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Notes to Accounts of HFCL Ltd.

Mar 31, 2023

15.2 The credit period towards trade receivables related to turnkey projects generally ranges between down to achievement of specified milestones (execution based) and average project execution cycle is around 6 to 18 months. General payment terms include process time with the respective customers ranging between 60 to 120 days from the date of invoices / achievement of specified milestones.

15.3 In determining the allowance for trade receivables the Company has used practical expedients based on financial condition of the customers, ageing of the customer receivables & over-dues, availability of collaterals and historical experience of collections from customers. The concentration of risk with respect to trade receivables is reasonably low as most of the customers are Government and large Corporate organisations though there may be normal delays in collections.

15.4 Above balance of trade receivable include recoverable form related party (refer note 52)

(v) Terms/right attached to Equity/Preference Shares -

The Company has issued equity share of ''1/- each. On a show of hands, every holder of equity shares is entitled for one vote and upon a poll shall have voting rights in proportion to the shares of the paid up equity capital of the Company held by them. In the event of liquidation of the Company, the holders of equity shares will be entitled to receive remaining assets of the Company, after distribution of all preferential amount in proportion to their shareholdings.

(vi) Shares reserved for issue under options:

Information related to Employee Stock Option Plan, including details of options issued, exercised, expired and forfeited during the previous financial year and options outstanding at the end of the reporting period, is set out in note 57.

(1) Brief description of Other Reserves:

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

b. Capital Redemption reserve is created to the extent of Preference Share Capital redeemed i.e. 80,50,000 (previous year 80,50,000) CRPSs of ''100/- each

c. Employee share based payment reserve is created as required by Ind AS 102 ''Share Based Payments'' on the Employee Stock Option Scheme operated by the Company for employees of the Group.

(2) Brief description of Money received against Convertible Warrants:

The Board of Directors and Shareholders of the Company at their meetings held on September 02, 2022 and September 30, 2022 respectively, has approved the issuance up to 1,41,00,000 (One crores forty one lakhs) warrants convertible into 1,41,00,000 equity shares at a price of ''80/- per equity share to one of the Promoters of the Company and certain persons belonging to non-Promoter category being senior leadership team. Subsequently, on receipt of warrant subscription price being ''20/- per warrant equivalent to 25% of the Warrant Exercise Price i.e., ''80/- per warrant, aggregating to ''28.20 crores, the Allotment Committee of the Board of Directors at its meeting held on October 15, 2022, has allotted 1,41,00,000 (One crores Forty-One Lacs) Warrants, being the entire issue, on preferential basis to aforesaid entity/persons. Balance consideration of ''60/- per warrant, being 75% of the Warrant Exercise Price shall be payable within 18 months from the allotment date, at the time of exercising the warrants to apply for fully paid-up equity share of ''1/- each of the Company, against each warrant held by the warrant holders.

Notes:

a) Term Loan of ''86.67 crores (Previous year ''108.94 crore) from the Banks are secured by pari-passu first charge on entire Optical Fiber Project Assets at Hyderabad (Unit-1), both present and future, by way of equitable mortgage. The loan is further secured by personal guarantee of Managing Director of the Company and Corporate Guarantee of M/s MN Ventures Private Limited. Repayment of this term loan would be made in 28 structured quarterly instalments over a period of 7 years commencing after moratorium period i.e. 12 months after date of commencement of the project.

b) Term Loan of ''30.57 crores (Previous year ''13.34 crore) as disbursed against sanction of ''48.00 crores from the Bank, are secured by exclusive first charge on entire Optical Fiber Cable Project Assets at Hyderabad (Unit -2), both present and future, by way of equitable mortgage except land which is pari-passu charge with the lenders of Unit 1. The loan is further secured by personal guarantee of Managing Director of the Company and Corporate Guarantee of M/s MN Ventures Private Limited. Repayment of this term loan would be made in 28 structured quarterly instalments over a period of 7 years commencing after moratorium period i.e. 12 months after date of commencement of the project.

c) Working Capital Facilities (COVID -19 Emergency Credit line) of ''Nil (Previous year ''0.86 crore) are secured on pari passu basis by way of hypothecation of stocks of raw materials, finished and semi- finished goods, stores and spares, book debts etc. as well as by way of second charge on immovable properties except Hyderabad units of the Company and are also secured by personally guaranteed of Managing Director of the Company and further secured by way of corporate guarantee of M/s MN Ventures Private Limited.

d) Other Vehicle Loans of ''3.83 crores (Previous Year ''3.07 crore) from banks are secured by way of hypothecation of respective vehicle.

* a) Working Capital Loans from banks aggregating to ''230.76 crores (Previous year: ''218.81 crore) are secured on pari passu basis by way of hypothecation of stocks of raw materials, finished and semi- finished goods, stores and spares, book debts etc. and all other current assets of the company as well as by way of first pari passu charge on enitre fixed assets of the company (both present and future) excluding fixed assets of manufacturing facility at Telangana and are also personally guaranteed by Managing Director of the Company and further secured by way of corporate guarantee of M/s MN Ventures Private Limited.

b) Working Capital Loans from Banks aggregating to ''73.64 crores (Previous year: ''73.37 crore) are secured by way of first pari passu charge on all current assets, movable & immovable fixed assets (both present & future) of IPMPLS back bone Project for Network for Spectrum (NFS). The loan is further secured by first pari passu charge on enitre fixed assets of the company (both present and future) excluding fixed assets of manufacturing facility at Telangana, personal guarantee by Managing Director of the Company, corporate guarantee of M/s MN Ventures Private Limited, first pari passu charge of cash flows of the project for working capital consortium.

c) Quarterly returns/statements of current assets filed by the Company with banks are in agreement with the books of accounts.

i) While disclosing the aggregate amount of transaction price yet to be recognised as revenue towards unsatisfied (or partially satisfied) performance obligations, along with the broad time band for the expected time to recognise those revenues, the Company has applied the practical expedient in Ind AS 115.

ii) Unsatisfied (or partially satisfied) performance obligations are subject to variability due to several factors such as terminations, changes in scope of contracts, periodic revalidations of the estimates, economic factors (changes in currency rates, tax laws etc.). The aggregate value of transaction price allocated to unsatisfied (or partially satisfied) performance obligations is '' Nil (Previous year ''Nil) which is expected to be recognised as revenue in the next year.

40. CRITICAL ACCOUNTING ESTIMATES AND JUDGMENTS

The preparation of financial statements requires the use of accounting estimates which, by definition, will seldom equal the actual results. This note provides an overview of the areas that involved a higher degree of judgment or complexity, and of items which are more likely to be materially adjusted due to estimates and assumptions turning out to be different than those originally assessed. Detailed information about each of these estimates and judgments is included in relevant notes together with information about the basis of calculation for each affected line item in the financial statements.

The following are the key assumptions concerning the future, and other key sources of estimated uncertainty at the end of the reporting period that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year.

1. Useful lives of property, plant and equipment and Intangible Assets

Property, plant and equipment represent a significant proportion of the asset base of the Company. 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.

The useful lives and residual values of Company''s assets are determined by management at the time the asset is acquired. 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.

2. Recoverability of intangible asset and intangible assets under development

Capitalisation of cost in intangible assets under development is based on management''s judgement that technological and economic feasibility is confirmed and asset under development will generate economic benefits in future. Based on evaluations carried out, the management has determined that there are no factors which indicates that these assets have suffered any impairment loss.

3. Employee benefits

Defined benefit plans and other long-term benefits are evaluated with reference to uncertain events and based upon actuarial assumptions including among others discount rates, expected rates of return on plan assets, expected rates of salary increases, estimated retirement dates, mortality rates. The significant assumptions used to account for Employee benefits are described in Note 45.

4. Revenue Recognition

The Company assesses the services promised in a contract and identifies distinct performance obligations in the contract. Judgement is also required to determine the transaction price for the contract. The Company allocates the elements of variable considerations to all the performance obligations of the contract unless there is observable evidence that they pertain to one or more distinct performance obligations. 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 indicators such as how customer consumes benefits. Provisions for estimated losses, if any, on uncompleted contracts are recorded in the period in which such losses become probable based on the estimated efforts or costs to complete the contract.

5. Leases

The Company evaluates if an arrangement qualifies to be a lease as per the requirements of Ind AS 116. Identification of a lease requires significant judgment. The Company uses significant judgement in assessing the lease term (including anticipated renewals) and the applicable discount rate. The discount rate is generally based on the incremental borrowing rate specific to the lease being evaluated or for a portfolio of leases with similar characteristics. Ind AS 116 requires assessment of whether an underlying asset is of low value, if lessee opts for the option of not to apply the recognition and measurement requirements of Ind AS 116 to leases where the underlying asset is of low value. For the purpose of determining low value, the Company has considered nature of assets and concept of materiality as defined in Ind AS 1 and the conceptual framework of Ind AS which involve significant judgement.

6. Loss allowance for receivables and unbilled revenues

The Company determines the allowance for credit losses based on historical loss experience adjusted to reflect current and estimated future economic conditions. The Company considered current and anticipated future economic conditions relating to industries the company deals with and the countries where it operates. In calculating expected credit loss, the Company has also considered credit reports and other related credit information for its customers to estimate the probability of default in future.

7. Taxes

Deferred tax assets are recognised for unused tax credits to the extent that it is probable that taxable profit will be available against which the losses can be utilised. Significant management judgment is required to determine the amount of deferred tax assets that can be recognised, based upon the likely timing and the level of future taxable profits together with future tax planning strategies.

8. Contingencies

On an ongoing basis, Company reviews pending cases, claims by third parties and other contingencies and obligations. Obligations relating to Project Executions is largely depends upon performance of services by respective contractors. For contingent losses that are considered probable, an estimated loss is recorded as an accrual in financial statements. Loss contingencies that are considered possible are not provided for but disclosed as Contingent liabilities in the financial statements. Contingencies the likelihood of which is remote are not disclosed in the financial statements. Gain contingencies are not recognised until the contingency has been resolved and amounts are received or receivable.

9. Fair Value of Unquoted equity investments

In order to arrive at the fair value of unquoted investments (other than subsidiaries and associates), the Company obtains independent valuations. The techniques used by the valuer is Asset approach - Net assets value method and Income approach-discounted cash flow method. The Company reviews its carrying value of investments carried at cost (net of impairment, if any) annually, or more frequently when there is indication for impairment. If the recoverable amount is less than its carrying amount, the impairment loss is accounted for in the statement of profit and loss.

42. DIVIDEND DISTRIBUTION MADE AND PROPOSED

The amount of dividend recognised as distributions to equity shareholders during the year ended March 31,2023 is @ 18 %, i.e. ''0.18/- per equity share of face value of ''1/- each (Previous Year ''0.15 per equity share). The Board of Directors at its meeting held on April 29, 2022 had recommended such dividend of 18% for the financial year ended March 31,2022 which was approved by the shareholders at the Annual General Meeting held on September 30, 2022. The aforesaid dividend was paid during the year ended March 31,2023.

The Board of Directors have recommended a dividend of 20% (i.e. ''0.20/- per equity share of face value of ''1/- each) for the financial year ended March 31,2023 which is subject to the approval of shareholders at the ensuing Annual General Meeting.

Interest on lease liabilities is ''2.30 crores and ''2.72 crores for the year ended March 31,2023 and March 31,2022 respectively.

Lease contracts entered by the Company majorly pertains for buildings taken on lease to conduct its business in the ordinary course. The Company does not have any lease restrictions and commitment towards variable rent as per the contract. The leases that the Company has entered with lessors towards properties used as ware houses/ offices are long term in nature.

44. BUSINESS COMBINATION

i) During the previous year the Company had acquired voting right of 50% in Nimpaa Telecommunications Private Limited (Nimpaa), having its registered office at No. 16/38, Maharaja Surya Road, Teynampet, Chennai -600018, Tamil Nadu, at a total consideration of ''1 crore, thereby making it a Jointly Controlled Entity of the Company w.e.f. June 14, 2021. Nimpaa is engaged in the business of manufacture of equipment, component, accessories and cables for telecommunication systems, networks.

ii) During the previous year the Company had also acquired voting right of 50% in BigCat Wireless Private Limited (BigCat), having its registered office at New No. 21, Old No. 9, Flat C2, Dwarka Apartments, 1st Avenue, Shastri Nagar, Chennai-600020, Tamil Nadu, at a total consideration of ''8.50 crore, thereby making it a Jointly Controlled Entity of the Company w.e.f. 12th Nov, 2021. BigCat is engaged in the development of software and hardware products for wireless networking and other related technical, research and development activities.

45. During the year, Company has recognised the following amounts in the financial statements as per Ind AS - 19 "Employees Benefits" as specified in the Companies (Indian Accounting Standards) Rules, 2015:

b) Defined Benefit Plan

The employees'' gratuity fund scheme is managed by HDFC Standard Life Insurance Company Limited which is a defined benefit plan. The present value of obligation is determined based on actuarial valuation using the Projected Unit Credit Method, which recognises each period of service as giving rise to additional unit of employee benefit entitlement and measures each unit separately to build up the final obligation and the obligation for leave encashment is recognised in the same manner as gratuity.

47. OPERATIONAL BUYERS'' CREDIT / SUPPLIERS CREDIT

Operational Buyers''/Suppliers'' Credit is availed in foreign currency from Indian banks through their offshor foreign branches at an interest rate ranging from 5.00%-6.00% per annum. These trade credits are generally repayable within 180 days from the date of draw down. Operational Buyers'' credit availed in foreign currency is partly backed by Standby Letter of Credit issued under working capital facilities sanctioned by Indian banks.

48. COMMITMENTS AND CONTINGENCIES

(a) Contingent Liabilities not provided for in respect of:

Particulars

As at

March 31, 2023

As at

March 31, 2022

(i) Unexpired Letters of Credit (margin money paid ''33.62 crore; Previous year ''72.89 crore)

224.13

466.20

(ii) Guarantees given by banks on behalf of the Company (margin money kept by way of fixed deposits of ''140.40 crore; Previous year ''132.14 crore)

869.89

868.37

(iii) Claims against the Company towards sales tax, income tax and others in dispute not acknowledged as debt (deposited under protest ''3.87 crores ; (Previous year ''3.87 crore)

38.99

30.87

Notes:

i) The Company''s pending litigations comprise of claims against the Company and proceedings pending with Tax Authorities. The Company has reviewed all its pending litigations and proceedings and has made adequate provisions, wherever required and disclosed the contingent liabilities, wherever applicable, in its financial statements. The Company does not expect the outcome of these proceedings to have a material impact on its financial position.

ii) The Company periodically reviews all its long term contracts to assess for any material foreseeable losses. Based on such review wherever applicable, the Company has made adequate provisions for these long term contracts in the books of account as required under any applicable law/accounting standard.

iii) The Company has provided guarantees to third parties on behalf of subsidiary and associates. The Company does not expect any outflow of resources in respect of such guarantees.

iv) We have perused the judgement of Hon''ble Supreme Court vide its ruling given in February 2019 and it has been opined that if any allowance is not paid across the board, it shall not be treated as basic wages for the purpose of Employee Provident Fund contribution under Employees'' Provident Funds and Miscellaneous Provisions Act, 1952, hence we understand that no further liability lies upon us.

v) 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 in to effect has not been notified. The Company will assess the impact of the Code when it comes into effect and will record any related impact in the period when the Code becomes effective.

vi) As at March 31,2023 the Company has outstanding term derivative contracts as referred in Note 60.

vii) There has been no delay in transferring amounts, required to be transferred if any, to the Investor Education and Protection Fund by the Company.

(b) Capital Commitments

Particulars

As at

March 31, 2023

As at

March 31, 2022

Estimated amount of contracts remaining to be executed on capital account and not provided for (net of advances)

267.43

102.42

Uncalled capital commitment pertaining to investments

5.00

12.00

49. HTL Limited, Subsidiary Company, has proposed for allotment of 8% redeemable and non-convertible preference share capital of ''100.00 crores by way of conversion of outstanding loan and advances extended by HFCL Limited. The Subsidiary Company has submitted the proposal before the Department of Telecommunications (DoT) vide letter dated 22.03.2022 for seeking their administrative approval for the proposal so that the required formalities under the Companies Act can be taken up accordingly. In view of this, entire advances & loans receivable from HTL Limited have been classified under Non-Current Assets in the financial statements. (Refer Note 9 and 10).

50. In the opinion of the Board, all assets other than property, plant and equipment and non-current investments, have a realisable value in the ordinary course of business which is not significantly differ from the amount at which it is stated. Balances of various trade payables, trade receivables, loans and advances, security deposits and other parties are subject to confirmation/reconciliation and consequential adjustments, if any. In the opinion of the management, such adjustments, if any, will not have a material impact on the Financial Statements.

51. The Company''s Solan manufacturing facilities are having limited scale of operations due to rapid change in technology and other advancements. The said facilities are currently generating revenue from job work only. In view of the above and as a step towards cost optimisation, company''s Board had decided to shift the Plant and Machinery of Solan facilities and operations thereof to its Manufacturing Facility located at Hyderabad. The process of shifting of employees has already been started. The partial plant & machinery and other testing equipment would transfer to Hyderabad plant in due course of time. The management is also in the process of identifying prospective usages of its facilities at Solan post shifting of plant and machinery to other locations.

Major Terms and Conditions of transactions with related parties:

i) Transactions with related parties are made on terms equivalent to those that prevail in arm''s length transactions.

ii) The remuneration to Key Managerial Personnel are in line with the HR policies of the company.

iii) Loans and advances given to Directors/ KMPs have specified terms/ period of repayment and are in line with HR policies of the Company.

iv) The company makes advances to its associate companies to cater their short term business requirements. Such advances carry interest rates at the rate applicable to the term loans as per Company''s policy.

v) The interest and /or dividend paid to the Trusts and Key Managerial Personnel are on account of their investments in the equity shares of the Company and dividend paid on such securities is uniformally applicable to all the holders.

vi) Outstanding balances of group companies at the year-end are unsecured.

53. SEGMENT REPORTING

The Company publishes the Standalone financial statements of the Company along with the consolidated financial statements.

In accordance with Ind AS 108, Operating Segments, the Company has disclosed the segment information in the consolidated

financial statements.

57. On October 15, 2018, pursuant to the approval by the shareholders, the Board has been authorised to introduce, offer, issue and allot share-based incentives to eligible employees of the Company and its subsidiaries under the Himachal Futuristic Communications Limited Employees'' Long Term Incentive Plan ("HFCL Plan 2017"). The maximum number of shares under the HFCL Plan 2017 shall not exceed 1,40,98,000 equity shares. Out of this, 70,49,000 equity shares will be issued against RSUs at par value and 70,49,000 equity shares will be issued against stock options at fair market price immediately prior to date of the grant i.e. ''20.65 per share. The Employee can exercise the vested options/units with in the maximum exercise period which shall be 5 years from the vesting date. The Stock options so granted shall vest over a period of 3 years and 70% RSUs granted will be vest at the end of 3rd year and remaining 30% RSUs shall vest at the end of 4th year from the date of grant.

The RSUs granted under the HFCL Plan 2017 are forfeited due to non-achievement of defined annual performance parameters as determined by the Nomination, Remuneration and Compensation Committee in its meeting held on April 23, 2022 and accordingly as on March 31,2022 the share based payment reserve was adjusted. During the previous year, this cancellation/ forfeiture of unvested options had resulted into a reversal of share based payment expense in the Standalone Statement of Profit and Loss.

I n respect of Options granted under the Employee Stock Option Plan the accounting is done as per requirements of Ind AS 102. Consequently, The Statement of Profit and Loss includes '' Nil (Previous Year: net income of ''8.26 crore) being expenses on account of share based payments, after adjusting for reversals on account of options forfeited. The amount excludes charged to its subsidiary for options issued to its employees.

The Nomination, Remuneration and Compensation Committee (''Committee'') of the Board of Directors which comprises a majority of Independent Directors is responsible for administration and supervision of the Stock Option Plans.

The expected life of the RSU / ESOP is estimated based on the vesting term and contractual term of the RSU / ESOP, as well as expected exercise behaviour of the employee who receives the RSU / ESOP. Expected volatility during the expected term of the RSU / ESOP is based on historical volatility of the observed market prices of the Company''s publicly traded equity shares during a period equivalent to the expected term of the RSU / ESOP.

59. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT

The Company''s principal financial liabilities, other than derivatives, comprise loans and borrowings, trade and other payables, lease liabilities and financial guarantee contracts. The main purpose of these financial liabilities is to finance the Company''s operations and to provide guarantees to support its operations. The Company''s principal financial assets include loans, cash and cash equivalents, trade and other receivables that derive directly from its operations.

The Company''s business activities expose it to a variety of financial risks, namely liquidity risk, market risks and credit risk. The management has the overall responsibility for the establishment and oversight of the Company''s risk management framework. The Company has constituted a Risk Management Committee, which is responsible for developing and monitoring the Company''s risk management policies. The Company''s risk management policies are established to identify and analyze the risks faced by the Company, to set appropriate risk limits and controls and to monitor risks and adherence to limits. Risk management policies and systems are reviewed regularly to reflect changes in market conditions and the Company''s activities.

Significant estimates

The fair value of financial instruments that are not traded in an active market is determined using valuation techniques. The Company uses its judgement to select a variety of methods and make assumptions that are mainly based on market conditions existing at the end of each reporting period.

59.2 Management of Financial Risk Liquidity risk

Liquidity risk is the risk that the Company will face in meeting its obligations associated with its financial liabilities. The Company''s approach to managing liquidity is to ensure that it will have sufficient funds to meet its liabilities when due without incurring unacceptable losses. In doing this, management considers both normal and stressed conditions.

The following table shows the maturity analysis of the Company''s financial liabilities based on contractually agreed undiscounted cash flows as at the Balance Sheet date.

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 risk comprises three types of risk: interest rate risk, currency risk and other price risk, such as equity price risk. Financial instruments affected by market risk include loans and borrowings, deposits, FVTOCI & FVTPL investments.

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 trade receivables) and from its financing activities, including deposits with banks and other financial instruments.

Trade Receivables

Customer credit risk is managed by each business unit subject to the Company established policy, procedures and control relating to customer credit risk management. To manage trade receivable, the Company periodically assesses the financial reliability of customers, taking into account the financial conditions, economic trends, analysis of historical bad debts and aging of such receivables.

The maximum exposure to credit risk at the reporting date is the carrying value of each class of financial assets disclosed in Note 15. The Company does not hold collateral as security. The Company evaluates the concentration of risk with respect to trade receivables as low, as its customers are located in several jurisdictions and industries and operate in largely independent markets.

Financial instruments and cash deposits

Credit risk from balances with banks and financial institutions is managed by the management in accordance with the Company''s policy. Counterparty credit limits are reviewed by the management on an annual basis, and may be updated throughout the year. The limits are set to minimise the concentration of risks and therefore mitigate financial loss through counterparty''s potential failure to make payments.

None of the Company''s financial assets are either impaired or past due, and there were no indications that defaults in payment obligations would occur.

Capital management

Capital includes issued equity capital and share premium and all other equity reserves attributable to the equity holders. The primary objective of the Company''s capital management is to maximise the shareholder value. The following table provides detail of the debt and equity at the end of the reporting period:

60. FOREIGN CURRENCY EXPOSURE

a) The Company undertakes transactions denominated in foreign currencies; consequently, exposures to exchange rate fluctuations will arise.

The Company uses foreign currency forward contracts to hedge its risks associated with foreign currency fluctuations relating to certain firm commitments and forecasted transactions. The use of foreign currency forward contracts is governed by the Company''s strategy, which provides principles on the use of such forward contracts consistent with Company''s Risk Management Policy. The Company does not use forward contracts for speculative purposes.

b) The carrying amounts of the Company''s foreign currency denominated monetary assets and monetary liabilities at the end of the reporting period are as follows:

62. RECENT INDIAN ACCOUNTING STANDARDS (IND AS)

The MCA has notified the Companies (Indian Accounting Standards) Amendment Rules, 2023 on March 31, 2023, whereby the amendments to various Indian Accounting Standards (Ind AS) has been made applicable with effect from April 1,2023 onwards. Amended requirements as per these rules in relation to various Standards are as follows:

Ind AS 1 - Presentation of Financial Statements: The amendments require companies to disclose their material accounting policies rather than their significant accounting policies. The Company has evaluated the requirements of the amendment and its impact on Financial Statements is not likely to be material.

Ind AS 8 - Accounting Policies, Changes in Accounting Estimates and Errors: The definition of a change in accounting estimates has been replaced with a definition of accounting estimates. The amendments will help entities to distinguish between accounting policies and accounting estimates. The Company has evaluated the requirements of the amendment and there is no impact on its Financial Statements.

I nd AS 12 - Income Taxes: The amendments narrowed the scope of the recognition exemption so that it no longer applies to transactions that, on initial recognition, give rise to equal taxable and deductible temporary differences. The Company has evaluated the requirements of the amendment and there is no impact on its Financial Statements.

Amendments to other Indian Accounting Standards viz. Ind AS 101- First-time Adoption of Indian Accounting Standards, Ind AS 102 - Share Based Payments, Ind AS 103- Business Combinations, Ind AS 107- Financial Instruments - Disclosures, Ind AS 109 - Financial Instruments, and Ind AS 34 Interim Financial Reporting are either consequential to above amendments or clerical in nature. The Company has evaluated the requirements of the amendments and there is no impact on its Financial Statements.

63. OTHER STATUTORY INFORMATION:

i) The Company does not have any benami property, where any proceeding has been initiated or pending against the Company for holding any benami property.

ii) The Company has not traded or invested in Crypto currency or Virtual Currency during the financial year.

iii) The Company has not advanced or loaned or invested funds to any other person(s) or entity(ies), including foreign entities (intermediaries) with the understanding that the intermediary shall:

(a) directly or indirectly lend or invest in other persons or entities identified in any manner whatsoever by or on behalf of the company (ultimate beneficiaries) or

(b) provide any guarantee, security or the like to or on behalf of the ultimate beneficiaries

iv) The Company has not received any fund from any person(s) or entity(ies), including foreign entities (funding party) with the understanding (whether recorded in writing or otherwise) that the company shall:

(a) 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

(b) provide any guarantee, security or the like on behalf of the ultimate beneficiaries.

v) The Company does not have any such transactions which are not recorded in the books of accounts that has been surrendered or disclosed as income during the year in the tax assessments under the Income Tax Act, 1961 (such as, search or survey or any other relevant provisions of the Income Tax Act, 1961).

vi) The Company has complied with the number of layers prescribed under clause (87) of section 2 of the Companies Act 2013 read with the Companies (restriction on number of layers) Rules, 2017.

vii) The Company is not declared wilful defaulter by bank or financial institution or lender during the year.

viii) The Company does not have any charges or satisfaction which is yet to be registered with ROC beyond the statutory period.

ix) The Company has used the borrowings from banks and financial institutions for the specific purpose for which it was obtained.

64. Figures for the previous year has been regrouped/rearranged wherever necessary to confirm current year classification / presentation.


Mar 31, 2022

2. The Company had been approved capital subsidy for investment in its newly manufacturing plant setup at Plot No. S-9, E-City, Rangareddy, Telangana under Modified Special Incentive Package Scheme (MSIPS) by the Ministry of Electronics and Information Technology Department vide Approval letter No. 27(69)/2017-IPHW dated May 29, 2018. The Company is in the process of submitting its disbursement claims before the competent authority for sanctioning and in the absence of reasonable certainty that the claim will be received, the same has not been accounted for.

3. The Company has been sanctioned capital subsidy under the Incentive scheme of Industries and Commerce Department (IP&INF), Government of Telangana for its newly manufacturing plant setup at Plot No S-9, E-City, Rangareddy, Telangana. The subsidy includes capital subsidy of '' 30 crores, interest subsidy of '' 2.63 crores, power subsidy of '' 1 crore and stamp duty reimbursement of '' 0.36 crores.

The Company has adjusted capital subsidy (including stamp duty reimbursement) aggregating to '' 30.36 crores against the related Property, Plant and Equipment and power and interest subsidy (including interest up to March 31, 2022) aggregating to '' 15.20 crores has been recognized under the head ''Other Income'' in the Statement of Profit and Loss.

4. Refer Note 23 and 25 for details of assets pledged.

15.2 The credit period towards trade receivables related to turnkey projects generally ranges between down to achievement of specified milestones ( execution based ) and average project execution cycle is around 6 to 18 months. General payment terms include process time with the respective customers ranging between 60 to 90 days from the date of invoices / achievement of specified milestones.

15.3 In determining the allowance for trade receivables the Company has used practical expedients based on financial condition of the customers, ageing of the customer receivables & over-dues, availability of collaterals and historical experience of collections from customers. The concentration of risk with respect to trade receivables is reasonably low as most of the customers are Government and large Corporate organisations though there may be normal delays in collections.

15.4 Above balance of trade receivable include recoverable form related party (refer note 51).

* The Board of Directors of the Company has approved allotment of 4,934,300 equity shares of face value of '' 1/- each at applicable grant price to HFCL Employee''s Trust under HFCL Employee''s Long Term Incentive Plan 2017. Upon allotment of these equity shares, the paid up equity share capital of the Company had increased from '' 128.44 crore (Rupees One Hundred Twenty Eight Crore Forty Four Lakh Only) comprising of 1,284,377,494 equity shares of the face value of '' 1/- each to '' 128.93 crore (Rupees One Hundred Twenty Eight Crore Ninety Three Lakh Only) comprising of 1,289,311,494 equity shares of the face value of '' 1/- each.

** On December 10, 2021, the Company through Qualified Institutions Placement (QIP) allotted 87,272,727 equity shares to the eligible Qualified Institutional Buyers (QIB) at a price of '' 68.75 per equity share of '' 1 face value (inclusive of premium of '' 67.75 per share) aggregating to approximately '' 600.00 Crore. The issue was made in accordance with the SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2018. Funds received in the QIP of equity shares have been utilised for the purpose mentioned in the objects of the issue in the offer document.

(v) Terms/right attached to Equity/Preference Shares

The Company has issued equity share of '' 1/- each. On a show of hands, every holder of equity shares is entitled for one vote and upon a poll shall have voting rights in proportion to the shares of the paid up equity capital of the Company held by them. In the event of liquidation of the Company, the holders of equity shares will be entitled to receive remaining assets of the Company, after distribution of all preferential amount in proportion to their shareholdings.

(vi) Shares reserved for issue under options

Information related to Employee Stock Option Plan, including details of options issued, exercised, expired and forfeited during the previous financial year and options outstanding at the end of the reporting period, is set out in note 56.

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

b. The Company had issued redeemable non-convertible debentures and created Debenture Redemption Reserve (DRR) out of the profits of the Company in terms of the Companies (Share capital and Debenture) Rules, 2014 (as amended). The Company was required to maintain a DRR of 25% of the value of debentures issued, either by a public issue or on a private placement basis. The amounts credited to the DRR may not be utilised by the Company except to redeem debentures.

c. Capital Redemption reserve is created to the extent of Preference Share Capital redeemed i.e. 80,50,000 (previous year 80,50,000) CRPSs of '' 100/- each

d. Employee share based payment reserve is created as required by Ind AS 102 ''Share Based Payments'' on the Employee Stock Option Scheme operated by the Company for employees of the Group. (refer note no. 56)

a) Company had issued 3,372,750 10.30% secured unlisted Non-Convertible Redeemable Debenture (NCDs) of '' 100/- each aggregating '' 33.73 crore by way of conversion of outstanding right of recompense amount payable by the Company. NCDs are secured by way of first pari-passu charge on movable & immovable fixed assets of Company with existing term loans and redeemable at face value in instalment in the ratio of 33.33%, 33.33% and 33.33% at the end of 30th September, 2019 (FY 2019-20), 2020 (FY 2020-21), 2021(FY 2021-22) respectively. All the instalments of 3,372,750 NCDs have been redeemed on time.

b) Term Loan of '' Nil (Previous year '' 25.00 crore) from one of the bank are secured by pari-passu first charge on all the Fixed Assets, both present and future, by way of equitable mortgage. Further, loan is secured by way of pari passu second charge on the Current Assets of the Company.

c) Term Loan of '' 108.94 crore (Previous year '' 124.41 crore) from the Banks are secured by pari-passu first charge on entire Optical Fibre Project Assets at Hyderabad (Unit-1), both present and future, by way of equitable mortgage. The loan is further secured by personal guarantee of Managing Director of the Company and Corporate Guarantee of M/s MN Ventures Pvt. Ltd. Repayment of this term loan would be made in 28 structured quarterly instalments over a period of 7 years commencing after moratorium period i.e. 12 months after date of commencement of the project.

d) Term Loan of '' 13.34 crore (Previous year '' Nil) as disbursed against sanctioned of '' 48.00 crore from the Bank, are secured by exclusive first charge on entire Optical Fibre Cable Project Assets at Hyderabad (Unit-2), both present and future, by way of equitable mortgage except land which is pari-passu charge with the lenders of Unit 1. The loan is further secured by personal guarantee of Managing Director of the Company and Corporate Guarantee of M/s MN Ventures Pvt. Ltd. Repayment of this term loan would be made in 28 structured quarterly instalments over a period of 7 years commencing after moratorium period i.e. 12 months after date of commencement of the project.

e) Working Capital Facilities (COVID-19 Emergency Credit line) of '' 0.86 crore ( Previous year '' 19.24 crore) and FITL under COVID-19 scheme of '' Nil (Previous year '' 0.65 crore) are secured on pari passu basis by way of hypothecation of stocks of raw materials, finished and semi- finished goods, stores and spares, book debts etc. as well as by way of second charge on immovable properties except Hyderabad units of the Company and are also personally guaranteed by Managing Director of the Company and further secured by way of corporate guarantee of M/s MN Ventures Pvt. Ltd.

f) Other Vehicle Loans of '' 3.08 crore (Previous Year '' 2.35 crore) from banks and others are secured by way of hypothecation of respective vehicle.

* a) Working Capital Loans from banks aggregating to '' 218.81crore (Previous year: '' 222.52 crore ) are secured on pari passu basis by way of hypothecation

of stocks of raw materials, finished and semi- finished goods, stores and spares, book debts etc. as well as by way of first charge on immovable properties pertaining to Wireline, Wireless and Cable divisions of the Company and are also personally guaranteed by Managing Director of the Company and further secured by way of corporate guarantee of M/s MN Ventures Pvt. Ltd.

b) Working Capital Loans from Banks aggregating to '' Nil (Previous year: '' 49.14 crore) and Inland bills discounting limit of '' Nil (Previous year '' 49.81 crore) are secured by way of first pari passu charge on all current assets, movable & immovable fixed assets (both present & future) of GIS based Optical Fibre Network Management System (GOFNMS) Project. The loan is further secured by second pari passu charge on movable & immovable fixed assets, personal guarantee by Managing Director of the Company, corporate guarantee of M/s MN Ventures Pvt. Ltd. and Nextwave Communications Pvt. Ltd., first pari passu charge of cash flows of the project for working capital consortium.

c) Working Capital Loans from Banks aggregating to '' 73.37 crore (Previous year: '' 70.80 crore) are secured by way of first pari passu charge on all current assets, movable & immovable fixed assets (both present & future) of IPMPLS back bone Project for Network for Spectrum (NFS). The loan is further secured by second pari passu charge on movable & immovable fixed assets, personal guarantee by Managing Director of the Company, corporate guarantee of M/s MN Ventures Pvt. Ltd., first pari passu charge of cash flows of the project for working capital consortium.

d) Quarterly returns/statements of current assets filed by the Company with banks are in agreement with the books of accounts.

# Inter Corporate Deposits are having a maturity of less than one year and carry interest rate 9% to 15%.

i) While disclosing the aggregate amount of transaction price yet to be recognised as revenue towards unsatisfied (or partially satisfied) performance obligations, along with the broad time band for the expected time to recognize those revenues, the Company has applied the practical expedient in Ind AS 115.

ii) Unsatisfied (or partially satisfied) performance obligations are subject to variability due to several factors such as terminations, changes in scope of contracts, periodic revalidations of the estimates, economic factors (changes in currency rates, tax laws etc.). The aggregate value of transaction price allocated to unsatisfied (or partially satisfied) performance obligations is '' Nil (Previous year '' 30.11 crore) which is expected to be recognised as revenue in the next year.

Revenues in excess of invoicing are classified as contract assets (which can also be referred to as unbilled revenue) while invoicing in excess of revenues are classified as contract liabilities (which can also be referred to as unearned revenues). The contract assets are transferred to receivables when the rights become unconditional. This usually occurs when the Company issues an invoice to the Customer.

iv) The Company has evaluated the impact of COVID-19 resulting from (i) the possibility of constraints to render supply & services which may require revision of estimations of costs to complete the contracts because of additional efforts; (ii) onerous obligations; (iii) penalties relating to breaches of service level agreements, and (iv) termination or deferment of contracts by customers. The Company has concluded that the impact of COVID-19 is not material based on these estimates. Due to the nature of the pandemic, the Company will continue to monitor developments to identify significant uncertainties relating to revenue in future periods.

40. Critical accounting estimates and judgments

The preparation of financial statements requires the use of accounting estimates which, by definition, will seldom equal the actual results. This note provides an overview of the areas that involved a higher degree of judgment or complexity, and of items which are more likely to be materially adjusted due to estimates and assumptions turning out to be different than those originally assessed. Detailed information about each of these estimates and judgments is included in relevant notes together with information about the basis of calculation for each affected line item in the financial statements.

The following are the key assumptions concerning the future, and other key sources of estimation uncertainty at the end of the reporting period that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year.

1. Useful lives of property, plant and equipment and Intangible Assets

Property, plant and equipment represent a significant proportion of the asset base of the Company. 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.

The useful lives and residual values of Company''s assets are determined by management at the time the asset is acquired. 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.

2. Recoverability of intangible asset and intangible assets under development

Capitalization of cost in intangible assets under development is based on management''s judgement that technological and economic feasibility is confirmed and asset under development will generate economic

benefits in future. Based on evaluations carried out, the management has determined that there are no factors which indicates that these assets have suffered any impairment loss.

3. Employee benefits

Defined benefit plans and other long-term benefits are evaluated with reference to uncertain events and based upon actuarial assumptions including among others discount rates, expected rates of return on plan assets, expected rates of salary increases, estimated retirement dates, mortality rates. The significant assumptions used to account for Employee benefits are described in Note 45.

4. Revenue Recognition

The Company assesses the services promised in a contract and identifies distinct performance obligations in the contract. Judgement is also required to determine the transaction price for the contract. The Company allocates the elements of variable considerations to all the performance obligations of the contract unless there is observable evidence that they pertain to one or more distinct performance obligations. 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 indicators such as how customer consumes benefits. Provisions for estimated losses, if any, on uncompleted contracts are recorded in the period in which such losses become probable based on the estimated efforts or costs to complete the contract.

5. Leases

The Company evaluates if an arrangement qualifies to be a lease as per the requirements of Ind AS 116. Identification of a lease requires significant judgment. The Company uses significant judgement in assessing the lease term (including anticipated renewals) and the

applicable discount rate. The discount rate is generally based on the incremental borrowing rate specific to the lease being evaluated or for a portfolio of leases with similar characteristics.

6. Loss allowance for receivables and unbilled revenues

The Company determines the allowance for credit losses based on historical loss experience adjusted to reflect current and estimated future economic conditions. The Company considered current and anticipated future economic conditions relating to industries the company deals with and the countries where it operates. In calculating expected credit loss, the Company has also considered credit reports and other related credit information for its customers to estimate the probability of default in future and has taken into account estimates of possible effect from the pandemic relating to COVID-19.

7. Taxes

Deferred tax assets are recognized for unused tax credits to the extent that it is probable that taxable profit will be available against which the losses can be utilized. Significant management judgment is required to determine the amount of deferred tax assets that can be recognized, based upon the likely timing and the level of future taxable profits together with future tax planning strategies.

8. Contingencies

On an ongoing basis, Company reviews pending cases, claims by third parties and other contingencies and obligations. Obligations relating to Project Executions is largely depends upon performance of services by respective contractors. For contingent losses that are considered probable, an estimated loss is recorded as an accrual in financial statements. Loss contingencies that are considered possible are not provided for but disclosed as Contingent liabilities in the financial statements. Contingencies the likelihood of which is remote are not disclosed in the financial statements. Gain contingencies are not recognised until the contingency has been resolved and amounts are received or receivable.

9. Fair Value of Unquoted equity investments

In order to arrive at the fair value of unquoted investments (other than subsidiaries and associates), the Company obtains independent valuations. The techniques used by the valuer is Asset approach - Net assets value method and Income approach - discounted cash flow method. The Company reviews its carrying value of investments carried at cost (net of impairment, if any) annually, or more frequently when there is indication for impairment. If the recoverable amount is less than its carrying amount, the impairment loss is accounted for in the statement of profit and loss.

41. Impact and future uncertainties relating to Global health pandemic from COVID-19

The Company has considered the possible effects that may result from the pandemic relating to COVID-19 in the preparation of the financial statements including there coverability of carrying amounts of financial and non financial assets. Further the impact assessment does not indicate any adverse impact on the ability of the company to continue as a going concern. In developing the assumptions relating to the possible future uncertainties in the global economic conditions because of this pandemic, the Company has, at the date of approval of the financial statements, used internal and external sources of information including credit reports and related information and economic forecasts and expects that the carrying amount of the assets will be recovered. The impact of COVID-19 on the Company''s financial statements may differ from that estimated as at the date of approval of these financial statements.

42. Dividend Distribution made and proposed

The amount of dividend recognized as distributions to equity shareholders during the year ended March 31, 2022 is @ 15 %, i.e. '' 0.15/- per equity share of face value of '' 1/- each (Previous Year '' Nil). The Board of Directors at its meeting held on May

10, 2021 had recommended such dividend of 15% for the financial year ended March 31, 2021 which was approved by the shareholders at the Annual General Meeting held on September 30, 2021. The aforesaid dividend was paid during the year ended March 31,2022.

The Board of Directors have recommended a dividend of 18% (i.e. '' 0.18/- per equity share of face value of '' 1/- each) for the financial year ended March 31, 2022 which is subject to the approval of shareholders at the Annual General Meeting.

Interest on lease liabilities is '' 2.72 crore and '' 2.41 crore for the year ended March 31, 2022 and March 31, 2021 respectively.

Lease contracts entered by the Company majorly pertains for buildings taken on lease to conduct its business in the ordinary course. The

Company does not have any lease restrictions and commitment towards variable rent as per the contract. The leases that the Company

has entered with lessors towards properties used as warehouses/offices are long term in nature.

44. Business Combination

(i) During the year the Company has acquired voting right of 50% in Nimpaa Telecommunications Pvt. Ltd. (Nimpaa), having its registered office at No. 16/38, Maharaja Surya Road, Teynampet, Chennai - 600018, Tamilnadu, at a total consideration of '' 1.00 crore thereby making it a Jointly Controlled Entity of the Company w.e.f. June 14, 2021. Nimpaa is engaged in the business of manufacture of equipment, component, accessories and cables for telecommunication systems, networks.

(ii) During the year the Company has also acquired voting rights of 50% in BigCat Wireless Pvt. Ltd., having its registered office at New No. 21, Old No. 9, Flat C2, Dwarka Apartments, 1st Avenue, Shastri Nagar, Chennai - 600020, Tamilnadu, at a total consideration of '' 8.50 crore, thereby making it a Jointly Controlled Entity of the Company w.e.f. Nov 12, 2021. BigCat Wireless Pvt. Ltd. is engaged in the development of software and hardware products for wireless networking and other related technical, research and development activities.

45. During the year, Company has recognised the following amounts in the financial statements as per Ind AS - 19 "Employees Benefits" as specified in the Companies (Indian Accounting Standards) Rules, 2015:

(b) Defined Benefit Plan

The employees'' gratuity fund scheme is managed by HDFC Standard Life Insurance Company Limited which is a defined benefit plan. The present value of obligation is determined based on actuarial valuation using the Projected Unit Credit Method, which recognises each period of service as giving rise to additional unit of employee benefit entitlement and measures each unit separately to build up the final obligation and the obligation for leave encashment is recognised in the same manner as gratuity.

47. Commitments and Contingencies

(a) Contingent Liabilities not provided for in respect of :

'' in crore

Particulars

As at

March 31, 2022

As at March 31, 2021

(i) Unexpired Letters of Credit (margin money paid '' 72.89 crore; Previous year '' 56.06 crore)

466.20

364.87

(ii) Guarantees given by banks on behalf of the Company (margin money kept by way of fixed deposits of '' 132.14 crore; Previous year ''145.69 crore)

868.37

777.21

(iii) Claims against the Company towards sales tax, income tax and others in dispute not acknowledged as debt (deposited under protest '' 3.87 crore, Previous Year '' 3.87 crore shown as recoverable advance)

30.87

17.41

Notes:

(i) The Company''s pending litigations comprise of claims against the Company and proceedings pending with Tax Authorities. The Company has reviewed all its pending litigations and proceedings and has made adequate provisions, wherever required and disclosed the contingent liabilities, wherever applicable, in its financial statements. The Company does not expect the outcome of these proceedings to have a material impact on its financial position.

(ii) The Company periodically reviews all its long term contracts to assess for any material foreseeable losses. Based on such review wherever applicable, the Company has made adequate provisions for these long term contracts in the books of account as required under any applicable law/accounting standard.

(iii) The Company has provided guarantees to third parties on behalf of subsidiary and associates. The Company does not expect any outflow of resources in respect of such guarantees.

(iv) There is uncertainty and ambiguity in interpreting and giving effect to the guidelines of Hon. Supreme Court vide its ruling in February 2019, in relation to the scope of compensation on which the organization and its employees are to contribute towards Provident Fund. The Company will evaluate its position and act, as clarity emerges.

(v) 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 in to effect has not been notified. The Company will assess the impact of the Code when it comes into effect and will record any related impact in the period when the Code becomes effective.

(vi) As at March 31, 2022 the Company has outstanding term derivative contracts as referred in Note 59.

(vii) There has been no delay in transferring amounts, required to be transferred if any, to the Investor Education and Protection Fund by the Company.

(viii) Claim made by one of the corporate on misleading information given by it for registration of impugned Patent. Impact on the sales of optical Fibre cable covered under alleged Patent No. 335369 is insignificant to the Company''s total sales of optical Fibre cables. Currently, purchase orders for such cables are just less than 0.75% of the total order book.

48. The HTL Ltd. ("Subsidiary Company") had proposed for a right issue of equity shares for '' 120.00 crore in the ratio of equity shares holding i.e. 26% by GOI and 74% by the HFCL Limited (HFCL). It was proposed that the right issue be funded by way of conversion of outstanding loans and advances extended by the HFCL. However, the proposal for loan conversion has not been agreed upon by the Competent Authority of GOI as communicated vide file no 20-71/2015-FAC.II dated January 27, 2022.

The Subsidiary Company has now proposed for allotment of 8% redeemable and non-convertible preference capital of '' 100.00 crore by way of conversion of outstanding loan and advances extended by HFCL Limited. The Subsidiary Company has submitted the proposal before the Department of Telecommunications (DoT) vide letter dated March 22, 2022 for seeking their administrative approval for the proposal so that the required formalities under the Companies Act can be taken up accordingly. In view of this, entire advances & loans receivable from HTL Ltd. have been classified under Non-Current Assets in the financial statements. (Refer Note 9 and 10).

49. In the opinion of the Board, all assets other than fixed assets and non-current investments, have a realisable value in the ordinary course of business which is not significantly differ from the amount at which it is stated.

Balances of various trade payables, trade receivables, loans and advances, security deposits and other parties are subject to confirmation/reconciliation and consequential adjustments, if any. In the opinion of the management, such adjustments, if any, will not have a material impact on the Financial Statements.

50. In view of the limited scale of operations at the Company''s Solan (Himachal Pradesh) Facilities and as a step towards cost optimization, the Board in its meeting held on January 20, 2020, had decided to shift the Plant and Machinery of Solan Facilities and operations thereof to the Company''s Manufacturing Facility located in Hyderabad. Further, in order to ensure continuity of the job of the employees currently based at Solan, the Company also considered to offer the continued employment either at Hyderabad or at such other places where the project works are being got executed. The Company introduced a Voluntary Retirement Scheme (VRS) to those employees who are finding it difficult to relocate to Hyderabad/other locations. Consequently, VRS compensation paid during the previous year amounting to '' 4.13 crores has been disclosed as an exceptional item. Further, the management is also in the process of identifying prospective usages of its facilities at Solan post shifting of plant and machinery at its Hyderabad Plant.

52. Segment Reporting

The Company publishes the Standalone financial statements of the Company along with the consolidated financial statements. In accordance with Ind AS 108, Operating Segments, the Company has disclosed the segment information in the consolidated financial statements.

56. On October 15, 2018, pursuant to the approval by the shareholders, the Board has been authorized to introduce, offer, issue and allot share-based incentives to eligible employees of the Company and its subsidiaries under the Himachal Futuristic Communications Limited Employees'' Long Term Incentive Plan ("HFCL Plan 2017"). The maximum number of shares under the HFCL Plan 2017 shall not exceed 1,40,98,000 equity shares. Out of this, 70,49,000 equity shares will be issued against RSUs at par value and 70,49,000 equity shares will be issued against stock options at fair market price immediately prior to date of the grant i.e. '' 20.65 per share. The Employee can exercise the vested options/units with in the maximum exercise period which shall be 5 years from the vesting date. The Stock options so granted will be vest over a period of 3 years and 70% RSUs granted will be vest at the end of 3 years from the date of grant and remaining 30% RSUs shall be vest in the 4th year from the date of grant.

The RSUs granted under the HFCL Plan 2017 are forfeited due to non-achievement of defined annual performance parameters as determined by the Nomination, Remuneration and Compensation Committee in its meeting held on April 23, 2022 and accordingly as on March 31,2022 the share based payment reserve is adjusted. This cancellation/forfeiture of unvested options has resulted into a reversal of share based payment expense in the Standalone Statement of Profit and Loss for the year ended March 31, 2022.

In respect of Options granted under the Employee Stock Option Plan the accounting is done as per requirements of Ind AS 102. Consequently, The Statement of Profit and Loss includes net income of '' 8.26 crore (Previous Year: net expenses of '' 3.69 crore) being expenses on account of share based payments, after adjusting for reversals on account of options forfeited. The amount excludes charged to its subsidiary for options issued to its employees.

The Nomination, Remuneration and Compensation Committee (''Committee'') of the Board of Directors which comprises a majority of Independent Directors is responsible for administration and supervision of the Stock Option Plans.

The expected life of the RSU/ESOP is estimated based on the vesting term and contractual term of the RSU/ESOP, as well as expected exercise behaviour of the employee who receives the RSU/ESOP. Expected volatility during the expected term of the RSU/ESOP is based on historical volatility of the observed market prices of the Company''s publicly traded equity shares during a period equivalent to the expected term of the RSU/ESOP.

58. Financial Instruments and risk management

The Company''s principal financial liabilities, other than derivatives, comprise loans and borrowings, trade and other payables, lease liabilities and financial guarantee contracts. The main purpose of these financial liabilities is to finance the Company''s operations and to provide guarantees to support its operations. The Company''s principal financial assets include loans, cash and cash equivalents, trade and other receivables that derive directly from its operations.

The Company''s business activities expose it to a variety of financial risks, namely liquidity risk, market risks and credit risk. The management has the overall responsibility for the establishment and oversight of the Company''s risk management framework. The Company has constituted a Risk Management Committee, which is responsible for developing and monitoring the Company''s risk management policies. The Company''s risk management policies are established to identify and analyze the risks faced by the Company, to set appropriate risk limits and controls and to monitor risks and adherence to limits. Risk management policies and systems are reviewed regularly to reflect changes in market conditions and the Company''s activities.

Significant estimates

The fair value of financial instruments that are not traded in an active market is determined using valuation techniques. The Company uses its judgement to select a variety of methods and make assumptions that are mainly based on market conditions existing at the end of each reporting period.

58.2 Management of Financial Risk Liquidity risk

Liquidity risk is the risk that the Company will face in meeting its obligations associated with its financial liabilities. The Company''s approach to managing liquidity is to ensure that it will have sufficient funds to meet its liabilities when due without incurring unacceptable losses. In doing this, management considers both normal and stressed conditions.

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 risk comprises three types of risk: interest rate risk, currency risk and other price risk, such as equity price risk. Financial instruments affected by market risk include loans and borrowings, deposits, FVTOCI & FVTPL investments.

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 trade receivables) and from its financing activities, including deposits with banks and other financial instruments.

Trade Receivables

Customer credit risk is managed by each business unit subject to the Company established policy, procedures and control relating to customer credit risk management. To manage trade receivable, the Company periodically assesses the financial reliability of customers, taking into account the financial conditions, economic trends, analysis of historical bad debts and aging of such receivables.

The maximum exposure to credit risk at the reporting date is the carrying value of each class of financial assets disclosed in Note 15. The Company does not hold collateral as security. The Company evaluates the concentration of risk with respect to trade receivables as low, as its customers are located in several jurisdictions and industries and operate in largely independent markets.

Financial instruments and cash deposits

Credit risk from balances with banks and financial institutions is managed by the management in accordance with the Company''s policy. Counterparty credit limits are reviewed by the management on an annual basis, and may be updated throughout the year. The limits are set to minimise the concentration of risks and therefore mitigate financial loss through counterparty''s potential failure to make payments.

None of the Company''s financial assets are either impaired or past due, and there were no indications that defaults in payment obligations would occur.

59. Foreign Currency Exposure

(a) The Company undertakes transactions denominated in foreign currencies; consequently, exposures to exchange rate fluctuations will arise.

The Company uses foreign currency forward contracts to hedge its risks associated with foreign currency fluctuations relating to certain firm commitments and forecasted transactions. The use of foreign currency forward contracts is governed by the Company''s strategy, which provides principles on the use of such forward contracts consistent with Company''s Risk Management Policy. The Company does not use forward contracts for speculative purposes.

(b) The carrying amounts of the Company''s foreign currency denominated monetary assets and monetary liabilities at the end of the reporting period are as follows:

61. Recent Indian Accounting Standards (Ind AS)

party) with the understanding (whether recorded in writing or otherwise) that the company shall:

(a) 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

(b) provide any guarantee, security or the like on behalf of the ultimate beneficiaries.

(v) The Company does not have any such transactions which are not recorded in the books of accounts that has been surrendered or disclosed as income during the year in the tax assessments under the Income Tax Act, 1961 (such as, search or survey or any other relevant provisions of the Income Tax Act, 1961).

(vi) The Company has complied with the number of layers prescribed under clause (87) of section 2 of the Companies Act 2013 read with the Companies (restriction on number of layers) Rules, 2017.

(vii) The Company is not declared wilful defaulter by bank or financial institution or lender during the year.

(viii) The Company does not have any charges or satisfaction which is yet to be registered with ROC beyond the statutory period.

(ix) The Company has used the borrowings from banks and financial institutions for the specific purpose for which it was obtained.

63. Figures for the previous year has been regrouped/

rearranged wherever necessary to confirm current year

classification/presentation.

Ministry of Corporate Affairs ("MCA") notifies new standard or amendments to the existing standards under Companies (Indian Accounting Standards) Rules as issued from time to time. On March 23, 2022, MCA amended the Companies (Indian Accounting Standards) Amendment Rules, 2022, applicable from April 1, 2022, are Ind AS 103 - Reference to Conceptual Framework, Ind AS 16 - Proceeds before intended use, Ind AS 37 - Onerous Contracts -Costs of Fulfilling a Contract, Ind AS 109 - Annual Improvements to Ind AS (2021) and Ind AS 106 - Annual Improvements to Ind AS (2021). The Company does not expect the amendment to have any significant impact in its financial statements.

62. Other statutory information:

(i) The Company does not have any benami property, where any proceeding has been initiated or pending against the Company for holding any benami property.

(ii) The Company has not traded or invested in Crypto currency or Virtual Currency during the financial year.

(iii) The Company has not advanced or loaned or invested funds to any other person(s) or entity(ies), including foreign entities (intermediaries) with the understanding that the intermediary shall:

(a) directly or indirectly lend or invest in other persons or entities identified in any manner whatsoever by or on behalf of the company (ultimate beneficiaries) or

(b) provide any guarantee, security or the like to or on behalf of the ultimate beneficiaries

(iv) The Company has not received any fund from any person(s) or entity(ies), including foreign entities (funding


Mar 31, 2021

15.1 The credit period towards trade receivables related to turnkey projects generally ranges between down to achievement of specified milestones (execution based ) and average project execution cycle is around 6 to 18 months. General payment terms include process time with the respective customers ranging between 30 to 60 days from the date of invoices / achievement of specified milestones .

15.2 In determining the allowance for trade receivables the Company has used practical expedients based on financial condition of the customers, ageing of the customer receivables & over-dues, availability of collaterals and historical experience of collections from customers. The concentration of risk with respect to trade receivables is reasonably low as most of the customers are Government and large Corporate organisations though there may be normal delays in collections.

* The Allotment Committee (Warrants) of the Board of Directors of the Company at its meetings held on 05th November, 2018, 29th March, 2019, 09th April, 2019 and 29th April, 2019 had made allotment of 75,00,000 & 2,75,00,000, 52,08,333 and 47,91,667 equity shares of the face value of Re.1/- each at a premium of ''15 per equity share respectively to the warrant holders consequent upon exercise of their rights for conversion of warrants into equity shares. Upon allotment of these equity shares, the paid up equity share capital of the Company had increased from ''123.94 Crore (Rupees One Hundred Twenty Three Crore Ninety Three Four Lakh Only) comprising of 1,23,93,77,194 equity shares of the face value of Re.1/- each to ''128.44 Crore (Rupees One Hundred Twenty Eight Crore Forty Four Lakh Only) comprising of 1,28,43,77,194 equity shares of the face value of Re.1/- each.

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

b. The Company had issued redeemable non-convertible debentures and created Debenture Redemption Reserve (DRR) out of the profits of the Company in terms of the Companies (Share capital and Debenture) Rules, 2014 (as amended). The Company is required to maintain a DRR of 25% of the value of debentures issued, either by a public issue or on a private placement basis. The amounts credited to the DRR may not be utilised by the Company except to redeem debentures.

c. Capital Redemption reserve is created to the extent of Preference Share Capital redeemed i.e. 80,50,000 (previous year 80,50,000) CRPSs of '' 100/- each

d. The fair value of the equity settled share based payment transactions with employees is recognised in Statement of Profit and Loss with corresponding credit to share based payment reserve. Further, equity settled share based payment transaction with employees of subsidiary is recognised in investment of subsidiaries with corresponding credit to Share based payment reserve. (Refer note 56).

a) Company had issued 33,72,750 10.30% secured unlisted Non- Convertible Redeemable Debenture (NCDs) of ''100/- each aggregating '' 33.73 crore by way of conversion of outstanding right of recompense amount payable by the Company. NCDs are secured by way of first pari-passu charge on movable & immovable fixed assets of Company with existing term loans and redeemable at face value in installment in the ratio of 33.33%, 33.33% and 33.33% at the end of 30th September, 2019 (FY 2019-20), 2020 (FY 2020-21), 2021(FY 2021-22) respectively. First & Second installment of 33.33% of each year being 22,48,444 NCDs have been redeemed on time.

b) Term Loan of ''25.00 crore (Previous year ''50.00 crore) from one of the bank are secured by pari-passu first charge on all the Fixed Assets, both present and future, by way of equitable mortgage. Further, loan is secured by way of pari passu second charge on the Current Assets of the Company.

c) Term Loan of ''124.41 crore (Previous year ''111.77 crore) from the Banks are secured by pari-passu first charge on entire Project Assets, both present and future, by way of equitable mortgage. The loan is further secured by personal guarantee of Managing Director of the Company and Corporate Guarantee of M/s MN Ventures Private Limited. Repayment of this term loan would be made in 28 structured quarterly incitements over a period of 7 years commencing after moratorium period i.e. 12 months after date of commencement of the project.

d) Working Capital Term loan (Covid -19 Emergency Credit line) of ''19.23 crore and FITL under Covid-19 scheme of '' 0.65 crore are secured on pari passu basis by way of hypothecation of stocks of raw materials, finished and semi- finished goods, stores and spares, book debts etc. as well as by way of second charge on immovable properties pertaining to Wireline, Wireless and Cable divisions of the Company and further secured by way of pledge of equity shares up to 51% (24,15,48,750 equity shares) of promoters and are also personally guaranteed by Managing Director of the Company and further secured by way of corporate guarantee of M/s MN Ventures Private Limited.

e) Other Vehicle Loans of ''2.35 crore (Previous Year ''2.99 crore) from banks and others are secured by way of hypothecation of respective assets.

* a) Working Capital Loans from banks aggregating to ''222.52 crore (Previous year: ''200.23 crore ) are secured on pari passu basis by way of

hypothecation of stocks of raw materials, finished and semi- finished goods, stores and spares, book debts etc. as well as by way of second charge on immovable properties pertaining to Wireline, Wireless and Cable divisions of the Company and further secured by way of pledge of equity shares up to 51% (24,15,48,750 equity shares) of promoters and are also personally guaranteed by Managing Director of the Company and further secured by way of corporate guarantee of M/s MN Ventures Private Limited.

b) Working Capital Loans from banks aggregating to '' 49.14 crore (Previous year: '' 49.83 crore) and Inland bills discounting limit of '' 49.81 crore (Previous year ''50.00 crore) are secured by way of first pari passu charge on all current assets, moveable & immoveable fixed assets (Present & future) of GIS based Optical Fiber Network Management System (GOFNMS) Project. The loan is further secured by second pari passu charge on moveable & immoveable fixed assets, personal guarantee by Managing Director of the Company, corporate guarantee of M/s MN Ventures Private Limited, first pari passu charge of cash flows of the project and first pari passu charge on shares pledged/earmarked for working capital consortium.

c) Working Capital Loans from banks aggregating to '' 70.80 crore (Previous year: ''NIL ) are secured by way of first pari passu charge on all current assets, moveable & immoveable fixed assets (Present & future) of IPMLS back bone Project for Network for Spectrum (NFS). The loan is further secured by second pari passu charge on moveable & immoveable fixed assets, personal guarantee by Managing Director of the Company, corporate guarantee of M/s MN Ventures Private Limited, first pari passu charge of cash flows of the project and first pari passu charge on shares pledged/earmarked for working capital consortium.

# Inter Corporate Deposits are having a maturity of less than one year and carry interest rate 12% to 16%.

40 Critical accounting estimates and judgments

The preparation of financial statements requires the use of accounting estimates which, by definition, will seldom equal the actual results. This note provides an overview of the areas that involved a higher degree of judgment or complexity, and of items which are more likely to be materially adjusted due to estimates and assumptions turning out to be different than those originally assessed. Detailed information about each of these estimates and judgments is included in relevant notes together with information about the basis of calculation for each affected line item in the financial statements.

The following are the key assumptions concerning the future, and other key sources of estimation uncertainty at the end of the reporting period that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year.

1. Useful lives of property, plant and equipment and Intangible Assets

Property, plant and equipment represent a significant proportion of the asset base of the Company. 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.

The useful lives and residual values of Company''s assets are determined by management at the time the asset is acquired. 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.

2. Recoverability of intangible asset and intangible assets under development

Capitalization of cost in intangible assets under development is based on management''s judgement that technological and economic feasibility is confirmed and asset under development will generate economic benefits in future. Based on evaluations carried out, the management has determined that there are no factors which indicates that these assets have suffered any impairment loss.

3. Employee benefits

Defined benefit plans and other long-term benefits are evaluated with reference to uncertain events and based upon actuarial assumptions including among others discount rates, expected rates of return on plan assets, expected rates of salary increases, estimated retirement dates, mortality rates. The significant assumptions used to account for Employee benefits are described in Note 45.

4. Revenue Recognition

The Company assesses the services promised in a contract and identifies distinct performance obligations in the contract. Judgement is also required to determine the transaction price for the contract. The Company allocates the elements of variable considerations to all the performance obligations of the contract unless there is observable evidence that they pertain to one or more distinct performance obligations. 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 indicators such as how customer consumes benefits. Provisions for estimated losses, if any, on uncompleted contracts are recorded in the period in which such losses become probable based on the estimated efforts or costs to complete the contract.

5. Leases

The Company evaluates if an arrangement qualifies to be a lease as per the requirements of Ind AS 116. Identification of a lease requires significant judgment. The Company uses significant judgement in assessing the lease term (including anticipated renewals) and the applicable discount rate. The discount rate is generally based on the incremental borrowing rate specific to the lease being evaluated or for a portfolio of leases with similar characteristics.

6. Loss allowance for receivables and unbilled revenues

The Company determines the allowance for credit losses based on historical loss experience adjusted to reflect current and estimated future economic conditions. The Company considered current and anticipated future economic conditions relating to industries the company deals with and the countries where it operates. In calculating expected credit loss, the Company has also considered credit reports and other related credit information for its customers to estimate the probability of default in future and has taken into account estimates of possible effect from the pandemic relating to COVID -19.

7. Taxes

Deferred tax assets are recognized for unused tax credits to the extent that it is probable that taxable profit will be available against which the losses can be utilized. Significant management judgment is required to determine the amount of deferred tax assets that can be recognized, based upon the likely timing and the level of future taxable profits together with future tax planning strategies.

8. Contingencies

On an ongoing basis, Company reviews pending cases, claims by third parties and other contingencies and obligations. Obligations relating to Project Executions is largely depends upon performance of services by respective contractors. For contingent losses that are considered probable, an estimated loss is recorded as an accrual in financial statements. Loss contingencies that are considered possible are not provided

for but disclosed as Contingent liabilities in the financial statements. Contingencies the likelihood of which is remote are not disclosed in the financial statements. Gain contingencies are not recognised until the contingency has been resolved and amounts are received or receivable.

9. Fair Value of Unquoted equity investments:

In order to arrive at the fair value of unquoted investments (other than subsidiaries and associates), the Company obtains independent valuations. The techniques used by the valuer is Asset approach - Net assets value method and Income approach- discounted cash flow method. The Company reviews its carrying value of investments carried at cost (net of impairment, if any) annually, or more frequently when there is indication for impairment. If the recoverable amount is less than its carrying amount, the impairment loss is accounted for in the statement of profit and loss.

41 Impact and future uncertainties relating to Global health pandemic from COVID-19

The Company has considered the possible effects that may result from the pandemic relating to COVID-19 in the preparation of the financial statements including there coverability of carrying amounts of financial and non financial assets. Further the impact assessment does not indicate any adverse impact on the ability of the company to continue as a going concern. In developing the assumptions relating to the possible future uncertainties in the global economic conditions because of this pandemic, the Company has, at the date of approval of the financial statements, used internal and external sources of information including credit reports and related information and economic forecasts and expects that the carrying amount of the assets will be recovered. The impact of COVID-19 on the Company''s financial statements may differ from that estimated as at the date of approval of these financial statements.

42 Change in Accounting Policy

Except for the changes below, the Company has consistently applied the accounting policies to all periods presented in these financial statements.

Ministry of Corporate Affairs ("MCA”) through Companies (Indian Accounting Standards) Amendment Rules, 2019 and Companies (Indian Accounting Standards) Second Amendment Rules, has notified Ind AS 116 Leases which replaces the existing lease standard, Ind AS 17 leases, and other interpretations. Ind AS 116 sets out the principles for the recognition, measurement, presentation and disclosure of leases for lessees. It introduces a single, on-balance sheet lease accounting model for lessees.

The Company has adopted Ind AS 116, effective annual reporting period beginning April 1, 2019 and applied the standard to its leases, retrospectively, with the cumulative effect of initially applying the Standard, recognised on the date of initial application (April 1,2019).

The total cash outflow for leases is '' 0.90 crore and '' 0.21 crore for the years ended March 31,2021 and March 31,2020, respectively, including cash outflow for short term and low value leases

Lease contracts entered by the Company majorly pertains for buildings taken on lease to conduct its business in the ordinary course. The Company does not have any lease restrictions and commitment towards variable rent as per the contract. The leases that the Company has entered with lessors towards properties used as ware houses/ offices are long term in nature and no changes in terms of those leases are expected due to the COVID-19.

44 Business Combination

(i) During the Previous Year, the Company acquired 90% (9,000 shares of face value of ''10/ each) of the equity share capital of M/s Raddef Pvt Ltd., a company dealing in components for the applications in defense, aerospace, meteorology and communication. This will help in exploring untapped growth in the Telecom and Defence Business verticals of the company. The business acquisition was undertaken by acquiring equity stake of 90% for cash consideration of ''90,000/-.

(ii) Company had entered into a Joint Venture Agreement dated October 18, 2010 with DragonWave Inc., Canada, and formed a joint venture entity under name DragonWave HFCL India Pvt Ltd. owned by DragonWave Pte. Ltd., Singapore (50.10%) (being controlled by DragonWave Inc., Canada) and HFCL Ltd. (49.90%). On December 17, 2019, the Company acquire balance 50.10% (comprising of 35,07,000 equity shares of face value '' 10/- each). The Company''s total holding along with the existing shares held has increased to 100%. The business acquisition was undertaken by entering into share purchase agreement for cash consideration of ''2.25 crore.

45 During the year, Company has recognised the following amounts in the financial statements as per Ind AS - 19 "Employees Benefits” as specified in the Companies (Indian Accounting Standards) Rules, 2015:

i) The Company''s pending litigations comprise of claims against the Company and proceedings pending with Tax Authorities. The Company has reviewed all its pending litigations and proceedings and has made adequate provisions, wherever required and disclosed the contingent liabilities, wherever applicable, in its financial statements. The Company does not expect the outcome of these proceedings to have a material impact on its financial position.

ii) The Company periodically reviews all its long term contracts to assess for any material foreseeable losses. Based on such review wherever applicable, the Company has made adequate provisions for these long term contracts in the books of account as required under any applicable law/accounting standard.

iii) The Company has provided guarantees to third parties on behalf of subsidiary and associates. The Company does not expect any outflow of resources in respect of such guarantees.

iv) There is uncertainty and ambiguity in interpreting and giving effect to the guidelines of Honorable Supreme Court vide its ruling in February 2019, in relation to the scope of compensation on which the organization and its employees are to contribute towards Provident Fund. The Company will evaluate its position and act, as clarity emerges.

v) 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 in to effect has not been notified. The Company will assess the impact of the Code when it comes into effect and will record any related impact in the period when the Code becomes effective.

vi) As at March 31,2021 the Company has outstanding term derivative contracts as referred in Note 58.

48 HTL Ltd., one of the Subsidiary of the Company, had proposed right issue of equity shares for '' 120.00 Crore to its existing shareholders i.e. GOI (26%) and the Company (74%). The Subsidiary Company is in the process of obtaining in principle concurrence from GOI for the proposed right issue of shares. Pending such formal concurrence, loan and advances given by the Company have been shown under Non-Current Financial Assets.

49 In the opinion of the Board, all assets other than fixed assets and non-current investments, have a realisable value in the ordinary course of business which is not significantly differ from the amount at which it is stated.

50 In view of the limited scale of operations at the Company''s Solan (Himachal Pradesh) Facilities and as a step towards cost optimization, the Board in its meeting held on January 20, 2020, had decided to shift the Plant and Machinery of Solan Facilities and operations thereof to the Company''s Manufacturing Facility located in Hyderabad. Further, in order to ensure continuity of the job of the employees currently based at Solan, the

Company also considered to offer the continued employment either at Hyderabad or at such other places where the project works are being got executed. The Company introduced a Voluntary Retirement Scheme (VRS) to those employees who are finding it difficult to relocate to Hyderabad/ other locations. Consequently, VRS compensation paid during the year amounting to ''4.13 crores has been disclosed as an exceptional item. Further, the management is also in the process of identifying prospective usages of its facilities at Solan post shifting of plant and machinery at its Hyderabad Plant.

54 Interest charges on loans is net of Interest income from loans and advances amounting to ''18.16 crore (Previous year ''21.37 crore ) .

55 Debt of the Company as restructured under Corporate Debt Restructuring (CDR) mechanism in financial year 2011-12 had been re-paid as per the approved Scheme, with improved performance, Company has also paid recompense amount of '' 148.47 crore as per exit term approved by CDR Empowered Group vide their order CDR(PMG) No.740/2015-16 dated March 22, 2016 on the recommendation of Monitoring Institution. CDR EG had given its approval for successful exit of the Company from CDR mechanism vide letter No. CDR(DAP) No.218/2017-18 dated 01.09.2017.

56 On October 15, 2018, pursuant to the approval by the shareholders, the Board has been authorized to introduce, offer, issue and allot share-based incentives to eligible employees of the Company and its subsidiaries under the Himachal Futuristic Communications Limited Employees'' Long Term Incentive Plan ("HFCL Plan 2017”). The maximum number of shares under the HFCL Plan 2017 shall not exceed 1,40,98,000 equity shares. Out of this, 70,49,000 equity shares will be issued against RSUs at par value and 70,49,000 equity shares will be issued against stock options at fair market price immediately prior to date of the grant i.e. ''20.65 per share. The Employee can exercise the vested options/units with in the maximum exercise period which shall be 5 years from the vesting date. The Stock options so granted will be vest over a period of 3 years and 70% RSUs granted will be vest at the end of 3 years from the date of grant and remaining 30% RSUs shall be vest in the 4th year from the date of grant.

The Nomination, Remuneration and Compensation Committee (''Committee'') of the Board of Directors which comprises a majority of Independent Directors is responsible for administration and supervision of the Stock Option Plans.

58 Financial Instruments and risk management

The Company''s principal financial liabilities, other than derivatives, comprise loans and borrowings, trade and other payables, lease liabilities and financial guarantee contracts. The main purpose of these financial liabilities is to finance the Company''s operations and to provide guarantees to support its operations. The Company''s principal financial assets include loans, cash and cash equivalents, trade and other receivables that derive directly from its operations.

The Company''s business activities expose it to a variety of financial risks, namely liquidity risk, market risks and credit risk. The management has the overall responsibility for the establishment and oversight of the Company''s risk management framework. The Company has constituted a Risk Management Committee, which is responsible for developing and monitoring the Company''s risk management policies. The Company''s risk management policies are established to identify and analyze the risks faced by the Company, to set appropriate risk limits and controls and to monitor risks and adherence to limits. Risk management policies and systems are reviewed regularly to reflect changes in market conditions and the Company''s activities.

Trade Receivables

Customer credit risk is managed by each business unit subject to the Company established policy, procedures and control relating to customer credit risk management. To manage trade receivable, the Company periodically assesses the financial reliability of customers, taking into account the financial conditions, economic trends, analysis of historical bad debts and aging of such receivables.

The maximum exposure to credit risk at the reporting date is the carrying value of each class of financial assets disclosed in Note 15. The Company does not hold collateral as security. The Company evaluates the concentration of risk with respect to trade receivables as low, as its customers are located in several jurisdictions and industries and operate in largely independent markets.

Financial instruments and cash deposits

Credit risk from balances with banks and financial institutions is managed by the management in accordance with the Company''s policy. Counterparty credit limits are reviewed by the management on an annual basis, and may be updated throughout the year. The limits are set to minimise the concentration of risks and therefore mitigate financial loss through counterparty''s potential failure to make payments.

None of the Company''s financial assets are either impaired or past due, and there were no indications that defaults in payment obligations would occur.

59 Foreign Currency Exposure

a) The Company undertakes transactions denominated in foreign currencies; consequently, exposures to exchange rate fluctuations will arise.

The Company uses foreign currency forward contracts to hedge its risks associated with foreign currency fluctuations relating to certain firm commitments and forecasted transactions. The use of foreign currency forward contracts is governed by the Company''s strategy, which provides principles on the use of such forward contracts consistent with Company''s Risk Management Policy. The Company does not use forward contracts for speculative purposes.

The carrying amounts of the Company''s foreign currency denominated monetary assets and monetary liabilities at the end of the reporting period are as follows:

61 Recent Indian Accounting Standards (Ind AS)

On March 24, 2021, the Ministry of Corporate Affairs ("MCA”) through a notification, amended Schedule III of the Companies Act, 2013. The amendments revise Division I, II and III of Schedule III and are applicable from April 1,2021. The amendments are extensive and the Company will evaluate the same to give effect to them as required by law.

62 Figures for the previous year has been regrouped/rearranged wherever necessary to confirm current year classification / presentation.

63 The Board has recommended a dividend @15% i.e. Re. 0.15 per equity share for the financial year ended 31st March, 2021 subject to the approval of shareholders at the ensuing Annual General Meeting (AGM) of the Company or other authorities wherever required. The dividend for the financial year ended 31st March, 2021, if any, declared at the ensuing AGM, will be paid to the Shareholders within 30 days from the date of declaration.


Mar 31, 2018

1. Corporate information

Himachal Futuristic Communications Limited (‘HFCL’ or ‘the Company’) is a public limited company domiciled and incorporated in India having its registered office at 8, Electronics Complex , Chambaghat, Solan, Himachal Pradesh-173213. The Company’s shares are listed and traded on Stock Exchanges in India. Established in 1987, HFCL is a diverse telecom infrastructure enabler with active interest spanning telecom infrastructure development, system integration, and manufacture and supply of high-end telecom equipment and Optic Fiber Cable (OFC).

The financial statements have been approved by the Board of Directors of the Company at its meeting held on May 03, 2018.

2 Deferred tax assets (net)

Deferred income tax reflect the net tax effects of temporary difference between the carrying amount of assets and liabilities for the financial reporting purposes and the amounts used for income tax purposes. Significant component of the Company’s net deferred income tax are as follows:-

3.1 The credit period towards trade receivables generally ranges between down to achievement of specified milestones ( execution based) and average project execution cycle is around 6 to 24 months. General payment terms include process time with the respective customers ranging between 30 to 60 days from the date of invoices / achievement of specified milestones.

3.2 In determining the allowance for trade receivables the Company has used practical expedients based on financial condition of the customers, ageing of the customer receivables and over-dues, availability of collaterals and historical experience of collections from customers. The concentration of risk with respect to trade receivables is reasonably low as most of the customers are Government and large Corporate organisations though there may be normal delays in collections.

(iv) Terms/right attached to Equity/Preference Shares -

The Company has issued equity share of Re.1/- each and preference share of Rs.100/- each. On a show of hands, every holder of equity shares is entitled for one vote and upon a poll shall have voting rights in proportion to the shares of the paid up capital of the Company held by them. Preference shareholders shall have voting right in proportion to the shares of the paid up capital provided if the dividend due on such capital or any part of such dividend has remained unpaid. In the event of liquidation of the Company, the holders of equity shares will be entitled to receive remaining assets of the Company, after distribution of all preferential amount in proportion to their shareholdings.

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

** The Company had issued redeemable non-convertible debentures and created Debenture Redemption Reserve (DRR) out of the profits of the Company in terms of the Companies (Share capital and Debenture) Rules, 2014 (as amended). The Company is required to maintain a DRR of 25% of the value of debentures issued, either by a public issue or on a private placement basis. The amounts credited to the DRR may not be utilised by the Company except to redeem debentures.

*** Capital Redemption reserve is created to the extent of Preference Share Capital redeemed (Rs.20.12 crore i.e. 25% of 80,50,000 CRPSs of Rs.100/- each)

**** During the year, Company has issued 4,50,00,000 Convertible Warrants on preferential basis with a right to Warrant Holders to apply for and get allotted one equity share of face value of Re. 1/- (Rupee One Only) each for each Warrant, within a period of 18 (Eighteen) months from the date of allotment of Warrants i.e. October 30, 2017, at a price of Rs.16/- each (Rupees Sixteen Only).

(a) 60,37,500 (Previous Year: 80,50,000) Cumulative Redeemable Preference Shares (CRPS) of Rs.100/- each aggregating to Rs.60.38 crore (Previous Year: Rs.80.50 crore) are redeemable at the rate of 25% and 75% of the face value in the financial years ending 31st March 2018 and 31st March, 2019, respectively. CRPS carry the coupon rate of 6.50% from new cut off date i.e. 1st January, 2011 as mentioned in the rework package approved by the CDR EG on 29.03.2011. However, dividend accrued on notional basis, as same has not been declared and fallen due for payment, and penal interest thereon, till the cut-off date, stands waived as per CDR rework package.

(b) During the year Company has allotted 423,000 (Previous Year: 29,49,750) 10.30% secured unlisted Non- Convertible Redeemable Debenture (NCDs) of Rs.100/- each aggregating Rs.4.23 crore (Previous Year : Rs.29.50 crore) by way of conversion of outstanding right of recompense amount payable by the Company. NCDs are secured by way of first pari-passu charge on movable & immovable fixed assets of Company with existing term loans and are redeemable at face value in installment in the ratio of 33.33%, 33.33% and 33.34% at the end of 30th September, 2019 (FY 2019-20), 2020 (FY 2020-21), 2021(FY 2021-22) respectively.

(c) Term Loan of Rs.103.32 crore (Previous year Rs.131.64 crore ) and Funded Interest Term Loan of Rs.6.31 crore (Previous year Rs.17.61 crore ) from one of the bank are secured by pari-passu first charge on all the Fixed Assets, both present and future, by way of equitable mortgage and first charge on the entire sales proceeds of the contracts covered under the aforesaid loan to be credited to the Escrow/designated account. Further, loan is secured by way of pari passu second charge on the Current Assets of the Company.

(d) Term Loan of Rs.4.67 crore (Previous year Rs.9.34 crore), Working Capital Term Loan of Rs.3.64 crore (Previous year Rs.7.28 crore) and Funded Interest Term Loan of Rs.10.34 crore (Previous year Rs.20.70 crore) from a bank are secured by way of pledge of shares and also secured on pari- passu basis by way of hypothecation of stocks of raw materials, finished and semi- finished goods, stores and spares, book debts etc. as well as by way of second charge on Fixed Assets pertaining to the Company.

(e) Working Capital Term Loans of Rs.5.01 crore (Previous year Rs.14.26 crore ) and Funded Interest Term Loans of Rs.6.93 crore (Previous year Rs.13.85 crore) from banks are secured on pari passu basis by way of hypothecation of stocks of raw materials, finished and semi- finished goods, stores and spares, book debts etc. as well as by way of second charge on Fixed Assets of the Company.

(f) Part of above Term Loans, Working Capital Term Loans and Funded Interest Term Loans from Banks amounting to Rs.52.71 crore (Previous year Rs.110.46 crore) are secured by pledge of equity shares up to 51% (241548750 equity shares) of new co-opted promoters and also personally guaranteed by Managing Director of the Company. Such loans are further secured by way of Corporate Guarantee of M/s MN Ventures Private Limited.

(g) Other Vehicle Loans of Rs.3.39 crore (Previous Year Rs.4 crore) from banks and others are secured by way of hypothecation of respective assets.

(h) Term and other Loans - Repayment schedule and rate of interest -

* Working Capital Loans from banks aggregating to Rs.115.27 crore (Previous year: Rs.114.64 crore) are secured on pari passu basis by way of hypothecation of stocks of raw materials, finished and semi- finished goods, stores and spares, book debts etc. as well as by way of second charge on immovable properties pertaining to Wireline, Wireless and Cable divisions of the Company and further secured by way of pledge of equity shares up to 51% (24,15,48,750 equity shares) of promoters and are also personally guaranteed by Managing Director of the Company and further secured by way of corporate guarantee of M/s MN Ventures Private Limited.

** Inter Corporate Deposits are having a maturity of less than one year and carry interest rate 12% to 16%.

4 Critical accounting estimates and judgments

The preparation of financial statements requires the use of accounting estimates which, by definition, will seldom equal the actual results. This note provides an overview of the areas that involved a higher degree of judgment or complexity, and of items which are more likely to be materially adjusted due to estimates and assumptions turning out to be different than those originally assessed. Detailed information about each of these estimates and judgments is included in relevant notes together with information about the basis of calculation for each affected line item in the financial statements.

The following are the key assumptions concerning the future, and other key sources of estimation uncertainty at the end of the reporting period that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year.

1. useful lives of property, plant and equipment and Intangible Assets

Property, plant and equipment represent a significant proportion of the asset base of the Company. 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.

The useful lives and residual values of Company’s assets are determined by management at the time the asset is acquired. 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.

2. Recoverability of intangible asset and intangible assets under development

Capitalization of cost in intangible assets under development is based on management’s judgement that technological and economic feasibility is confirmed and asset under development will generate economic benefits in future. Based on evaluations carried out, the management has determined that there are no factors which indicates that these assets have suffered any impairment loss.

3. Employee benefits

Defined benefit plans and other long-term benefits are evaluated with reference to uncertain events and based upon actuarial assumptions including among others discount rates, expected rates of return on plan assets, expected rates of salary increases, estimated retirement dates, mortality rates. The significant assumptions used to account for Employee benefits are described in Note 42.

4. Contingencies

On an ongoing basis, Company reviews pending cases, claims by third parties and other contingencies and obligations. Obligations relating to Project Executions is largely depends upon performance of services by respective contractors. For contingent losses that are considered probable, an estimated loss is recorded as an accrual in financial statements. Loss contingencies that are considered possible are not provided for but disclosed as Contingent liabilities in the financial statements. Contingencies the likelihood of which is remote are not disclosed in the financial statements. Gain contingencies are not recognized until the contingency has been resolved and amounts are received or receivable.

5. Fair Value of unquoted equity investments:

Fair value is derived on the basis of income approach, in this approach the discounted cash flow method is used to capture the present value of the expected future economic benefits to be derived from the ownership of these investments.

5 Business Combination

During the previous year Company had acquired 88.47% (1,60,000 shares) on 09-08-2016 and 6.00% (10,856 shares) on 31-03-2017, of the equity share capital of M/s Polixel Security Systems Pvt Ltd., a company engaged in safe & smart city business. The Company’s total holding along with the existing shares held increased to 100%. The business acquisition was conducted by entering into share purchase agreements for Cash consideration of Rs.11 crore and 0.75 crore respectively.

6 During the year, Company has recognized the following amounts in the financial statements as per Ind AS - 19 “Employees Benefits” as specified in the Companies (Indian Accounting Standards) Rules, 2015:

(a) Defined Contribution Plan

Contribution to Defined Contribution Plan, recognized are charged to Statement of Profit and Loss for the year as under :

(b) Defined Benefit Plan

The employees’ gratuity fund scheme is managed by HDFC Standard Life Insurance Company Limited which is a defined benefit plan. The present value of obligation is determined based on actuarial valuation using the Projected Unit Credit Method, which recognises each period of service as giving rise to additional unit of employee benefit entitlement and measures each unit separately to build up the final obligation and the obligation for leave encashment is recognized in the same manner as gratuity.

Note: The estimates of rate of escalation in salary considered in actuarial valuation, takes into account inflation, seniority, promotion and other relevant factors including supply and demand in the employment market. The above information is certified by the Actuary Valuer.

7 HTL Ltd., one of the Subsidiary of the Company, has proposed right issue of equity shares for Rs.120.00 Crore to its existing shareholders i.e. GOI (26%) and the Company (74%).The Subsidiary company is in the process of obtaining in principle concurrence from GOI for the proposed right issue of shares. Pending such formal concurrence, loan and advances given by the Company have been shown under Non-Current Financial Assets.

8 The Company had made payment of Rs.1.79 crore to the lenders of associate company towards Guarantee Obligation and considering non-recoverability, the amount has been charged to Statement of Profit and Loss as exceptional items.

9 In the opinion of the Board, all assets other than fixed assets and non-current investments, have a realisable value in the ordinary course of business which is not significantly differ from the amount at which it is stated.

10 Lease payments under non-cancellable operating leases have been recognized as an expense in the Statement of Profit and Loss. Maximum obligation on lease amount payable as per rentals stated in respective agreements are as follows:-

11 During the year, the Company has paid interim dividends aggregating to Rs.6.50 per Cumulative Redeemable Preference Share (CRPS) of par value of Rs.100/ each for the year 2017-18.

12 Investment In Joint Venture entities:

(a) The disclosures relating to the Joint Venture Companies viz. DragonWave HFCL India Pvt. Ltd. (hereinafter referred to as JV) is as follows:

(b) The proportion of interest in the Company in the JV is by way of equity participation with DragonWave Inc, Canada formally known as DragonWave-X Canada Inc., a subsidiary of Transform -X Inc.

(c) The aggregate amount of interests in the JV as at 31st March, 2018 is as follows:

13 Segment Reporting

The Company publishes the Standalone financial statements of the Company along with the consolidated financial statements. In accordance with Ind AS 108, Operating Segments, the Company has disclosed the segment information in the consolidated financial statements.

14 Interest charges on loans is net of Interest income from loans and advances amounting to Rs.11.87 crore (Previous year Rs.3.71 crore).

15 (a) Debt of the Company were earlier restructured under Corporate Debt Restructuring (CDR) mechanism in April 2004 which was subsequently modified in June 2005 with cut-off date as 1st April, 2005. CDR Empowered Group at its meeting held on 9th February, 2011 had approved the Rework Package of the Company with the cut off date as 1st January 2011 and communicated its sanction vide their letter No. BY CDR(JCP)/No 8643/2010-11 dated 29th March, 2011. The Rework Package includes inter-alia reduction in the existing rate of interest, re-schedulement for repayment of loans, conversion of overdue interest into funded interest term loan (FITL), conversion of Zero Coupon Premium Bonds (ZCPB’s), part of their premium and part of working capital loans into Equity, conversion of part of working capital loan into working capital term loan (WCTL), waiver of unpaid dividend on preference shares, waiver of penal interest etc. The conditions as stipulated by CDR EG while sanctioning Rework Package have been complied with by the Company. Accordingly, the impact of the rework package has been considered in the Financial Statements.

(b) Subsequent to the implementation of Rework Package, lenders have reset the rate of interest on certain loans in view of improved performance of the Company.

(c) Further, lenders have the right to claim recompense from the Company on account of various sacrifices & waivers made by them in the CDR Rework Package upon exit by the Company from CDR. The Company’s proposal for CDR exit was considered by the Monitoring Institution (MI) of lenders i.e. IDBI Bank Ltd which recommended the recompense amount of Rs.148.47 crore on term loans and working capital loans. The said recompense amount was approved by CDR-EG vide its order CDR(PMG) No.740/2015-16 dated March 22, 2016. The Company has accordingly made provision of the said recompense amount in the financial year 2015-16. The Board of Directors in their meeting held on 10th May, 2016 has approved the recompense amount so that the Company can exit from CDR mechanism.

(d) Accordingly, Company has paid the recompense amount to the CDR lenders as per exit terms and CDR-EG has been given its approval for successful exit of the Company from CDR mechanism vide letter No. CDR(DAP) No.218/2017-18 dated 01.09.2017

16 Financial Instruments and risk management

The Company’s principal financial liabilities, other than derivatives, comprise loans and borrowings, trade and other payables, and financial guarantee contracts. The main purpose of these financial liabilities is to finance the Company’s operations and to provide guarantees to support its operations. The Company’s principal financial assets include loans, trade and other receivables, and cash and cash equivalents that derive directly from its operations.

The Company’s business activities expose it to a variety of financial risks, namely liquidity risk, market risks and credit risk. The management has the overall responsibility for the establishment and oversight of the Company’s risk management framework. The Company has constituted a Risk Management Committee, which is responsible for developing and monitoring the Company’s risk management policies. The Company’s risk management policies are established to identify and analyse the risks faced by the Company, to set appropriate risk limits and controls and to monitor risks and adherence to limits. Risk management policies and systems are reviewed regularly to reflect changes in market conditions and the Company’s activities.

1. Fair Value measurement

Fair Value Hierarchy and valuation technique used to determine fair value :

The fair value hierarchy is based on inputs to valuation techniques that are used to measure fair value that are either observable or unobservable and are categorized into Level 1 , Level 2 and Level 3 inputs.

Significant estimates

The fair value of financial instruments that are not traded in an active market is determined using valuation techniques. The Company uses its judgement to select a variety of methods and make assumptions that are mainly based on market conditions existing at the end of each reporting period. For details of the key assumptions used and the impact of the changes to these assumptions.

16.2 Management of Liquidity Risk

Liquidity risk is the risk that the Company will face in meeting its obligations associated with its financial liabilities. The Company’s approach to managing liquidity is to ensure that it will have sufficient funds to meet its liabilities when due without incurring unacceptable losses. In doing this, management considers both normal and stressed conditions.

The following table shows the maturity analysis of the Company’s financial liabilities based on contractually agreed undiscounted cash flows as at the Balance Sheet date.

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 risk comprises three types of risk: interest rate risk, currency risk and other price risk, such as equity price risk. Financial instruments affected by market risk include loans and borrowings, deposits, FVTOCI investments.

The sensitivity analyses in the following sections relate to the position as at 31 March 2018 and 31 March 2017.

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 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 established policy, procedures and control relating to customer credit risk management. To manage trade receivable, the Company periodically assesses the financial reliability of customers, taking into account the financial conditions, economic trends, analysis of historical bad debts and aging of such receivables.

None of the Company’s financial assets are either impaired or past due, and there were no indications that defaults in payment obligations would occur.

The maximum exposure to credit risk at the reporting date is the carrying value of each class of financial assets disclosed in Note 14. The Company does not hold collateral as security. The Company evaluates the concentration of risk with respect to trade receivables as low, as its customers are located in several jurisdictions and industries and operate in largely independent markets.

Financial instruments and cash deposits

Credit risk from balances with banks and financial institutions is managed by the management in accordance with the Company’s policy. Counterparty credit limits are reviewed by the management on an annual basis, and may be updated throughout the year. The limits are set to minimise the concentration of risks and therefore mitigate financial loss through counterparty’s potential failure to make payments.

None of the Company’s financial assets are either impaired or past due, and there were no indications that defaults in payment obligations would occur.

Capital management

Capital includes issued equity capital and share premium and all other equity reserves attributable to the equity holders. The primary objective of the Company’s capital management is to maximize the shareholder value.The following table provides detail of the debt and equity at the end of the reporting period :

17 Foreign Currency Exposure

a) The Company undertakes transactions denominated in foreign currencies; consequently, exposures to exchange rate fluctuations will arise.

The Company uses foreign currency forward contracts to hedge its risks associated with foreign currency fluctuations relating to certain firm commitments and forecasted transactions. The use of foreign currency forward contracts is governed by the Company’s strategy, which provides principles on the use of such forward contracts consistent with Company’s Risk Management Policy. The Company does not use forward contracts for speculative purposes.

The carrying amounts of the Company’s foreign currency denominated monetary assets and monetary liabilities at the end of the reporting period are as follows:

Foreign currency sensitivity analysis

The following details are demonstrate the Company’s sensitivity to a 5% increase and decrease in the INR against the relevant foreign currencies. The sensitivity analysis includes only outstanding foreign currency denominated monetary items as tabulated above and adjusts their translation at the period end for a 5% change in foreign currency rates. The sensitivity analysis includes external loans. A positive number below indicates an increase in profit or equity and vice-versa.

18 Recent Indian Accounting Standards (Ind AS)

Ministry of Corporate Affairs (“MCA”) through Companies (Indian Accounting Standards) Amendment Rules, 2018 has notified the following new and amendments to Ind ASs which the Company has not applied as they are effective for annual periods beginning on or after April 1, 2018:

(i) Ind AS 115 Revenue from Contracts with Customers

(ii) Ind AS 21 The effect of changes in Foreign Exchange rates

The Company is evaluating the impact of these amendments on its financial statements.

19 The Board has recommended a dividend of 6 % per equity share for the financial year ended 31st March, 2018 subject to the approval of shareholders at the ensuing Annual General Meeting (AGM) of the Company or other authorities wherever required. The dividend for the financial year ended 31st March, 2018, if any, declared at the ensuing AGM, will be paid to the Shareholders within 30 days from the date of declaration.

20 Figures for the previous year has been regrouped/rearranged wherever necessary to confirm current year classification / presentation.


Mar 31, 2017

NOTE 1. CORPORATE INFORMATION

Himachal Futuristic Communication Limited (‘HFCL’ or ‘the Company’) is a public limited company domiciled and incorporated in India having its registered office at 8, Electronics Complex, Chambaghat, Solan, Himachal Pradesh-173213. . The Company’s shares are listed and traded on Stock Exchanges in India. Established in 1987, Himachal Futuristic Communications Limited (HFCL) is a diverse telecom infrastructure enabler with active interest spanning telecom infrastructure development, system integration, and manufacture and supply of high-end telecom equipment and Optic Fiber Cable (OFC).

The financial statements are approved for issue by the Company’s Board of Directors on May 10, 2017

NOTE 2. APPLICATION OF NEW AND REVISED IND -AS

All the Indian Accounting Standards issued and notified by the Ministry of Corporate Affairs under the Companies (Indian Accounting Standards) Rules, 2015 (as amended) read with Section 133 of the Companies Act, 2013 to the extent applicable have been considered in preparing these financial statements.

Recent accounting pronouncements:-

Standards issued but not yet effective

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.

The company is evaluating the requirements of the amendment and its effect on the financial statements.

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 nonvesting conditions are reflected in the ‘fair values’, but nonmarket 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.

The company is evaluating the requirements of the amendment and its impact on the financial statements is being evaluated.

Equity shares

1,45,50,000 (Previous year 1,45,50,000) shares of Re. 1/- each issued for consideration other than cash pursuant to the amalgamation of erstwhile Himachal Telematics Ltd. with the Company.

52,96,01,640 shares of Re. 1/- each have been allotted for a consideration other than cash pursuant to the Composite Scheme of Arrangement and Amalgamation between Sunvision Engineering Company Private Limited (SECPL), its Share holders & the Optionally Convertible Debenture (OCD) holders and the Company & its Shareholders, sanctioned by the Hon’ble High Court of Himachal Pradesh at Shimla vide its Order passed on 5th January, 2011.

The Company had received the notice for conversion of Optionally Fully Convertible Debentures (OFCDs) into Equity Shares on 27th February, 2006. Accordingly during the year 2006-2007, 2,000,000 OFCDs were converted into 11,802,739 equity shares of the face value of Rs. 10/- at a premium of Rs.11.90 per equity share and Rs.14.05 Crore has been transferred to securities premium account.

Terms/right attached to Equity/Preference Shares

The Company has issued equity share of Re.1/- each and 6.5% cumulative redeemable preference share of Rs.100/- each. On a show of hands, every holder of equity shares is entitled for one vote and upon a poll shall have voting rights in proportion to the shares of the paid up capital of the Company held by them. Preference shareholders shall have voting right in proportion to the shares of the paid up capital provided if the dividend due on such capital or any part of such dividend has remained unpaid. The Company declares dividend, if any, in Indian Rupees. The dividend, if any, proposed by the Board of Directors is subject to the approval of shareholders in the Annual General Meeting. In the event of liquidation of the Company, the holders of equity shares will be entitled to receive remaining assets of the Company, after distribution of all preferential amount in proportion to their shareholdings.

a.) During the year Company has allotted 10.30% 29,49,750 Non-Convertible Debenture (NCDs) of Rs.100/- each aggregating Rs. 29.50 Crore by way of conversion of outstanding right of recompense amount payable by the Company. NCDs are secured by way of first pari-passu charge on movable & immovable fixed assets of Company with existing term loans and are redeemable at face value in installment in the ratio of 33.33%, 33.33% and 33.34% at the end of 30th September, 2019 (FY 2019-20), 2020 (FY 2020-21), 2021(FY 2021-22) respectively.

b.) The 6.5% Cumulative Redeemable Preference Shares (CRPS) aggregating to Rs. 80.50 Crore shall be redeemed at the rate of 25% and 75% of the face value in the financial years ending 31st March 2018 and 31st March, 2019, respectively and will carry the coupon rate of 6.50% from new cut off date i.e. 1st January, 2011 as mentioned in the rework package approved by the CDR EG on 29.03.2011. However, dividend accrued on notional basis, as same has not been declared and fallen due for payment, and penal interest thereon, till the cut-off date, stands waived as per CDR rework package.

c.) Term loan of Rs.131.64 Crore (Previous year Rs.143.51 Crore ) and Funded interest term loan of Rs.17.61 Crore (Previous year Rs. 28.92 Crore ) from one of the bank are secured on pari passu basis by way of first charge on all the immovable properties, both present and future, by way of equitable mortgage and first charge on the entire sales proceeds of the contracts covered under the aforesaid loan to be credited to the Escrow/designated account.

d.) Term loan of Rs.9.34 Crore (Previous year Rs.12.85 Crore) from a bank, Working capital term loan of Rs.7.28 Crore (Previous year Rs.10.01 Crore) and Funded interest term loan of Rs.20.70 Crore (Previous year Rs. 31.06 Crore) are secured by way of pledge of shares and also secured on pari passu basis by way of hypothecation of stocks of raw materials, finished and semi- finished goods, stores and spares, book debts etc. as well as by way of second charge on immovable properties pertaining to the Company.

e.) Working capital term loans of Rs.10.03 Crore (Previous year Rs.13.79 Crore ) from banks and Funded interest term loans of Rs.13.85 Crore (Previous year Rs.20.78 Crore) are secured on pari-passu basis by way of hypothecation of stocks of raw materials, finished and semi- finished goods, stores and spares, book debts etc. as well as by way of second charge on immovable properties of the Company.

f.) Part of term loan and FITL from Banks & Financial Institutions amounting to Rs.110.46 Crore (Previous year Rs.160.91 Crore) are secured by Pledge of equity shares up to 51% (241548750) of new co-opted promoters and also personally guaranteed by Managing Director of the Company and further by way of corporate Guarantee of M/s M N Ventures Pvt. Ltd. (erstwhile M/s ANM Enginnering and Works Pvt. Ltd.)

g.) Vehicle loan of Rs. 4.00 Crore (Previous Year Rs.3.95 Crore) from banks is secured by way of hypothecation of respective assets.

h.) Term loans and FITL are repayable in 7 years / 3 years commencing from Financial year 2012-13 / 2016-17 with rate of Interest @10% p.a. or at the rate as re-set by the lenders as detailed here in below:

i.) Term Loan amount to Rs.100 Crore with rate of Interest @ 10.75% p.a. re- payable as under:

Working capital loans from banks aggregating to Rs.117.64 crore (Previous year Rs. 66.35 crore) are secured on pari-passu basis by way of hypothecation of stocks of raw materials, finished and semi- finished goods, stores and spares, book debts etc. as well as by way of second charge on immovable properties pertaining to Wireline, Wireless and Cable divisions of the Company and further secured by way of pledge of equity shares up to 51% (241548750) of new co-opted promoters and are also personally guaranteed by Managing Director of the Company and further by way of corporate guarantee of M/s M N Ventures Pvt. Ltd. ( erstwhile M/s ANM Enginnering and Works Pvt. Ltd.).

Note 3. critical accounting estimates and judgments

The preparation of financial statements requires the use of accounting estimates which, by definition, will seldom equal the actual results. This note provides an overview of the areas that involved a higher degree of judgment or complexity, and of items which are more likely to be materially adjusted due to estimates and assumptions turning out to be different than those originally assessed. Detailed information about each of these estimates and judgments is included in relevant notes together with information about the basis of calculation for each affected line item in the financial statements.

The areas involving critical estimates or judgments are:

1. Estimation of useful life of tangible asset Note 4.

2. Estimation of useful life of intangible asset Note 6.

3. Estimation of useful life of intangible asset under development Note 7.

4. Estimation of fair value of unlisted securities Note 62.

5. Estimation of defined benefit obligation Note 41.

6. Estimation of contingent liabilities refer Note 43.

Estimates and judgments are continually evaluated. They are based on historical experience and other factors, including expectations of future events that may have a financial impact on the Company and that are believed to be reasonable under the circumstances.

NOTE 4. Business Combination

During the year the Company has acquired 88.47% (1,60,000 shares) on 09-08-2016 and 6.00% (10,856 shares) on 31-03-2017, of the equity share capital of M/s Polixel Security Systems Pvt. Ltd., a company engaged in safe & smart city business. The Company’s total holding alongwith the shares held as on 1.4.2016 increased to 100% during the year. The business acquisition was conducted by entering into share purchase agreements for a Cash consideration of Rs.11 crore and Rs. 0.75 crore respectively.

Note 5. During the year, Company has recognised the following amounts in the financial statements as per Ind AS - 19 “Employees Benefits” issued by the ICAI :

a) Defined Contribution Plan

Contribution to Defined Contribution Plan, recognised are charged off for the year as under :

b) Defined Benefit Plan

The employees’ gratuity fund scheme is partially managed by HDFC Standard Life Insurance Company Limited which is a defined benefit plan. The present value of obligation is determined based on actuarial valuation using the Projected Unit Credit Method, which recognises each period of service as giving rise to additional unit of employee benefit entitlement and measures each unit separately to build up the final obligation and the obligation for leave encashment is recognised in the same manner as gratuity.

Investment details

HDFC Standard Life Insurance Company Limited (Cash accumulation ) Policy

Note-1: The estimates of rate of escalation in salary considered in actuarial valuation, takes into account inflation, seniority, promotion and other relevant factors including supply and demand in the employment market. The above information is certified by the Actuary.

NOTE 6. COMMITMENTs AND CONTINGENCY

(a) Contingent Liabilities not provided for in respect of :

(a) The Company’s pending litigations comprise of claims against the Company and proceedings pending with Tax Authorities. The Company has reviewed all its pending litigations and proceedings and has made adequate provisions, wherever required and disclosed the contingent liabilities, wherever applicable, in its financial statements. The Company does not expect the outcome of these proceedings to have a material impact on its financial position.

(b) The Company periodically reviews all its long term contracts to assess for any material foreseeable losses. Based on such review wherever applicable, the Company has made adequate provisions for these long term contracts in the books of account as required under any applicable law/accounting standard.

(c) As at 31st March, 2016, the Company did not have any outstanding term derivative contracts.

(b) Capital Commitments

NOTE 7. HTL Ltd., one of the Subsidiary of the company, has proposed right issue of equity shares for Rs. 120.00 Crore to its existing shareholders i.e GOI (26%) and the Company (74%).The Subsidiary company is in the process of obtaining in principal concurrence from GOI for the proposed right issue of shares. Pending such formal concurrence, loan and advances given by the Company have been shown under Non-Current Financial Assets as against Current Financial Assets shown in the previous year.

NOTE 8. Pursuant to the disinvestment by the Government of India, the Company had acquired 11,10,000 equity shares of Rs.100/- each of HTL Limited representing 74% of its equity capital at total consideration of Rs. 55.00 crore in terms of Shareholders Agreement dated 16.10.2001. The above consideration paid by the Company was subject to post closing adjustments on account of difference in net worth of HTL Limited as on 31.03.2001 and as on the date of purchase of shares in terms of Share Purchase Agreement dated 16.10.2001. The claim filed by the Company has been settled during the previous year and the amount of Rs.93.52 Crore received in the previous year has been adjusted against cost of investment amounting to Rs.55.00 Crore and balance being interest credited to Profit & Loss account during the previous year.

NOTE 9. During the previous year, the Exceptional items consist of : (i) Impact of recompense amount on account of waivers under rework package of CDR - Rs.148.47 Crore. Recompense amount payable has been worked out by Monitoring Institution (MI) of lenders i.e. IDBI Bank Ltd. and approved by CDR -EG and (ii) Claims in regard to one of investment made in earlier years amounting to Rs.38.52 Crore settled and recovered.

NOTE 10. The Company has reviewed the outstanding receivables and has written off a sum of Rs. 2.44 Crore( Previous year Rs.11.50 Crore) during the year as bad, which in the opinion of the Management is adequate and sundry balances also written back amounting to Rs. 0.73 Crore ( Previous year Rs.5.44 Crore)

NOTE 11. Lease payments under cancellable operating leases have been recognized as an expense in the Statement of profit & loss. Maximum obligation on lease amount payable as per rentals stated in respective agreements are as follows:-

NOTE 12. During the year, the Company has paid first interim dividend of Rs.3.25 per 6.5% Cumulative Redeemable Preference Share (CRPS) of par value of Rs.100/- each for the year 2016-17. Further Company has proposed second interim dividend of Rs.3.25 per CRPS of par value of Rs.100/- each for the year 2016-17. Thus, the total dividend for the financial year is Rs.6.50 per CRPS of Rs. 100/- each.

NOTE 13. INVESTMENT IN JOINT VENTURE ENTITIEs:

a) The disclosures relating to the Joint Venture Companies viz. DragonWave HFCL India Pvt. Ltd. (hereinafter referred to as JV) is as follows:

b) The proportion of interest in the Company in the JV is by way of equity participation with DragonWave Pte. Ltd., Singapore.

c) The aggregate amount of interests in the JV as at 31st March, 2017 is as follows:

NOTE 14. As REQUIRED BY Ind As - 24 “Related PARTY Disclosures”

(i) Name and description of related parties.

NOTE 15. SEGMENT REPORTING

The chief operational decision maker monitors the operating results of its business segment separately for the purpose of making decisions about resource allocation and performance assessment. Segment performance is evaluated based on profit or loss and is measured consistently with profit or loss in the financial statements.

The operating segments have been identified on the basis of nature of products.

i. Segment revenue includes sales and other income directly identifiable with the segment including inter-segment revenue.

ii. Expenses that are directly identifiable with the segment are considered for determining the segment result.

iii. Expenses / Incomes which are not directly allocable to the segments are included under un-allocable expenditure / incomes.

iv. Segment results include margins on inter-segment sales which are reduced in arriving at the profit before tax of the company.

v. Segment assets and liabilities include those directly identifiable with the respective segments. Un-allocable assets and liabilities represent the assets and liabilities that relate to the company as a whole and not allocable to any segment.

Inter - Segment revenue :- Segment revenue resulting from transactions with other business segments is accounted on the basis of transfer price agreed between the segments. Such transfer prices are either determined to yield a desired margin or agreed on a negotiated basis.

(a) Primary segment information

The Company’s operations primarily relates to manufacturing of telecom products, executing turnkey contracts and providing services relating thereto. Accordingly segments have been identified in line with Indian Accounting Standard on Segment Reporting ‘Ind AS-108’. Telecom products and Turnkey contracts and services are the primary business segments. Details of business segments are as follows:

(b) secondary segment information

The Company caters mainly to the needs of Indian market and the export turnover being 4.03% (Previous year 2.91%) of the total turnover of the Company, there are no reportable geographical segments.

NOTE 14. DEFERRED TAX

In accordance with Ind AS 12 on ‘Income Taxes’, issued by the Institute of Chartered Accountants of India, on conservative basis, deferred tax assets have not been accounted for in the books, as the estimation of future taxable profits cannot be made with virtual certainty supported by convincing evidences, against which such deferred tax assets would be realized.

NOTE 15. Interest charges on loans is net of Interest income from loans and advances amounting to Rs.3.71 crore (Previous year Rs.0.45 crore).

NOTE 16. (a) Debt of the Company were earlier restructured under Corporate Debt Restructuring (CDR) mechanism in April 2004 which was subsequently modified in June 2005 with cut-off date as 1st April, 2005. CDR Empowered Group at its meeting held on 9th February, 2011 has approved the Rework Package of the Company with the cut off date as 1st January 2011 and communicated its sanction vide their letter No. BY CDR(JCP)/No 8643/2010-11 dated 29th March, 2011. The Rework Package includes inter-alia reduction in the existing rate of interest, re-schedulement for repayment of loans, conversion of overdue interest into funded interest term loan (FITL), conversion of Zero Coupon Premium Bonds (ZCPB’s), part of their premium and part of working capital loans into Equity, conversion of part of working capital loan into working capital term loan (WCTL), waiver of unpaid dividend on preference shares, waiver of penal interest etc. The conditions as stipulated by CDR EG while sanctioning Rework Package have been complied with by the Company. Accordingly, the impact of the rework package has been considered in the Financial Statements.

(b) Subsequent to the implementation of Rework Package, lenders have reset the rate of interest on certain loans in view of improved performance of the Company.

(c ) Further, lenders have the right to claim recompense from the Company on account of various sacrifices & waivers made by them in the CDR Rework Package upon exit by the Company from CDR. The Company’s proposal for CDR exit was considered by the Monitoring Institution (MI) of lenders i.e. IDBI Bank Ltd which recommended the recompense amount of Rs.148.47 Crore on term loans and working capital loans. The said recompense amount was approved by CDR-EG vide its order CDR(PMG) No.740/2015-16 dated March 22, 2016 subject to confirmations by the respective lenders. The Company has accordingly made provision of the said recompense amount in the previous year. The Board of Directors in their meeting held on 10th May, 2016 has approved the recompense amount so that the Company can exit from CDR mechanism. Company has paid the recompense amount to the CDR lenders as per exit terms and has requested to MI to put up the status before CDR-EG for formal approval for exit of the Company from CDR mechanism.

NOTE 17. DISCLOSURE OF SPECIFIED BANK NOTEs (SBNS)

During the year the Company had specified bank notes or other denomination note as defined in MCA notification G.S.R. 308(E) dated March 31, 2017 on the details of Specified Bank Notes (SBNs) held and transacted during the period from November 8, 2016 to December 30, 2016, the denomination wise SBNs and other notes as per the notification is given below:

* For the purpose of this clause, the term ‘Specified Bank Notes’ shall have the same meaning provided in the notification of the Government of India, in the Ministry of Finance, Department of Economic Affairs number S.O. 3407(E), dated the 8th November, 2016.

NOTE 18. FINANCIAL RISK MANAGEMENT, OBJECTIVEs AND POLICIEs

The Company’s principal financial liabilities, other than derivatives, comprise loans and borrowings, trade and other payables, and financial guarantee contracts. The main purpose of these financial liabilities is to finance the Company’s operations and to provide guarantees to support its operations. The Company’s principal financial assets include loans, trade and other receivables, and cash and cash equivalents that derive directly from its operations.

The Company’s business activities expose it to a variety of financial risks, namely liquidity risk, market risks and credit risk. The Company’s senior management has the overall responsibility for the establishment and oversight of the Company’s risk management framework. The Company has constituted a Risk Management Committee, which is responsible for developing and monitoring the Company’s risk management policies. The Company’s risk management policies are established to identify and analyse the risks faced by the Company, to set appropriate risk limits and controls and to monitor risks and adherence to limits. Risk management policies and systems are reviewed regularly to reflect changes in market conditions and the Company’s activities.

MANAGEMENT OF LIQUIDITY RISK

Liquidity risk is the risk that the Company will face in meeting its obligations associated with its financial liabilities. The Company’s approach to managing liquidity is to ensure that it will have sufficient funds to meet its liabilities when due without incurring unacceptable losses. In doing this, management considers both normal and stressed conditions.

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 risk comprises three types of risk: interest rate risk, currency risk and other price risk, such as equity price risk. Financial instruments affected by market risk include loans and borrowings, deposits, FVTOCI investments.

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 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 established policy, procedures and control relating to customer credit risk management. Credit quality of a customer is assessed based on an extensive credit rating scorecard and individual credit limits are defined in accordance with this assessment. Outstanding customer receivables are regularly monitored. At 31 March 2017, the Company had top10 customers (31 March 2016: top 10 customers, 1 April 2015: top 10 customers) that owed the Company more than Rs. 1112.37 Crore(31 March 2016: 1091.36 Crore, 1 April 2015: 320.34 Crore) and accounted for approximately 96.97% (31 March 2016: 97.56 %, 1 April 2015: 87.19 %) of all the receivables outstanding.

An impairment analysis is performed at each reporting date on an individual basis for major clients. In addition, a large number of minor receivables are grouped into homogenous groups and assessed for impairment collectively. The maximum exposure to credit risk at the reporting date is the carrying value of each class of financial assets disclosed in Note 14. The Company does not hold collateral as security. The Company evaluates the concentration of risk with respect to trade receivables as low, as its customers are located in several jurisdictions and industries and operate in largely independent markets.

Financial instruments and cash deposits

Credit risk from balances with banks and financial institutions is managed by the management in accordance with the Company’s policy. Counterparty credit limits are reviewed by the management on an annual basis, and may be updated throughout the year. The limits are set to minimise the concentration of risks and therefore mitigate financial loss through counterparty’s potential failure to make payments.

The Company’s maximum exposure to credit risk for the components of the balance sheet at 31 March 2017 and 31 March 2016 is the carrying amounts as illustrated in Note 15 except for financial guarantees. The Company’s maximum exposure relating to financial guarantees and financial derivative instruments is noted in note 43 (c) and the liquidity table below.

Capital management

Capital includes issued equity capital and share premium and all other equity reserves attributable to the equity holders. The primary objective of the Company’s capital management is to maximize the shareholder value.

The Company manages its capital structure and makes adjustments in light of changes in economic conditions and the requirements of the financial covenants. The Company monitors capital using a gearing ratio, which is net debt divided by total capital plus net debt. The Company’s policy is to keep the gearing ratio between 40% and 50%.

No changes were made in the objectives, policies or processes for managing capital during the years ended 31 March, 2017, 31 March, 2016 and 31 March, 2015.

1. Fair Value measurement

Fair Value Hierarchy and valuation technique used to determine fair value :

The fair value hierarchy is based on inputs to valuation techniques that are used to measure fair value that are either observable or unobservable and are categorized into Level 1 , Level 2 and Level 3 inputs.

Significant estimates

The fair value of financial instruments that are not traded in an active market is determined using valuation techniques. The Company uses its judgement to select a variety of methods and make assumptions that are mainly based on market conditions existing at the end of each reporting period. For details of the key assumptions used and the impact of the changes to these assumptions.

NOTE 19. DERIVATIVE INSTRUMENTS

a) The Company uses foreign currency forward contracts to hedge its risks associated with foreign currency fluctuations relating to certain firm commitments and forecasted transactions. The use of foreign currency forward contracts is governed by the Company’s strategy, which provides principles on the use of such forward contracts consistent with Company’s Risk Management Policy. The Company does not use forward contracts for speculative purposes.

NOTE 20. OVERALL PRINCIPLED

The Company has prepared the opening balance sheet as per Ind AS as of April 1, 2015 (the transition date) by recognizing all assets and liabilities whose recognition is required by Ind AS, not recognizing items of assets or liabilities which are not permitted by Ind AS, by reclassifying certain items from Previous GAAP to Ind AS as required under the Ind AS, and applying Ind AS in the measurement of recognized assets and liabilities. However, this principle is subject to certain mandatory exceptions and certain optional exemptions availed by the Company as detailed below.

NOTE 21. FIRST TIME ADOPTION OF IND As

The accounting policies set out in Note 3 have been applied in preparing the Financial statements for the year ended March 31, 2017 and 2016.

Exemptions and exceptions availed

Set out below are the applicable Ind AS 101 optional exemptions and mandatory exceptions applied in the transition from previous GAAP to Ind AS as at the transition date, i.e. April 1, 2015.

A.1 Ind- As optional exemptions A. 1.1 Deemed cost

Ind AS 101 permits a first-time adopter to elect to continue with the carrying value for all of its property, plant and equipment as recognized in the financial statements as at the date of transition to Ind AS, measured as per the Previous GAAP and use that as its deemed cost as at the date of transition after making necessary adjustments for de-commissioning liabilities. This exemption can also be used for intangible assets covered by Ind AS 38 Intangible Assets and Investment Property covered by Ind AS 40 Investment Properties.

Accordingly, the Company has elected to measure all of its property, plant and equipment, intangible assets and investment property at their Previous GAAP carrying value.

A.1.2 Business combinations

Ind AS 101 provides the option to apply Ind AS 103 prospectively from the transition date or from a specific date prior to the transition date. This provides relief from full retrospective application that would require restatement of all business combinations prior to the transition date.

The Company elected to apply Ind AS 103 prospectively to business combinations occurring after its transition date. Business combinations occurring prior to the transition date have not been restated instead have been accounted as per previous GAAP. The Company has applied same exemption for investment in associates and joint ventures.

A.1.3 Designation of previously recognized financial instruments

Ind AS 101 allows an entity to designate investments in equity instruments at FVOCI on the basis of the facts and circumstances at the date of transition to Ind AS.

The Company has elected to apply this exemption for its investment in equity instruments.

A.1.4 Leases

Appendix C to Ind AS 17 requires an entity to assess whether a contract or arrangement contains a lease. In accordance with Ind AS 17, this assessment should be carried out at the inception of the contract or arrangement. Ind AS 101 provides an option to make this assessment on the basis of facts and circumstances existing at the date of transition to Ind AS, except where the effect is expected to be not material.

The Company has elected to apply this exemption for such contracts / arrangements.

a.1.3 Impairment of financial assets

The Company has applied the impairment requirements of Ind AS 109 retrospectively; however, as permitted by Ind AS 101, it has used reasonable and supportable information that is available without undue cost or effort to determine the credit risk at the date that financial instruments were initially recognized in order to compare it with the credit risk at the transition date. Further, the Company has not undertaken an exhaustive search for information when determining, at the date of transition to Ind ASs, whether there have been significant increases in credit risk since initial recognition, as permitted by Ind AS 101.

A.2 Ind As mandatory exceptions A.2.1 Estimates

An entity’s estimates in accordance with Ind AS at the date of transition to Ind AS shall be consistent with estimates made in for the same date in accordance with previous GAAP (after adjustments to reflect any difference in accounting policies), unless there is objective evidence that those estimates were in error.

Ind AS estimates as at April 1, 2015 are consistent with the estimates as at the same date made in conformity with previous GAAP. A.2.2 Classification and measurement of financial assets

Ind AS 101 requires an entity to assess classification and measurement of financial assets (investment in debt instruments) on the basis of the facts and circumstances that exist at the date of transition to Ind AS. Accordingly, classification and measurement of financial asset has been based on the facts and circumstances that exist at the date of transition to Ind AS.

Note to Reconciliation statement

1. Under the Previous GAAP, investments in equity instruments and mutual funds were classified as long-term investments or current investments based on the intended holding period and realisability. Long-term investments were carried at cost less provision for other than temporary decline in the value of such investments. Current investments were carried at lower of cost and fair value. Under Ind AS, these investments are required to be measured at fair value. The resulting fair value changes of these investments (other than equity instruments designated as at FVOCI) have been recognised in other equity as at the date of transition i.e. April 1, 2015.

Fair value changes with respect to investments in equity instruments designated as at FVOCI have been recognised in FVOCI equity instruments reserve as at the date of transition and subsequently in the other comprehensive income.

2. Under the previous GAAP the debtors assigned to third party were carried at cost, however under IND AS the debtors assigned for more than 12 months needs to be fair valued. Company has fair valued such debtors and the difference has been charged to profit and loss account as finance charge.

Note to Reconciliation statement

1. Proposed dividend

Under the Previous GAAP, dividends proposed by the board of directors after the balance sheet date but before the approval of the financial statements were considered as adjusting events. Accordingly, provision for proposed dividend including dividend distribution tax was recognised as a liability. Under Ind AS, such dividends are recognised when the same is approved by the shareholders in the general meeting. Accordingly, the liability for proposed dividend including dividend distribution tax included under provisions has been reversed with corresponding adjustment to in other equity.

Under Previous GAAP, the entire dividend distribution tax paid by the Group was charged as an appropriation in equity along with the dividend proposed by the Parent company. As per Ind AS dividend distribution tax paid on the dividends is recognised consistently with the presentation of the transaction that creates the income tax consequence. Dividend distribution tax is charged to profit or loss if the dividend itself is charged to profit or loss. If the dividend is recognised in equity, the presentation of dividend distribution tax is also recognised in equity.

2. Under the Previous GAAP, investments in equity instruments and mutual funds were classified as long-term investments or current investments based on the intended holding period and realisability. Long-term investments were carried at cost less provision for other than temporary decline in the value of such investments. Current investments were carried at lower of cost and fair value. Under Ind AS, these investments are required to be measured at fair value. The resulting fair value changes of these investments (other than equity instruments designated as at FVOCI) have been recognised in other equity as at the date of transition i.e. April 1, 2015

Fair value changes with respect to investments in equity instruments designated as at FVOCI have been recognised in FVOCI equity instruments reserve as at the date of transition and subsequently in the other comprehensive income.

3. Under the previous GAAP the debtors assigned to third party were carried at cost, however under IND AS the debtors assigned for more than 12 months needs to be fair valued. Company has fair valued such debtors and the difference has been charged to profit and loss account as finance charge.

4. Under Ind AS, re-measurements i.e. actuarial gains and losses and the return on plan assets, excluding amounts included in the net interest expense on the net defined benefit liability are recognised in other comprehensive income instead of profit or loss. Under the Previous GAAP, these re-measurements were forming part of the profit or loss for the year


Mar 31, 2016

1. Merger of Manufacturing Division of Jindal Photo Limited

The Hon''ble High Court of Judicature at Allahabad and Bombay vide their Order dated 12th October, 2015 and 26th February, 2016 respectively sanctioned the scheme of arrangement (''the scheme'') between Jindal Photo Limited (“Demerged Company”) and Jindal Poly Films Limited (“Resulting Company”) and their respective shareholders and creditors, pursuant to the provisions of section 391 to 394 and other provisions of the Companies Act, 1956 and/or Companies Act, 2013. The scheme became effective upon filing of certified copies of the Orders of the Hon''ble High Court of Judicature at Bombay on 31st March, 2016.

The scheme is effective from Appointed Date i.e. 1st April, 2014 inter alia provides for the demerger of the demerged undertaking as defined in part (III) of the scheme - Business of Manufacture, production, sale and distribution of photographic products of demerged company into the Resulting Company. Accordingly financial statements of the demerged entity has been incorporated for the year ended 31st March 2016 along with corresponding previous year ended 31st March 2015.

(a) Pursuant to the scheme of Arrangement between Jindal Photo Limited (Demerged Company) and Jindal Poly Films Limited (Resulting Company) and their respective shareholders and creditors, as a Consideration, Jindal Poly Films Limited have allotted 17,38,700 (seventeen lac thirty eight thousand seven hundred) Equity shares of Rs. 10 each fully paid up in the capital of the company on 30th May,2016 in the ratio of 10 fully Paid-up equity shares of Rs. 10 each of the Company for every 59 Equity shares of Jindal Photo Limited held by shareholders of Jindal Photo Limited on record date i.e. 13th May, 2016. Accordingly these shares are treated as outstanding as on reporting date and are included for the calculation of basic earnings per share for the year ended 31st March 2016 along with corresponding previous year ended 31st March 2015.

(b) The accounting of this Arrangement was done as per the scheme and the same has been given effect to in the financial statements as under:

i. The Resulting Company has recorded all assets and liabilities of the Demerged Undertaking vested in it pursuance to this scheme, at the respective book values thereof, as appearing in the books of account of the Demerged Company immediately before the appointed date.

ii. The Resulting Company has credited the aggregate face value of the New Equity shares of the Company issued by it to the members of the Demerged Company pursuant to this scheme to the share capital in books of accounts.

iii. The difference of the aggregate of face value equity shares allotted by the Company to the shareholders of the Demerged Undertaking, and the amount representing surplus of book value of assets over liabilities of the Demerged Undertaking has been recorded by the Resulting Company as Capital Reserve.

iv. Figures of demerged undertakings have been regrouped and/or rearranged wherever required to align with disclosure parameters of the Resulting Company.

Note : Pursuant to the scheme of Arrangement between Jindal Photo Limited (Demerged Company) and Jindal Poly Films Limited (Resulting Company), as approved by Hon''ble High Court of Judicature Mumbai vide order dated 26th February 2016, the Company has given impact in its books of accounts. Accordingly general inter unit balances arose earlier to approval of the scheme between Demerged Undertaking - M/s Jindal Photo Limited (Manufacturing Division) and Residual Undertaking - M/s Jindal Photo Limited (Investing Division) aggregating Rs 9,08,29,456 (Previous Year Rs 7,26,51,606) has been disclosed in short Term Loans and Advances (Refer Note 17.1). Being merely an accounting treatment for giving effect of the scheme, the above transaction and balance thereon is not disclosed in above related party disclosures.

2. Disclosure under Regulation 34(3) of “Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations 2015”

Loans and advances outstanding at the year end and maximum amount outstanding during the year, as required to be disclosed under schedule V and Regulation 34(3) of “securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations 2015” are as follows: *Comprehensive disclosure of investments as at 31st March 2016 has been made in Note 10 to the Financial statements, hence closing balance of other investments (Equity shares/Preference shares) having no movement during the year were not again disclosed in above statement.

**balance including interest

Note: Pursuant to the scheme of Arrangement between Jindal Photo Limited (Demerged Company) and Jindal Poly Films Limited (Resulting Company), as approved by Hon''ble High Court of Judicature Mumbai vide order dated 26th February 2016, the Company has given impact in its books of accounts. Accordingly general inter unit balances arose earlier to approval of the scheme between Demerged Undertaking - M/s Jindal Photo Limited (Manufacturing Division) and Residual Undertaking - M/s Jindal Photo Limited (Investing Division) aggregating Rs 9,08,29,456 (Previous Year Rs 7,26,51,606) has been disclosed in short Term Loans and Advances (Refer Note 17.1). Being merely an accounting treatment for giving effect of the scheme, the above transaction and balance thereon is not disclosed in above related party disclosures.

3. Segment Reporting

Pursuant to the scheme of arrangement for merger of manufacturing business of Jindal Photo Limited having different photographic products, the management has classified the business in two reportable segment, as defined in Accounting standard - 17 (segment Reporting) as follows :

- Plastic Films Business

- Photographic Division

4. Provision for Post-sales Client support and Warranties:

Provisions for post-sales client support and warranties on certain products and services relating to photographic business of the Company are made towards expected cost of meeting such obligations of rectification/replacement, based on the expected future cash outflows and computed on total sales made during the year, based on past experience. Provision for post-sales client support are expected to be utilized over a period of one year.

5. (a) The Administration of Union Territory of Dadra & Nager Haveli vide its Notification dated 31st December, 1999 granted exemption for sales tax to the Demerged Entity M/s Jindal Photo Limited (now being merged with the Company M/s Jindal Poly Films Limited) and in view of legal opinion received from experts and as per Ads-12 such benefit being in nature of capital receipt has been reduced from Gross sales and credited to Capital Reserve.

(b) Further financial statements for the financial years 2005-06 to 2010-11 of Demerged Entity M/s Jindal Photo Limited (now being merged with the Company M/s Jindal Poly Films Limited) were prepared considering such benefit as revenue receipt and income tax was provided and paid at normal rate for respective year. The assessment of financial year 2005-06 to 2010-11 for which assessment proceedings u/s 153A is in progress, entity has filed revised income tax computations for such financial years claiming benefit of Rs. 1,12,88,56,658 as exempted income and tax liability was revised as per provisions of section 115JB of Income Tax Act, 1961 (MAT) at Rs. 22,78,69,632. As the claim is for the years for which normal revised return could not be filed, the effect of such claim of benefit is not considered and necessary effective entries will be passed on finality of the assessment. Year wise detail is as under:

6. (a) A sum of Rs.13,92,18,077 (previous year Rs.13,11,88,659) being the difference between domestic and imported raw material prices prevailing at the year ended on 31st March 2016 on account of advance liceNSE s excess utilized for which exports are yet to be made, has been adjusted in the cost of raw material.

(b) Under the Package scheme of Incentive 2001/2007 approved by the Government of Maharashtra, the Company is entitled to industrial promotion subsidy to the extent of 100% of the fixed capital investment or to the extent of taxes paid to the state Government within a period of 7 years, whichever is lower. During the year, subsidy receivable under the above said scheme amounting to Rs 52,14,31,163 (previous year Rs. 51,57,72,707) has been added to Capital Reserve .

(c) The Export obligation undertaken by the company for import of capital equipments under EPCG scheme of the Central Government at the concessional rate of custom duty are in the opinion of the management expected to be fulfilled within their respective due dates/extended due date.

7. During the year, the Company had invested Rs. 39,29,00,000 in the Zero Percent redeemable preference share capital and Rs 249,00,00,000 in Zero Percent Optionally Convertible Preference shares M/s of Jindal India Powertech Limited (JIPL), a group company. JIPL is the holding Company of Jindal India Thermal Power Limited (the borrower).

8. (a) Certain old balances of sundry debtors and sundry creditors are subject to reconciliation and confirmation.

(b) sundry Debtors include Rs.53,23,605 (previous year Rs. 46,06,143) under litigation, against which legal cases are pending in various Courts for recovery. The same are considered good and realizable in the opinion of the management.

(c) In the opinion of the Board and to the best of their knowledge and belief, the realizable value of current assets, loans and advances in the ordinary course of business would not be less than the amount at which they are stated in the Balance sheet.

9. (a) Advance receivable in cash or in kind includes Rs. 28,254,171 (Previous Year Rs. 28,254,171 ) being the amount of custom duty deposited against import of capital goods assessed under provisional assessments in earlier year.

(b) Non - Current Investment includes 6 shares of Jindal Films India Ltd (Previously known as Jindal Metal & Mining Ltd) of which the Company is beneficial owner are held by certain individuals in fiduciary capacity.

(c) Pursuant to the scheme of Arrangement (Refer Note 30), investment held by Demerged Undertaking (M/s Jindal Photo Limited) in equity shares of M/s Jindal Imaging Limited and M/s Jindal Photo Imaging Limited has been transferred to Resulting Company (M/s Jindal Poly Films Limited), accordingly these equity shares has been considered as Non-Current Investments of the Resulting Company, however issuance of these shares in the name of M/s Jindal Poly Films Limited is under process.

(d) stores & spares consumed and salaries & wages incurred during the year for repair and maintenance of plant & machinery and sheds & building, have been charged to the former accounts wherever separation is not ascertainable.

10. (a) Discontinued Operation

Company has discontinued the operation of Partially Oriented Yarn (POY) facility at Gulaothi, Uttar Pradesh and Pet film facility at Khanvel unit as it has been terminated through abandonment in earlier years as per Accounting standard - 24 (Discontinuing Operations) referred to in section 133 of the Companies Act 2013.

Following is extracts of financial information included in loss from discontinued operations for the Gulaothi and Khanvel unit:-

(b) since FY 2006-07, the company was in the process of disposal of its unused plant & machineries and store items at Gulaothi Unit (Discontinued Operation). During the year, a part of such unused plant and machineries was reported to have been removed inappropriately. The management is taking due actions for recovery and do not consider any impairment/ provision for loss, if any, on this account as the credit balance of parties and realizable value of remaining assets is likely to exceed the book value of assets.

(c) As per Accounting standard -28 “Impairment of Assets” referred to in section 133 of the Companies Act 2013, no further impairment loss has been considered by the management in assets of Gulaothi & Khanvel unit.

11. Exceptional items represents Loss of Rs. 1,58,31,145 (previous year Rs 2,98,35,055) being exchange differences on translation/settlement of long term foreign currency loans for acquiring fixed assets.

12. Information related to Micro Enterprises and small Enterprises, as defined in the Micro, small and Medium Enterprises Development Act, 2006 (MsME Development Act), are given below. The information given below have been determined to the extent such enterprises have been identified on the basis of information available with the Company:

13. During the year, the erstwhile associate M/s Rexor Holding sAs has been merged with its wholly owned subsidiary M/s Rexor sAs, with effect from 1st April 2015, sanctioned as per order dated 21st October 2015 by an Foreign Authority (Greffe du Tribunal de Commerce de Vienne) and accordingly post-merger the surviving entity M/s Rexor sAs has become the associate of M/s Jindal Poly Films Limited. Pursuant to the scheme of merger, shares of M/s Rexor Holding sAs have been cancelled and in consideration proportionate shares as per the determined ratio, has been allotted in the surviving entity M/s Rexor sAs comprising 11163 Equity shares at Face Value of Euro 3506 allotted to M/s Jindal Poly Films Limited.

14. The Company has pledged 4,88,76,000 equity shares of Rs 10/- each of M/s Global Nonwoven Limited a subsidiary company and mortgaged 26.54 acres land of the Company situated at Nasik Maharashtra (Land being Leased out to Global


Mar 31, 2014

A Equity Shares

(i) Nil (Previous year 278,180) shares of Rs. 1/- each represent Global Depository Receipts.

(ii) 1,45,50,000 (Previous year 1,45,50,000) shares of Rs. 1/- each issued for consideration other than cash pursuant to the amalgamation of erstwhile Himachal Telematics Ltd. with the Company.

(iii) 52,96,01,640 shares of Rs. 1/- each have been allotted for a consideration other than cash pursuant to the Composite Scheme of Arrangement and Amalgamation between Sunvision Engineering Company Private Limited (SECPL), its Share holders &the Optionally Convertible Debenture (OCD) holders and the Company & its Shareholders, sanctioned by the Hon''ble High Court of Himachal Pradesh at Shimla vide its Order passed on 5th January, 2011.

B Preference Shares

The Cumulative Redeemable Preference Shares (CRPS) aggregating to Rs. 80.50 crore shall be redeemed at the rate of 25% and 75% of the face value in the financial years ending 31st March 2018 and 31st March, 2019, respectively and will carry the coupon rate of 6.50% from new cut off date i.e. 1st January, 2011 as mentioned in the rework package approved by the CDR EG on 29.03.2011. However, dividend accrued on notional basis, as same has not been declared and fallen due for payment, and penal interest thereon, till the cut-off date, stands waived as per CDR rework package.

E Terms/right attached to Equity/Preference Shares

The Company has issued equity share of Rs. 1/-each and preference share of Rs.100/-each. On a show of hands, every holder of equity shares is entitled for one vote and upon a poll shall have voting rights in proportion to the shares of the paid up capital of the Company held by them. Preference shareholders shall have voting right in proportion to the shares of the paid up capital provided if the dividend due on such capital or any part of such dividend has remained unpaid. The Company declares dividend, if any, in Indian Rupees. The dividend, if any, proposed by the Board of Directors is subject to the approval of shareholders in the Annual General Meeting. In the event of liquidation of the Company, the holders of equity shares will be entitled to receive remaining assets of the Company, after distribution of all preferential amount in proportion to their shareholdings.

Secured Long Term Borrowings

a) Term loan of Rs.63.28 crore (Previous year Rs.71.19 crore) and Funded interest term loan of Rs.28.92 crore (Previous yearRs. 33.92 crore) from one of the bank are secured on pari passu basis by way of first charge on all the immovable properties, both present and future, by way of equitable mortgage and first charge on the entire sales proceeds of the contracts covered under the aforesaid loan to be credited to the Escrow/designated account.

b) Term loan of Rs.18.69 crore (Previous yearRs.21.02 crore) from a bank, Working capital term loan ofRs.14.56 crore (Previous year Rs.16.38 crore) and Funded interest term loan of Rs.31.06 crore (Previous year Rs. 31.06 crore) are secured by way of pledge of shares and also secured on pari passu basis by way of hypothecation of stocks of raw materials, finished and semi- finished goods, stores and spares, book debts etc. as well as by way of second charge on immovable properties pertaining to the Company.

c) Working capital term loans of Rs.20.09 crore (Previous year Rs.22.57 crore) from banks and Funded interest term loans of Rs.20.77 crore (Previous year Rs.20.77 crore) are secured on pari passu basis by way of hypothecation of stocks of raw materials, finished and semi- finished goods, stores and spares, book debts etc. as well as by way of second charge on immovable properties pertaining to Wireline, Wireless and Cable divisions of the Company.

d) All the secured loans from banks are secured by Pledge of equity shares up to 51 % (239700000) of new co-opted promoters.

e) All the secured loans as stated above are also personally guaranteed by Managing Director of the Company.

f) Term loans and FITLare repayable in 7 years/3 years commencing from Financial year2012-13/2016-17 with rate of Interest @10% p.a. or at the rate as re-set by the lenders as detailed herein below:

Secured Short Term Borrowings

Working capital loans from banks aggregating to Rs.33.86 crore (Previous year Rs. 30.67 crore) are secured on pari passu basis by way of hypothecation of stocks of raw materials, finished and semi-finished goods, stores and spares, book debts etc. as well as by way of second charge on immovable properties pertaining to Wireline, Wireless and Cable Divisions of the Company and further secured by way of pledge of equity shares up to 51% (239700000) of new co-opted promoters and are also personally guaranteed by Managing Director of the Company.

(Rs. in crore)

As at As at

NOTE 2 Contingent Liabilities not provided for in respect of 31.03.2014 31.03.2013

(a) Unexpired Letters of Credit (margin money paid Rs.7.61 crore ; Previous year Rs.1.82 crore) 26.54 1.82

(b) Guarantees given by banks on behalf of the Company (margin money kept by way of fixed 56.03 32.93 deposits Rs.15.79 crore; Previous year Rs.10.64 crore)

(c) Counter Guarantees given by the Company to the financial institutions/banks for providing 20.16 20.16 guarantees on behalf of companies promoted by the Company, (margin money kept by the banks by way of fixed deposits Rs. Nil ; Previous year Rs. Nil)

(d) Arrears of Dividend on Cumulative redeemable preference shares - 18.90



NOTE 3 Interest charges on loans is net of Interest income from loans and advances amounting to Rs.0.43 crore (Previous year Rs.0.45 crore).

NOTE 4 The disclosures as per the Accounting Standard 7 on ''Construction Contracts'' issued by the Institute of Chartered Accountants of India are as under:

NOTE 5 (a) Debt of the Company were earlier restructured under Corporate Debt Restructuring (CDR) mechanism in April 2004 which was subsequently modified in June 2005 with cut-off date as 1st April, 2005. CDR Empowered Group at its meeting held on 9th February, 2011 has approved the Rework Package of the Company with the cut off date as 1st January 2011 and communicated its sanction vide their letter No. BY CDR(JCP)/No 8643/2010-11 dated 29th March, 2011. The Rework Package includes inter-alia reduction in the existing rate of interest, re-schedulement for repayment of loans, conversion of overdue interest into funded interest term loan (FITL), conversion of Zero Coupon Premium Bonds (ZCPB''s), part of their premium and part of working capital loans into Equity, conversion of part of working capital loan into working capital term loan (WCTL), waiver of unpaid dividend on preference shares, waiver of penal interest etc. The conditions as stipulated by CDR EG while sanctioning Rework Package have been complied with by the Company. Accordingly, the impact of the rework package has been considered in the Financial Statements.

(b) Subsequent to the implementation of Rework Package, lenders have reset the rate of interest on certain loans in view of improved performance of the Company.

(c) Further, lenders have the right to claim recompense from the Company on account of various sacrifices & waivers made by them in the CDR Rework Package. The amount of recompense and the manner of repayment shall be ascertained upon exit from CDR mechanism by the Company.

NOTE 6 Pursuant to the disinvestment by the Government of India, the Company had acquired 11,10,000 equity shares of Rs.100/- each of HTL Limited representing 74% of its equity capital at total consideration of Rs. 55.00 crore in terms of Shareholders Agreement dated 16.10.2001. The above consideration paid by the Company is subject to post closing adjustments on account of difference in net worth of HTL Limited as on 31.03.2001 and as on the date of purchase of shares in terms of Share Purchase Agreement dated 16.10.2001. The Company has submitted its claim on account of Closing Date Adjustment to the Government in respect of such reduction in net assets of HTL Limited which has not been settled by the Government. Due to this, the Company has invoked the provisions of the Share Purchase Agreement for settlement of dispute by Arbitration. The Hon''ble Arbitral Tribunal has since given the award in favour of the Company on 12th October, 2007 upholding the claim of the Company on account of the above to the extent of Rs.55.00 crore and interest from the date of award till actual date of payment. The said award has been upheld by the single Judge of Hon''ble High Court of Delhi on 5th December, 2012 and again by the Division Bench on 25th February, 2013. SLP filed by DoT against Order of Division Bench of Hon''ble High Court of Delhi was also dismissed on 1 st November, 2013, by the Hon''ble Supreme Court of India. The Review Petition filed by DoT was also dismissed on 16th January, 2014 by the Hon''ble Supreme Court of India. However, the consequential effect has not been given in the books of accounts as DoT is entitled to file Curative Petition before Hon''ble Supreme Court of India.

NOTE 7 The Company had made payment of Rs.9.70 crore (Previous year Rs.0.24 crore) to certain Cumulative Redeemable Preference Shareholders as per contractual obligations. The said amount has been shown as "advances recoverable in cash or kind or for value to be received".

NOTE 8 Payment made to lenders towards guarantee contract/obligation amounting to Rs.Nil on behalf of associates companies (Previous year 9.82 crore) has been accounted for under the head Exceptional items.

NOTE 9 In accordance with the Company''s Policy, the Company has reviewed the outstanding receivables and has written off a sum of Rs.87.14 crore during the year as bad, which in the opinion of the Management is adequate.

NOTE 10 During the year, Company has recognised the following amounts in the financial statements as per Accounting Standard 15 (Revised) "Employees Benefits" issued by the ICAI:

b) Defined Benefit Plan

The employees'' gratuity fund scheme is partially managed by HDFC Standard Life Insurance Company Limited which is a defined benefit plan. The present value of obligation is determined based on actuarial valuation using the Projected Unit Credit Method, which recognises each period of service as giving rise to additional unit of employee benefit entitlement and measures each unit separately to build up the final obligation and the obligation for leave encashment is recognised in the same manner as gratuity.

NOTE 11 The Company has carried out Impairment Test on its Fixed Assets as on 31.3.2014 and the Management is of the opinion that there is no asset for which impairment is required to be madeasperAccountingStandard-28on Impairment of Assets issued by the ICAI. (Previous year Rs. Nil)

NOTE 12 The Board of Directors has recommended a dividend of Rs. 6.50 p.a. on each 80,50,000 Cummulative Redeemable Preference Shares of Rs. 100/- each for the period from 1 st January, 2011 to 31 st March, 2014. The dividend for the financial year 2010-11 would be proportionate which is Rs. 1.60 per Preference Share.

NOTE 13 As required by Accounting Standard 18 "Related Party Disclosures"

(i) Name and description of related parties.

Relationship Name of Related Party

(a) Subsidiaries: HTLLtd. Moneta Finance Pvt. Ltd.

(b) Associates: Microwave Communications Ltd.

Exicom Tele-systems Ltd.

HFCL Satellite Communications Ltd.

HFCL Dacom Infochek Ltd.

HFCL Bezeq Telecom Ltd.

Westel Wireless Ltd.

Polixel Security Systems Pvt. Ltd.

DragonWave HFCL India Pvt. Ltd.

ANM Enginnering and Works Pvt. Ltd.

NextWave Communications Pvt. Ltd.

(c) Key management personnel : Mr. Mahendra Nahata

Mr. Arvind Kharabanda

Note : Related party relationship is as identified by the Company and relied upon by the auditors.

(a) Primary segment information

The Company''s operations primarily relates to manufacturing of telecom products, executing turnkey contracts and providing services relating thereto. Accordingly segments have been identified in line with Accounting Standard on Segment Reporting ''AS-17''. Telecom products and Turnkey contracts and services are the primary business segments whereas Others constituting less than 10% of the segment revenue/results/assets and accordingly have been considered as other business segments and are disclosed in the financial statements. Details of business segments are as follows:

(b) Secondary segment information

The Company caters mainly to the needs of Indian market and the export turnover being 0.72% (Previous year 0.02%) of the total turnover of the Company, there are no reportable geographical segments.

NOTE 14 Details of business advances outstanding from Subsidiary for the year ended 31st March, 2014 - Disclosure required under Clause 32 of the

NOTE 15 Derivative Instruments

a) The Company uses foreign currency forward contracts to hedge its risks associated with foreign currency fluctuations relating to certain firm commitments and forecasted transactions. The use of foreign currency forward contracts is governed by the Company''s strategy, which provides principles on the use of such forward contracts consistent with Company''s Risk Management Policy. The Company does not use forward contracts for speculative purposes.

NOTE 16 Previous year figures have been regrouped/reclassified wherever necessary and the figures have been rounded off to the nearest rupees in lakh. NOTE 52 Value of imported and indigenous raw material and stores & spares consumed


Mar 31, 2013

As at As at 31.03.2013 31.03.2012

01 Contingent Liabilities not provided for in respect of :

(a) Unexpired Letters of Credit (margin money paid Rs.18,155 ; Previous year 18,155 125,214 Rs.70,000)

(b) Guarantees given by banks on behalf of the Company (margin money kept by 329,274 338,176 way of fxed deposits Rs.106,424; Previous year Rs.147,919)

(c) Counter Guarantees given by the Company to the fnancial institutions/banks for 201,591 1,374,331 providing guarantees on behalf of companies promoted by the Company. (margin money kept by the banks by way of fxed deposits Rs.Nil ; Previous year Rs Nil)

(d) Arrears of Dividend on Cumulative redeemable preference shares 189,013 136,688

The Company has received necessary approval from the Central Government (CG) for the re-appointment and payment of remuneration to Wholetime Directors for the Financial Year 2007-08, 2008-09 and part Financial Year 2009-10 for Rs.27,464.The Company also fled the necessary Applications with the CG seeking their approval for re-appointment and payment of remuneration to Wholetime Directors for remaining part of the Financial Year 2009-10 and onwards which have not been approved by the CG in absence of "no objection letter" from the lenders. Accordingly a sum of Rs.41,144 being the excess amount paid for the aforesaid period continuous to be shown as recoverable. The working capital lenders have authorised IDBI Bank Ltd. (IDBI) to issue ‘no objection letter'' (NOC) for payment of managerial remuneration to whole time directors for the aforesaid period which has since been received from IDBI. The Company will now fle its representation with the CG for seeking their approval for the balance amount of remuneration. However, pending approval from the Central Government, the said amount, subsequent to Balance Sheet date, has been recovered from the respective Directors.

02 Interest charges on loans is net of Interest income from loans and advances amounting to Rs.4,515 (Previous year Rs.4,282).

03 Debt of the Company were earlier restructured under Corporate Debt Restructuring (CDR) mechanism in April 2004 which was subsequently modifed in June 2005 with cut-off date as 1st April, 2005. CDR Empowered Group at its meeting held on 9th February, 2011 has approved the reworked package of the Company with the cut off date as 1st January 2011 and communicated its sanction vide their letter No. BY CDR(JCP)/No 8643/2010-11 dated 29.03.2011. The reworked package includes interalia reduction in the existing rate of interest, re-schedulement for repayment of loans, conversion of overdue interest into funded interest term loan (FITL), conversion of Zero Coupon Premium Bonds (ZCPB''s), part of their premium and part of working capital loans into Equity, conversion of part of working capital loan into working capital Term Loan (WCTL), waiver of unpaid dividend on preference shares, waiver of penal interest etc. The conditions as stipulated by CDR EG while sanctioning Rework Package have been complied with by the Company. Accordingly, the impact of the reworked package has been considered in the Financial Statement.

04 Pursuant to the disinvestment by the Government of India, the Company had acquired 11,10,000 equity shares of Rs.100/- each of HTL Limited representing 74% of its equity capital at total consideration of Rs. 550,000 in terms of Shareholders Agreement dated 16.10.2001. The above consideration paid by the Company is subject to post closing adjustments on account of difference in net worth of HTL Limited as on 31.03.2001 and as on the date of purchase of shares in terms of Share Purchase Agreement dated 16.10.2001.The Company has submitted its claim on account of Closing Date Adjustment to the Government in respect of such reduction in net assets of HTL Limited which has not been settled by the Government. Due to this, the Company has invoked the provisions of the Share Purchase Agreement for settlement of dispute by Arbitration. The Hon''ble Arbitral Tribunal has since given the award in favour of the company on 10th October, 2007 upholding the claim of the company on account of the above to the extent of Rs.550,000 and interest from the date of award. The said award has been upheld by the Divisional Bench of Hon''ble High Court of Delhi on 25th February, 2013, however, the consequential effect has not been given as DoT is entitled to appeal against said order before Hon''ble Supreme Court of India.

05 The Company had made payment of Rs.2,400 (Previous year Rs.2,400) to certain cumulative redeemable preference shareholders as per contractual obligations in the earlier years. The said amount paid have been shown as "advances" to be adjusted against future expected liability of dividend on cumulative preference shares.

06 Payment made to lenders towards guarantee contract/obligation amounting to Rs.98,187 including associate company (Previous year Rs.59,500) has been accounted for under the head Exceptional items.

07 In accordance with the Company Policy, the company has reviewed the outstanding receivables and is in continuous process of working out different modalities of recovery. The Company has also written off a sum of Rs. 303,007 during the year, which in the opinion of the Management, is adequate.

08 During the year, Company has recognised the following amounts in the fnancial statements as per Accounting Standard 15 (Revised) "Employees Benefts" issued by the ICAI:

09 The Company has carried out Impairment Test on its Fixed Assets as on 31.3.2013 and the Management is of the opinion that there is no asset for which impairment is required to be made as per Accounting Standard-28 on Impairment of Assets issued by ICAI . (Previous year Rs. Nil)

10 Lease payments under cancellable operating leases have been recognised as an expense in the proft & loss account. Maximum obligation on lease amount payable as per rentals stated in respective agreements are as follows:-

11 Segment Reporting

(a) Primary segment information

The Company''s operations primarily relates to manufacturing of telecom products, executing turnkey contracts and providing services relating thereto. Accordingly segments have been identifed in line with Accounting Standard on Segment Reporting ''AS-17'' .Telecom products and Turnkey contracts and services are the primary business segments whereas Others constituting less than 10% of the segment revenue/results/assets and accordingly have been considered as other business segments and are disclosed in the fnancial statements. Details of business segments are as follows:

12 Previous period''s fgures have been regrouped/reclassifed wherever necessary and the fgures have been rounded off to the nearest rupee.


Mar 31, 2012

A Equity Shares

(i) 278,180 (Previous year 278,180) shares of Re. 1/- each represent Global Depository Receipts.

(ii) 14,550,000 (Previous year 14,550,000) shares of Re. 1/- each issued for consideration other than cash pursuant to the amalgamation of erstwhile Himachal Telematics Ltd. with the Company.

(iii) The Company on 10th April 2006, further allotted 100B to F Series Foreign Currency Convertible Bonds (FCCBs) of USD 100,000 each fully paid up aggregating to USD 10 million. Each FCCB has been converted into 168,620 fully paid up equity shares of face value of Rs.10 each at a premium of Rs.16.45 per equity share ( At a total price of Rs.26.45 per share).

(iv) 529,601,640 shares of Re. 1/- each have been allotted for a consideration other than cash pursuant to the Composite Scheme of Arrangement and Amalgamation between Sunvision Engineering Company Private Limited (SECPL) its share holders and the Optionally Convertible Debenture (OCD) holders and the Company and its shareholders sanctioned by the Hon'ble High Court of Himachal Pradesh at Shimla vide its order passed on 5 th January, 2011.

B Preference Shares

The Cumulative Redeemable Preference Shares (CRPS) aggregating to Rs. 805,000 shall be redeemed at the rate of 25% and 75% of the face value in the financial years ending 31st March 2018 and 31st March, 2019, respectively and will carry the coupon rate of 6.50% from new cut off date i.e. 1st January 2011. However, dividend accrued on notional basis, as same has not been declared and fallen due for payment, and penal interest thereon, till the cut-off date, stands waived as per CDR rework package.

C Terms/right attached to Equity/Preference Shares

The Company has issued equity share of Re.1/- each and preference share of Rs.100/- each. On a show of hands, every holder of equity shares is entitled for one vote and upon a poll shall have voting rights in proportion to the shares of the paid up capital of the Company held by them. Preference shareholders shall have voting right in proportion to the shares of the paid up capital provided if the dividend due on such capital or any part of such dividend has remained unpaid. The Company declares dividend, if any, in Indian Rupees. The dividend, if any, proposed by the Board of Directors is subject to the approval of shareholders in the Annual General Meeting. In the event of liquidation of the Company, the holders of equity shares will be entitled to receive remaining assets of the company, after distribution of all preferential amount in proportion to their shareholdings.

Secured Long Term Borrowings

a) Term loan of Rs.791,043 (Previous year Rs.791,043) from financial institution and Funded interest term loan of Rs.339,154 (Pre- vious year Rs. 450,022) are secured on pari passu basis by way of first charge on all the immovable properties, both present and future, by way of equitable mortgage and first charge on the entire sales proceeds of the contracts covered under the aforesaid loan to be credited to the Escrow/designated account.

b) Term loan of Rs.233,541 (Previous year Rs.233,541) from a bank, Working capital term loan of Rs.182,010(Previous year Rs.182,010) and Funded interest term loan of Rs.310,600 (Previous year Rs. 361,614) are secured by way of pledge of shares/ Bonds/Units and also secured on pari passu basis by way of hypothecation of stocks of raw materials, finished and semi- finished goods, stores and spares, book debts etc. as well as by way of second charge on immovable properties pertaining to the Com- pany.

c) Working capital term loans of Rs.250,800 (Previous year Rs.134,941) from banks and Funded interest term loans of Rs.207,800 (Previous year Rs.143,900) are secured on pari passu basis by way of hypothecation of stocks of raw materials, finished and semi- finished goods, stores and spares, book debts etc. as well as by way of second charge on immovable properties pertaining to Wireline, Wireless and Cable divisions of the Company.

d) Pursuant to the rework CDR package, some of the loans amounting to Rs.24,30,301 have been converted into Equity shares of the Company at a price of Rs.9.84 per equity share as per SEBI guidelines, after complying with necessary formalities in this regard. In the previous year pending completion of such formalities the said amount of Rs.24,30,301 was shown as " Loans pending conversion into Equity" under the head "Loan Funds".

e) All the secured loans as stated above are also personally guaranteed by Managing Director of the Company.

f) Term loans are repayable in 7 years commencing from Financial year 2012-13 with rate of Interest @10% p.a. and Interest free Funded interest term loans are repayable in three equal annual installments commencing from December 31, 2016, as detailed here in below:

a) Working capital loans from banks aggregating to Rs.363,504 (Previous year Rs. 534,300) are secured on pari passu basis by way of hypothecation of stocks of raw materials, finished and semi- finished goods, stores and spares, book debts etc. as well as by way of second charge on immovable properties pertaining to Wireline, Wireless and Cable divisions of the Company.

b) Other loans amounting to Rs. Nil (Previous year Rs.123) are secured by way of hypothecation of assets under hire purchase agreements.

As at As at 31.03.2012 31.03.2011

1 Contingent Liabilities not provided for in respect of :

(a) Unexpired Letters of Credit (margin money paid Rs.70,000 ; Previous year Rs.20,511) 125,214 15,702

(b) Guarantees given by banks on behalf of the Company (margin money kept by way 338,176 478,992 of fixed deposits Rs.147,919; Previous year Rs.168,812)

(c) Counter Guarantees given by the Company to the financial institutions/ banks for providing 1,374,331 1,374,331* guarantees on behalf of companies promoted by the Company. (margin money kept by the banks by way of fixed deposits Rs. Nil ; Previous year Rs Nil)

(d) Arrears of Dividend on Cumulative redeemable preference shares 137,937 400,513

* This excludes Company's counter guarantees of Rs.56.70 crore in respect of guarantees provided by the banks and institutions on behalf of HFCL Bezeq Telecom Ltd. for bid bonds to Department of Telecommunications (DoT) towards tender for operation of basic telephone services as the guarantees have already expired and the Hon'ble Delhi High Court vide its order dated 19.09.97 granted permanent injunction restraining the DoT from invoking the said guarantees. The appeal filed by DoT against this also stands dismissed as per order dated 02/01/2012. The Hon'ble High Court has further directed the banks to treat the said bank guarantee(s) as discharged.

2 Estimated amount of contracts remaining to be executed on capital account and not 78,138 51,625 provided for (net of advances)

3 Claims against the Company towards sales tax, income tax and others in dispute not acknowledged 100,903 100,903 as debt (deposited under protest Rs.5,000 shown as advance)

4 The Company has received necessary approval from the Central Government for the re-appointment and payment of remuneration to Wholetime Directors for the Financial Year 2007-2008, 2008-09 and part Financial Year 2009-10 for Rs.27,464.The Company has also filed the necessary application with the Central Government seeking their approval for re-appointment and payment of remuneration to Wholetime Director for remaining part of the Financial Year 2009-10 and onwards which has not been approved by the Central Government. However, since the Financial Year 2007-08, the company has so far paid Rs.64,396 as remuneration to Whole time Directors. As the approval of Central Government received is of lesser amount than the actual amount paid for the aforesaid period, the excess amount of Rs.36,932 paid continues to be shown as recoverable. The Company is in the process of making representation to the Central Government for seeking their approval for the entire amount of remuneration paid to them.

5 Interest charges on loans is net of Interest income from loans and advances amounting to Rs.4,282 (Previous year Rs.122,333) .

6 (a) Debt of the Company were earlier restructured under Corporate Debt Restructuring (CDR) mechanism in April 2004 which was subsequently modified in June 2005 with cut-off date as 1st April, 2005. CDR Empowered Group at its meeting held on 9th February, 2011 has approved the Rework package of the Company with the cut off date as 1st January 2011 and communicated its sanction vide their letter No. BY CDR(JCP)/No 8643/2010-11 dated 29.03.2011. The Rework package interalia includes reduction in the existing rate of interest, re-schedulement for repayment of loans, conversion of overdue interest into funded interest term loan (FITL), conversion of Zero Coupon Premium Bonds (ZCPB's), part of their premium and part of working capital loans into Equity, conversion of part of working capital loan into working capital Term Loan (WCTL), waiver of unpaid dividend on preference shares, waiver of penal interest etc. The said CDR package also stipulates arrangement of additional infusion of funds by the promoters.

(b) The Company has created securities as stipulated by the CDR Empowered Group and complied with all other terms and conditions except execution of pledge of shares in favour of the lenders. The execution of pledge of shares as stipulated in CDR rework package which is in process. Accordingly, during the year:

i) In terms of CDR rework package, Secured working capital loans from banks amounting to Rs.165,201 Zero Coupon Premium Bonds (ZCPBs) amounting to Rs.19,50,700 and the premium of Rs.3,14,400 accrued on these ZCPB's till cut off date have been converted into equity shares of face value of Re.1/-each at a price of Rs.9.84 per equity share as per SEBI guidelines.

ii) Subsequent to the individual sanctions & reconciliation with working capital lenders, a sum of Rs.120,800 (Previous period Rs.235,604) out of working capital loan have been converted into working capital term loans (WCTL) and the same is to be repaid in 84 monthly installments commencing from 30th April 2012.

iii) Subsequent to the individual sanctions & reconciliation with working capital lenders, a sum of Rs.63,900 (Previous period Rs.793,654) being interest accrued and due up to the cut off date on working capital loans have been converted into Funded Interest Term Loan (FITL) and which is repayable in three equal annual installments commencing from 31st December 2016 onwards and shall not carry any interest.

(c) The Company is in process of reconciliation of balances with one of the bank. Adjustments, if any, on account of interest/ principal will be made when the same stands reconciled and confirmed.

7 Pursuant to the disinvestment by the Government of India, the Company had acquired 1,110,000 equity shares of Rs.100/- each of HTL Limited representing 74% of its equity capital at total consideration of Rs. 550,000 in terms of Shareholders Agreement dated 16.10.2001. The above consideration paid by the Company is subject to post closing adjustments on account of difference in net worth of HTL Limited as on 31.03.2001 and as on the date of purchase of shares in terms of Share Purchase Agreement dated 16.10.2001.The Company has submitted its claim on account of Closing Date Adjustment to the Government in respect of such reduction in net assets of HTL Limited which has not been settled by the Government. Due to this, the Company has invoked the provisions of the Share Purchase Agreement for settlement of dispute by Arbitration. The Hon'ble Arbitral Tribunal has since given the award in favour of the company on 10th October, 2007 upholding the claim of the company on account of the above to the extent of Rs.550,000 and interest from the date of award.

Since the Government of India has gone in appeal against the above arbitral award which is yet to be decided by the Hon'ble High Court, no adjustment has been made in the accounts in respect of above award pending the final outcome.

8 The Company had made payment of Rs.113,375 to certain cumulative preference shareholders as per contractual obligations in the earlier years. Pursuant to the CDR rework package some of the preferential share holders has adjusted a sum of Rs.110,975 against the contractual liability and waived the balance dues. Accordingly, a sum of Rs.110,975 has been written off and the balance amount of Rs.2,400 (previous year 113,375) has been shown as "advances" to be adjusted against future expected liability of dividend on cumulative preference shares.

9 Exceptional items consists of (i) Payment made to lenders towards guarantee contract/obligation amounting to Rs.59,500 including promoted companies (Previous period 64,500) (ii) Written back of liabilities / waiver under rework package of CDR and on account of One Time Settlement of some of the of the lenders Rs. NIL (Previous period Rs.2,677,977).

10 Sundry debtors include debts outstanding for more than two years amounting to Rs.2,417,161. The Company is in continuous process of working out different modalities of recovery for its remaining long outstanding debts. Pending outcome of such exercise, an amount of Rs.83,507 has been written off during the year, which is in opinion of the management is adequate.

11 During the year, Company has recognised the following amounts in the financial statements as per Accounting Standard 15 (Revised) "Employees Benefits" issued by the ICAI :

a) Defined Contribution Plan

Contribution to Defined Contribution Plan, recognised are charged off for the year/period as under :

b) Defined Benefit Plan

The employees' gratuity fund scheme managed by HDFC Standard Life Insurance Company Limited is a defined benefit plan. The present value of obligation is determined based on actuarial valuation using the Projected Unit Credit Method, which recognises each period of service as giving rise to additional unit of employee benefit entitlement and measures each unit separately to build up the final obligation and the obligation for leave encashment is recognised in the same manner as gratuity.

12 The Company has carried out Impairment Test on its Fixed Assets as on 31.03.2012 and the Management is of the opinion that there is no asset for which impairment is required to be made as per Accounting Standard-28 on Impairment of Assets issued by ICAI . (Previous period Rs.795,275 has been impaired )

13 Lease payments under cancellable operating leases have been recognised as an expense in the profit & loss account. Maximum obligation on lease amount payable as per rentals stated in respective agreements are as follows:-

14 Balances of some of the sundry debtors, creditors, lenders ,loans and advances are subject to confirmations from the respective parties and consequential adjustments arising from reconciliation, if any. The Management, however is of the view that there will be no material adjustments in this regard.

15 Segment Reporting

(a) Primary segment information

The Company's operations primarily relates to manufacturing of telecom products, executing turnkey contracts and providing services relating thereto. Accordingly segments have been identified in line with Accounting Standard on Segment Reporting 'AS- 17' .Telecom products and Turnkey contracts and services are the primary business segments whereas others constituting less than 10% of the segment revenue/results/assets and accordingly have been considered as other business segments and are disclosed in the financial statements. Details of business segments are as follows:

Note: 1. The above information and that given in Note No. 7 ' Trade payable' regarding Micro, Small and Medium Enterprises has been determined on the basis of information available with the Company and has been relied upon by the auditors.

Note: 2. The Company is in process of compiling relevant information for the period from its suppliers, since the information is not ready, no disclosure have been made in accounts. However, in view of the management, the impact of interest, if any, that may be payable is not expected to be material.

16 Earning per Share (EPS)- In accordance with the Accounting Standard (AS-20)

17 The figures of the current year are not comparable with those of previous period as current year is for Twelve months as against six months for previous period. Previous period's figures have been regrouped/reclassified wherever necessary and the figures have been rounded off to the nearest rupee.


Mar 31, 2011

(Rs. in thousands) 1. The Company has opted for the period of current financial year as six months from 1st October, 2010 to 31st March 2011. During the previous year, Registrar of Companies, Punjab, Himachal Pradesh and Chandigarh (ROC) vide its order dated 4th May, 2010 had granted the permission to the Company to prepare the annual accounts for a period of eighteen months ending 30th September, 2010.

As at As at 31.03.2011 30.09.2010

2. Contingent Liabilities not provided for in respect of :

(a) Unexpired Letters of Credit (margin money paid Rs. 20,511; Previous year 15,702 24,348 Rs. 44,745)

(b) Guarantees given by banks on behalf of the Company (margin money kept 4,78,992 4,15,295 by way of fixed deposits Rs. 168,812; Previous year Rs. 104,422)

(c) Counter Guarantees given by the Company to the financial institutions/banks 13,74,331* 19,15,672* for providing guarantees on behalf of companies promoted by the Company. (margin money kept by the banks by way of fixed deposits Rs. Nil ; Previous year Rs. Nil)

* This excludes Company’s counter guarantees of Rs. 567,000 in respect of guarantees provided by the banks and institutions on behalf of HFCL Bezeq Telecom Ltd. for bid bonds to Department of Telecommunications (DoT) towards tender for operation of basic telephone services as the guarantees have already expired and the Hon’ble Delhi High Court vide its order dated 19.09.97 granted permanent injunction restraining the DoT from invoking the said guarantees. The appeal fled by DoT against this also stands dismissed. The DoT has fled application for restoration of appeal before the Double Bench of the Hon’ble High Court of Delhi which has been allowed and matter is now pending for decision.

* The Company has received necessary approval from the Central Government for the re-appointment and payment of remuneration to Wholetime Directors for the Financial year 2007-08, 2008-09 and part financial year of 2009-10 for Rs. 27,464. The Central Government has not given its approval for remuneration paid to Managing Director for the period from 1st October, 2010 to 31st March, 2011. However, since the financial year 2007-08, the Company has so far paid Rs. 52,772 as remuneration to Wholetime Directors. As the approval of Central Government received is of lesser amount than the actual remuneration paid for the aforesaid period, the excess amount of Rs. 25,308 paid continues to be shown as recoverable. The Company is in the process of making representation to the Central Government for seeking their approval for the entire amount of remuneration paid to them. The Company also fled necessary application with the Central Government seeking their approval for re-appointment and payment of remuneration to Wholetime Director for financial year 2009-10 and onwards which is under their consideration.

3. Interest charges on loans is net of Interest income from loans and advances amounting to Rs. 122,333 (Previous year Rs. 145,483).

4. a Debt of the Company were earlier restructured under Corporate Debt Restructuring (CDR) mechanism in April 2004 which was subsequently modified in June 2005 with cut-off date as 1st April, 2005. Because of liquidity problems and due to inadequate working capital funds, the Company had again approached its lenders viz. Banks and Financial Institutions for Rework of earlier sanctioned restructuring package. CDR Empowered Group at its meeting held on 9th February, 2011 has approved the Rework package of the company with the cut off date as 1st January 2011 and communicated its sanction vide their letter No. BY CDR(JCP)/No 8643/2010-11 dated 29.03.2011. The Rework package includes interalia reduction in the existing payable rate of interest, reschedulement and longer period for repayment of loans, conversion of overdue interest into funded interest term loan (FITL), conversion of Zero Coupon Premium Bonds (ZCPB’s), part of their premium and part of working capital loans into Equity, conversion of part of working capital loan into working capital Term Loan (WCTL), waiver of unpaid dividend on preference shares, waiver of penal interest etc. The said CDR package also stipulates conditions to be complied with by the Company and arrangement of additional infusion of funds from promoters.

b The Company has complied with most of the conditions as stipulated in CDR Rework package. Accordingly, the impact of CDR Scheme as above has been incorporated in these financial statements as below:

i) Interest to banks and financial institutions w.e.f. cut off date has been accounted for at the rates specified in the said package.

ii) The Cumulative Redeemable Preference Shares (CRPS) aggregating to Rs. 805,000 shall be redeemed at the rate of 25% and 75% of the face value in the financial years ending 31st March 2018 and 31st March, 2019, respectively and will carry the coupon rate of 6.50% from new cut off date i.e. 1st January 2011. However, dividend accrued on notional basis, as same has not been declared and fallen due for payment, and penal interest thereon, till the cut-off date, shall be waived. (Also refer Note no. 9 (c ) below)

iii) Zero Coupon Premium Bonds (ZCPBs) amounting to Rs. 1,950,700 shall be converted into equity shares of face value of Rs. 1/-each at a price to be arrived at as per SEBI guidelines. Accordingly Equity shares equal to Rs. 1,950,700 divided by such arrived at price shall be allotted to the holders of ZCPBs after necessary compliance & formalities. Out of the total premium of Rs. 1,189,781 accrued on these ZCPBs till cut off date, a sum of Rs. 314,400 shall also converted into equity share of face value of Rs. 1/- each at a price to be arrived at as per SEBI guidelines. According Equity shares equal to Rs. 314,400 divided by such arrived at price shall be allotted to the holders of ZCPBs after necessary compliance & formalities and balance amount of premium of Rs. 875,381 has been waived. The amount of premium waived which was earlier adjusted from security premium account in earlier years has now been reversed.

iv) Secured and unsecured working capital loans from banks amounting to Rs. 240,545 have been converted into working capital term loans (WCTL) which together with existing WCTL of Rs. 76,406 have been reschedule so as to be repaid in 84 monthly installments, commencing from 30th April 2012 and ending 31st March 2019.

v) Secured working capital loans from banks amounting to Rs. 170,142 shall be converted in to equity shares of face value of Rs. 1/- each at a price to be arrived at as per SEBI guidelines. Accordingly equity shares equal to Rs. 170,142 divided by such arrived at price shall be allotted to the respective lenders after necessary compliance & formalities.

vi) The outstanding principal amount of secured loan amounting to Rs. 1,024,584 from financial institutions and banks have been rescheduled so as to be repaid in 84 monthly installments commencing from 30th April, 2012 and ending 31st March 2019 on flat interest rate of 10% p.a. from cut off date.

vii) Funded Interest Term Loans (FITL) amounting to Rs. 647,346 have been settled at 25% on one time settlement basis. One time settled amount of Rs. 161,836 is payable by 30th September 2011. The balance 75% of FITL i.e. Rs. 485,509 has been waived off and shown under the head other income as waiver of loans & writes back of liability.

viii) Interest accrued and due on simple interest basis amounting to Rs. 506,500 up to the cut off date on the term loans have been converted into Funded Interest Term Loan (FITL) and is to be repaid in three equal installments on 31st December 2016, 31st December 2017 and 31st December 2018 and shall not carry any interest. Balance amount of outstanding interest as on cut off date, comprising of liquidated damages etc. amounting to Rs. 83,294 has been waived and shown under the head other income as waiver of loans & writes back of liability.

ix) Interest accrued and due on simple interest basis amounting to Rs. 287,200 up to the cut off date on working capital loans have been converted into Funded Interest Term Loan (FITL) and is to be repaid in three equal installments on 31st December 2016, 31st December 2017 and 31st December 2018 and shall not carry any interest. Balance amount of outstanding interest as on cut off date, comprising of liquidated damages etc. amounting to Rs. 63,928 has been waived and shown under the head other income as waiver of loans & writes back of liability.

x) The Company has to create securities as stipulated by the CDR Empowered Group.

xi) One of the working capital lender having total outstanding of Rs. 157,226 as at 31.03.2011 has not agreed to the restructuring granted by CDR empowered group. However, the Company is in discussion with the lender for fresh proposal which is under consideration.

c Some of the Cumulative Redeemable Preference Share (CRPS) shareholders have disputed the modified terms of redemption and rate of dividend as per CDR package on the ground that they have not agreed to any of the restructuring granted by CDR empowered group and hence original terms and conditions of 12% CRPS continues to be in force and accordingly are insisting for redemption and dividend as per the original terms of the issue of CRPS. One of the preference shareholder has earlier fled case against the company for recovery. The Company is in the advance stage of negotiation with these CRPS holders to accord their approval to reworked package approved under CDR system in view of the present financial position of the Company.

d The company is in process of reconciliation of balances with the lenders i.e. financial institutions and banks. Adjustments, if any, on account of interest/ principal will be made when the same are confirmed by them.

e The Company had settled the dues of certain lender/suppliers on One Time Settlement (OTS) basis and made the final payment of settled amount during the current period. The gain arising out of such OTS has been accounted for during the current period under the head other income as waiver of loan, interest thereon and write backs. The provision for premium on Zero Coupon Premium Bond issued to lender amounting to Rs. 641,349 which was adjusted from security premium account in earlier years has been now reversed.

f Pursuant to the rework of CDR package, some of the loans amounting to Rs. 2,435,242, are to be converted into Equity shares of the Company at a price to be arrived at as per SEBI guidelines, after complying with necessary formalities in this regard. Pending completion of such formalities the amount of Rs. 2,435,242 has been kept as " Loans pending conversion into Equity" and shown under the head "Loan Funds".

5. 529,601,640 equity share of Rs. 1/- each have been issued & allotted as on 10th February, 2011 pursuant to the Arrangement & Amalgamation to the shareholders and Optionally Convertible Debenture (OCD) holders of erstwhile Sunvision Engineering Company Private Limited (SECPL) this amount was shown as ‘Equity Share Suspense Account’ as on 30.09.2010.

6. Pursuant to the disinvestment by the Government of India, the Company had acquired 1,110,000 equity shares of Rs.100/- each of HTL Limited representing 74% of its equity capital at total consideration of Rs. 550,000 in terms of Shareholders Agreement dated 16.10.2001. The above consideration paid by the Company is subject to post closing adjustments on account of difference in net worth of HTL Limited as on 31.03.2001 and as on the date of purchase of shares in terms of Share Purchase Agreement dated 16.10.2001.The Company has submitted its claim on account of Closing Date Adjustment to the Government in respect of such reduction in net assets of HTL Limited which has not been settled by the Government. Due to this, the Company has invoked the provisions of the Share Purchase Agreement for settlement of dispute by Arbitration. The Hon’ble Arbitral Tribunal has since given the award in favour of the company on 10th October, 2007 upholding the claim of the company on account of the above to the extent of Rs. 550,000 and interest from the date of award.

Since the Government of India has gone in appeal against the above arbitral award which is yet to be decided by the Hon’ble High Court, no adjustment has been made in the accounts in respect of above award pending the final outcome.

7. The Company had made a payment of Rs. 113,375 to certain cumulative preference shareholders as per contractual obligations in the earlier years. The said amounts paid have been treated as "advances" to be adjusted against future expected liability of dividend on cumulative preference shares.

8. Dividend on 6,500,000 equity shares of AB Corp Ltd. which are pledge with OBC (e- GTBL), amounting to Rs. 39,000 has not been received by the Company. The same is under reconciliation and shall be accounted for after completion of reconciliation.

9. During the year, the Company has transferred a sum of Rs. 1,432,715 to Loans & Advances from the carrying amount of its investment in Optionally Fully Convertible Debentures (OFCDs), as per the agreed terms with respective investee companies, since the Company has not exercised its conversion option and said OFCDs had become overdue for redemption. An amount of Rs.1,132,715 had already been provided in the accounts in earlier years towards diminution in value of these OFCDs.

10. Profit on sales of Investment (net) includes Rs. 60 being Profit on sales of OFCD’s, [Sale proceeds of OFCDs Rs. 60 Less (cost in books Rs. 2,700,757) less (Provision already made in earlier years for diminution in value Rs. 2,700,757) ].

11. During the period the Company has paid Guarantee contract/obligation amounting to Rs. 64,500 towards obligation payments ( as Corporate guarantor ) to the lenders of promoted companies against their over dues.

12. Sundry debtors include debts outstanding for more than two years amounting to Rs.v2,564,056. The Company is in continuous process of working out different modalities of recovery for its remaining long outstanding debts. Pending outcome of such exercise, an amount of Rs. 614,203 has been written off during the period, which is in opinion of the management is adequate.

13. Pursuant to the Accounting Standard (AS-28) - Impairment of Assets issued by ICAI, the Company had appointed an outside agency for conducting an exercise of identifying the assets, if any, that may have been impaired. Based on the report Impairment loss of Rs. 795,275 has been determined on curtained fixed assets as at 31.03.2011 and the same has been provided in the accounts. The Impairment loss has been assessed on the basis of projected cash flows of Cash Generating Units (CGUs) for the next 3 years discounted at IRR of 8.5%.

14. Balances of some of the sundry debtors, creditors, lenders ,loans and advances are subject to confirmations from the respective parties and consequential adjustments arising from reconciliation, if any. The Management, however is of the view that there will be no material adjustments in this regard.

15. The fgures of the current period are not comparable with those of previous year as current period is for six months as against period of eighteen months for previous year. Previous year’s fgures have been regrouped/reclassified wherever necessary and the fgures have been rounded off to the nearest rupee.


Sep 30, 2010

A. OTHER NOTES

1 The Company has filed an application under section 210 (4) of the Companies Act, 1956 with the Registrar of Companies , Punjab, Himachal Pradesh and Chandigarh (ROC) seeking permission to extend the fi -nancial year of the Company for a period of eighteen months commencing from 1st April, 2009 to 30th September, 2010. The ROC vide its order dated 4th May, 2010 has granted the permission to the Company to prepare the annual accounts for eighteen months up to 30th September, 2010.

2 The Board of Directors of the Company in compliances with the terms of (i) letter dated 13th August, 2009 issued by CDR Cell of IDBI, (ii) Settlement Co-operation Agreement dated 12th September, 2009, (iii) SEBI order dated 3rd March, 2010 and IDBIs letter dated 30th March, 2010 at its meeting held on 30th March, 2010 has approved the sale of 32,67,05,000 equity shares and 65,00,000 Cumulative Redeemable Preference shares of HFCL Infotel Limited held by the Company to fulfi ll its obligation as stipulated in settlement co-operation agreement dated 12.09.2009. Accordingly the said shares have been sold on 31st March, 2010 and HFCL Infotel Limited has ceased to be a subsidiary of the Company w.e.f. 31st March, 2010. The loss on sale of the said investment in subsidiary of Rs.3916.05 million has been shown as extra ordinary item in the profit & Loss Account.

3 (a) The Honble High Court of Himachal Pradesh at Shimla has sanctioned the Composite Scheme of Arrangement and Amalgamation (" the Scheme") between Sunvision Engineering Company Private Limited ("SECPL", Transferrer Company), its Shareholders and Optionally Convertible Debenture holder ("OCD holder") and Himachal Futuristic Communications Limited ("HFCL", Company, Transferee Company) and its Shareholders vide its order passed on 5th January, 2011 u/s 391 to 394 of the Companies Act, 1956.The aforesaid Order has been filed with the Registrar of Companies, Punjab, Himachal Pradesh and Chandigarh (ROC) in the prescribed form no. 21 both by HFCL and SECPL, and ROC has issued a certifi cate confi rming the registration of the aforesaid Court Order on 14th January, 2011 i.e. "effective date". With the registration of the aforesaid Court Order on 14th January, 2011 (effective date), SECPL stands amalgamated with HFCL w.e.f. 1st January, 2010 (Appointed date).

(b) The objects for which SECPL had been established were to carry on the business of manufacturing, assembling, trading, repairing, installation and commissioning of various types of engineering equipments, engineering goods, infrastructural works, civil, mechanical, electrical projects, etc. The Company forayed in the business of electronic surveillance, electronic security and monitoring systems, etc. and made a strategic investment of 47.95% in Polixel Security Systems Private Limited (Polixel).

(c) Consequent upon the said scheme becoming effective, the Companys issued, subscribed and paid up equity share capital stands reduced from Rs. 4627.94 million divided into 46,27,93,697 equity shares of Rs. 10/- each to Rs. 462.79 million divided into 46,27,93,697 equity shares of Re 1/- each by reduction in face value and paid up value from Rs. 10/- per share to Re 1/- per share. Accordingly, an amount of Rs.4165.15 million being the equity capital so reduced has been credited to the Business Reconstruction Account. The ROC has also issued a necessary certifi cate under Section 103(4) of the Companies Act, 1956 on 14th January, 2011 confi rming the reduction in equity share capital of the Company.

(d) With effect from the Appointed date SECPL (Transferor Company) has been amalgamated with the Company, as a going concern, with all its assets, liabilities, properties, rights, benefits and interest therein subject to existing charges thereon in favour of banks and financial institutions. All the employees of the Transferor Company, who are in service on the effective date, shall become the employees of the Company on that date, without any break or interruption in service.

(e) In consideration for the amalgamation, 470,000,000 equity shares of face value of Re1/- each, credited as fully paid-up, in the ratio of 47(forty seven) equity shares of the face value of Re1/- each in the Company for every 1 (one) equity share of face value of Rs.10/- each held in SECPL have been allotted on 10th February, 2011 to the share holders of SECPL whose names appeared in the Register of Members, as on 9th February, 2011, being the record date. Further, upon the scheme becoming effective, 59,601,640 equity shares of Re 1/- each credited as fully paid-up have been allotted to the Optionally Convertible Debenture Holders of erstwhile SECPL.

(f) The amalgamation has been accounted for under the Purchase method prescribed by Accounting standard AS-14 " Accounting for Amalgamations " issued by the Institute of Chartered Accountants of India. Accordingly, the assets and liability of SECPL have been recorded at fair value on the appointed date.

(g) In terms of the Scheme, the Company has recorded all the assets and liabilities appearing in the books of account of SECPL and transferred to and vested in the Company at their fair values as on 1st January, 2010. For this purpose the fair value of Assets including Investments is as per the report of the independent valuers, fairness opinion on the said valuation report and based on the managements assessment of its recoverability. The difference of Rs.33.68 million between the fair value of net assets of SECPL transferred to the Company, and the fair value of equity shares allotted by the Company (the consideration) has been debited to Goodwill. The same has been written off in profit and Loss Statement.

(h) Excess of Consideration over the paid-up value of equity shares issued and allotted (as referred to under 3(e) above) amounting to Rs.4770.50 million has been credited to Securities Premium Account as prescribed in the Scheme. Further, difference between fair value and paid up value of equity shares issued and allotted to OCD holders of erstwhile SECPL (as referred to under 3(e) above) amounting to Rs.640.40 million has been credited to Securities Premium Account as prescribed in the Scheme.

i) The Company is in the process of getting the investment and other assets of SECPL transferred in its own name by the operation of law.

(j) Authorised Share Capital of the Transferee Company is total of the authorised share capital of both the Companies

4 529,601,640 equity share of Re 1/- each referred to note no. B-3(e) above have been allotted after the balance sheet date i.e. on 10th February, 2011 for a consideration other than cash pursuant to the scheme to the shareholders and the OCD holders of erstwhile SECPL and have been booked in " Equity Share Suspense" account as on 30.09.2010.

5 Pursuant to the scheme approved by the Honble high court of Himachal Pradesh vide its order dated 05 January, 2011 under section 391 to 394 of the Companies Act, 1956, (the Act), SECPL has amalgamated with Company w.e.f. 1st January, 2010. Before amalgamation SECPL was having certain investment and loans. However being a private limited company it was exempt from the provisions of section 372A of the Act. On amalgamation, the financial statements of SECPL and Company have been combined as a result of which the Company has exceeded the prescribed limit u/s 372A(1) of the Act and it has to carry on certain investment in the form of debentures at a rate of interest lower than the rate prescribed u/s 372A(3) of the Act. The above situation has arisen only on account of amalgamation as per the scheme approved by the Honble High Court.

The Company has been legally advised that in above situation it would not be deemed to have violated the provisions of section 372A(1) and (3) of the Act.

As at As at 30.09.2010 31.03.2009 (Rs. in millions) (Rs. in millions)

6 Contingent Liabilities not provided for in respect of :

(a) Unexpired Letters of Credit (margin money paid Rs.44.74 million ; Previous year Rs.2.62 million) 24.35 26.17

(b) Guarantees given by banks on behalf of the Company (margin money kept by way of fixed deposits Rs.104.42 million;

Previous year Rs.123.70 million) 415.29 440.06

(c) Counter Guarantees given by the Company to the financial institutions/banks for providing guarantees on behalf of companies promoted by the Company. (margin money kept by the banks by way of fi -xed deposits Rs. Nil ;

Previous year Rs Nil) 1,915.67* 7225.67*

* This excludes Companys counter guarantees of Rs.567.00 million in respect of guarantees provided by the banks and institutions on behalf of HFCL Bezeq Telecom Ltd. for bid bonds to Department of Telecommunications (DoT) towards tender for operation of basic telephone services as the guarantees have already expired and the Honble Delhi High Court vide its order dated 19.09.97 granted permanent injunction restraining the DoT from invoking the said guarantees. The appeal filed by DoT against this also stands dismissed. The DoT has filed application for restoration of appeal before the Double Bench of the Honble High Court of Delhi which has been allowed and matter is now pending for decision.

7 Interest charges on loans is net of Interest income from loans and advances and others amounting to Rs.145.48 million (Previous year Rs.1.01 million) .

8 (a) The Company had approached its lenders viz. Banks and Financial Institutions for financial restructuring and a financial restructuring package, has been approved under the Corporate Debt Restructuring (CDR) mechanism by the CDR Empowered Group of lenders vide letter dated 6th April ,2004. Subsequently the CDR Empowered Group in its meeting held on 8th June, 2005 has approved modifi cations to the aforesaid CDR package with the cut off date as 1st April 2005 and communicated to the company vide their letter No. BY CDR(ALB)/No 404 dated 24.06.2005.The modifi cation in the CDR package include, interalia, reduction of interest rate on loans with effect from new cut off date, re-schedulement of repayment of loans and Cumulative Redeemable Preference Shares (CRPS) and conversion of certain loan amounts into Zero Coupon Premium Bonds (ZCPBs) . The said CDR package also stipulates conditions to be complied with by the Company and arrangement of additional infusion of working capital from existing or new lenders.

(b) The Company has complied with most of the conditions as stipulated in CDR package and Master Restructuring Agreement (MRA) has been signed with the lenders. Pursuant to the modifi ed CDR package:

i) Interest to banks and financial institutions has been accounted for at the rates specifi ed in the said package.

ii) The Cumulative Redeemable Preference Shares (CRPS) aggregating to Rs. 805.00 million shall be redeemed at the rate of 25% and 75% of the face value in the financial years ending 31st March 2018 and 31st March, 2019, respectively and will carry the coupon rate of 9% from old cut off date till new cut off date and 6.50% from new cut off date. (Also refer Note no.13(d) below)

iii) The Company has issued 23,600,000 and 8,318,000 Zero Coupon Premium Bonds (ZCPBs) of Rs.100/- each on 30th October,2004 and 8th October, 2005 respectively in lieu of the part of term loans and debentures from financial institutions and banks. ZCPBs are to be redeemed in 48 monthly installments, from 30th April 2011 and ending 31st March 2015 on ballooning basis to ensure yield of 8.5% p.a. on simple interest basis by way of premium payable in 36 monthly interest free installments commencing from 30th April,2015 till 31st March, 2018.

iv) Secured and unsecured working capital loans from banks amounting to Rs. 315.00 million and Rs. 76.41 million respectively have been converted into working capital term loans to be repaid in 48 monthly installments, on ballooning basis, from 30th April, 2011 and ending 31st March, 2015 to ensure yield of 8.5% p.a. on simple interest basis..

v) The outstanding principal amount of secured and unsecured term loans (after conversion into OFCDs and ZCPBs) amounting to Rs.1316.82 million (Previous year Rs.1756.82 million) and Rs.33.50 million (Previous year Rs.131.59 million) respectively from financial institutions and banks have been rescheduled so as to be repaid on ballooning basis in monthly installments commencing from 30th April, 2007 till 31st March, 2013. The installments fallen due/repayable during the period eighteen month amounted to Rs.107.78 million (Previous year Rs.89.20 million) and Rs.3.35 million (Previous year Rs.6.71 million). Accordingly overdue installments amounting to Rs.349.95 million and Rs.11.73 million have not been paid for Secured and unsecured loans, respectively.

vi) Funded Interest Term Loan (FITL) amounting to Rs.889.68 million (Previous year Rs.889.68 million) is repayable in twenty four monthly installments commencing from 30th April, 2017 till 31st March, 2019 and shall not carry any interest.

vii) The Company is required to open and operate Trust and Retention Account and the rights, title and interest in all bank accounts have to be assigned to the lenders by way of fi rst ranking security interest.

viii) The Company has to create securities as stipulated by the CDR Empowered Group.

(c) Due to continued cash losses and very tight liquidity conditions, the company could not meet its interest and repayment obligations towards its lenders under CDR package its over due amount towards such lenders as on 30th September, 2010 is Rs.841.10 million (Previous year 556.91 million) including interest Rs.479.42 million (Previous year 394.88 million). However the company is in continuous discussions with lenders in respect of such default / possibility of further restructuring / modifi cation in the CDR package in view of this, the company does not expect withdrawal of any relief. Further, the company has submitted fresh restructuring proposal to the lenders which is under consideration

(d) Some of the Cumulative Redeemable Preference Share (CRPS) shareholders have disputed the modifi ed terms of redemption and rate of dividend as per CDR package on the ground that they have not agreed to any of the restructuring granted by CDR empowered group and hence original terms and conditions of 12% CRPS continues to be in force and accordingly are insisting for redemption and dividend as per the original terms of the issue of CRPS.

The management has requested the said CRPS shareholders to accord their approval to revised package in view of the present financial position of the company. One of the shareholders, has, however filed case against the company for recovery which is being contested.

(e) The company is in process of reconciliation of balances with the lenders i.e. financial institutions and banks. Adjustments, if any, on account of interest/ principal will be made when the same are confi rmed by them. The Company has submitted fresh restructuring proposal which has already been recommended by the lenders to the empowered group of CDR Cell.

(f) The Company has settled the dues of The Jammu & Kashmir Bank Ltd. and HDFC Bank Ltd. ( Formerly Centurion Bank of Punjab Ltd. ) on One Time Settlement (OTS) basis and the gain arising out of OTS amounting to Rs.210.67 million and Rs.391.18 million respectively has been accounted for under the head other income as remission of liability & interest thereon. Further, Rs.86.85 million being the provision for premium on Zero Coupon Premium Bond issued to the The Jammu & Kashmir Bank Ltd. which was earlier adjusted from security premium account in earlier year has been now reversed.

(g) The Company has its dues with Assets Reconstruction Company (India) Ltd (ARCIL) on One time settlement (OTS) basis and most of the commitments as per the OTS have been fulfi lled. In view of this, provision of interest on loan from ARCIL has not been made for the period from 1st July, 2010 to 30th September, 2010. The effect of the settlement will be given in the accounts after completion of all obligations.

9 The Board of Directors of the Company at their meeting held on 26th March, 2010 has allotted 20,000,000 equity shares of Rs. 10/- each at par to Asset Reconstruction Company (India) Limited on account of conversion of part of their loan into equity shares in terms of Loan Agreement dated 5th March, 2001 and letter dated 8th February, 2010 from ARCIL.

10 In terms of the modifi ed CDR package, Company has to pay interest on term loans on ballooning basis over the period 2006 to 2013 at the ballooning rates of interest from 2% to 15.5% p.a. The Company accounts for interest at the rate it is required to pay during the respective year in terms of the aforesaid package on monthly rests for this year, in place of @ 8.50% p.a. i.e. on YTM basis. Had the interest been provided for on YTM basis, the loss for the year would have been lower by Rs.172.60 million and the accumulated debit balance in the profit and Loss Account would have been higher by Rs.46.35 million.

11 Pursuant to the disinvestment by the Government of India, the Company had acquired 1,110,000 equity shares of Rs.100/- each of HTL Limited representing 74% of its equity capital at total consideration of Rs. 550.00 million in terms of Shareholders Agreement dated 16.10.2001. The above consideration paid by the Company is subject to post closing adjustments on account of difference in net worth of HTL Limited as on 31.03.2001 and as on the date of purchase of shares in terms of Share Purchase Agreement dated 16.10.2001.The Company has submitted its claim on account of Closing Date Adjustment to the Government in respect of such reduction in net assets of HTL Limited which has not been settled by the Government. Due to this, the Company has invoked the provisions of the Share Purchase Agreement for settlement of dispute by Arbitration. The Honble Arbitral Tribunal has since given the award in favour of the company on 10th October, 2007 upholding the claim of the company on account of the above to the extent of Rs.550.00 million and interest from the date of award.

Since the Government of India has gone in appeal against the above arbitral award which is yet to be decided by the Honble High Court, no adjustment has been made in the accounts in respect of above award. It shall be made as and when the appeal is decided finally.

12 The Company had made a payment of Rs.113.38 million to certain cumulative preference shareholders as per contractual obligations in the earlier years. The said amounts paid have been treated as "advances" to be adjusted against future expected liability of dividend on cumulative preference shares.

13 During the period the Company has paid Guarantee contract/obligation amounting to Rs. 69.92 million. It includes Rs. 23.12 million on account of compensation to its customers/ invocation of performance bank guarantees due to non fulfillment of contractual obligations in terms of work orders and Rs.46.80 million towards obligation payments ( as Corporate guarantor ) to the lenders of promoted companies against their over dues.

14 Sundry debtors include debts outstanding for more than two years amounting to Rs 1922.92 million. The Company is in continuous process of working out different modalities of recovery for its remaining long outstanding debts. Pending outcome of such exercise, an amount of Rs.677.19 million (net of provision) has been written off during the period, which is in opinion of the management is adequate.

15 During the year, Company has recognised the following amounts in the financial statements as per Accounting Standard 15 (Revised) "Employees benefits" issued by the ICAI :

a) Defi ned Contribution Plan

Contribution to Defi ned Contribution Plan, recognised are charged off for the year/period are as under:

b) Defi ned Benefit Plan

The employees gratuity fund scheme managed by HDFC Standard Life Insurance Company Limited a defi ned Benefit plan. The present value of obligation is determined based on actuarial valuation using the Projected Unit Credit Method, which recognises each period of service as giving rise to additional unit of employee Benefit entitlement and measures each unit separately to build up the fi nal obligation and the obligation for leave encashment is recognised in the same manner as gratuity.

15 To comply with the requirement of the Accounting Standard (AS-28) on "Impairment of Assets" the management has appointed an outside agency for conducting an exercise of identifying the assets that may have been impaired, if any. Since the exercise is still in process, the effect of diminution in value of assets due to impairment, if any shall be given in the accounts upon such determination.

16 Balances of some of the sundry debtors, creditors, lenders ,loans and advances are subject to confirmations from the respective parties and consequential adjustments arising from reconciliation, if any. The Management, however is of the view that there will be no material adjustments in this regard.

17 As required by Accounting Standard 18 "Related Party Disclosures" (i) Name of related parties and description of relationship:

Relationship Name of Related Party

(a) Subsidiaries: HTL Ltd.

Moneta Finance Pvt. Ltd.

HFCL Infotel Ltd. (Ceased w.e.f. 31st March, 2010)

Infotel Tower Infrastructure Private Ltd (Ceased w.e.f. 31st March, 2010)

(b) Associates: HFCL Bezeq Telecom Ltd

HFCL Dacom Infochek Ltd (HDIL) HFCL Kongsung Telecom Ltd HFCL Satellite Communications Ltd Exicom Tele-systems Ltd. Microwave Communications Ltd. Westel Wireless Ltd WPPL Ltd Polixel Security Systems Pvt. Ltd.

(c) Key management personnel: Mr. Mahendra Nahata

Mr. Arvind Kharabanda

Note : Related party relationship is as identified by the Company and relied upon by the auditors.

18 The figures of the current period are not comparable with those of previous year as current period is for eighteen months as against twelve months in previous year and in view of the amalgamation of SECPL w.e.f 01.01.2010. Previous years figures have been regrouped/reclassified wherever necessary and the figures have been rounded off to the nearest rupee.

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