (Income tax), (March. 31, 2018 - RS. 1,398 Mn) for which the possibility of tax demand materializing is remote, based on internal assessment of the Company.

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

a) Sales tax

The claims for sales tax comprise of the case relating to levy of demand in vehicle seizure case & non submission of concessional forms.

b) Stamp duty

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

c) Entry tax

Hon’ble Apex Court on November 11, 2016 while upholding the constitutional validity of entry tax levied by few States wherever its applicable, referred all the cases back to regular benches of the Court/s to decide all existing cases on merits while testing inter alia that whether the present levies in each such case/ State is discriminatory in nature or not.

Accordingly, all the said cases were listed before the regular bench of Supreme Court wherein after taking up all pending cases on State by State basis court have found that prima facie inter alia discrimination issues still exists and all the listed petitions have been remanded back with direction, to file fresh writ petitions before respective High Courts on the ground of discrimination as well as other directions as laid down in the aforesaid judgment of nine member bench of Hon’ble Supreme Court. The Company has filed fresh writ petition in the state of Orissa, Madhya Pradesh, Chhattisgarh, Rajasthan, Mizoram and Assam and amended the pending petitions in the states of Mizoram, Bihar and Jammu & Kashmir. The amendment has been allowed in the states of Jammu & Kashmir and Mizoram and pending in the state of Bihar. Pending disposition of each case by the High Courts, the company has decided to maintain ‘Status Quo’ on its position/assessment.

d) Municipal taxes

The Company based on its assessment of the applicability and tenability of certain municipal levies, which is an industry wide phenomenon, does not consider the impact of such levies to be material.

Further, in the event these levies are confirmed by the respective government authorities, the Company would recover these amounts from its customers in accordance with the terms of Master Service Agreement.

e) Service tax

The service tax department had issued certain orders for the disallowance of cenvat credit availed on Inputs, Capital Goods and Input Services for the period starting from August, 2007 to March, 2014 and follow up orders for the financial year 2014-15 and 2015-16. The Company has filed writ petition before Hon’ble High Court of Delhi which was allowed in favour of the Company vide order dated October 31, 2018 wherein it was held that towers are movable in nature and Cenvat credit can be availed on receipt of such goods.

On the similiar matter, there are contrary judgements by the Hon’ble High Court of Bombay in the case of few telecom operators against which, such operators have filed SLP before Hon’ble Supreme Court.These matters are pending before Supreme Court for final decision.

In separate proceeding before Directorate General of Central Excise Intelligence, the department had issued order for disallowance of Cenvat credit on items sold as scrap for the year 2014-15 and 2015-16 against which the company has filed appeal before CESTAT.

f) Other claims mainly includes demands under BOCW Cess Act and site related legal disputes.

During the year, the company has received a demand in the state of Jammu & Kashmir (J&K) and Madhya Pradesh (MP) under Building & Other Construction Workers Cess Act,1996 (the BOCW Cess Act, 1996). The Demand in MP has been challenged before Statutory Appellate Authority of Jabalpur under BOCW Cess Act, 1996. The hearing has been concluded and the Order is reserved by the Authority. The demand in J&K has been challenged through writ petition before the J&K High Court which is now fixed for hearing on April 25, 2019.

g) Income tax matters

The tax demands for Assessment years 2011-12 is mainly on issue of disallowance of provision for gratuity as unascertained provision u/s 115JB against which matter is pending before ITAT, Delhi.

The Principal bench of ITAT and CIT(A) in AY 2008-09, 2009-10 and 2011-12 and 2013-14 in respective assessment years has given relief on main issue involved in all of the assessment years i.e. disallowance of lease equalization revenue and lease equalization charges claimed/disallowed in computation of Income of respective assessment years as being notional in nature.

During the year ended March. 31, 2018, CIT(A) in AY 2012-13 & 2014-15 has allowed the appeal filed by company on issue of disallowance of lease equalization revenue and lease equalization charges claimed/disallowed in computation of Income of respective assessment years, relying on order passed by Delhi ITAT on similar issue in assessment year 2008-09.

The following methods / assumptions were used to estimate the fair values:

i. The carrying value of cash and cash equivalents, other bank balances, trade receivables, borrowings and trade payables approximate their fair value mainly due to the short-term maturities of these instruments.

ii. The fair values of financial assets classified as Fair Value through Profit or Loss like investment in mutual funds, taxable bonds, non convertible debentures and government securities is based on quoted market price/ net assets value at the reporting date.

iii. The fair value of other financial assets and other financial liabilities is estimated by discounting future cash flows using rates applicable to instruments with similar terms, currency, credit risk and remaining maturities. The fair values of other financial assets and other financial liabilities are assessed by the management to be same as their carrying value and is not expected to be significantly different if estimated by discounting future cash flows using rates currently available for debt on similar terms, credit risk and remaining maturities.

iv. The fair value of financial asset classified as Fair Value through other comprehensive income like investment in commercial paper, certificate of deposits and tax free bonds etc are based on market value/net assets value at the reporting date.

There are no significant unobservable inputs used in the fair value measurement.

41. Fair Value Hierarchy

All financial instruments for which fair value is recognised or disclosed are categorised within the fair value hierarchy, described as follows, based on the lowest level input that is significant to the fair value measurement as a whole;

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

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

Level 3: Inputs for the assets or liabilities that are not based on observable market data (unobservable inputs)

Terms and Conditions of Transactions with Related Parties

The transactions with related parties are made on terms equivalent to those that prevail in arm’s length transactions. Outstanding balances at the end of the year are unsecured and interest free and settlement occurs in cash. There have been no guarantees provided or received for any related party receivables or payables.

7. The Company is engaged in the business of establishing, operating and maintaining wireless communication towers. This is the only activity performed and there are no components of the Company that may be identified as a reportable segment. Further, as the Company does not operate in more than one geographical segment, the relevant disclosures as per Ind AS 108 - operating segments are not applicable to the Company on a standalone basis.

8. As per transitional provisions specified in Ind AS 101, The Company has continued to apply the accounting prescribed under the scheme with respect to mergers listed below.

a) Scheme Accounting - Bharti Airtel Scheme

During the year ended March. 31, 2008, pursuant to the Scheme of Arrangement with Bharti Airtel Limited (‘BAL Scheme’) under sections 391 to 394 of the Companies Act, 1956, the telecom infrastructure undertaking of Bharti Airtel Limited was transferred to the Company. Pursuant to the Scheme, the depreciation charged by the Company on the excess of the fair values over the original book values of the assets transferred by Bharti Airtel Limited is being off-set against General Reserve. Accordingly, depreciation charges on the excess of fair value over the original book values is charged to General Reserve.

b) Scheme Accounting - The Indus Scheme

The Scheme of Arrangement (‘Indus Scheme’) under Section 391 to 394 of the Companies Act, 1956 for transfer of all assets and liabilities, as defined in Indus scheme, from Bharti Infratel Ventures Limited (BIVL), erstwhile wholly owned subsidiary Company, to Indus Towers Limited (Indus), was approved by the Hon’ble High Court of Delhi vide order dated April 18, 2013 and filed with the Registrar of Companies on June 11, 2013 with appointed date April 1, 2009 i.e. effective date of Indus Scheme and accordingly, effective June 11, 2013, the erstwhile subsidiary Company has ceased to exist and has become part of Indus. The Company was carrying investment in BIVL at RS. 59,921 Mn. Pursuant to Indus Scheme, the Company has additionally got 504 shares in Indus in lieu of transfer of its investment in BIVL to Indus and recorded these additional shares at their fair value of RS. 60,419 Mn in accordance with the scheme. The resultant gain of RS. 382 Mn (net of taxes RS. 116 Mn) has been disclosed as adjustment to carry forward balance of Statement of Profit and Loss as at April 1, 2009.

9. During FY 2016-17, the Company (concessionaire) has entered into a concession agreement as a lead member with Bhopal Smart City Development Corporation Limited (BSCDL/ grantor) along with other consortium members for implementation and maintenance of “Bhopal Smart City project”(the project) vide agreement dated October 28, 2016. As per the terms of the agreement, the Company along with the consortium members has to work on Build, Own, Operate and Transfer (BOOT) model on Public Private Partnership (PPP) basis.

The concession period granted as per the agreement is 15 years (excluding implementation period of 1 year) further extendable by another 15 years based on mutually agreed terms and conditions.

The title of interest, ownership and rights with regard to project implemented by the Company along with fixtures/ fittings provided therein shall rest with the Company until the expiry/ termination of the agreement and the rights related to the land allotted by the BSCDCL shall vest with the BSCDCL, except that, these will be operated and maintained by the Company at its own cost and expenses as agreed in the concession agreement.

These project facilities and assets constructed shall be transferred to BSCDCL at zero cost on expiry/ termination of the agreement. On obtaining the Completion Certificate from the specified authority, the Company shall be exclusively entitled to demand and collect revenue from the project assets in any manner.

The Concessionaire shall pay a fixed quarterly revenue share, as specified by the terms of agreement, to BSCDCL over the concession period.

10. During the year ended March. 31, 2019, the company has received dividend of RS.22,500 per equity share from joint venture company amounting to RS.11,261 Mn which has been disclosed under other income.

11. The Company was required to spend RS. 440 Mn towards CSR expenditure as per the requirement of the Companies Act 2013. During the year RS. 414 Mn were spent towards ongoing long term CSR projects basis approval from the board. The disbursement of committed funds was based on the individual project work plans and milestones achieved over the year. All projects are being monitored and evaluated on the progress made and impact created during the routine course of the business. The Company also contributed as charity/donation to Ibadat Foundation* and Bharti Foundation (RS. 1 Mn via Airtel Delhi Half Marathon).

*Amount contributed is less than 1 Mn.

Charity and donation includes RS. 130 Mn ( FY 2017-18 : RS. 80 Mn) paid to Prudent electoral trust (erstwhile Satya electoral trust).

12. Financial Risk Management Objectives and Policies

The Company’s principal financial liabilities comprise trade payables, security deposits received, short term borrowings etc. The main purpose of these financial liabilities is to manage finances for the Company’s operations. The Company’s principal financial assets include Investment in Mutual Funds, Bonds and Government Securities, trade and other receivables, unbilled revenue, cash and cash equivalents, security deposits paid, etc. that derive directly from its operations.

The Company is exposed to market risk, credit risk and liquidity risk. The Company’s senior management oversees the management of these risks. The senior professionals working to manage the financial risks and the appropriate financial risk governance frame work for the Company are accountable to the Board Audit Committee. This process provides assurance to the Company’s senior management that the Company’s financial risk-taking activities are governed by appropriate policies and procedures and that financial risks are identified, measured and managed in accordance with Company’s policies and Company’s risk appetite. The Company has not entered into any derivative transactions. All derivative activities if any, for risk management purposes are carried out by specialist teams that have the appropriate skills, experience and supervision. It is the Company’s policy that no trading in derivatives for speculative purposes shall be undertaken. The Board of Directors reviews and agrees policies for managing each of these risks which are summarised below:

(a) Market Risk

Market risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in market prices. Market prices comprise three types of risk: interest rate risk, foreign currency risk and price risk. Financial instruments affected by market risk include interest bearing Investment in bonds, Government Securities and fixed deposits etc.

The sensitivity of the relevant profit or loss item is the effect of the assumed changes in respective market risks. This is based on the financial assets and financial liabilities held at March. 31, 2019 and March. 31, 2018.

The Company’s exposure to financial risks is to a variety of financial risks, including the effect of changes in foreign currency exchange rates, if any. The Company uses derivative financial instruments such as foreign exchange contracts to manage its exposures and foreign exchange fluctuations, if any.

(i) Interest Rate Risk

Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates.

The Company has invested in Government securities and bonds which will fetch a fixed rate of interest, hence, the income and operating cash flows are substantially independent of changes in market interest rates.

(ii) Foreign Currency Risk

Foreign currency risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in foreign exchange rates.

The Indian Rupee is the Company’s functional currency. As a consequence, the Company’s results are presented in Indian Rupee and exposures are managed against Indian Rupee accordingly. The Company has very limited foreign currency exposure mainly due to incurrence of some expenses. The Company may use foreign exchange option contracts or forward contracts towards operational exposures resulting from changes in foreign currency exchange rates exposure. These foreign exchange contracts, carried at fair value, may have varying maturities depending upon the primary host contract requirement.

The Company manages its foreign currency risk if any, by hedging appropriate percentage of its foreign currency exposure, as approved by the Board as per established risk management policy.

(iii) Price Risk

The Company invests its surplus funds in various Government securities, taxable and tax free quoted debt bonds, liquid & Money Market schemes of mutual funds (liquid investments) and higher duration short term debt funds.

These are susceptible to market price risk, mainly arising from changes in the interest rates or market yields which may impact the return and value of such investments. The Company manages the price risk through diversification from time to time.

(b) Credit Risk

Credit risk is the risk that counterparty will not meet its obligations under a financial instrument or customer contract, leading to a financial loss. The Company is exposed to credit risk from its operating activities (primarily for trade and other receivables) and from its financing activities, including deposits with banks and financial institutions, and other financial instruments.

(i) Trade Receivables

Customer credit risk is managed in accordance with Company’s established policy, procedures and control relating to customer credit risk management. Trade receivables are non-interest bearing and are generally on 15 days credit term. Outstanding customer receivables are regularly monitored. The ageing analysis of trade receivables as of the reporting date is as follows:

(ii) Financial Instruments and Cash Deposits

Credit risk from balances with banks and financial institutions is managed by Company’s treasury in accordance with the board approved policy. Investment of surplus funds are made only with approved counterparties who meet the minimum threshold requirements under the counterparty risk assessment process. The Company monitors ratings, credit spreads and financial strength on at least quarterly basis. Based on its on-going assessment of counterparty risk, the Company adjusts its exposure to various counterparties. The Company’s maximum exposure to credit risk for the components of the Balance Sheet at March. 31, 2019 and March. 31, 2018 is the carrying amounts as illustrated in Note 40.

(c) Liquidity Risk

Liquidity risk is the risk that the Company may not be able to meet its present and future cash and collateral obligations without incurring unacceptable losses. The Company’s objective is to, at all times maintain optimum levels of liquidity to meet its cash and collateral requirements. The Company principal sources of liquidity are cash and cash equivalents and the cash flow generated from operations. The Company closely monitors its liquidity position and deploys a robust cash management system.

For the purpose of Company’s Capital management, Capital includes issued equity capital, share premium and all other equity reserves attributable to the equity shareholders. The primary objective of the Company’s capital management is to maximise the shareholder value.

The Company manages its capital structure and makes adjustments to it, in light of changes in economic conditions. To maintain or adjust the capital structure, the Company may adjust the dividend payment to shareholders, return capital to shareholders or issue new shares. The Company has availed Bank overdraft facility for 57 MN (March. 31, 2018 -Nil) which is integral part of cash management The Cash and Cash equivalent is RS. 2 Mn (March. 31, 2018 - RS. 305 Mn). The Company is not having any interest bearing debt as at March. 31, 2019 and March. 31, 2018 except disclosed above.

13. There are no amounts due and outstanding to be credited to the Investor Education and Protection Fund as at March. 31, 2019.

14. During the year, the company has entered into arrangements with operators to receive an amount estimating to RS.4,900 Mn, which become due over the period of 36 months in monthly equated instalments effective January 1, 2019 on account of exit charges subject to fulfilment of certain periodic obligations given by the company and further extension of new or existing tenancies to the extent of future rental amounting to RS.3,960 Mn. Revenue from operations includes exit charges amounting to RS.1,010 Mn recognised during the year ended March. 31, 2019.

15. The Board of Directors has declared an interim dividend of RS. 7.50 per equity share in its meeting held on April 24, 2019 for financial year 2018-19.


Mar 31, 2018

1. Corporate information

Bharti Infratel Limited (‘the Company’ or ‘BIL’) was incorporated on November 30, 2006 with the object of, inter-alia, setting up, operating and maintaining wireless communication towers. The Company received the certificate of commencement of business on April 10, 2007 from the Registrar of Companies. The Registered office of the Company is situated at Bharti Crescent, 1, Nelson Mandela Road, Vasant Kunj, Phase - II, New Delhi - 110070. The Registered office of the Company has been shifted to 901, Park Centra, Sector 30 NH-8, Gurugram Haryana -122001 w.e.f April 17, 2018.

Bharti Infratel Limited is a subsidiary of Bharti Airtel Limited (‘BAL’) and BAL holds 50.33% shares in the Company. Nettle Infrastructure Investments Limited, Wholly owned Subsidiary of BAL also holds 3.18% shares in the Company as on March.31, 2018.

The Company is publicly traded on National Stock Exchange of India (NSE) and BSE Limited.

The Company had entered into a joint venture agreement with Vodafone India Limited and Aditya Birla Telecom Limited to provide passive infrastructure services in 15 Telecom circles of India and formed Indus Towers Limited for such purpose which is a Company incorporated in India. The Company and Vodafone India Limited are holding 42% each in Indus Towers Limited, 11.15% is held by Aditya Birla Telecom Limited.

A wholly owned subsidiary, Smartx Services Limited, has been incorporated on September 21, 2015 with the object of transmission through Optic Fibre Cables and setting up Wi-Fi hotspots for providing services to telecom operators and others on sharing basis.

The financial statements are approved for issuance by the Company’s Board of Directors on April 23, 2018.

2. Basis of preparation

The Standalone financial statements (“financial statements”) have been prepared to comply in all material aspects with the Indian Accounting Standard (Ind AS) notified under section 133 of the Companies Act, 2013, read together with Rule 3 of the Companies (Indian Accounting Standards) Rules, 2015, Companies (Indian Accounting Standards) Amendment Rules, 2016 and Companies (Indian Accounting Standards) Amendment Rules, 2017 issued by the Ministry of Corporate Affairs (‘MCA’).

The financial statements have been prepared under historical cost convention on accrual and going concern basis, except for the certain financial instruments which have been measured at fair value as required by relevant Ind ASs.

Effective April 1, 2016, the Company has adopted Indian Accounting Standards (Ind AS) and the adoption was carried out in accordance with Ind AS 101 First time adoption of Indian Accounting Standards, with April 1, 2015 as the transition date. The transition was carried out from Indian GAAP as prescribed under Section 133 of the Act, read with Rule 7 of the Companies (Accounts) Rules, 2014 (IGAAP), which was the previous GAAP.

Accounting policies have been consistently applied except where a newly issued accounting standard is initially adopted or a revision to an existing accounting standard requires a change in the accounting policy hitherto in use.

Amounts for the year ended and as at March.31, 2017 were audited by previous auditors - S.R. Batliboi & Associates LLP.

All the amounts included in the financial statements are reported in millions of Indian Rupees (‘Rupees’ or ‘H’), and are rounded to the nearest million (Mn) except per share data and unless stated otherwise.

3. Significant accounting judgements, estimates and assumptions

The preparation of the Company’s financial statements requires management to make judgements, estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities, and the accompanying disclosures, and the disclosure of contingent liabilities. Uncertainty about these assumptions and estimates could result in outcomes that require a material adjustment to the carrying amount of assets or liabilities affected in future periods.

Judgements

In the process of applying the Company’s accounting policies, management has made the following judgements, which have the most significant effect on the amounts recognised in the financial statements:

a) Operating lease commitments - Company as lessor

The Company has assessed that its master service agreement (“MSA”) with operators contains lease of its tower sites and plant and equipment and has determined, based on evaluation of the terms and conditions of the arrangements such as various lessees sharing the same tower sites with specific area, the fair value of the asset and all the significant risks and rewards of ownership of these properties retained by the Company, that such contracts are in the nature of operating lease and has accounted for as such.

The Company has ascertained that the annual escalations in the lease payment received under the MSA are structured to compensate the expected inflationary increase in cost and therefore has not been straight-lined.

Estimates and assumptions

The key assumptions concerning the future and other key sources of estimation uncertainty at the reporting date, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year, are described below. The Company has based its assumptions and estimates on parameters available when the financial statements were prepared. Existing circumstances and assumptions about future developments, however, may change due to market changes or circumstances arising that are beyond the control of the Company. Such changes are reflected in the assumptions when they occur.

b) Impairment of non-financial assets

The carrying amounts of the Company’s non-financial assets, other than deferred tax assets, are reviewed at the end of each reporting period to determine whether there is any indication of impairment. If any such indication exists, then the asset’s recoverable amount is estimated.

The recoverable amount of an asset or cash-generating unit (‘CGU’) is the greater of its value in use and its fair value less costs to sell. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset or CGU. For the purpose of impairment testing, assets that cannot be tested individually are grouped together into the smallest group of assets that generates cash inflows from continuing use that are largely independent of the cash inflows of other assets or groups of assets (‘CGU’).

The Company’s corporate assets do not generate separate cash inflows. If there is an indication that a corporate asset may be impaired, then the recoverable amount is determined for the CGU to which the corporate asset belongs.

An impairment loss is recognized, if the carrying amount of an asset or its cash-generating unit exceeds its estimated recoverable amount and are recognised in Statement of Profit and Loss. Impairment losses recognised in respect of cash-generating units are allocated first to reduce the carrying amount of goodwill, if any, allocated to the units and then to reduce the carrying amounts of the other assets in the unit (group of units) on a pro rata basis.

Impairment losses recognised in prior periods are assessed at end of each reporting period for any indications that the loss has decreased or no longer exists. An impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount. An impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortisation, if no impairment loss had been recognised. Such reversal is recognised in the statement of profit and loss except when the asset is carried at revalued amount, the reversal is treated as a revaluation increase.

c) Property, plant and equipment

Refer Note 3(a) for the estimated useful life of Property, plant and equipment.

Property, plant and equipment also represent a significant proportion of the asset base of the Company. Therefore, the estimates and assumptions made to determine their carrying value and related depreciation are critical to the Company’s financial position and performance.

The charge in respect of periodic depreciation is derived after determining an estimate of an asset’s expected useful life and the expected residual value at the end of its life. Increasing an asset’s expected life or its residual value would result in a reduced depreciation charge in the Statement of Profit and Loss.

The useful lives and residual values of Group assets are determined by management at the time the asset is acquired and reviewed periodically. The lives are based on historical experience with similar assets as well as anticipation of future events which may impact their life, such as changes in technology.

During the financial year 2014-15, the Company had re-assessed the useful life and residual value of all its assets, accordingly, effective April 1, 2014, it has revised the useful life of certain class of shelters from 15 years to 10 years and revised the residual value of certain plant and machineries (batteries and DG sets) from Nil and 5% to 25% and 10%, respectively. Set out below is the impact of above change on future period depreciation:-

d) Allowance of doubtful trade receivables

The expected credit loss is mainly based on the ageing of the receivable balances and historical experience. The receivables are assessed on an individual basis or grouped into homogeneous groups and assessed for impairment collectively, depending on their significance. Moreover, trade receivables are written off on a case-to-case basis if deemed not to be collectible on the assessment of the underlying facts and circumstances.

e) Asset retirement obligation

The Company uses various leased premises to install its tower assets. A provision is recognised for the cost to be incurred for the restoration of these premises at the end of the lease period, which is estimated based on actual quotes, which are reasonable and appropriate under these circumstances. It is expected that these provisions will be utilised at the end of the lease period of the respective sites as per respective lease agreements.

f) Share based payment

The Company initially measures the cost of cash-settled transactions with employees using a binomial model to determine the fair value of the liability incurred. Estimating fair value for share-based payment transactions requires determination of the most appropriate valuation model, which is dependent on the terms and conditions of the grant. This estimate also requires determination of the most appropriate inputs to the valuation model including the expected life of the share option, volatility and dividend yield and making assumptions about them. For cash-settled share-based payment transactions, the liability needs to be remeasured at the end of each reporting period up to the date of settlement, with any changes in fair value recognised in the profit or loss. This requires a reassessment of the estimates used at the end of each reporting period.

4. Recent accounting pronouncement issued but not yet effective upto the date of issuance of financial statements

In MarcRs.2018, the Ministry of Corporate Affairs issued the Companies (Indian Accounting Standards) Amendment Rules, 2018, notifying Ind AS 115, ‘Revenue from Contracts with Customers’ (a new revenue standard) and Appendix B to Ind AS 21, ‘Foreign Currency Transactions and Advance Consideration’. These amendments are applicable to the company from April 1, 2018.

Ind AS 115, Revenue from Contracts with Customers

This standard requires an entity to recognise revenue on the basis of 5 step model given in the standard. The Standard focuses on identification of various performance obligations on the basis of promised goods and services to the customers as per contract, allocation of contract price on the various performance obligations and recognition of revenue when entity satisfies the performance obligation. The Standard Scopes out lease agreements from its scope.

There is no impact on transition of Ind AS 115 (new standard) from Ind AS 18 (old standard) on Revenue.

Appendix B to Ind AS 21, Foreign Currency Transactions and Advance Consideration

Appendix B to Ind AS 21, Foreign currency transactions and advance consideration clarifies the date of the transaction for the purpose of determining the exchange rate to use on initial recognition of the related asset, expense or income, when an entity has received or paid advance consideration in a foreign currency.

There is no impact on the company due to notification of this Appendix.

a) Equity share capital:

b) Terms/ rights attached to equity shares:

The Company has only one class of equity shares having par value of RS.10 per share. Each holder of equity shares is entitled to one vote per share. The Company declares and pays dividend in Indian rupees.

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

The Board of Directors, in its meeting held on MarcRs.22, 2017 had approved an interim dividend of RS.12 per equity share for FY 2016-17.

The Board of Directors, in its meeting held on May 8, 2017, proposed a final dividend of RS.4 per equity share for FY 2016-17 and the same was approved by the shareholders at the Annual General Meeting held on July 22, 2017.

c) Shares held by holding Company:

d) Details of shareholders holding more than 5% shares in the Company:

e) Aggregate number of bonus shares issued and shares issued for consideration other than cash during the period of five years immediately preceding the reporting date:

During the year ended March.31, 2013, the Company allotted 1,161,605,820 equity shares as fully paid bonus shares by capitalization of securities premium account.

During the year ended March.31, 2016, the Company allotted 2,897,776 equity shares (F.Y 2014-15, 2013-14 and 2012-13 - 4,468,180, 558,059 and 100,212 equity shares respectively) of RS.10 each to its employees on exercise of stock options under the Employee Stock Option Plan 2008 wherein part consideration was received in form of employee services. (refer note 37).

f) Aggregate number and class of shares bought back:

During the previous year ended March.31, 2017, the Company brought back 47,058,824 equity shares of RS.10 each by way of tender offer through stock exchange mechanism for cash at price of RS.425 per equity share.

g) Shares reserved for issue under options:

For details of shares reserved for issue under the employee stock option plan (ESOP) of the Company, refer note 37.

5. Exceptional items

Aircel was one of the leading customer of the Company. During the quarter ended March.31, 2018, Aircel filed for bankruptcy with NCLT. Pursuant to the same, the Company assessed the recoverability of dues and has taken a charge of RS.260 Mn (Previous Year - Nil) as an exceptional item.

Defined benefit plan

Gratuity liability is defined benefit obligation and is provided for on the basis of an actuarial valuation on projected unit credit method made at the end of each reporting period. The plan is not funded by the Company. Such liability is included in salaries, wages and bonus, refer note 29.

ii. Due to its defined benefit plans, the Company is exposed to the following significant risks:

Changes in bond yields - A decrease in bond yields will increase plan liability.

Salary risk - The present value of the defined benefit plans liability is calculated by reference to the future salaries of the plan participants. As such, an increase in the salary of the plan participants will increase the plan’s liability.

v. The discount rate is based on the average yield on government bonds at the reporting date with a term that matches that of the liabilities.

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

vii. Estimated amounts of expense to be recognized within next year is RS.46 Mn (March.31, 2017- RS.43 Mn).

The above sensitivity analysis is based on a change in an assumption by a percentage while holding all other assumptions constant. In practice, this is unlikely to occur, and changes in some of the assumptions may be correlated. While calculating the sensitivity of the defined benefit obligation to significant actuarial assumption, same method i.e. Projected Unit Credit method has been applied as when calculating the gratuity liability recognized within the Balance sheet

6. Employee stock/cash settled option plans

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

In FY 2013-14 and 2014-15, the Company had announced new performance unit plan (cash settled option plan) for its employees.

In FY 2015-16, 2016-17 and 2017-18, the Company had announced Long term incentive plan (LTIP) 2015, Long term incentive plan (LTIP) 2016 and Long term incentive plan (LTIP) 2017 respectively for its employees.

(i) The Company has decided to issue equity shares on exercise of ESOPs through ESOP trust. The loan of RS.625 Mn has been given to ESOP trust during F.Y 2014-15 to purchase the Equity Shares of the Company from open market as permitted by SEBI (Share Based Employee Benefits) Regulations, 2014.

(ii) During the FY 2014-15 Bharti Infratel Employee Welfare Trust (a trust set up for administration of Employee Stock Option Plan (‘ESOP’) of the Company) has acquired 1,652,000 equity shares of the Company from the open market at an average price of RS.377.72 per share. As of March.31, 2018, Bharti Infratel Employee Welfare Trust (‘the Trust’) holds 762,110 shares (of Face Value of RS.10 each) (March.31, 2017- 852,656 equity shares) of the Company.

(a) Operating lease: Company as a lessee

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

b) Operating lease: Company as a lessor

The Company has given sites on operating lease to telecom operators. As per the agreements with the operators the escalation rates range from 0% to 2.5% per annum. The service charges recognised as income during the year for non-cancellable arrangements relating to provision for passive infrastructure sites as per the agreements is RS.40,649 Mn and RS.37,433 Mn for the year ended March.31, 2018 and March.31, 2017 respectively:

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

a) Sales tax

The claims for sales tax as of March.31, 2018 comprise of the case relating to levy of penalty for the year 2008-09 in right to use litigation wherein the main demand has already been quashed by Hon’ble High Court (‘HC’) of Indore. The Company has filed Writ petition against the penalty before Hon’ble High Court which is pending for hearing on merits. Further the department has filed an appeal before Hon’ble Supreme Court (‘SC’) against the favorable order of Hon’ble High Court. The matter was heard on MarcRs.19, 2018 before Ld. Bench of Hon’ble SC where SLP was dismissed by the apex court.

b) Stamp duty

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

c) Entry tax

Hon’ble Apex Court on November 11, 2016 while upholding the constitutional validity of entry tax levied by few States wherever its applicable, referred all the cases back to regular benches of the Court/s to decide all existing cases on merits while testing inter alia that whether the present levies in each such case/ State is discriminatory in nature or not.

Accordingly, all the said cases were listed before the regular bench of Supreme Court wherein after taking up all pending cases on State by State basis court have found that prima facie inter alia discrimination issues still exists and all the listed petitions have been remanded back with direction, to file fresh writ petitions before respective High Courts on the ground of discrimination as well as other directions as laid down in the aforesaid judgment of nine member bench of Hon’ble Supreme Court. Company has filed fresh writ petition in the state of Orissa, Madhya Pradesh, Chhattisgarh, Rajasthan, Mizoram and Assam.

The revenue counsel has filed counters against writ petition filed by the Company and further in reply to that, rejoinders have been filed by the Company. Fresh writ petition filed before Hon’ble HC of Bihar & J&K. No active hearing took place in quarter ending MarcRs.2018 in others matter. Pending disposition of each case by the High Courts, the Company has decided to maintain ‘Status Quo’ on its position/assessment.

d) Municipal taxes

The Company based on its assessment of the applicability and tenability of certain municipal levies, which is an industry wide phenomenon, does not consider the impact of such levies to be material.

Further, in the event these levies are confirmed by the respective government authorities, the Company would recover these amounts from its customers in accordance with terms of Master Service Agreement.

e) Service tax

The service tax department has issued certain orders for the disallowance of cenvat credit availed on Inputs, Capital Goods and Input Services for the period starting from August, 2007 to March, 2014 The Company has filed an appeal before Hon’ble High Court of Delhi against the Larger Bench CESTAT decision while the appeal is pending before Division Bench, Chandigarh on merits, the matter has been heard before bench of Hon’ble High Court of Delhi and argued by the Company’s counsels. Next date of hearing is scheduled on May 11, 2018 for completion of arguments from Revenue and Company’s counsels.

For the year 2014-15 & 2015-16, Commissioner, service tax has allowed Cenvat Credit on telecom towers & related services however confirmed demand on pre-fabricated shelters and Input services used in creation of immovable property.

In separate proceeding before Directorate General of Central Excise Intelligence, the department has issued order for disallowance of Cenvat credit on items sold as scrap. The Company has filed appeal before CESTAT against such order.

f) Others claims include site related legal disputes.

g) Income tax matters

This mainly includes tax demands for Assessment years 2011-12 to 2014-15. The Principal bench of ITAT and CIT(A) in AY 2008-09, 2009-10 and 2011-12 and 2013-14 in respective assessment years has given relief on main issue involved in all of the assessment years i.e. disallowance of lease equalization revenue and lease equalization charges claimed/ disallowed in computation of Income of respective assessment years as being notional in nature.

Set out below is the Category wise details as to the carrying amount and fair value of the Company’s financial instruments that are recognised in the financial statements.

The following methods / assumptions were used to estimate the fair values:

i. The carrying value of cash and cash equivalents, other bank balances, trade receivables, borrowings and trade payables approximate their fair value mainly due to the short-term maturities of these instruments.

ii. The fair values of financial assets classified as Fair Value through Profit or Loss like investment in mutual funds, taxable bonds, non convertible debentures and government securities is based on quoted market price/ net assets value at the reporting date.

iii. The fair value of other financial assets and other financial liabilities is estimated by discounting future cash flows using rates applicable to instruments with similar terms, currency, credit risk and remaining maturities. The fair values of other financial assets and other financial liabilities are assessed by the management to be same as their carrying value and is not expected to be significantly different if estimated by discounting future cash flows using rates currently available for debt on similar terms, credit risk and remaining maturities.

iv. The fair value of financial asset classified as Fair Value through other comprehensive income like investment in commercial paper, certificate of deposits and tax free bonds etc are based on market value/net assets value at the reporting date.

There are no significant unobservable inputs used in the fair value measurement.

7. Fair value hierarchy

All financial instruments for which fair value is recognised or disclosed are categorised within the fair value hierarchy, described as follows, based on the lowest level input that is significant to the fair value measurement as a whole;

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

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

Level 3: Inputs for the assets or liabilities that are not based on observable market data (unobservable inputs)

The following table presents the financial instruments measured at fair value, by level within the fair value measurement hierarchy:

In accordance with the requirements of Ind AS - 24 “Related Party Disclosures”, the names of the related parties where control exists and/ or with whom transactions have taken place during the year and description of relationships, as identified and certified by the management are as below:

A. List of related parties

1. Key management personnel (KMP)

Akhil Kumar Gupta, Chairman

D.S. Rawat, Managing Director and CEO

Pankaj Miglani, Chief Financial Officer

Shweta Girotra, Company Secretary (ceased to be related party w.e.f September 14, 2017)

Samridhi Rodhe, Company Secretary (w.e.f January 17, 2018)

2. Related parties where control exists irrespective of whether transactions have occurred or not

Parent Company Bharti Airtel Limited

Ultimate controlling entity (w.e.f. November 3, 2017) Bharti Enterprises (Holding) Private Limited.

It is held by private trust of Bharti family, with Mr. Sunil Bharti Mittal’s family trust effectively controlling the said Company. Subsidiary Company Smartx Services Limited

3. Other related parties with whom transactions have taken place during the year

‘Group Company’ though not ‘Related Parties’ as per the definition under Ind AS 24, ‘Related party disclosures’, have been included as a voluntary disclosure.

B. Related Party Transactions during the year:

Related party transactions represent transactions entered into by the Company with parent Company, Subsidiary Company, entities having significant influence over the Company/Group Company, joint venture and fellow subsidiaries. The transactions with these related parties for year ended March.31, 2018 and March.31, 2017 and balances as at March.31, 2018 and March.31, 2017 are described below:

Terms and conditions of transactions with related parties

The transactions with related parties are made on terms equivalent to those that prevail in arm’s length transactions. Outstanding balances at the end of the year are unsecured and interest free and settlement occurs in cash. There have been no guarantees provided or received for any related party receivables or payables.

8. The Company is engaged in the business of establishing, operating and maintaining wireless communication towers. This is the only activity performed and there are no components of the Company that may be identified as a reportable segment. Further, as the Company does not operate in more than one geographical segment, the relevant disclosures as per Ind AS 108 - operating segments are not applicable to the Company on a standalone basis.

9. As per transitional provisions specified in Ind AS 101, The Company has continued to apply the accounting prescribed under the scheme with respect to mergers listed below.

a) Scheme accounting - Bharti Airtel Scheme

During the year ended March.31, 2008, pursuant to the Scheme of Arrangement with Bharti Airtel Limited (‘BAL Scheme’) under sections 391 to 394 of the Companies Act, 1956, the telecom infrastructure undertaking of Bharti Airtel Limited was transferred to the Company. Pursuant to the Scheme, the depreciation charged by the Company on the excess of the fair values over the original book values of the assets transferred by Bharti Airtel Limited is being off-set against General Reserve. Accordingly, depreciation charges on the excess of fair value over the original book values is charged to General Reserve.

b) Scheme accounting - The Indus Scheme

The Scheme of Arrangement (‘Indus Scheme’) under Section 391 to 394 of the Companies Act, 1956 for transfer of all assets and liabilities, as defined in Indus scheme, from Bharti Infratel Ventures Limited (BIVL), erstwhile wholly owned subsidiary Company, to Indus Towers Limited (Indus), was approved by the Hon’ble High Court of Delhi vide order dated April 18, 2013 and filed with the Registrar of Companies on June 11, 2013 with appointed date April 1, 2009 i.e. effective date of Indus Scheme and accordingly, effective June 11, 2013, the erstwhile subsidiary Company has ceased to exist and has become part of Indus. The Company was carrying investment in BIVL at RS.59,921 Mn. Pursuant to Indus Scheme, the Company has additionally got 504 shares in Indus in lieu of transfer of its investment in BIVL to Indus and recorded these additional shares at their fair value of RS.60,419 Mn in accordance with the scheme. The resultant gain of RS.382 Mn (net of taxes RS.116 Mn) has been disclosed as adjustment to carry forward balance of Statement of Profit and Loss as at April 1, 2009.

10. Buyback of Shares

In accordance with Sec 68, 69, 70 and other applicable provisions of the Companies Act, 2013 and SEBI regulations and pursuant to the public announcement for buy back made by the Company, the Company initiated a buy back during FY 2016-17 by way of tender offer through stock exchange mechanism for cash at price of RS.425 per equity share for an aggregate amount of RS.20,000 Mn.

11. During FY 2016-17, the Company (concessionaire) has entered into a concession agreement as a lead member with Bhopal Smart City Development Corporation Limited (BSCDL/ grantor) along with other consortium members for implementation and maintenance of “Bhopal Smart City project”(the project) vide agreement dated October 28, 2016. As per the terms of the agreement, the Company along with the consortium members has to work on Build, Own, Operate and Transfer (BOOT) model on Public Private Partnership (PPP) basis.

The concession period granted as per the agreement is 15 years (excluding implementation period of 1 year) further extendable by another 15 years based on mutually agreed terms and conditions.

The title of interest, ownership and rights with regard to project implemented by the Company along with fixtures/ fittings provided therein shall rest with the Company until the expiry/ termination of the agreement and the rights related to the land allotted by the BSCDCL shall vest with the BSCDCL, except that, these will be operated and maintained by the Company at its own cost and expenses as agreed in the concession agreement.

These project facilities and assets constructed shall be transferred to BSCDCL at zero cost on expiry/ termination of the agreement. On obtaining the Completion Certificate from the specified authority, the Company shall be exclusively entitled to demand and collect revenue from the project assets in any manner.

The Concessionaire shall pay a fixed quarterly revenue share, as specified by the terms of agreement,to BSCDCL over the concession period.

12. During the year ended March.31, 2018, the Company has received dividend of RS.20,000 per equity share from joint venture company amounting to RS.10,010 Mn which has been disclosed under other Income.

13. The Company was required to spend RS.400 Mn towards CSR expenditure as per the requirement of the Companies Act 2013. During the year RS.212 Mn were spent towards ongoing long term CSR projects basis approval from the board. The disbursement of committed funds was based on the individual project work plans and milestones achieved over the year. All projects are being monitored and evaluated on the progress made and impact created during the routine course of the business.

The Company also contributed as charity/donation to Ramabai Keshav Vishwasth Sanstha (RS.1 Mn) and Bharti Foundation towards promotion of formal education in rural areas (RS.1 Mn via Airtel Delhi Half Marathon).

Charity and donation includes RS.80 Mn ( FY 2016-17 : RS.50 Mn) paid to Prudent electoral trust (erstwhile Satya electoral trust).

14. Financial risk management objectives and policies

The Company’s principal financial liabilities comprise trade payables, security deposits received, short term borrowings etc. The main purpose of these financial liabilities is to manage finances for the Company’s operations. The Company’s principal financial assets include Investment in Mutual Funds, Bonds and Government Securities, trade and other receivables, unbilled revenue, cash and cash equivalents, security deposits paid, etc. that derive directly from its operations.

The Company is exposed to market risk, credit risk and liquidity risk. The Company’s senior management oversees the management of these risks. The senior professionals working to manage the financial risks and the appropriate financial risk governance frame work for the Company are accountable to the Board Audit Committee. This process provides assurance to the Company’s senior management that the Company’s financial risk-taking activities are governed by appropriate policies and procedures and that financial risks are identified, measured and managed in accordance with Company’s policies and Company’s risk appetite. The Company has not entered into any derivative transactions. All derivative activities if any, for risk management purposes are carried out by specialist teams that have the appropriate skills, experience and supervision. It is the Company’s policy that no trading in derivatives for speculative purposes shall be undertaken. The Board of Directors reviews and agrees policies for managing each of these risks which are summarised below:

(a) Market Risk

Market risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in market prices. Market prices comprise three types of risk: interest rate risk, foreign currency risk and price risk. Financial instruments affected by market risk include interest bearing Investment in bonds, Government Securities and fixed deposits etc.

The sensitivity of the relevant profit or loss item is the effect of the assumed changes in respective market risks. This is based on the financial assets and financial liabilities held at March.31, 2018 and March.31, 2017.

The Company’s exposure to financial risks is to a variety of financial risks, including the effect of changes in foreign currency exchange rates, if any. The Company uses derivative financial instruments such as foreign exchange contracts to manage its exposures and foreign exchange fluctuations, if any.

(i) Interest rate risk

Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates.

The Company has invested in Government securities and bonds which will fetch a fixed rate of interest, hence, the income and operating cash flows are substantially independent of changes in market interest rates.

(ii) Foreign currency risk

Foreign currency risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in foreign exchange rates.

The Indian Rupee is the Company’s functional currency. As a consequence, the Company’s results are presented in Indian Rupee and exposures are managed against Indian Rupee accordingly. The Company has very limited foreign currency exposure mainly due to incurrence of some expenses. The Company may use foreign exchange option contracts or forward contracts towards operational exposures resulting from changes in foreign currency exchange rates exposure. These foreign exchange contracts, carried at fair value, may have varying maturities depending upon the primary host contract requirement.

The Company manages its foreign currency risk if any, by hedging appropriate percentage of its foreign currency exposure, as approved by the Board as per established risk management policy.

(iii) Price risk

The Company invests its surplus funds in various Government securities, taxable and tax free quoted debt bonds, liquid schemes of mutual funds (liquid investments) and higher duration short term debt funds and income funds (duration investments).

These are susceptible to market price risk, mainly arising from changes in the interest rates or market yields which may impact the return and value of such investments. The Company manages the price risk through diversification from time to time.

(b) Credit risk

Credit risk is the risk that counterparty will not meet its obligations under a financial instrument or customer contract, leading to a financial loss. The Company is exposed to credit risk from its operating activities (primarily for trade and other receivables) and from its financing activities, including deposits with banks and financial institutions, and other financial instruments.

(i) Trade receivables

Customer credit risk is managed in accordance with Company’s established policy, procedures and control relating to customer credit risk management. Trade receivables are non-interest bearing and are generally on 15 days credit term. Outstanding customer receivables are regularly monitored. The ageing analysis of trade receivables as of the reporting date is as follows:

(ii) Financial instruments and cash deposits

Credit risk from balances with banks and financial institutions is managed by Company’s treasury in accordance with the board approved policy. Investment of surplus funds are made only with approved counterparties who meet the minimum threshold requirements under the counterparty risk assessment process. The Company monitors ratings, credit spreads and financial strength on at least quarterly basis. Based on its on-going assessment of counterparty risk, the Company adjusts its exposure to various counterparties. The Company’s maximum exposure to credit risk for the components of the Balance Sheet at March.31, 2018 and March.31, 2017 is the carrying amounts as illustrated in Note 41.

(c) Liquidity risk

Liquidity risk is the risk that the Company may not be able to meet its present and future cash and collateral obligations without incurring unacceptable losses. The Company’s objective is to, at all times maintain optimum levels of liquidity to meet its cash and collateral requirements. The Company principal sources of liquidity are cash and cash equivalents and the cash flow generated from operations. The Company closely monitors its liquidity position and deploys a robust cash management system.

The table below summarizes the maturity profile of the Company’s financial liabilities based on contractual undiscounted payments:

Capital management

For the purpose of Company’s Capital management, Capital includes issued equity capital, share premium and all other equity reserves attributable to the equity shareholders. The primary objective of the Company’s capital management is to maximise the shareholder value.

The Company manages its capital structure and makes adjustments to it, in light of changes in economic conditions. To maintain or adjust the capital structure, the Company may adjust the dividend payment to shareholders, return capital to shareholders or issue new shares. The Company has availed Bank overdraft facility for Nil (March.31, 2017 - RS.2,785 Mn) which is integral part of cash management and the cash and cash equivalent amounting to Nil as at March.31, 2018 (March.31, 2017 - RS.22,494 Mn). The Cash and Cash equivalent net of Bank overdraft is RS.190 Mn (March.31, 2017 - RS.19,709 Mn). The Company is not having any interest bearing debt as at March.31, 2018 and March.31, 2017 except disclosed above.

15. There are no amounts due and outstanding to be credited to the Investor Education and Protection Fund as at March.31, 2018.

16. The Board of Directors has recommended a final dividend of RS.14 per equity share in its meeting held on April 23, 2018 for financial year 2017-18. The dividend recommended by the Board of Directors is subject to approval of the shareholders in the ensuing general meeting.

17. Previous period’s figures in the financial statements, including the notes thereto, have been reclassified wherever required to conform to the current period’s presentation/classification. These are not material and do not affect the previously reported net profit or equity.


Mar 31, 2017

4. Significant accounting judgments, estimates and assumptions

The preparation of the Company’s financial statements requires management to make judgments, estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities, and the accompanying disclosures, and the disclosure of contingent liabilities. Uncertainty about these assumptions and estimates could result in outcomes that require a material adjustment to the carrying amount of assets or liabilities affected in future periods.

Judgments

I n the process of applying the Company’s accounting policies, management has made the following judgments, which have the most significant effect on the amounts recognized in the financial statements:

(a) Operating lease commitments - Company as less or

The Company has assessed that its master service agreement (“MSA”) with operators contains lease of its tower sites and plant and equipment and has determined, based on evaluation of the terms and conditions of the arrangements such as various lessees sharing the same tower sites with specific area, the fair value of the asset and all the significant risks and rewards of ownership of these properties retained by the Company, that such contracts are in the nature of operating lease and has accounted for as such.

The Company has ascertained that the annual escalations in the lease payment received under the MSA are structured to compensate the expected inflationary increase in cost and therefore has not been straight-lined.

Estimates and assumptions The key assumptions concerning the future and other key sources of estimation uncertainty at the reporting date, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year, are described below. The Company has based its assumptions and estimates on parameters available when the financial statements were prepared. Existing circumstances and assumptions about future developments, however, may change due to market changes or circumstances arising that are beyond the control of the Company. Such changes are reflected in the assumptions when they occur.

(b) Impairment of non-financial assets

The carrying amounts of the Company’s non-financial assets, other than deferred tax assets, are reviewed at the end of each reporting period to determine whether there is any indication of impairment. If any such indication exists, then the asset’s recoverable amount is estimated.

The recoverable amount of an asset or cash-generating unit (‘CGU’) is the greater of its value in use and its fair value less costs to sell. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset or CGU. For the purpose of impairment testing, assets that cannot be tested individually are grouped together into the smallest group of assets that generates cash inflows from continuing use that are largely independent of the cash inflows of other assets or groups of assets (‘CGU’).

The Company’s corporate assets do not generate separate cash inflows. If there is an indication that a corporate asset may be impaired, then the recoverable amount is determined for the CGU to which the corporate asset belongs.

An impairment loss is recognized, if the carrying amount of an asset or its cash-generating unit exceeds its estimated recoverable amount and are recognized in Statement of Profit and Loss. Impairment losses recognized in respect of cash-generating units are allocated first to reduce the carrying amount of goodwill, if any, allocated to the units and then to reduce the carrying amounts of the other assets in the unit (group of units) on a pro rata basis.

Impairment losses recognized in prior periods are assessed at end of each reporting period for any indications that the loss has decreased or no longer exists. An impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount. An impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortization, if no impairment loss had been recognized.

(c) Property, plant and equipment

Refer Note 3(a) for the estimated useful life of Property, plant and equipment.

Property, plant and equipment also represent a significant proportion of the asset base of the Company. Therefore, the estimates and assumptions made to determine their carrying value and related depreciation are critical to the Company’s financial position and performance.

The charge in respect of periodic depreciation is derived after determining an estimate of an asset’s expected useful life and the expected residual value at the end of its life. Increasing an asset’s expected life or its residual value would result in a reduced depreciation charge in the Statement of Profit and Loss.

The useful lives and residual values of Group assets are determined by management at the time the asset is acquired and reviewed periodically. The lives are based on historical experience with similar assets as well as anticipation of future events which may impact their life, such as changes in technology.

During the FY 2014-15, the Company had reassessed the useful life and residual value of all its assets, accordingly, effective April 1, 2014, it has revised the useful life of certain class of shelters from 15 years to 10 years and revised the residual value of certain plant and machineries (batteries and DG sets) from Nil and 5% to 25% and 10%, respectively. Set out below is the impact of above change on future period depreciation:-

(d) Allowance of doubtful trade receivables

The expected credit loss is mainly based on the ageing of the receivable balances and historical experience. The receivables are assessed on an individual basis or grouped into homogeneous groups and assessed for impairment collectively, depending on their significance. Moreover, trade receivables are written off on a case-to-case basis if deemed not to be collectible on the assessment of the underlying facts and circumstances.

(e) Asset retirement obligation

The Company uses various leased premises to install its tower assets. A provision is recognized for the cost to be incurred for the restoration of these premises at the end of the lease period, which is estimated based on actual quotes, which are reasonable and appropriate under these circumstances. It is expected that these provisions will be utilized at the end of the lease period of the respective sites as per respective lease agreements.

(f) Share based payment

The Company initially measures the cost of cash-settled transactions with employees using a binomial model to determine the fair value of the liability incurred. Estimating fair value for share-based payment transactions requires determination of the most appropriate valuation model, which is dependent on the terms and conditions of the grant. This estimate also requires determination of the most appropriate inputs to the valuation model including the expected life of the share option, volatility and dividend yield and making assumptions about them. For cash-settled share-based payment transactions, the liability needs to be premeasured at the end of each reporting period up to the date of settlement, with any changes in fair value recognized in the profit or loss. This requires a reassessment of the estimates used at the end of each reporting period.

(g) Contingencies

Refer note 36 for details of contingencies.

1. Recent accounting pronouncement issued but not yet effective upto the date of issuance of financial statements

In March 2017, the Ministry of Corporate Affairs issued the Companies (Indian Accounting Standards) (Amendments) Rules, 2017, notifying amendments to Ind AS 7, ‘Statement of cash flows’ and Ind AS 102, ‘Share-based payment.’ These amendments are in accordance with the recent amendments made by International Accounting Standards Board (IASB) to IAS 7, ‘Statement of cash flows’ and IFRS 2, ‘Share-based payment,’ respectively. The amendments are applicable to the Company from April 1, 2017.

Amendment to Ind AS 7:

The amendment to Ind AS 7 requires the entities to provide disclosures that enable users of financial statements to evaluate changes in liabilities arising from financing activities, including both changes arising from cash flows and non-cash changes, suggesting inclusion of a reconciliation between the opening and closing balances in the balance sheet for liabilities arising from financing activities, to meet the disclosure requirement.

Amendment to Ind AS 102:

The amendment to Ind AS 102 provides specific guidance to measurement of cash-settled awards, modification of cash-settled awards and awards that include a net settlement feature in respect of withholding taxes.

It clarifies that the fair value of cash-settled awards is determined on a basis consistent with that used for equity-settled awards. Market-based performance conditions and non-vesting conditions are reflected in the ‘fair values’, but non-market performance conditions and service vesting conditions are reflected in the estimate of the number of awards expected to vest. Also, the amendment clarifies that if the terms and conditions of a cash-settled share-based payment transaction are modified with the result that it becomes an equity-settled share-based payment transaction, the transaction is accounted for as such from the date of the modification. Further, the amendment requires the award that include a net settlement feature in respect of withholding taxes to be treated as equity-settled in its entirety. The cash payment to the tax authority is treated as if it was part of an equity settlement.

b. Terms/ rights attached to equity shares:

The Company has only one class of equity shares having par value of Rs, 10 per share. Each holder of equity shares is entitled to one vote per share. The Company declares and pays dividend in Indian rupees.

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

On May 8, 2017, the Board of Directors have proposed a dividend of Rs, 4 per equity share (FY 2015-16 - Rs, 3 per equity share) to all the existing shareholders for the year ended March 31, 2017. The dividend proposed by the Board of Directors is subject to approval of the shareholders in the ensuing general meeting.

The Board of directors of the Company at its meeting held on March 22, 2017 has approved an interim dividend of Rs, 12 per equity share for FY 2016-17.

e. Aggregate number of bonus shares issued and shares issued for consideration other than cash during the period of five years immediately preceding the reporting date:

During the year ended March 31, 2013, the Company allotted 1,161,605,820 equity shares as fully paid bonus shares by capitalization of securities premium account.

During the year ended March 31, 2016, the Company allotted 2,897,776 equity shares (FY 2014-15, 2013-14 and 201213 - 4,468,180, 558,059 and 100,212 equity shares respectively) of Rs, 10 each to its employees on exercise of stock options under the Employee Stock Option Plan 2008 wherein part consideration was received in form of employee services. (refer note 34).

f. Aggregate number and class of shares bought back during the year:

During the year ended March 31, 2017, the Company brought back 47,058,823 equity shares of Rs, 10 each by way of tender offer through stock exchange mechanism for cash at price of Rs, 425 per equity share.

g. Shares reserved for issue under options:

For details of shares reserved for issue under the employee stock option plan (ESOP) of the Company, refer note 34.

The above security deposit is the fair value of total security deposit at transaction value for Rs, 4,034 as at March 31, 2017 (March 31, 2016 Rs, 3,743 Mn, April 1, 2015 Rs, 3,507 Mn)

“Security deposits” includes transaction value of '' 2,019 Mn (March 31, 2016 - Rs, 1,936 Mn, April 1, 2015 - Rs, 1,949 Mn) amounts received from related parties. For details, refer note 40.

The Company uses various premises on lease to install plant and equipment. A provision is recognized for the costs to be incurred for the restoration of these premises at the end of the lease period. It is expected that this provision will be utilized at the end of the lease period of the respective sites as per the respective lease agreements. The movement of Provision in accordance with Ind AS 37 on ‘Provisions, Contingent liabilities and Contingent Assets’ is given below:

The bank overdraft is repayable on demand and carries interest rate of 8.15% per annum.

2. Trade payables

a) Trade Payable include Rs, 92 Mn (March 31, 2016 - Rs, 290 Mn, April 1, 2015 - Rs, 350 Mn) payable to Parent company and fellow subsidiary Company. For details, refer note 40.

b) Details of dues to micro and small enterprises as defined under the MSMED Act, 2006

v. The discount rate is based on the average yield on government bonds at the reporting date with a term that matches that of the liabilities.

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

vii. Estimated amounts of benefits payable within next year are Rs, 43 Mn (March 31, 2016- Rs, 38 Mn).

The above sensitivity analysis are based on a change in an assumption by a percentage while holding all other assumptions constant. In practice, this is unlikely to occur, and changes in some of the assumptions may be correlated. While calculating the sensitivity of the defined benefit obligation to significant actuarial assumption, same method i.e Projected Unit Credit method has been applied as when calculating the gratuity liability recognized within the Balance sheet

3. Employee stock/cash settled option plans

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

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

The weighted average share price at the exercise date was Rs, 348.64 per share for options exercised under the 2008 Scheme & LTI plan, Rs, 364.88 per share for options exercised under cash settled plan & Rs, 341.41 per share for options exercised under the LTIP Scheme 2015 during the year ended March 31, 2017.

The weighted average fair value of the options granted during the year March 31, 2017 is Rs, 382.44 per share (FY 2015 -16 - Rs, 497.29 per share). The fair value of the options granted during the year was estimated using the Black Scholes, method of valuation with the following assumptions:

Total employee stock/cash options expense recognized for the year ended March 31, 2017and March 31, 2016 is Rs, 32 Mn and Rs, 82 Mn respectively.

Notes:

(i) Bharti Airtel Limited has given stock option to certain employees of the Company. Bharti Airtel Limited has not charged the compensation cost relating to the stock option granted to the Company’s employee. Besides this, the Company has also given stock options to certain employees of Bharti Airtel Limited and has considered the related compensation cost in its books.

(ii) The Company has decided to issue equity shares on exercise of ESOPs through ESOP trust. The loan of Rs, 625 Mn has been given to ESOP trust during F.Y 2014-15 to purchase the Equity Shares of the Company from open market as permitted by SEBI (Share Based Employee Benefits) Regulations, 2014.

(iii) During the FY 2014-15 Bharti Infratel Employee Welfare Trust (a trust set up for administration of Employee Stock Option Plan (‘ESOP’) of the Company) has acquired 1,652,000 equity shares of the Company from the open market at an average price of Rs, 377.72 per share. As of March 31, 2017, Bharti Infratel Employee Welfare Trust (‘the Trust’) holds 852,656 shares (of Face Value of Rs, 10 each) (March 31, 2016- 1,470,439 equity shares) of the Company.

(b) Operating lease: Company as a lessor

The Company has given sites on operating lease to telecom operators. As per the agreements with the operators the escalation rates range from 0% to 2.5% per annum. The service charges recognized as income during the year for non-cancellable arrangements relating to provision for passive infrastructure sites as per the agreements is Rs, 37,433 Mn and Rs, 34,367 Mn for the year ended March 31, 2017 and March 31, 2016 respectively.

@ the amount includes demand amount and interest till the date of demand.

# Includes Rs, 2,955Mn (March 31, 2016 - Rs, 1,627 Mn , April 1, 2015 - Rs, 2,727 Mn) for which the possibility of tax demand materializing is remote, based on internal assessment of the Company.

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

a) Sales Tax

The claims for sales tax as of March 31, 2017 comprise of the case relating to levy of penalty for the year 200809 in right to use litigation wherein the main demand has already been quashed by Hon’ble High Court (‘HC’) of Indore. The Company has filed Writ petition against the penalty before Hon’ble High Court which is pending for hearing on merits. Further the department has filed an appeal before Hon’ble Supreme Court (‘SC’) against the favorable order of Hon’ble High Court. Hon’ble SC has issued notice in this matter to file a reply.

(b) Stamp Duty

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

(c) Entry tax

Hon’ble Apex Court on November 11, 2016 while upholding the constitutional validity of entry tax levied by few States wherever its applicable, referred all the cases back to regular benches of the Court/s to decide all existing cases on merits while testing inter alia that whether the present levies in each such case/ State is discriminatory in nature or not.

Accordingly, all the said cases were listed before the regular bench of Supreme Court wherein after taking up all pending cases on State by State basis court have found that prime facie inter alia discrimination issues still exists and all the listed petitions have been remanded back to the respective High courts for decision after taking consideration all the grounds as laid down in the judgment of nine judges bench.

Pending disposition of each case by the High Courts, the Company has decided to maintain ‘Status Quo’ on its position/assessment and continued to disclose it as contingent liability.

(d) Municipal taxes

The Company based on its assessment of the applicability and tenability of certain municipal levies, which is an industry wide phenomenon, does not consider the impact of such levies to be material.

Further, in the event these levies are confirmed by the respective government authorities, the Company would recover these amounts from its customers in accordance with terms of Master Service Agreement.

(e) Service Tax

The service tax department has issued certain orders for the disallowance of cenvat credit availed on Inputs, Capital Goods and Input Services for the period starting from August, 2007 to March, 2014 The Company has filed an appeal before Hon’ble High Court of Delhi against the Larger Bench CESTAT decision while the appeal is pending before Division Bench, Chandigarh on merits. Writ petition listed for hearing on April 19, 2017 which is further adjourned to July 6 & 7, 2017 for final hearing.

I n separate proceeding before Directorate General of Central Excise Intelligence, the department has issued order for disallowance of Cenvat credit on items sold as scrap. The Company has filed appeal before CESTAT against such order.

(f) Others mainly include site related legal disputes.

(g) Income tax

This mainly includes tax demands for Assessment years 2011-12 to 2014-15.

The following methods / assumptions were used to estimate the fair values:

i. The carrying value of cash and cash equivalent, other bank balances, certificate of deposits, trade receivables and trade payables approximate their fair value mainly due to the short-term maturities of these instruments.

ii. The fair values of financial assets classified as FVTPL like investment in quoted mutual funds and Government securities is based on quoted market price/ net assets value at the reporting date.

iii. The fair value of other financial assets and other financial liabilities is estimated by discounting future cash flows using rates applicable to instruments with similar terms, currency, credit risk and remaining maturities. The fair values of other financial assets and other financial liabilities are assessed by the management to be same as their carrying value and is not expected to be significantly different if estimated by discounting future cash flows using rates currently available for debt on similar terms, credit risk and remaining maturities.

iv. The fair value of financial asset classified as FVTOCI like Investment in Commercial papers, corporate deposits and quoted bonds etc are derived from quoted price/net assets value at the reporting date.

There are no significant unobservable inputs used in the fair value measurement.

4. Fair value hierarchy

All financial instruments for which fair value is recognized or disclosed are categorized within the fair value hierarchy, described as follows, based on the lowest level input that is significant to the fair value measurement as a whole;

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

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

Level 3: Inputs for the assets or liabilities that are not based on observable market data (unobservable inputs)

The following table presents the financial instruments measured at fair value, by level within the fair value measurement hierarchy:

During the year ended March 31, 2017, there were no transfers between Level 1 and Level 2 fair value measurements and no transfers in to and out of Level 3 fair value measurements

5. Related party Disclosures

In accordance with the requirements of Ind AS - 24 “Related Party Disclosures”, the names of the related parties where control exists and/ or with whom transactions have taken place during the year and description of relationships, as identified and certified by the management are as below:

A. List of related parties

1. Key management personnel (KMP)

Akhil Kumar Gupta, Chairman

D.S. Rawat, Managing Director and Chief Executive Officer

Pankaj Miglani, Chief Financial Officer

Shweta Girotra, Company Secretary

2. Related parties where control exists irrespective of whether transactions have occurred or not

Parent Company Bharti Airtel Limited

Subsidiary Company Bharti Infratel Services Limited (refer note 1)

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

Name of related party_Relationship_

Bharti Hexacom Limited_Fellow Subsidiary_

Bharti Telemedia Limited_Fellow Subsidiary_

Nxtra Data Limited_Fellow Subsidiary_

Nettle Infrastructure Investments Limited_Fellow Subsidiary_

Indus Towers Limited_Joint Venture_

Bharti Enterprises Limited_Entity having significant influence/ Group Company

Centum Learning Limited_Entity having significant influence/ Group Company

Bharti Foundation_Entity having significant influence/ Group Company

Bharti Axa General insurance Co. Ltd. (Bharti Axa)_Entity having significant influence/ Group Company

Bharti Infratel Employees Welfare Trust_Entity having significant influence/ Group Company

Bharti Realty Holdings Limited_Entity having significant influence/ Group Company

Telesonic Network Limited_Entity having significant influence/ Group Company

Bharti Retail Limited_Entity having significant influence/ Group Company

Bharti Realty Limited_Entity having significant influence/ Group Company

Amount received from KMP for ESOP exercised Rs, 7 Mn during the year ended March 31, 2017 (March 31, 2016 '' 300 mn).

Terms and conditions of transactions with related parties The transactions with related parties are made on terms equivalent to those that prevail in arm’s length transactions. Outstanding balances at the yearend are unsecured and interest free and settlement occurs in cash. There have been no guarantees provided or received for any related party receivables or payables.

6. Pursuant to Initial Public Offer (IPO), the Company raised '' 31,657 Mn (net of selling shareholder’s proceeds), details of utilization of IPO proceeds are as follows:-

Note :-

(a) The Company has fully utilized the IPO Proceeds towards the Objects to the Issue as stated in the prospectus and/ or as approved by the shareholders through postal ballot dated March 21, 2016.

(b) Variation to the objects and schedule of deployment as disclosed in the prospectus dated December 19, 2012 issued by the Company for its IPO was approved by the shareholders of the Company through postal ballot on March 21, 2016.

(c) Amount of Rs, 263 Mn has been utilized against installation of new towers adjusted from “Up gradation and replacement of existing towers” in line with the approval referred in (b) above.

7. The Company was set-up with the object of, interalia, establishing, operating and maintaining wireless communication towers. This is the only activity performed and is thus also the main source of risks and returns. The Company’s segments as reviewed by the Chief Operating Decision Maker (CODM) does not result in to identification of different ways/ sources in to which they see the performance of the Company. Accordingly, the Company has a single reportable segment as far as standalone reporting is concerned. Further, as the Company does not operate in more than one geographical segment hence the relevant disclosures as per Ind AS 108 - Operating Segments are not applicable to the Company on a Standalone basis.

8. In absence of any specific guidance under Ind AS with respect to merger under court scheme, the Company has continued to apply the accounting prescribed under the scheme as applied under Indian GAAP Accordingly, depreciation charges on the excess of fair value over the original book values is charged to general reserve.

A) Scheme accounting - Bharti Airtel Scheme

During the year ended March 31, 2008, pursuant to the Scheme of Arrangement with Bharti Airtel Limited (‘BAL Scheme’) under sections 391 to 394 of the Companies Act, 1956, the telecom infrastructure undertaking of Bharti Airtel Limited was transferred to the Company. Pursuant to the Scheme, the depreciation charged by the Company on the excess of the fair values over the original book values of the assets transferred by Bharti Airtel Limited is being off-set against General Reserve.

B) Scheme accounting - The Indus Scheme

The Scheme of Arrangement (‘Indus Scheme’) under Section 391 to 394 of the Companies Act, 1956 for transfer of all assets and liabilities, as defined in Indus scheme, from Bharti Infratel Ventures Limited (BIVL), erstwhile wholly owned subsidiary Company, to Indus Towers Limited (Indus), was approved by the Hon’ble High Court of Delhi vide order dated April 18, 2013 and filed with the Registrar of Companies on June 11, 2013 with appointed date April 1, 2009 i.e. effective date of Indus Scheme and accordingly, effective June 11, 2013, the erstwhile subsidiary Company has ceased to exist and has become part of Indus. The Company was carrying investment in BIVL at Rs, 59,921 Mn. Pursuant to Indus Scheme, the Company has additionally got 504 shares in Indus in lieu of transfer of its investment in BIVL to Indus and recorded these additional shares at their fair value of Rs, 60,419 Mn in accordance with the scheme. The resultant gain of Rs, 385 Mn (net of taxes Rs, 116 Mn) has been disclosed as adjustment to carry forward balance of Statement of Profit and Loss as at April 1, 2009.

9. First-time adoption of Ind AS

As stated in note 2(b), the Company has prepared its first annual Ind AS financial statements for the year ended March 31, 2017. These financial statements for the year ended March 31, 2017 have been prepared in accordance with Ind AS. The preparation of these financial statements resulted in changes to the accounting policies as compared to most recent annual financial statements prepared under Indian GAAP (“Previous GAAP”). Accounting policies have been applied consistently to all periods presented in the financial statements. They have also been applied in preparing the Ind AS opening balance sheet as at April 1, 2015 for the purpose of transition to Ind AS and as required by Ind AS 101: First Time adoption of Indian Accounting Standards.

Exemptions applied

Ind AS 101 allows first-time adopters certain exemptions from the retrospective application of certain requirements under Ind AS. The Company has applied the following exemptions with respect to transition to Ind AS:

a. Deemed cost exemption

The Company has elected to continue with the carrying value of all of its property, plant and equipment and intangible assets as recognized in the financial statements as at the date of transition to Ind AS, measured as per previous GAAP and used it as its deemed cost at the date of transition.

The Company, in its separate financial statements, has elected to record its investment in Joint Venture at previous GAAP carrying value by considering the same as deemed cost.

b. Merger Accounting

The Company has continued to follow the accounting treatment pursuant to the Merger Scheme prescribed by the Hon’ble High Court under Ind AS which is in line

with Previous GAAP Use of the accounting as mandated by the merger scheme means that the Indian GAAP carrying amounts of assets and liabilities, that are required to be recognized under Ind AS, is their deemed cost at the date of the acquisition. The Company did not recognize or exclude any previously recognized amounts as a result of Ind AS recognition requirements.

Impact of transition to Ind AS

Net Ind-AS transition adjustments of Rs, 3,330 Mn (Other than proposed dividend and DDT) in the opening balance sheet as at April 1, 2015 has been adjusted from General Reserve (created as per provisions of Companies (Transfer of profit to reserves) rules, 1975 upon declaration of dividend as per companies Act, 1956) and Retained Earnings as on April 1, 2015 by Rs, 1,925 Mn and Rs, 1,405 mn, respectively.

The following is a summary of the effects of the differences between Ind AS and Indian GAAP on the Company’s total equity and profit for the period or periods previously reported under Indian GAAP following the date of transition to Ind AS:

10 Asset Retirement obligation

Under Indian GAAP, Asset Retirement obligation (ARO) is capitalized when it is probable that an outflow of resources will be required to settle the obligation and reliable estimate can be made. The ARO Liability is stated at Historical cost till the extinguishment of liability or expiry of the contractual period. The capitalized portion of the cost is depreciated over the useful life of the asset.

Under Ind AS, Asset Retirement obligation is provided at the present value of expected cost to settle the obligation and is recognized as part of Property, Plant and Equipment and liability. The estimated future cash outflows are discounted at a current pre tax rate that reflects the risk specific to the decommissioning liability. The unwinding of the discount is expensed as incurred and recognized in the Statement of Profit and Loss as finance cost. Changes in the estimated future cost or in the discount rate applied are added to or deducted from the cost of the asset.

The financial impact on transition date for ARO adjustment amounted to decrease in Property, Plant and Equipment (ARO Asset) and Provision for ARO (Long Term provisions) by Rs, 1,397 mn and Rs, 1,711 mn respectively. The impact as at March 31, 2016 amounted to decrease in Property, Plant and Equipment (ARO asset) and Provision for ARO (Long Term provisions) by Rs, 1,307 mn and Rs, 1,635 mn, respectively. The impact of such adjustment in Statement of Profit and Loss for year ended March 31, 2016 is reduction in depreciation by Rs, 154 mn and increase in Finance cost due to unwinding of discount by Rs, 139 mn.

11. Revenue Equalization

Under Indian GAAP Rental income arising from operating leases is accounted for on a straight-line basis over the lease terms and is included in revenue in the Statement of Profit and Loss.

Under Ind AS, the Company has ascertained that the increase is on account of general inflation. Hence, revenue equalization reserve relating to general inflation increase has been reversed.

The reversal of Revenue equalization on April 1, 2015 has been adjusted in general reserve & retained earnings and Other Non-Current Assets has been decreased by Rs, 14,538 mn. As at March 31, 2016 other noncurrent assets have been reduced by Rs, 15,122 mn respectively. In Statement of Profit and Loss for the year ended March 31, 2016, Revenue equalization has been reversed and revenue from operation is decreased by Rs, 585 mn.

12. Lease Equalization

Under Indian GAAP Operating lease payments are recognized as an expense in the Statement of Profit and Loss on a straight line basis over the non-cancellable lease term.

Under Ind AS, the Company has ascertained that the payments are structured to increase in line with expected general inflation to compensate for the less or’s expected general inflationary cost increases. Hence lease equalization reserve has been reversed.

The reversal of Lease equalization on April 1, 2015 impacts as decrease in other long term liabilities and such transition impact is adjusted in general reserve & retained earnings by Rs, 1,669 mn. As at March 31, 2016, other long term liabilities have been reduced by Rs, 1,778 mn.

In Statement of Profit and Loss for the year ended March 31, 2016, Lease equalization has been reversed and Rental expense is decreased by Rs, 109 mn.

13 Proposed dividend

Under Indian GAAP, proposed dividends including Dividend distribution tax (DDT) are recognized as a liability in the period to which they relate, irrespective of when they are declared.

Under Ind AS, a proposed dividend is recognized as a liability in the period in which it is declared by the company (usually when approved by shareholders in a general meeting) or paid.

The final dividend are declared and approved post the period to which it relates to, therefore, the liability of Rs, 14,815 mn for the year ended on March 31, 2015 recorded for dividend including dividend distribution tax has been derecognized against retained earnings on April 1, 2015. The proposed dividend for the year ended on March 31, 2016 of Rs, 6,847 mn recognized under Indian GAAP was reduced from Short term provisions and with a corresponding impact in the retained earnings.

14. Define benefit plan on Retirement benefits

Both under Indian GAAP and Ind AS, the Company recognized costs related to its post-employment defined benefit plan on an actuarial basis. Under Indian GAAP the entire cost, including actuarial gains and losses, are charged to profit or loss. Under Ind AS, remeasurements (comprising of actuarial gains and losses, the effect of the asset ceiling, excluding amounts included in net interest on the net defined benefit liability and the return on plan assets excluding amounts included in net interest on the net defined benefit liability) are recognized immediately in the balance sheet with a corresponding debit or credit to retained earnings through OCI. Thus the employee benefit cost is impacted by '' 3 Mn and remeasurement gains/ losses on defined benefit plans has been recognized in the other comprehensive income ( net of tax) for the year ended March 31, 2016.

15. Financial Assets at Fair Value through profit or loss

Under Indian GAAP Current investments are accounted for at cost or market price whichever is lower. Difference between the cost and market price is recognized in the Statement of Profit and Loss.

The long term investments in mutual funds required to be measured at cost less provision for diminution, other than temporary in the value of investments.

Under Ind AS, such investment have been designated at Financial Assets at Fair value through profit and loss. These are accounted for at fair value and any difference with the cost is recognized as gain or loss in the Statement of Profit and Loss.

The impact of financial assets at FVTPL measured at fair value as at April 1, 2015 resulted in increase in general reserve & retained earnings by Rs, 7,413 mn and increase in Non Current Investment and current Investment by Rs, 3,881 mn and Rs, 3,532 mn respectively. As at March 31, 2016, there is increase in Non Current Investment and Current Investment by Rs, 4,299 mn and Rs, 2,438 mn respectively. The Finance cost for the year ended March 31, 2016 increased by Rs, 682 mn on account of MTM gain reversed/ recognized earlier on fair value of such Investments.

16. Financial Assets at Amortised Cost

This category generally applies to trade and other receivables, Security deposit etc. Under Indian GAAP these kind of financial assets are stated at transaction value.

Under Ind AS, financial assets which are non derivative with fixed or determinable payments that are not quoted in an active market and recognized initially at Fair value. After initial measurement, such financial assets are subsequently measured at amortised cost using the effective interest rate (EIR) method. Amortised cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral part of the EIR. The EIR amortisation is included in finance income in the profit or loss. The losses arising from impairment are recognized in the profit or loss.

Such financial assets are classified at Amortised cost which needs to be initially recognized at Fair value under Ind AS. The corresponding fair value impact on April 1, 2015 is recognized in general reserve & retained earnings and security deposit paid is decreased by Rs, 6 mn and Rs, 9 mn, respectively as at April 1, 2015 and March 31, 2016.

The impact of amortization of deferred lease expense and finance income for the year ended March 31, 2016 as increase in rental expense by Rs, 18 Mn and finance income of Rs, 15 Mn.

17. Financial Liabilities at Amortized cost

This category applies to Security deposit received, Trade payables etc. Under Indian GAAP these kind of financial liabilities are stated at transaction value.

Under Ind AS Financial liabilities at amortized cost are non derivative financial liabilities with fixed or determinable payment that are not quoted in an active market and recognized initially at fair value. After initial measurement, such liability are subsequently measured at amortized cost using the effective interest rate (EIR) method. The EIR amortization is included in finance cost in the Statement of Profit or Loss.

Such financial assets are classified at Amortized cost which needs to be initially recognized at Fair value under Ind AS. The corresponding fair value impact on such financial assets on April 1, 2015 resulted in increase in general reserve & retained earnings and decrease of Security deposit received by Rs, 291 mn and Rs, 317 mn, respectively on April 1 ,2015 and March 31, 2016.

The impact of amortization of deferred income on security deposit received resulted in increase in revenue from operation by Rs, 211 mn and unwinding of discount resulting in increase in finance cost by Rs, 185 mn during the year ended March 31, 2016, respectively.

18. Deferred Tax

Indian GAAP requires deferred tax accounting using the income statement approach, which focuses on differences between taxable profits and accounting profits for the period. Ind AS 12 requires entities to account for deferred taxes using the balance sheet approach, which focuses on temporary differences between the carrying amount of an asset or liability in the balance sheet and its tax base. The application of Ind AS 12 approach has resulted in recognition of deferred tax on new temporary differences which was not required under Indian GAAP

I n addition, the various transitional adjustments lead to temporary differences. According to the accounting policies, the Company has to account for such differences. Deferred tax adjustments are recognized in correlation to the underlying transaction either in retained earnings or a separate component of equity. The net impact on deferred tax liabilities/ assets as on April 1, 2015 and March 31, 2016 is of Rs, 1,527 mn and Rs, 2,687 mn respectively.

19. Other Comprehensive Income

Under Indian GAAP, the Company has not presented other comprehensive income (OCI) separately. Hence, it has reconciled Indian GAAP profit or loss to profit or loss as per Ind AS. Further, Indian GAAP profit or loss is reconciled to total comprehensive income as per Ind AS.

20. Statement of Cash Flows

The impact of transition from Indian GAAP to Ind AS on the Statement of Cash Flows is due to various reclassification adjustments recorded under Ind AS in Balance Sheet and Statement of Profit and Loss. The transition from Indian GAAP to Ind AS has not had a material impact on the Statement of Cash Flows.

21. Buyback of Shares

In accordance with Sec 68, 69, 70 and other applicable provisions of the Companies Act, 2013 and SEBI regulations and pursuant to the public announcement for buy back made by the Company, the Company initiated a buy back by way of tender offer through stock exchange mechanism for cash at price of Rs, 425 per equity share for an aggregate amount of 20,000 Mn.

22. On April 26, 2016, Board of Directors had proposed a dividend of Rs, 3.00 per equity share to all the existing shareholders for the year ended March 31, 2016. The dividend proposed by the Board of Directors has been approved by shareholders in the annual general meeting dated August 10, 2016 and paid subsequently.

23. The Company (concessionaire) has entered into a service concession agreement as a lead member with Bhopal Smart City Development Corporation Limited (BSCDL/ grantor) along with other consortium members for implementation and maintenance of “Bhopal Smart City project”(the project) vide agreement dated October 28, 2016. As per the terms of the agreement, the Company along with the consortium members has to work on Build, Own, Operate and Transfer (BOOT) model on Public Private Partnership (PPP) basis.

The concession period granted as per the agreement is 15 years (excluding implementation period of 1 year) further extendable by another 15 years based on mutually agreed terms and conditions.

The title of interest, ownership and rights with regard to project implemented by the Company along with fixtures/ fittings provided therein shall rest with the Company until the expiry/ termination of the agreement and the rights related to the land allotted by the BSCDCL shall vest with the BSCDCL, except that, these will be operated and maintained by the Company at its own cost and expenses as agreed in the concession agreement.

These project facilities and assets constructed shall be transferred to BSCDCL at zero cost on expiry/ termination of the agreement. On obtaining the Completion Certificate from the specified authority, the Company shall be exclusively entitled to demand and collect revenue from the project assets in any manner.

The Concessionaire shall pay a fixed quarterly revenue share, as specified by the terms of agreement,to BSCDCL over the concession period. As of March 31, 2017, the Company has incurred capex cost of Rs, 17 Mn and recognized in capital work in progress.

24. The Company was required to spend Rs, 326 Mn towards CSR expenditure as per the requirement of the Companies Act 2013. During the year Rs, 171 Mn were spent towards ongoing long term CSR projects basis approval from the board. The disbursement of committed funds was based on the individual project work plans and milestones achieved over the year. All projects are being monitored and evaluated on the progress made and impact created during the routine course of the business. Besides the above, the Company also contributed as charity/donation to Bharti Foundation for Satya Bharti School Program (? 50 Mn); Brooking Institution India Centre (Rs, 2.5 Mn) and Bharti Foundation towards promotion of formal education in rural areas (? 0.5 Mn via Airtel Delhi Half Marathon)

25. Financial risk management objectives and policies

The Company’s principal financial liabilities comprise trade payables, security deposits, short term borrowings etc. The main purpose of these financial liabilities is to manage finances for the Company’s operations. The Company’s principal financial assets include Investment in Mutual Funds, Bonds and Government Securities, trade and other receivables, unbilled revenue, cash and cash equivalents, security deposits, etc. that derive directly from its operations.

The Company is exposed to market risk, credit risk and liquidity risk. The Company’s senior management oversees the management of these risks. The senior professionals working to manage the financial risks and the appropriate financial risk governance frame work for the Company are accountable to the Board Audit Committee. This process provides assurance to the Company’s senior management that the Company’s financial risk-taking activities are governed by appropriate policies and procedures and that financial risks are identified, measured and managed in accordance with Company’s policies and Company’s risk appetite. All derivative activities for risk management purposes are carried out by specialist teams that have the appropriate skills, experience and supervision. It is the Company’s policy that no trading in derivatives for speculative purposes shall be undertaken. The Board of Directors reviews and agrees policies for managing each of these risks which are summarized below:

- Market Risk

Market risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in market prices. Market prices comprise three types of risk: interest rate risk, foreign currency risk and price risk. Financial instruments affected by market risk include interest bearing Investment in bonds, Government Securities and fixed deposits etc.

The sensitivity of the relevant profit or loss item is the effect of the assumed changes in respective market risks. This is based on the financial assets and financial liabilities held at March 31, 2017 and March 31, 2016.

The Company’s exposure to financial risks is to a variety of financial risks, including the effect of changes in foreign currency exchange rates, if any. The Company uses derivative financial instruments such as foreign exchange contracts to manage its exposures and foreign exchange fluctuations, if any.

- Foreign currency risk

Foreign currency risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in foreign exchange rates.

The Indian Rupee is the Company’s functional currency. As a consequence, the Company’s results are presented in Indian Rupee and exposures are managed against Indian Rupee accordingly. The Company has very limited foreign currency exposure mainly due to incurrence of some expenses. The Company may use foreign exchange option contracts or forward contracts towards operational exposures resulting from changes in foreign currency exchange rates exposure. These foreign exchange contracts, carried at fair value, may have varying maturities depending upon the primary host contract requirement. The Company manages its foreign currency risk by hedging appropriate percentage of its foreign currency exposure, as approved by the Board as per established risk management policy.

- Interest rate risk

Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates.

The Company has invested in Government securities and bonds which will fetch a fixed rate of interest, hence, the income and operating cash flows are substantially independent of changes in market interest rates.

- Price risk

The Company invests its surplus funds in various Government securities, taxable and tax free quoted debt bonds, liquid schemes of mutual funds (liquid investments) and higher duration short term debt funds and income funds (duration investments).

These are susceptible to market price risk, mainly arising from changes in the interest rates or market yields which may impact the return and value of such investments. The Company manages the price risk through diversification from time to time.

- Credit risk

Credit risk is the risk that counterparty will not meet its obligations under a financial instrument or customer contract, leading to a financial loss. The Company is exposed to credit risk from its operating activities (primarily for trade receivables) and from its financing activities, including deposits with banks and financial institutions, and other financial instruments.

- Trade receivables

Customer credit risk is managed by each business unit subject to the Company’s established policy, procedures and control relating to customer credit risk management. Trade receivables are non-interest bearing and are generally on 15 days credit term. Outstanding customer receivables are regularly monitored. The ageing analysis of trade receivables as of the reporting date is as follows:

Financial instruments and cash deposits

Credit risk from balances with banks and financial institutions is managed by Company’s treasury in accordance with the board approved policy. Investment of surplus funds are made only with approved counterparties who meet the minimum threshold requirements under the counterparty risk assessment process. The Company monitors ratings, credit spreads and financial strength on at least quarterly basis. Based on its on-going assessment of counterparty risk, the Company adjusts its exposure to various counterparties. The Company’s maximum exposure to credit risk for the components of the Balance Sheet at March 31, 2017, March 31, 2016 and April 1, 2015 is the carrying amounts as illustrated in Note 38.

- Liquidity risk

Liquidity risk is the risk that the Company may not be able to meet its present and future cash and collateral obligations without incurring unacceptable losses. The Company’s objective is to, at all times maintain optimum levels of liquidity to meet its cash and collateral requirements. The Company principal sources of liquidity are cash and cash equivalents and the cash flow generated from operations. The Company closely monitors its liquidity position and deploys a robust cash management system.

The table below summarizes the maturity profile of the Company’s financial liabilities based on contractual undiscounted payments:-

- Capital management

Capital includes equity attributable to the equity holders of the parent. The primary objective of the Company’s capital management is to ensure that it maintains a strong credit rating and healthy capital ratios in order to support its business and maximize shareholder value.

The Company manages its capital structure and makes adjustments to it, in light of changes in economic conditions. To maintain or adjust the capital structure, the Company may adjust the dividend payment to shareholders, return capital to shareholders or issue new shares. During the current year, the Company has availed Bank overdraft facility for Rs, 2,785 mn (Mar 31, 2016 - Nil, April 1, 2015 - Nil) which is integral part of cash management and the cash and cash equivalent amounting to Rs, 22,494 mn as at March 31, 2017 (March 31, 2016 - Rs, 20,091 mn and April 1, 2015 -Rs, 62 mn). The Cash and Cash equivalent net of Bank overdraft is Rs, 19,709 mn. Hence Capital gearing ratio as at March 31, 2017, March 31, 2016 and April 1, 2015 is not required to be disclosed.

26. During the year ended March 31, 2016, the company has re-classified the termination charges w.r.t. cancellation of contracts by operators of Rs, 47 Mn, from ‘Other income’ to ‘revenue from operations’ w.e.f July 1, 2015 and has not reclassified prior period comparative on the basis of materiality.

27. Charity and donation includes Rs, 50 Mn (FY 2015-16 - Nil) paid to Satya electoral trust.

28. During Q4’ 2017, dividend distribution tax (DDT) of Rs, 4,519 mn on Interim dividend and DDT of Rs,1,130 Mn on final dividend paid in the current year has been adjusted and reclassified from surplus in profit & loss account, respectively, to the general reserve under the demerger scheme as referred in Note 43.

29. The Board of Directors, in its meeting held on April 26, 2016, proposed a final dividend of Rs, 3 per equity share and the same was approved by the shareholders at the Annual General Meeting held on August 10, 2016.

30. General reserve include general reserve under scheme for Rs, 69,244 Mn as at March 31, 2017 (March 31, 2016 - Rs, 75,430 Mn, March 31, 2015 - Rs, 76,056 Mn), General reserve for Dividend as at March 31, 2017 - Nil (March 31, 2016 - Rs, 501 Mn, March 31, 2015 - Rs, 501 Mn) and Others as at March 31, 2017- Rs, 13 Mn (March 31, 2016 - Rs, 50 Mn, March 31, 2015 -Rs, 16 Mn)

31. Previous year’s figures in the financial statements, including the notes thereto, have been reclassified wherever required to conform to the current year’s presentation/classification. These do not affect the previously reported net profit or equity.

32. Overlapping circles Represent the telecommunication circles of Haryana, Rajasthan, Uttar Pradesh (East) and Uttar Pradesh (West) wherein Bharti Infratel and Indus Towers have overlapping operations. Bharti Infratel is not permitted to roll out any new towers in these telecommunications Circles, although it continues to own and operate its existing telecommunications towers in these Circles, and add additional sharing operators to these towers. New tower rollout in these telecommunication circles is done by Indus.

33. Circles Represents the telecommunications circles of Bihar, Madhya Pradesh and Chhattisgarh, Odisha, Jammu and Kashmir, Himachal Pradesh, Assam and North East states wherein Bharti Infratel operates on exclusive basis.

34. Circles Represents the 7 telecommunications circles of Bihar, Madhya Pradesh and Chhattisgarh, Odisha, Jammu and Kashmir, Himachal Pradesh, Assam and North East states wherein Bharti Infratel operates on exclusive basis and the 4 common circles of Haryana, Rajasthan, Uttar Pradesh (East) and Uttar Pradesh (West) wherein Bharti Infratel and Indus Towers have overlapping operations.

35.Circles Represents the 11 telecommunication circles of Andhra Pradesh, Delhi, Gujarat,

Karnataka, Kerala, Kolkata, Maharashtra & Goa, Mumbai, Punjab, Tamil Nadu (including Chennai) and West Bengal wherein Indus operates on exclusive basis and the 4 common telecommunication circles of Haryana, Rajasthan, Uttar Pradesh (East) and Uttar Pradesh (West) wherein Bharti Infratel and Indus Towers have overlapping operations.

Adjusted Fund from Operations It is not an Ind AS measure and is defined as EBITDA adjusted for Maintenance and

(AFFO) General Corporate Capex, revenue equalization and lease rent equalization (which represents straight lining of revenue and expense).

Average Co-locations Average co-locations are derived by computing the average of the Opening and Closing co-locations at the end of relevant period.

Average Sharing Factor Average Sharing factor is calculated as the average of the opening and closing number of co-locations divided by average of the opening and closing number of towers for the relevant period.

Average Towers Average towers are derived by computing the average of the opening and closing towers at the end of relevant period.

BISL Bharti Infratel Services Limited

BIVL Bharti Infratel Ventures Limited

Bn Billion

Capex It includes investment in gross fixed assets and capital work in progress for the relevant period.

Capital Employed Capital Employed is defined as sum of equity attributable to equity shareholders and

Net Debt/ (Net Cash).

Cash Profit from operations It is not an Ind AS measure and is defined as operating income adjusted for depreciation and amortization, revenue equalization, lease rent equalizations and finance costs.

Circle(s) 22 service areas that the Indian telecommunications market has been segregated into Closing sharing factor Closing sharing factor is calculated as the closing number of co-locations divided by closing number of towers as at the end of relevant period.

Co-locations Co-location is the total number of sharing operators at a tower, and where there is a single operator at a tower; ‘co-location’ refers to that single operator. Co-locations as referred to are revenue-generating co-locations.

Consolidated Financial The Consolidated financial statements of the company till FY 2012-13 represent statements the financials of Bharti Infratel Ltd Standalone taken together with its wholly owned subsidiary Bharti Infratel Ventures Ltd and Bharti Infratel’s 42% equity interest in Indus Towers Ltd. accounted for by proportionate consolidation. Consequent to Indus Merger, the financial statements of Indus have been prepared after giving effect to the Merger Scheme. Accordingly the Consolidated Financial Results of the Company from quarter ended June 2013 and onwards represent the financials of Bharti Infratel Ltd. Standalone taken together with its 42% equity interest in Indus Towers Ltd. accounted for by proportionate consolidation and consolidating the subsidiary Bharti Infratel Services Ltd. & Smartx Services Ltd. till March 31, 2016 under Indian GAAP Post transition to Ind AS, the Consolidated financial results of the Company represent financials of Bharti Infratel Ltd. Standalone taken together with its 42% interest in Indus Towers Ltd accounted for under Equity method and consolidation of subsidiary Smartx Services Ltd. and controlled trust Bharti Infratel Employee Welfare Trust.

Cumulative Investments Cumulative Investments comprises of gross property, plant & equipment (including

Capital Work In Progress).

Earnings per Share (EPS) (Basic) It is computed by dividing net profit or loss attributable for the period to equity shareholders by the weighted average number of equity shares outstanding during the period.

Earnings per Share (EPS)- Diluted earnings per share is calculated by adjusting net profit or loss for the period (Diluted) attributable to equity shareholders and the weighted average number of shares outstanding during the period for the effects of all dilutive potential equity shares.

EBIT Earnings before interest, taxation excluding other income for the relevant period.

EBIT (Including Other Income) Earnings before interest, taxation including other income for the relevant period.

EBITDA Earnings before interest, taxation, depreciation and amortization and charity and donations excluding other income for the relevant period. It is defined as operating income and does not include depreciation and amortization expense, finance cost and tax expense.

EBITDA (Including Other Income) Earnings before interest, taxation, depreciation and amortization and charity and donations including other income for the relevant period.

Enterprise Value (EV) Calculated as sum of Market Capitalization plus Net Debt/ (Net Cash) as at the end of the relevant period.

EV / EBITDA (times) (LTM) Computed by dividing Enterprise Value as at the end of the relevant period (EV) by EBITDA for the preceding (last) 12 months from the end of the relevant period.

Future Minimum Lease Payment The Company has entered into long term non-cancellable agreements to provide

Receivable infrastructure services to tel


Mar 31, 2016

1. Employee Stock/Cash Option Plans

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

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

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

2. Leases

(a) Operating lease: Company as a lessee

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

(b) Operating lease: Company as a lessor

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

3. Asset Retirement Obligation

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

4. Interest in Joint Venture

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

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

5. Related Party Disclosures

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

A. List of Related Parties

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

D.S. Rawat, Managing Director and CEO

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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


Mar 31, 2009

1. Contingent Liability

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

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

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

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

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

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

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

-Municipal Taxes 333 333

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

(Refer to below) 795,332 773,896



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

(c) Sales tax

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

(d) Stamp Duty

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

(e) Entry tax

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

(f) Others

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

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

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

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

Finance Lease - as a Lessee

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

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

There are no restrictions imposed on lease arrangements.

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

4. Employee benefits

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

A) Defined Contribution Plans

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

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

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

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

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

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

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

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

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

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

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

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

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

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