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NOTES TO ACCOUNTS

Vodafone Idea Ltd.

You can view the entire text of Notes to accounts of the company for the latest year
Market Cap. (₹) 31465.25 Cr. P/BV 0.56 Book Value (₹) 19.68
52 Week High/Low (₹) 27/11 FV/ML 10/1 P/E(X) 0.00
Bookclosure 02/04/2019 EPS (₹) 0.00 Div Yield (%) 0.00
Year End :2018-03 

1. CORPORATE INFORMATION

Idea Cellular Limited (‘the Company’), a public limited company, was incorporated under the provisions of the Companies Act applicable in India on March 14, 1995. It is a part of the Aditya Birla Group and its shares are listed on the National Stock Exchange (NSE) and Bombay Stock Exchange (BSE) in India (Scrip Code BSE:532822; NSE:IDEA). The Company is amongst the top three telecom service providers in India with pan India operations. It is engaged in the business of Mobility and Long Distance services.

The financial statements for the year ended March 31, 2018 were approved by the Board of Directors and authorised for issue on April 28, 2018.

2. STATEMENT OF COMPLIANCE

The financial statements of the Company comprising of Balance Sheet, Statement of Profit and Loss, Statement of Changes in Equity and Statement of Cash Flows together with the notes have been prepared in accordance with Indian Accounting Standards (Ind AS) notified under section 133 of the Companies Act, 2013 read with Companies (Indian Accounting Standards) Rules, 2015 and relevant amendment rules issued thereafter.

3. BASIS OF PREPARATION

These financial statements have been prepared on a historical cost basis, except for certain financial instruments that have been measured at fair values at the end of each reporting period, as explained in the accounting policies below.

Historical cost is generally based on the fair value of the consideration given in exchange for goods and services on the transaction date.

All financial information presented in INR has been rounded off to the nearest two decimals of Million unless otherwise stated.

The financial statements are based on the classification provisions contained in Ind AS 1, ‘Presentation of Financial Statements’ and division II of schedule III of the Companies Act, 2013.

4. USE OF ESTIMATES, ASSUMPTIONS AND JUDGMENTS

The preparation of the financial statements requires management to make judgments, estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities, and the accompanying disclosures including the disclosure of contingent liabilities. Uncertainty about these assumptions and estimates could result in outcomes that require an adjustment to the carrying amount of assets or liabilities in future periods. Difference between actual results and estimates are recognised in the periods in which the results are known / materialise.

The Company has based its assumptions and estimates on parameters available when the financial statements were prepared. Existing circumstances and assumptions about future developments, however, may change due to market changes or circumstances arising that are beyond the control of the Company. Such changes are reflected in the assumptions when they occur.

Estimate and Assumptions:

i. Share-based payments

The Company initially measures the cost of equity-settled transactions with employees using Black and Scholes model to determine the fair value of the liability incurred. Estimating fair value for share-based payment transactions requires determination of the most appropriate valuation model, which is dependent on the terms and conditions of the grant. Vesting conditions, other than market conditions i.e performance based condition are not taken into account when estimating the fair value. This estimate also requires determination of the most appropriate inputs to the valuation model including the expected life of the share option, volatility and dividend yield and making assumptions about them. The assumptions and models used for estimating fair value for share-based payment transactions are disclosed in note 51.

ii. Taxes

The Company provides for tax considering the applicable tax regulations and based on reasonable estimates. Management periodically evaluates positions taken in the tax returns giving due considerations to tax laws and establishes provisions in the event if required as a result of differing interpretation or due to retrospective amendments, if any.

The recognition of deferred tax assets is based on availability of sufficient taxable profits in the Company against which such assets can be utilized. 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.

MAT is recognized as an asset only when and to the extent there is convincing evidence that the Company will pay normal income tax and will be able to utilize such credit during the specified period. In the year in which the MAT credit becomes eligible to be recognized as an asset, the said asset is created by way of a credit to the Statement of Profit and loss and is included in Deferred Tax Assets. The Company reviews the same at each balance sheet date and if required, writes down the carrying amount of MAT credit entitlement to the extent there is no longer convincing evidence to the effect that Company will be able to absorb such credit during the specified period. Further details about taxes refer note 55 and 56.

iii. Defined benefit plans (gratuity benefits)

The Company’s obligation on account of gratuity and compensated absences is determined based on actuarial valuations. An actuarial valuation involves making various assumptions that may differ from actual developments in the future. These include the determination of the discount rate, future salary increases and mortality rates. Due to the complexities involved in the valuation and its long-term nature, these liabilities are highly sensitive to changes in these assumptions. All assumptions are reviewed at each reporting date.

The parameter subject to frequent changes is the discount rate. In determining the appropriate discount rate, the management considers the interest rates of government bonds in currencies consistent with the currencies of the post-employment benefit obligation.

The mortality rate is based on publicly available mortality tables in India. Those mortality tables tend to change only at interval in response to demographic changes. Future salary increases and gratuity increases are based on expected future inflation rates.

Further details about gratuity obligations are given in note 52(A).

iv. Allowance for Trade receivable

The Company follows a ‘simplified approach’ (i.e. based on lifetime ECL) for recognition of impairment loss allowance on Trade receivables (including lease receivables). For the purpose of measuring lifetime ECL allowance for trade receivables, the Company estimates irrecoverable amounts based on the ageing of the receivable balances and historical experience. Further, a large number of minor receivables are grouped into homogeneous groups and assessed for impairment collectively. Individual trade receivables are written off when management deems them not to be collectible.

v. Useful life of Property, Plant and Equipment

The useful life to depreciate property, plant and equipment is based on technical obsolescence, nature of assets, estimated usage of the assets, operating conditions of the asset, and manufacturers’ warranties, maintenance and support period, etc. The charge for the depreciation is derived after considering the expected residual value at end of the useful life.

The residual values, useful lives and methods of depreciation of property, plant and equipment are reviewed by the management at each financial year end and adjusted prospectively, if appropriate. Further details about property, plant and equipment are given in Note 7.

vi. Impairment of Non-financial assets

Non-financial assets are reviewed for impairment, whenever events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable. If any such indication exists, the recoverable amount of the asset is calculated in order to determine the extent of the impairment loss (if any). The recoverable amount is the fair value less costs of disposal calculated based on available information and sensitive to the discount rate, valuation techniques, expected future cash-inflows and the growth rate.

vii. Provision for decommissioning

In measuring the provision for ARO, the Group uses technical estimates to determine the discount rates, expected cost to dismantle and remove the infrastructure equipment from the site, and the expected timing of these costs. Discount rates are determined based on the risk adjusted pre-tax rate of a similar period liability which is currently estimated at 10%. The Group calculates the provision using the DCF method based on the weighted average estimated future cost. Refer Note 50 for further details on ARO.

viii. Operating lease commitments - Company as lessee

The Company has entered into lease agreements for properties and cell sites. The classification of the leasing arrangement as a finance lease or operating lease is based on the evaluation of several factors including, but not limited to, transfer of ownership of leased asset at end of lease term, lessee’s option to purchase and estimated certainty of exercise of such option, proportion of lease term to the asset’s economic life, proportion of present value of minimum lease payments to fair value of leased asset and extent of specialized nature of the leased asset. Lease arrangements where the significant risks and rewards related to properties and cell sites are retained with the lessor, are accounted for as operating leases. Refer note 44(a) for further details about operating lease.

ix. Provisions and Contingent Liabilities

Provisions and contingent liabilities are reviewed at each balance sheet date and adjusted to reflect the current best estimates. Evaluation of uncertain provisions and contingent liabilities and assets requires judgment and assumptions regarding the probability of realization and the timing and amount, or range of amounts, that may ultimately be incurred. Such estimates may vary from the ultimate outcome as a result of differing interpretations of laws and facts. Refer Note 42 for further details about Contingent Liabilities.

5. STANDARDS ISSUED OR MODIFIED BUT NOT YET EFFECTIVE UP TO THE DATE OF ISSUANCE OF THE COMPANY’S FINANCIAL STATEMENTS

The standards and the amendments to standards that are issued, but not yet effective up to the date of issuance of Company’s financial statements are discussed below. The Company intends to adopt these standards, if applicable, when they became effective. All these standards / amendments have been notified on March 28, 2018 and are effective from April 1, 2018.

a) Ind AS 115 Revenue from contracts with Customers

Ind AS 115 ‘Revenue from Contracts with Customers’ supersedes all existing revenue recognition requirements under Ind AS 18. This standard is based on the principle that revenue is recognised when control of a good or service is transferred to the customer. The notion of control replaces the existing notion of risk and rewards. It requires the Company to identify deliverables in contracts with customers that qualify as “performance obligations”. The transaction price receivable from customers must be allocated between the Company’s performance obligations under the contracts on a relative stand-alone selling price basis.

Certain incremental costs incurred for obtaining customer contracts will have to be deferred on the Balance Sheet under Ind AS 115 and recognised over the customer relationship period. This may lead to the deferred recognition of charges for incremental costs, if any, over the customer relationship period.

The standard permits full retrospective application (with or without optional practical expedient) or through a cumulative effect adjustment as on the start of the first period for which the standard is applied (i.e. April 1, 2018).The Company is currently assessing the impact of the application of Ind AS 115 on the financial statements of the Company.

b) Amendment to Ind AS 40 ‘Investment Property’

The amendment clarifies the principles regarding when a Company should transfer asset to / from Investment property. The transfer can be done when and only when:

i. There is an actual change of use, i.e., an asset meets or ceases to meet the definition of investment property.

ii. There is evidence of the change in use.

This amendment has no impact on the Company’s Statement of Profit and Loss and Balance Sheet.

c) Amendment to Ind AS 21 ‘Effects of Changes in Foreign Exchange Rates’

Under current Ind AS, foreign currency transactions are recorded in the Company’s functional currency by applying the spot exchange rate on the date of transaction. The amendment clarifies the date of transaction in case of foreign currency consideration paid / received in advance as the earlier of:

i. Date of initial recognition of such advance; or

ii. Date that the related item is recognised in the financial statements.

This amendment has no impact on the Company’s Statement of Profit and Loss and Balance Sheet.

d) Amendment to Ind AS 112 ‘Disclosure of Interests in Other Entities’

The amendment clarifies that disclosure requirements for interests in other entities also applies to the interests that are classified as held for sale or as discontinued operations.

e) Amendment to Ind AS 12 ‘Income Taxes’

The amendment to Ind AS 12 explains that determining temporary difference and estimating probable future taxable profit against which deductible temporary difference are assessed for utilization are two separate steps and the carrying amount of an asset is relevant only to determination of temporary differences.

The amendment considers that:

i. Tax law determines which deductions are offset against taxable income in determining taxable profits.

ii. No deferred tax is recognized if the reversal of the deductible temporary difference will not lead to tax deductions.

This amendment has no significant impact on the Company’s Statement of Profit and Loss and Balance Sheet.

f) Amendment to Ind AS 28 ‘Investments in Associates and Joint Ventures’

The amendment clarifies that a venture capital organization, or mutual fund, or unit trust and similar entities may elect, at initial recognition, to measure investments in associate or joint venture at FVTPL separately for each associate or joint venture.

Also, Ind AS 28 permits an entity that is not an investment entity to retain the fair value measurement applied by its associates and joint venture (that are investment entities) when applying the equity method.

This amendment is not applicable to the Company.

b) Terms/ rights attached to equity shares

The Company has only one class of equity shares having par value of Rs.10 per share. Each holder of equity shares is entitled to one vote per share. The company declares and pays dividends in Indian rupees. 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 amounts. The distribution will be in proportion to the number of equity shares held by the shareholders.

d) Shares reserved for issue under options

For details of shares reserved for issue under the employee stock option scheme, please refer note 51.

(c) Interest rate for Rupee Term Loan ranges from 7.8% to 8.7%, Foreign currency Loan ranges from 2.58% to 3.14% and Deferred Payment Liability towards spectrum ranges from 9.30% to 10%.

(d) During the year, the company has re-financed Loans worth Rs.23,733.78 Mn (Previous year Rs.4,317.34 Mn)

6. SIGNIFICANT TRANSACTIONS / NEW DEVELOPMENTS

i. The Board of Directors of the Company at its meeting held on November 13, 2017 has approved the sale of its entire shareholding in Idea Cellular Infrastructure Services Limited (ICISL), a wholly owned subsidiary to ATC Telecom Infrastructure Private Limited (ATC). ATC and the Company has entered into a Share Purchase Agreement for a consideration of Rs.40,000 Mn. The closing of the transaction is subject to certain regulatory approvals and other closing conditions. The effects of the arrangement will be recognised once the transaction is consummated.

However effective November 13, 2017, in line with the requirements of Ind AS 105 - “Non-current Assets Held for Sale and Discontinued Operations”, investment in ICISL of Rs.4,865.08 Mn has been classified as Assets held for Sale. The realizable value of this investment is higher than the carrying value resulting in no further adjustments in these financial statements.

ii. On March 20, 2017, the board of directors of the Company had approved the scheme of amalgamation of Vodafone India Ltd (VIL) and its wholly owned subsidiary Vodafone Mobile Services Ltd (VMSL) with the Company subject to necessary approvals of shareholders, creditors, SEBI, Stock Exchanges, the Competition Commission of India, the Department of Telecommunications (DoT), the Foreign Investment Promotion Board, the Reserve Bank of India (RBI), other governmental authorities and third parties as may be required.

On the scheme of amalgamation becoming effective, the Company shall issue an aggregate number of equity shares of the Company (credited as fully paid up) to VIL equal to 47% of the post issue paid up capital of the Company on a fully diluted basis. Immediately thereafter, on the amalgamation of VIL with the Company, the shares issued to VIL pursuant to amalgamation of VMSL shall stand cancelled and, post such cancellation, the Company shall issue an aggregate number of equity shares of the Company (credited as fully paid up) equal to 50% of the post issue paid up capital of the Company to the shareholders of VIL.

Existing shareholders of VIL (VIL promoters) will own 45.1% of the combined Company after transferring a 4.9% stake to the Aditya Birla Group for an agreed consideration concurrent with completion of the merger. The Aditya Birla Group will then own 26.0% of the combined Company and Idea’s other shareholders will own the remaining 28.9%.

The Aditya Birla Group has the right to acquire up to 9.5% additional stake from VIL promoters under an agreed mechanism with a view to equalising the shareholdings over time. Until equalisation is achieved, the additional shares held by VIL promoters will be restricted and votes will be exercised jointly under the terms of the shareholders’ agreement. The combination will be jointly controlled by VIL promoters and the Aditya Birla Group.

The Company has received the approvals from the Competition Commission of India (CCI) on July 24, 2017 and from the Stock Exchange on August 4, 2017. The Equity shareholders, secured and unsecured creditors of the Company have approved the amalgamation in their respective meetings held on October 12, 2017. The Company has also received the approval from National Company Law Tribunal on January 11, 2018. The transferor Companies’ i.e. VIL and VMSL have also received approval from the National Company Law Tribunal on January 19, 2018.

For the scheme to become effective certain conditions precedent will need to be met which are in process including requisite approvals from Foreign Investment Promotion Board, Department of Industrial Policy and Promotion and RBI, for which the Company has filed applications and is awaiting approvals to take the process forward further with the DoT.

iii. The Scheme of Amalgamation of Idea Mobile Commerce Services Limited (IMCSL), a wholly owned subsidiary with Aditya Birla Idea Payments Bank limited (ABIPBL), an associate was approved by the Hon’ble Mumbai High Court. The merger was subject to certain regulatory approvals and other conditions which got fulfilled on February 22, 2018. Accordingly, effective this date IMCSL merged with ABIPBL.

Pursuant to the merger, the Company was allotted 104,869,800 equity shares of ABIPBL in lieu of the shares held in IMCSL. The excess of the value of such shares issued over the book value of investment in IMCSL amounting to Rs.148.70 Mn has been grouped under finance cost in the Statement of Profit and Loss. The Company now holds 49% stake in ABIPBL.

iv. After the requisite shareholders’ approval, the Company, during the year, has issued and allotted 326,633,165 Equity Shares of face value of Rs.10 to entities forming part of promoter / promoter group on preferential basis at a price of Rs.99.50 per Equity Share, including a premium of Rs.89.50 per Equity Share (in line with SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2009), aggregating Rs.32,500 Mn.

v. The Company has also issued and allotted 424,242,424 Equity Shares of face value of Rs.10 each to eligible Qualified Institutional Buyers at a price of Rs.82.50 per Equity Share, including a premium of Rs.72.50 per Equity Share (in line with SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2009), aggregating Rs.35,000 Mn.

7. CAPITAL AND OTHER COMMITMENTS:

Estimated amount of commitments are as follows:

- Spectrum won in auctions Rs. Nil (Previous year: Rs.3,312.07 Mn)

- Contracts remaining to be executed for capital expenditure (net of advances) and not provided for are Rs.12,979.88 Mn (Previous year: Rs.20,097.43 Mn)

- Long term contracts remaining to be executed including early termination commitments (if any) are Rs.18,712.64 Mn (Previous year: Rs.17,600.26 Mn)

8. CONTINGENT LIABILITIES:

A) Licensing Disputes:

i. One Time Spectrum Charges:

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

- For spectrum beyond 6.2 MHz in respective service areas for retrospective period from July 1, 2008 to December 31, 2012, amounting to Rs.3,691.30 Mn (Previous year: Rs.3,691.30 Mn) and

- For spectrum beyond 4.4 MHz in respective service areas effective January 1, 2013 till expiry of the period as per respective licenses amounting to Rs.17,443.70 Mn (Previous year: Rs.17,443.70 Mn)

In the opinion of Company, inter-alia, the above demands amount to alteration of financial terms of the licenses issued in the past. The Company had therefore, petitioned the Hon’ble High Court of Bombay, where the matter was admitted and is currently sub-judice. The Hon’ble High Court of Bombay has directed the DoT, not to take any coercive action until the matter is further heard. No effects have been given in the financial statements for the above.

ii. Other Licensing Disputes - Rs.107,710.35 Mn (Previous year: Rs.58,318.18 Mn):

- Demands due to difference in interpretation of definition of adjusted gross revenue (AGR) and other license fee assessment related matters. Most of these demands are currently before the Hon’ble TDSAT, Hon’ble High court and Hon’ble Supreme Court.

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

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

- Demand with respect to upfront spectrum amounts for continuation of services from February 02, 2012 till various dates in the service areas where the licenses were quashed following the Hon’ble Supreme Court Order.

- Demands raised by Term Cell towards subscriber verification norms.

B) P5 Asia Holdings Investments (Mauritius) Limited (P5) has a right to require the ABTL to buy equity shares of Indus Towers Limited (Indus) held by P5 at fair value if:

i. ABTL’s stake in Indus is reduced below the agreed threshold; or

ii. Aditya Birla Group companies collectively (ABG) cease to be the single largest shareholder of the Company before P5 is able to sell its stake in Indus. However, provided that the Company and / or ABG are able to demonstrate that ABG has a joint control over the Company then this right will not be available to P5 even if ABG cease to be the single largest shareholder of the Company.

Pursuant to proposed merger of Indus with Bharti Infratel Limited (BIL), P5 has agreed to suspend this right during the period from April 25, 2018 till such date the merger is effective and such right will be terminated upon the merger being effective.

i. Income Tax Matters

- Appeals filed by the Company against the demands raised by the Income Tax Authorities (which includes matters on which the Appellate Authorities have decided in favour of the Company) relating to incorrect disallowance of revenue share licence fees, disputes on non-applicability of tax deductions at source on prepaid margin allowed to prepaid distributors & roaming settlement, etc.

- During the year, the appellate authorities decided on several matters in favour of the Company which were under appeal for assessments done relating to periods prior to AY 2015-16. These matters pertain to incorrect disallowance of revenue share licence fees, demerger of Passive Infra business to the step down subsidiary from the Company and demerger of Bihar Telecom undertaking from its subsidiary into the Company, depreciation on spectrum and other matters including disallowance on prepaid margin allowed to prepaid distributors & roaming settlements. The Tax Department may however appeal further in higher forums.

ii. Sales Tax and Entertainment Tax

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

- Demand of tax for non-submission of Declaration forms viz. C forms & F forms in stipulated time limit.

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

iii. Service Tax / GST

Service Tax / GST demands mainly relates to the following matters:

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

- Denial of Cenvat credit related to Towers and Shelters.

- Demand raised on services provided by foreign telecom operators stating that it is liable to Service tax under reverse charge.

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

- Demand of tax on telecommunication services provided to employees.

- Demand of interest on the credit availed but not utilized.

iv. Entry Tax

- Entry Tax disputes pertains to classification / valuation of goods.

v. Other claims not acknowledged as debts

- Mainly include consumer forum cases, disputed port charges, miscellaneous disputed matters with local Municipal Corporation, Electricity Board and others including EB rate dispute in a couple of circles.

*includes guarantees towards first installment of deferred payment liability ofRs.73,808.22 Mn (Previous Year: to Rs.73,808.22 Mn).

*LC’s primarily issued to vendors of capital equipment supplies. Out of the above supplies shipped / received amount to Rs.2,096.34 included in payable for capital expenditure.

9. OPERATING LEASE

a) Company as lessee

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

Lease payments amounting to Rs.51,560.10 Mn (Previous year: Rs.52,522.45 Mn) are included in passive infrastructure charges, non- network rent and switching and cellsite rent in the Statement of Profit and Loss. Terms of the lease include operating term for renewal, increase in rent in future periods and terms for cancellation, where applicable.

Future minimum lease rentals payable under non-cancellable operating leases are as follows:

b) Company as lessor

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

Future minimum lease rentals receivable under non-cancellable operating leases are as follows:

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

11. ASSET RETIREMENT OBLIGATION

The Company installs equipment’s on leased premises to provide seamless connectivity to its customers. In certain cases, the Company may have to incur some cost to remove such equipment’s on leased premises. Estimated costs to be incurred for restoration is capitalised along with the assets. The movement of provision as required in Ind AS - 37 “Provisions, Contingent Liabilities and Contingent Assets” is given below:

12. SHARE-BASED PAYMENTS Employee stock option plan

The Company has granted stock options under the employee stock option scheme (ESOS) 2006 and stock options as well as restricted stock units (RSU’s) under ESOS 2013 to the eligible employees of the Company and its subsidiaries from time to time. These options, subject to fulfillment of vesting conditions, would vest in 4 equal annual installments after one year of the grant and the RSU’s will vest after 3 years from the date of grant. The maximum period for exercise of options and RSU’s is 5 years from the date of vesting. Each option and RSU when exercised would be converted into one fully paid-up equity share of Rs.10 each of the Company. The options granted under ESOS 2006 and options as well as RSUs granted under the ESOS 2013 scheme carry no rights to dividends and no voting rights till the date of exercise.

The fair value of the share options is estimated at the grant date using Black and Scholes Model, taking into account the terms and conditions upon which the share options were granted.

There were no modifications to the options / RSU’s during the year ended March 31, 2018 and March 31, 2017. During the year, certain unvested options were cancelled on non-fulfillment of certain vesting conditions under ESOS 2013. As at the end of the financial year, details and movements of the outstanding options are as follows:

The weighted average share price at the date of exercise of options exercised during the year was Rs.85.15 (March 31, 2017 Rs.84.88) The fair value of each option and RSU is estimated on the date of grant / re-pricing based on the following assumptions:

The expected life of the share options is based on historical data and current expectations and is not necessarily indicative of exercise patterns that may occur. The volatility is based on the historical share price over a period similar to the expected life of the options.

13. EMPLOYEE BENEFITS

A. Defined Benefit Plan (Gratuity)

General description and benefits of the plan

The Company operates a defined benefit final salary gratuity plan through a trust. The gratuity benefits payable to the employees are based on the employee’s service and last drawn salary at the time of leaving. In case of employees retiring from the Company, the Company’s scheme is more favorable as compared to the obligation under Payment of Gratuity Act, 1972 depending on the period of continuous service. The benefit is payable on termination of service or retirement, whichever is earlier. The employees do not contribute towards this plan and the full cost of providing these benefits are borne by the Company.

Regulatory framework, funding arrangement and governance of the Plan

The gratuity plan is governed by the Payment of Gratuity Act, 1972 (Gratuity Act). The trustees of the gratuity fund have a fiduciary responsibility to act according to the provisions of the trust deed and rules. Since the fund is income tax approved, the Company and the trustees have to ensure that they are at all times fully compliant with the relevant provisions of the income tax act and rules. The Company is bound to pay the statutory minimum gratuity as prescribed under Gratuity Act. There are no minimum funding requirements for a gratuity plan in India. The Company’s philosophy is to fund the benefits based on its own liquidity and tax position as well as level of underfunding of the plan vis-a-vis settlements. The trustees of the trust are responsible for the overall governance of the plan. The trustees of the plan have outsourced the investment management of the fund to insurance Companies which in turn manage these funds as per the mandate provided to them by the trustees and applicable insurance and other regulations.

The Company operates its gratuity and superannuation plans through separate trusts which is administered and managed by the Trustees. As on March 31, 2018 and March 31, 2017, the contributions towards the plans have been invested in Insurer Managed Funds.

Inherent risks

The plan is of a final salary defined benefit in nature which is sponsored by the Company and hence it underwrites all the risks pertaining to the plan. In particular, there is a risk for the Company that any significant change in salary growth or demographic experience or inadequate returns on underlying plan assets can result in an increase in cost of providing these benefits to employees in future.

The following tables summarizes the components of net benefit expense recognized in the Statement of Profit and Loss and the funded status and amounts recognized in the Balance Sheet for gratuity:

Projected plan cash flow:

The table below shows the expected cash flow profile of the benefits to be paid to the current membership of the plan based on past service of the employees as at the valuation date.

The average duration of the defined benefit plan obligation at the end of the reporting period is 10.92 years (March 31, 2017: 13.80 years).

14. EXPENDITURE FOR CORPORATE SOCIAL RESPONSIBILITY

a) Gross amount required to be spent by the Company during the year is Rs.470.50 Mn (Previous year Rs.731.94 Mn).

b) Amount spent for the year ended March 31, 2018:

c) Amount spent for the year ended March 31, 2017:

15. RELATED PARTY TRANSACTIONS

The related parties where control, joint control and significant influence exists are subsidiaries, joint venture and associates respectively. Key Management personnel are those persons having authority and responsibility for planning, directing and controlling the activities of the entity, directly or indirectly, including any Director whether executive or otherwise.

^represents contribution to provident and superannuation funds. As Gratuity expense is based on actuarial valuations, the same cannot be computed for individual employees and hence not included.

# the charge for the year is net of reversal on account of cancellation of unvested options.

16. DISCLOSURE AS PER THE REQUIREMENT OF REGULATION 34 OF THE SECURITIES AND EXCHANGE BOARD OF INDIA (LISTING OBLIGATIONS AND DISCLOSURE REQUIREMENTS) REGULATIONS, 2015 :

The amounts at the year end and the maximum amount of loans & advances outstanding during the year ending March 31, 2018 is Rs. Nil (Previous year Rs. Nil)

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

18. FINANCIAL INSTRUMENTS

a) Financial Instruments by Category: The following table provides categorization of all financial instruments at carrying value except non-current investments in subsidiaries and associates (including advance given for purchase of shares) which are carried at cost.

b) Fair value hierarchy

The Company has classified its financial instruments into three levels in order to provide an indication about the reliability of the inputs used in determining fair values.

i. Fair value hierarchy of financial assets and liabilities measured at fair value as at March 31, 2018

iii. The carrying amounts of the following financial assets and financial liabilities are a reasonable approximation of their fair values. Accordingly, the fair values of such financial assets and financial liabilities have not been disclosed separately.

a) Financial Assets

- Trade receivables

- Deposits with Body Corporates, Government Authorities and Others

- Loans to Employees

- Cash and cash equivalents

- Bank balances other than cash and cash equivalents

- Interest receivable

b) Financial Liabilities

- Trade payables

- Payable for capital expenditure

- Security Deposits from Customers and Others

^includes Deferred Payment Liability, NCD and others.

c) Valuation Technique used to determine fair value

Fair value of quoted current investments in Mutual Funds is based on price quotations at the reporting date.

The fair value of the financial assets and liabilities is included at the amount at which the instrument could be exchanged in a current transaction between knowledgeable and willing parties, other than in a forced or liquidation sale. The valuation techniques used to determine the fair values of financial assets and financial liabilities classified as level 2 include use of quoted market prices or dealer quotes for similar instruments and generally accepted pricing models based on a discounted cash flow analysis using rates currently available for debt on similar terms, credit risk and remaining maturities.

19. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES

The Company’s principal financial liabilities comprise loans and borrowings, trade and other payables. The main purpose of these financial liabilities is to finance and support the Company’s operations. The Company’s principal financial assets comprise investments, cash and bank balance, trade and other receivables. The Company also enters into derivative transactions such as foreign forward exchange contracts, Interest rate swaps as a part of Company’s financial risk management policies. It is the Company’s policy that no trading in derivatives for speculative purposes may be undertaken.

The Company is exposed to various financial risks such as market risk, credit risk and liquidity risk. A team of qualified finance professionals with appropriate skills and experience provides assurance to the management that financial risks are identified, measured and managed in accordance with the Company’s policies and risk objectives. The risks and measures to mitigate such risks is reviewed by the committee of Board of Directors periodically.

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 borrowings, bank deposits, investments and derivative financial instruments.

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

a) Interest rate risk

Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates. The Company’s exposure to the risk of changes in market interest rates relates primarily to the Company’s long-term debt obligations with floating interest rates.

The Company manages its interest rate risk by having a balanced portfolio of fixed and variable rate loans and borrowings. To manage this, the Company enters into interest rate swaps, in which it agrees to exchange, at specified intervals, the difference between fixed and variable rate interest amounts calculated by reference to an agreed-upon notional principal amount. At March 31, 2018, after taking into account the effect of interest rate swaps, approximately 80.70% of the Company’s borrowings are at a fixed rate of interest (Previous year: 88.06%).

Interest rate sensitivity

The following table demonstrates the sensitivity to a reasonably possible change in interest rates on that portion of loans and borrowings affected, after the impact of hedge accounting. With all other variables held constant, the Company’s profit before tax is affected through the impact on floating rate borrowings, as follows:

b) Foreign currency risk

Foreign currency risk is the risk that the fair value or future cash flows of an exposure will fluctuate because of changes in foreign exchange rates. The Company’s exposure to the risk of changes in foreign exchange rates relates primarily to the Company’s operating activities (when revenue or expense is denominated in a foreign currency).

The Company’s foreign currency risks are identified, measured and managed at periodic intervals in accordance with the Company’s policies. When a derivative is entered into for the purpose of hedging any foreign currency exposure, the Company negotiates the terms of those derivatives to match the terms of the hedged exposure.

At March 31, 2018, the Company hedged 27.19% (Previous year: 53.82%), of its foreign currency trade payables and 10.05% (Previous year: 21.14%) of its foreign currency loan. This foreign currency risk is hedged by using foreign currency forward contracts.

Foreign currency sensitivity

The following tables demonstrate the sensitivity to a reasonably possible change in foreign currency rates, with all other variables held constant. The impact on the Company’s profit before tax is due to changes in the fair value of monetary assets and liabilities including non-designated foreign currency derivatives and embedded derivatives. The Company’s exposure to foreign currency changes for all other currencies is not material.

The derivatives have not been designated in a hedge relationship, they act as a hedge and will offset the underlying transactions when they occur.

c) Price risk

The Company invests its surplus funds in various debt instruments and debt mutual funds. These comprise of mainly liquid schemes of mutual funds (liquid investments) and fixed deposits.

Mutual fund investments are susceptible to market price risk, mainly arising from changes in the interest rates or market yields which may impact the return and value of such investments. However due to the very short tenor of the underlying portfolio in the liquid schemes, these do not pose any significant price risk.

d) 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 and other receivables) and from its financing activities, including deposits with banks, foreign exchange transactions and other financial instruments.

- Trade receivables

Customer credit risk is managed in accordance with the Company’s established policy, procedures and controls relating to customer credit risk management. Trade receivables are non-interest bearing and are generally on 15 to 30 days credit terms. Outstanding customer receivables are regularly monitored.

The Company follows a ‘simplified approach’ (i.e. based on lifetime ECL) for recognition of impairment loss allowance on Trade receivables (including lease receivables). A large number of minor receivables are grouped into homogeneous groups and assessed for impairment collectively. For the purpose of measuring lifetime ECL allowance for trade receivables, the Company estimates irrecoverable amounts based on the ageing of the receivable balances and historical experience. The Company, based on past trends, recognizes allowance for trade receivables: a) for retail subscribers (net of security deposit) remaining unpaid beyond 90 days from date of billing and b) for receivables on account of roaming, IUC and passive infrastructure sharing remaining unpaid beyond 180 days. Further, allowance is also recognised for cases indicating any specific trail of credit loss within the ageing brackets mentioned above. Individual trade receivables are written off when management deems them not to be collectible. Any subsequent recovery is recognized as Income in the Statement of Profit and Loss. Refer Note 14 for the carrying amount of credit exposure as on the Balance Sheet date.

- Other financial instruments and cash deposits

Credit risk from balances with banks is managed by the Company’s treasury department. Investments of surplus funds are made only with approved counterparties and within credit limits assigned to each counter party. Counterparty credit limits are reviewed by the Company’s Treasury Department 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 March 31, 2018 and March 31, 2017 on its carrying amounts as disclosed in notes 10, 15, 16 and 17 except for derivative financial instruments. The Company’s exposure relating to financial derivative instruments is noted in note 62(e) and the liquidity table below

e) Liquidity risk

Liquidity risk is the risk that the Company may not be able to meet its present and future cash and collateral obligations without incurring unacceptable losses. The Company’s objective is to, at all times maintain optimum levels of liquidity to meet its cash and collateral requirements. The Company monitors its risk of a shortage of funds using a liquidity planning tool.

The Company’s objective is to maintain a balance between continuity of funding and flexibility through the use of bank overdrafts, bank loans and finance leases. Approximately 1.80% of the Company’s debt will mature in less than one year at March 31, 2018 (Previous year: 6.20%) based on the carrying value of borrowings reflected in the financial statements. The Company has access to a sufficient variety of sources of funding and debt maturing within 12 months can be rolled over with existing lenders.

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

^Interest accrued but not due of Rs.27,808.03 Mn (Previous year: Rs.28,551.02 Mn) has been excluded from other financial liabilities and included in borrowings and interest thereon.

#Payable for capex expenditure of Rs.29,523.15 Mn (Previous year: Rs.45,727.29 Mn) has been excluded from other financial liabilities and included in trade and other payables.

included as part of maturity profile as the underlying of these derivatives are borrowings and other financial liabilities included above.

20. CAPITAL MANAGEMENT

For the purpose of the Company’s capital management, capital includes issued equity capital, 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 Company manages its capital structure and makes adjustments in light of changes in economic conditions and the requirements of the financial covenants. To maintain or adjust the capital structure, the Company may adjust the dividend payment to shareholders, return capital to shareholders or issue new shares. The Company monitors capital using the debt-equity ratio, which is net debt divided by total equity. The Company includes within net debt, interest bearing loans and borrowings less cash and cash equivalents, Bank balance other than cash and cash equivalents and investment in liquid mutual funds.

In order to achieve this overall objective, the Company’s capital management, amongst other things, aims to ensure that it meets financial covenants attached to the interest-bearing loans and borrowings that define capital structure requirements. Breaches in meeting the financial covenants would permit the bank to call the consequences attached with the same. There is no breach in such covenants as of March 31, 2018.

No changes were made in the objectives, policies or processes for managing capital during the years ended March 31, 2018 and March 31, 2017.

21. During the previous year, the Company had paid / accrued remuneration amounting to Rs.100.46 Mn to its Managing Director, Mr. Himanshu Kapania which was in excess of the limits specified in section 197 of Companies Act, 2013 (‘the Act’) read with Schedule V thereto as the Company did not have profits. Subsequently, during the current year, the Company has obtained approval from central government / shareholders for the excess remuneration paid.

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

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