BSE Prices delayed by 5 minutes... << Prices as on May 24, 2019 >>   ABB 1494.65 [ 4.57 ]ACC 1705 [ 4.09 ]AMBUJA CEM 232.05 [ 4.27 ]ASIAN PAINTS 1385.55 [ 1.18 ]AXIS BANK 793.65 [ 2.14 ]BAJAJ AUTO 3077.3 [ 0.31 ]BANKOFBARODA 137.05 [ 7.49 ]BHARTI AIRTE 353.3 [ 4.40 ]BHEL 69 [ 3.76 ]BPCL 395.2 [ 2.73 ]BRITANIAINDS 2851.75 [ 0.44 ]CAIRN INDIA 285.4 [ 0.90 ]CIPLA 570.35 [ 1.22 ]COAL INDIA 244.6 [ 0.23 ]COLGATEPALMO 1161.8 [ 0.72 ]DABUR INDIA 399.2 [ 3.50 ]DLF 191.5 [ 6.04 ]DRREDDYSLAB 2664.2 [ 1.02 ]GAIL 341.1 [ 1.13 ]GRASIM INDS 908.3 [ 2.46 ]HCLTECHNOLOG 1061.65 [ -0.46 ]HDFC 2127.5 [ 0.56 ]HDFC BANK 2372.3 [ 1.63 ]HEROMOTOCORP 2828.35 [ 3.24 ]HIND.UNILEV 1749.2 [ -0.10 ]HINDALCO 195.8 [ 1.79 ]ICICI BANK 431.5 [ 5.09 ]IDFC 38.5 [ 7.09 ]INDIANHOTELS 151.6 [ 2.05 ]INDUSINDBANK 1649.85 [ 3.32 ]INFOSYS 709.45 [ 1.17 ]ITC LTD 290.15 [ 0.57 ]JINDALSTLPOW 160.95 [ 5.89 ]KOTAK BANK 1513.85 [ 0.88 ]L&T 1543.65 [ 4.60 ]LUPIN 762.95 [ 1.84 ]MAH&MAH 663.9 [ 3.82 ]MARUTI SUZUK 7096.15 [ 2.36 ]MTNL 8.96 [ 2.87 ]NESTLE 10692.35 [ -0.67 ]NIIT 102.7 [ 3.27 ]NMDC 97.9 [ 1.66 ]NTPC 129.2 [ -0.54 ]ONGC 174.4 [ 0.20 ]PNB 88.15 [ 5.19 ]POWER GRID 185.65 [ 0.65 ]RIL 1336.8 [ 0.07 ]SBI 354.6 [ 3.59 ]SESA GOA 163.85 [ 4.20 ]SHIPPINGCORP 33.2 [ 6.92 ]SUNPHRMINDS 415.55 [ 0.56 ]TATA CHEM 627.35 [ 1.66 ]TATA GLOBAL 234.55 [ 1.85 ]TATA MOTORS 182.15 [ 4.09 ]TATA STEEL 483.5 [ 3.78 ]TATAPOWERCOM 67.7 [ 4.80 ]TCS 2049.65 [ -0.20 ]TECH MAHINDR 736 [ -0.94 ]ULTRATECHCEM 4796.35 [ 2.64 ]UNITED SPIRI 546.25 [ 2.36 ]WIPRO 283.15 [ 0.35 ]ZEETELEFILMS 375.9 [ 4.14 ] BSE NSE
You can view the entire text of Notes to accounts of the company for the latest year

BSE: 500108ISIN: INE153A01019INDUSTRY: Telecom Services

BSE   ` 8.96   Open: 8.70   Today's Range 8.51
9.10
+0.25 (+ 2.79 %) Prev Close: 8.71 52 Week Range 8.42
19.40
Year End :2018-03 

1. Corporate Information

Mahanagar Telephone Nigam Limited (MTNL), a public sector enterprise, is engaged in providing telecom services in the geographical area of Mumbai and Delhi. The registered office of the company is located at Mahanagar Doorsanchar Sadan, 5th Floor, 9, CGO Complex, Lodhi Road, New Delhi - 110003.

Basis of preparation

These financial statements have been prepared in accordance with the Indian Accounting Standards (hereinafter referred to as the ‘Ind AS’) as notified by Ministry of Corporate Affairs pursuant to section 133 of the Companies Act, 2013 read with Rule 3 of the Companies (Indian Accounting Standards) Rules, 2015 and Companies (Indian Accounting Standards) Amendment Rules, 2016.

These Financial statements are separate financial statements of the Company. The Company has also prepared consolidated financial statements for the year ended 31 March 2018 in accordance with Ind AS 110 and the same were also approved for issue by the Board of Directors on 30 May 2018.

The financial statements have been prepared on accrual and going concern basis. All assets and liabilities have been classified as current or non-current as per the Company’s Act, 2013. Based on the nature of products and the time between acquisition of assets for processing and their realisation in cash and cash equivalents, the Company has ascertained its operating cycle as 12 months for the purpose of current or non-current classification of assets and liabilities.

The financial statements have been prepared on going concern basis under the historical cost convention except for the following -

- Certain financial assets and liabilities which are measured at fair value;

- Defined benefit plans - plan assets measured at fair value; and

- Assets held for sale - measured at fair value less cost to sell

Notes:

(a) Investments in subsidiaries, associates and joint venture are stated at cost as per Ind AS 27 ‘Separate Financial Statements’.

“(b) As per article 12.19 (b) of Shareholders’ agreement together with para 27 of the amendatory agreement (together referred to as ‘amended agreement’) entered into between MTNL, TCIL, TCL and NVPL (Nepal), together referred to as ‘Investors’ pursuant to their investment in United Telecom Limited (‘UTL’), in case NVPL (the local partner in Nepal) decides to sell its stake to any third party, it requires prior consent of other Investors. Further, at such time, per exit clause in the agreement, any of the other Investors other than NVPL can exit the arrangement after 2 years from the amended agreement by issuing 3 month’s notice. Pursuant to this exit clause, the Company has issued notice to UTL on 30 January, 2018 for making an exit. The notice is valid uptil 30 April 2018 and subsequent to 30 April 2018, the local partner has sought time extension of another 3 months i.e. till 30 July,2018 for giving effect to the exit requested by the Company. Accordingly, such investment has been classified as ‘held for sale’ in the financial statements for year ended 31 March 2018. Refer note 21 for details.”

Notes:

(i) No loans are due from director or other officers of the Company either severally or jointly with any other person. Further, no loans are due from firms or private companies respectively in which any director is partner, director or a member

(ii) Refer note 43 - Fair value disclosures for disclosure of fair value in respect of financial assets measured at amortised cost and note 44 - Financial risk management for assessment of expected credit losses.

(iii) For details on settlement of receivable from BSNL, refer note 63

(iv) For details on settlement of receivable from DoT, refer note 68

(i) Rs. 10.81 crores ( 31 March 2017 - Rs. 10.55 crores) representing deposits with original maturity of more than twelve months, held by the entity that are not available for use by the Company, as these are pledged with the banks for issuing bank guarantees to third parties.

(ii) Refer note 43 - Fair value disclosures for disclosure of fair value in respect of financial assets measured at amortised cost and note 44 - Financial risk management for assessment of expected credit losses

Total current investments

*Receivable in 5 equal instalments, all instalments of Rs. 20 crore each were due in 2012-13, 2013-14, 2014-15, 2015-16 and 2016-17 but still not received. Refer note 59 for further details.

(i) Trade receivables have been pledged as security for liabilities, for details refer note 53.

(ii) No trade or other receivable are due from director or other officers of the Company either severally or jointly with any other person. Further, no trade or other receivables are due from firms or private companies respectively in which any director is partner, director or a member

(iii) Trade receivables are secured to the extent of security deposits received from customers, with contractual amounts as at 31 March 2018 of Rs. 51.47 crores (31 March 2017 - Rs. 76.12 crores) and related amortised cost as at 31 March 2018 of Rs. 27.39 crores (31 March 2017 - Rs. 31.06 crores).

(iv) The carrying values of trade receivables are considered to be a reasonable approximation of fair values.

Notes:

(a) In respect of assets classified as held for sale in previous year ended 31 March 2017, the Company was in the process to sell switches and BTS-batteries originally acquired for GSM Services in Mumbai in earlier years. A tender was floated for auction of the asset held for sale, which failed due to technical reasons that was not originally envisaged. Another tender was under process for auction of the asset at the year ending 31 March 2018 and favourable resolution is expected. Therefore, such assets continue to be classified as held for sale.

Non-recurring fair value measurements

Asset classified as held for sale was measured at the lower of its carrying amount and fair value less costs to sell at the time of re-classification, resulting in the recognition of a write down of 0.45 crores as impairment loss in the statement of profit and loss. “(b) As per article 12.19 (b) of Shareholders’ agreement together with para 27 of the amendatory agreement (together referred to as ‘amended agreement’) entered into between MTNL, TCIL, TCL and NVPL (Nepal), together referred to as ‘Investors’ pursuant to their investment in United Telecom Limited (‘UTL’), in case NVPL (the local partner in Nepal) decides to sell its stake to any third party, it requires prior consent of other Investors. Further, at such time, per exit clause in the agreement, any of the other Investors other than NVPL can exit the arrangement after 2 years from the amended agreement by issuing 3 month’s notice. Pursuant to this exit clause, the Company has issued notice to UTL on 30 January 2018 for making an exit. The notice is valid uptil 30 April 2018 and subsequent to 30 April 2018, the local partner has sought time extension of another 3 months i.e. till 30 July, 2018 for giving effect to the exit requested by the Company. Accordingly, such investment has been classified as ‘held for sale’ in the financial statements for year ended 31 March 2018. “

Non-recurring fair value measurements

The recoverable amount is expected to be higher than the carrying value of such investment and therefore, no further loss required to be recognised upon classification of such investment as ‘held for sale’.

b) Rights/preferences/restrictions 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.

Nature and purpose of other reserves

(i) Debenture redemption reserve

The Company is required to create a debenture redemption reserve out of the profits which is available for payment of dividend for the purpose of redemption of debentures.

(ii) Securities premium reserve

Securities premium reserve represents premium received on issue of shares. The reserve can be utilised in accordance with the provisions of the Companies Act.

(iii) Contingency reserve

The Company created this reserve for unforeseen tax demands/disallowances by Income tax department under section 80IA of the Income Tax Act, 1961.

(ii) Other Comprehensive Income(OCI)

The Company has recognised remeasurements benefits on defined benefits plans through Other comprehensive income

Notes:

(i) No loans have been guaranteed by the directors and others.

(ii) There is no default as on the balance sheet date in the repayment of borrowings and interest thereon.

(iii) These facilities are securred by floating first pari passu charge on all movable fixed assets (classified under property plant and equipment) and current assets. Further, for securing the above term loans letter of comfort was issued by DoT. For repayment terms of the outstanding long-term borrowings (including current maturities) refer the table below:

*Debentures-Series 1A

The Debentures as mentioned above are Government of India guaranteed, unsecured, listed, 8.57 % Redeemable Non Convertible Debentures (in the form of Bonds) having tenure/maturity period of 10 years with redemption date being 28 March 2023. The coupon payment frequency is semi annual interest payment. There was no instalment due as on the reporting date.

*Debentures-Series 2A

The Debentures as mentioned above are Government of India guaranteed, unsecured, listed, 9.38 % Redeemable Non Convertible Debentures (in the form of Bonds) having tenure/maturity period of 10 years with redemption date being 05 December 2023. The coupon payment frequency is semi annual interest payment. There was no instalment due as on the reporting date.

Rate of interest- The Company’s total borrowings from banks and others have a effective weighted average rate of 9.99% per annum calculated using the interest rate effective as on 31 March 2017.

(iv) Government of India approved the financial support to the Company in the year 2014 and on surrender of Broadband Wireless Access (BWA) Spectrum by MTNL, upfront charges paid by the Company in the year 2011 for such spectrum amounting to Rs. 4,533.97 crores were agreed to be funded by way of issuance of debentures by the Company on behalf of Government of India (GOI) and for which GOI provided sovereign guarantee with attendant condition for repayment of principal on maturity as well as the interest payments through DOT. Accordingly, the Company does not have any liability towards repayment of principal and interest on the bonds issued and has been offset against the amount recoverable from DoT of equivalent amount.

(v) For details on repayment schedule of finance lease obligations, refer note 50(B).

(vi) Refer note 43 - Financial instruments for disclosure of fair values in respect of financial liabilities measured at amortised cost and analysis of their maturity profiles.

(a) Provision for asset retirement obligations

The Company as part of its business installs wireless telecommunication towers and other equipments for facilitating telecommunication services to its customers and is under an obligation to decommission the tower and replenish the site at end of useful life of the tower and other equipment. For the purpose of same Appendix A to Ind AS 16, “Property, Plant and Equipment” states measurement of Property, plant and equipment to include initial estimate of the costs of dismantling and removing the item and restoring the site on which it is located. The Company has estimated the cost of dismantling based on independent bids received from open market and the same have been escalated using the expected inflation rate (6% per annum) and discounted at the rates prevailing at each period end date.

(b) For disclosures required related to provision for employee benefits, refer note 46- Employee benefit obligations

(i) MTNL has unabsorbed depreciation and brought forward business losses amounting to Rs. 11,234.61 crores as on 31 March 2018 on which no deferred tax asset has been recognised. Deferred tax asset shall be created in the year in which the Company will have reasonable certainty of future taxable income as required by Indian Accounting Standard 12 - “Income Taxes” as specified under Section 133 of the Companies Act, 2013 read with Rule 7 of Companies (Accounts) Rules, 2015 and Companies (Indian Accounting Standards) Amendment Rules, 2016.

(ii) Details of year wise expiry are given below:

2. EARNINGS PER EQUITY SHARE

The Company’s Earnings Per Share (‘EPS’) is determined based on the net profit attributable to the shareholders’ of the Company. Basic earnings per share is computed using the weighted average number of shares outstanding during the year. Diluted earnings per share is computed using the weighted average number of common and dilutive common equivalent shares outstanding during the year including share options, except where the result would be anti-dilutive.

3. FAIR VALUE DISCLOSURES

I Fair values hierarchy

Financial assets and financial liabilities measured at fair value in the statement of financial position are divided into three Levels of a fair value hierarchy. The three levels are defined based on the observability of significant inputs to the measurement, as follows:

Level 1: quoted prices (unadjusted) in active markets for financial instruments.

Level 2: The fair value of financial instruments that are not traded in an active market is determined using valuation techniques which maximise the use of observable market data rely as little as possible on entity specific estimates.

Level 3: If one or more of the significant inputs is not based on observable market data, the instrument is included in level 3.

II. Financial assets and liabilities measured at fair value - recurring fair value measurements

III. Fair value of instruments measured at amortised cost

Fair value of instruments measured at amortised cost for which fair value is disclosed is as follows:

The management assessed that cash and cash equivalents, other bank balances, trade receivables, other receivables, trade payables and short-term borrowings approximate their carrying amounts largely due to the short-term maturities of these instruments. 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 willing parties, other than in a forced or liquidation sale. The following methods and assumptions were used to estimate the fair values:

(i) Long-term fixed-rate and variable-rate receivables are evaluated by the Company based on parameters such as interest rates, individual creditworthiness of the customer and other market risk factors. Based on this evaluation, allowances are taken into account for the expected credit losses of these receivables.

(ii) The fair values of the Company’s interest-bearing borrowings, loans and receivables are determined by applying discounted cash flows (‘DCF’) method, using discount rate that reflects the issuer’s borrowing rate as at the end of the reporting period. The own non-performance risk as at 31 March 2018 was assessed to be insignificant.

4. FINANCIAL RISK MANAGEMENT

I Financial instruments by category

"Investments in subsidiaries, associate and joint venture are carried at cost per Ind AS 27 - Separate financial statements and therefore, not presented here.

ii Risk Management

The Company’s activities expose it to market risk, liquidity risk and credit risk. This note explains the sources of risk which the entity is exposed to and how the entity manages the risk and the related impact in the financial statements.

The Company’s risk management is carried out by a central treasury department (of the Company) under policies approved by the board of directors. The board of directors provides written principles for overall risk management, as well as policies covering specific areas, such as foreign exchange risk, interest rate risk, credit risk and investment of excess liquidity.

A. Credit risk

“Credit risk is the risk that a counterparty fails to discharge an obligation to the company. The company is exposed to this risk for various financial instruments, for example by granting loans and receivables to customers, placing deposits, etc. The company’s maximum exposure to credit risk is limited to the carrying amount of following types of financial assets.

- cash and cash equivalents,

- trade receivables,

- loans & receivables carried at amortised cost, and

- deposits with banks and financial institutions.”

a. Credit risk management

The Company assesses and manages credit risk based on internal credit rating system, continuously monitoring defaults of customers and other counterparties, identified either individually or by the company, and incorporates this information into its credit risk controls. Internal credit rating is performed for each class of financial instruments with different characteristics. The Company assigns the following credit ratings to each class of financial assets based on the assumptions, inputs and factors specific to the class of financial assets.

A: Low

B: Medium

C: High

Cash & cash equivalents and bank deposits

Credit risk related to cash and cash equivalents and bank deposits is managed by only accepting highly rated banks and diversifying bank deposits and accounts in different banks across the country.

Trade receivables

Credit risk related to trade receivables are mitigated by taking bank guarantees from customers where credit risk is high. The Company closely monitors the credit-worthiness of the debtors through internal systems that are configured to define credit limits of customers, thereby, limiting the credit risk to pre-calculated amounts. The Group assesses increase in credit risk on an ongoing basis for amounts receivable that become past due and default is considered to have occurred when amounts receivable become past due in each business segment as follows:

(i) Cellular: Six months past due

(i) Basic & other services: Three years past due

Other financial assets measured at amortised cost

Other financial assets measured at amortized cost includes loans and advances to employees, security deposits and others. Credit risk related to these other financial assets is managed by monitoring the recoverability of such amounts continuously, while at the same time internal control system in place ensure the amounts are within defined limits.

b. Expected credit losses

The Company provides for expected credit losses based on the following:

Trade receivables

(i) The company recognizes lifetime expected credit losses on trade receivables using a simplified approach, wherein Company has defined percentage of provision by analysing historical trend of default relevant to each business segment based on the criteria defined above. And such provision percentage determined have been considered to recognise life time expected credit losses on trade receivables (other than those where default criteria are met).

During the periods presented, the Company made no write-offs of trade receivables.

(ii) Reconciliation of loss allowance provision from beginning to end of reporting period:

Other financial assets measured at amortised cost

Company provides for expected credit losses on loans and advances other than trade receivables by assessing individual financial instruments for expectation of any credit losses. Since this category includes loans and receivables of varied natures and purpose, there is no trend that the company can draws to apply consistently to entire population For such financial assets, the Company’s policy is to provides for 12 month expected credit losses upon initial recognition and provides for lifetime expected credit losses upon significant increase in credit risk. The Company does not have any expected loss based impairment recognised on such assets considering their low credit risk nature, though incurred loss provisions are disclosed under each sub-category of such financial assets.

B. Liquidity risk

Prudent liquidity risk management implies maintaining sufficient cash and marketable securities and the availability of funding through an adequate amount of committed credit facilities to meet obligations when due. Due to the nature of the business, the Company maintains flexibility in funding by maintaining availability under committed facilities. Management monitors rolling forecasts of the Company’s liquidity position and cash and cash equivalents on the basis of expected cash flows. The Company takes into account the liquidity of the market in which the entity operates. In addition, the Company’s liquidity management policy involves projecting cash flows in major currencies and considering the level of liquid assets necessary to meet these, monitoring balance sheet liquidity ratios against internal and external regulatory requirements and maintaining debt financing plans.

(a) Financing arrangements

The Company had access to the following undrawn borrowing facilities at the end of the reporting period:

b) Maturities of financial liabilities

The tables below analyse the Company’s financial liabilities into relevant maturity Companyings based on their contractual maturities for all non-derivative financial liabilities.

The amounts disclosed in the table are the contractual undiscounted cash flows. Balances due within 12 months equal their carrying balances as the impact of discounting is not significant.

C. Market Risk

a) Foreign currency risk

The Company is exposed to foreign exchange risk arising from foreign currency transactions, primarily with respect to the US Dollar and Euro. Foreign exchange risk arises from recognised assets and liabilities denominated in a currency that is not the functional currency of any of the Company entities. Considering the low volume of foreign currency transactions, the Company’s exposure to foreign currency risk is limited and the Company hence does not use any derivative instruments to manage its exposure. Also, the Company does not use forward contracts and swaps for speculative purposes.

i) Foreign currency risk exposure in USD:

The Company’s exposure to foreign currency risk at the end of the reporting period expressed in ‘, are as follows

Sensitivity

The sensitivity of profit or loss to changes in the exchange rates arises mainly from foreign currency denominated financial instruments.

(ii) Foreign currency risk exposure in EURO:

The Company’s exposure to foreign currency risk at the end of the reporting period expressed in ‘, are as follows

Sensitivity

The sensitivity of profit or loss to changes in the exchange rates arises mainly from foreign currency denominated financial instruments.

b) Interest rate risk

(i) Liabilities

The Company’s policy is to minimise interest rate cash flow risk exposures on long-term financing. At 31 March 2018 and 31 March 2017, the Company is exposed to changes in interest rates through bank borrowings at variable interest rates. The Company’s investments in fixed deposits carry fixed interest rates.

Interest rate risk exposure

Below is the overall exposure of the Company to interest rate risk:

Sensitivity

Below is the sensitivity of profit or loss and equity changes in interest rates.

ii) Assets

The Company’s fixed deposits are carried at amortised cost and are fixed rate deposits. They are therefore not subject to interest rate risk as defined in Ind AS 107, since neither the carrying amount nor the future cash flows will fluctuate because of a change in market interest rates.

c) Price risk

The Company does not have any significant investments in equity instruments which create an exposure to price risk.

5. CAPITAL MANAGEMENT

The Company’ s capital management objectives are

- to ensure the Company’s ability to continue as a going concern

- to provide an adequate return to shareholders

The Company monitors capital on the basis of the carrying amount of equity less cash and cash equivalents as presented on the face of balance sheet.

Management assesses the Company’s capital requirements in order to maintain an efficient overall financing structure while avoiding excessive leverage. This takes into account the subordination levels of the Company’s various classes of debt. The Company manages the capital structure and makes adjustments to it in the light of changes in economic conditions and the risk characteristics of the underlying assets. In order to maintain or adjust the capital structure, the Company may adjust the amount of dividends paid to shareholders, return capital to shareholders, issue new shares, or sell assets to reduce debt.

Gratuity

The Company provides for gratuity for employees in India as per the Payment of Gratuity Act, 1972. Employees who are in continuous service for a period of 5 years are eligible for gratuity. The amount of gratuity payable on retirement/termination is the employees last drawn basic salary per month computed proportionately for 15 days salary multiplied for the number of years of service.

For the funded plan, the Company makes contributions to recognised debt base funds in India. The Company does not fully fund the liability and maintains a target level of funding to be maintained over a period of time based on estimations of expected payments. The expected contribution to the plan for next annual reporting period amounts to Rs. 20.33 crores (previous year - Rs. 19.87 crores). The weighted average duration of the defined benefit obligation as at 31 March 2018 is 7 to 8 years years (31 March 2017: 7 to 8 years).

These assumptions were developed by management with the assistance of independent actuarial appraisers. Discount factors are determined close to each year-end by reference to government bonds of relevant economic markets and that have terms to maturity approximating to the terms of the related obligation. Other assumptions are based on management’s historical experience.

The above sensitivity analysis are based on a change in an assumption while holding all other assumptions constant. In practice, this is unlikely to occur and changes in some of the assumptions may be correlated. When calculating the sensitivity of the defined benefit obligation to significant actuarial assumptions the same method (present value of the defined benefit obligation calculated with the projected unit credit method at the end of the reporting period) has been applied which was applied while calculating the defined benefit obligation liability recognised in the balance sheet.

The methods and types of assumptions used in preparing the sensitivity analysis did not change compared to previous period.

B. Compensated absences (unfunded)

The leave obligations cover the Company’s liability for sick and earned leaves. The Company does not have an unconditional right to defer settlement for the obligation shown as current provision balance above. However based on past experience, the Company does not expect all employees to take the full amount of accrued leave or require payment within the next 12 months, therefore based on the independent actuarial report, only a certain amount of provision has been presented as current and remaining as non-current. Amount of Rs. 146.02 crores (previous year: Rs. 164.53 crores) has been recognised in the statement of profit and loss.

C. Defined contribution plans

Contributions are made to the Government Provident Fund and Family Pension Fund which cover all regular employees eligible under applicable Acts. Both the eligible employees and the Company make pre-determined contributions to the Provident Fund. The contributions are normally based upon a proportion of the employee’s salary

D. Gratuity and compensated absences is payable to the employees on death or resignation or on retirement at the attainment of superannuation age. To provide for these eventualities, the Actuary has used LIC (1994-96) Ultimate table for mortality in service and LIC (1996-98) table for mortality in retirement.

E. Mortality in service is assumed on the basis of LIC (1994-96) Ultimate table for mortality in service and LIC (1996-98) table.

F. The Company has taken an Insurance Policy for medical benefits in respect of its retired and working employees. The Insurance Policy is fully funded by the Company.

6. RELATED PARTY DISCLOSURES

Related parties where control exists:

i Key Management Personnel

ii Subsidiaries

Mahanagar Telephone (Mauritius) Limited (‘MTML’)

Millenium Telecom Limited

MTML International Limited (subsidiary of MTML)

MTML Data Limited (subsidiary of MTML)

iii Joint ventures

MTNL STPI IT Services Limited (‘MSISL’)

iv Associates

United Telecommunications Limited (‘UTL’)

v Other related parties MTNL Leave encashment trust MTNL Gratuity trust

vi Other government entity

Bharat Sanchar Nigam Limited (‘BSNL’)

vii Summary of significant transactions with related parties:

ix The Company has certain transactions with respect to sale and purchase of services and receives reimbursement of expenses (vis-a-vis electricity and water charges) in relation to renting of immovable property from BSNL.

*As per article 12.19 (b) of Shareholders’ agreement together with para 27 of the amendatory agreement (together referred to as ‘amended agreement’) entered into between MTNL, TCIL,TCL and NVPL (Nepal), together referred to as ‘Investors’ pursuant to their investment in United Telecom Limited (‘UTL’), in case NVPL (the local partner in Nepal) decides to sell its stake to any third party, it requires prior consent of other Investors.Further, at such time, per exit clause in the agreement, any of the other Investors other than NVPL can exit the arrangement after 2 years from the amended agreement by issuing 3 month’s notice. Pursuant to this exit clause, the Company has issued notice to UTL on 30 January, 2018 for making an exit. The notice is valid uptil 30 April 2018 and subsequent to 30 April 2018, the local partner has sought time extension of another 3 months i.e. till 30 July, 2018 for giving effect to the exit requested by the Company. Accordingly, such investment has been classified as ‘held for sale’ in the financial statements for year ended 31 March 2018.

7. COMMITMENTS

A Capital expenditure contracted for at the end of the reporting period but not recognised as liabilities is as follows:

B In respect of incomplete contracts where the expenditure already incurred has exceeded the contract value, the additional expenditure required to complete the same cannot be quantified.

8. LEASES

A. Operating leases - Assets taken on lease

The Group has leased certain towers, land and buildings under operating lease arrangements. The leases are renewable on periodical basis and cancellable at Group’s option. Total lease payments recognized in the consolidated statement of comprehensive income is Rs. 93.75 crores (31 March 2017: Rs. 88.47 crores).

B. Finance leases - Assets given on lease

The Company has leased land under finance lease arrangements. As at 31 March 2018, the net carrying amount of the leasehold land was Rs. 293.30 crores (31 March 2017: Rs. 294.92 crores).

9. DISCONTINUED OPERATIONS

(a) Description

CDMA Service, which is reported under Cellular Segment as per Ind AS 108, ‘Operating Segment’ (Segment Reporting), was discontinued from 01 March 2016 and spectrum used for CDMA services has been surrendered for Rs. 458.04 crores to DoT. During the current year, the Company has made recoveries pertaining to CDMA assets and paid license fee on such recoveries.

(b) Financial performance and cash flow information

The financial performance and cash flow information presented are for the year ended 31 March 2018 and 31 March 2017.

10. SEGMENT INFORMATION

The Company is in the business of providing telecommunication services in India and has two reportable segments viz. Basic and Cellular. As per para 4 of Ind AS 108 ‘Operating Segments”, if a financial report contains both the consolidated financial statements as well as the separate financial statements, segment information is required only in the consolidated financial statements.

The Company is in the process of seeking confirmation from its vendors regarding their status under the Micro, Small and Medium Enterprises Development Act, 2006. The above disclosure has been determined to the extent such parties have been identified on the basis of information available with the Company. This has been relied upon by the auditors.

11A The Company is covered under Section 135 of the Companies Act, 2013 and accordingly constituted a Corporate Social Responsibility Committee of the Board. However, as the Company did not have average net profits based on the immediately preceding three financial years, the Company is not required to spend amounts towards Corporate Social Responsibility in terms of the 2013 Act.

11B During the year the Company has made expenditure in foreign currency equivalent to Rs. 3.35 crores. Whereas earnings in foreign currency are Rs. 2.80 crores.

12 Certain Lands and Buildings capitalized in the books are pending registration/legal vesting in the name of the company and the landed properties acquired from DOT have not been transferred in the name of the company and in the case of leasehold lands, the documentation is still pending. Stamp Duty on the lands and buildings acquired from DOT is payable by DOT as per sale deed and in respect of properties acquired after 01 April 1986, the documentation shall be contemplated at the time of sale or disposal as and when effected.

13 Department of Telecommunications (DOT) has levied one time spectrum charges for the GSM and CDMA spectrum on MTNL and it also included the spectrum given on trial basis to the extent of 4.4 MHz in 1800 MHz frequency while calculating the spectrum charges. The calculations are further subject to change in accordance with the changes in the quantum of spectrum holding and the remaining valid period of license as per DOT MTNL has surrendered some of the spectrum allotted on trial basis and does not require to pay for CDMA spectrum since it holds only 2.5 MHz spectrum in respect of CDMA. DOT has been apprised of the same and the matter is still under correspondence. Apart from this, the issue of charges for spectrum given on trial basis is also to be decided. Further MTNL has finally surrendered CDMA spectrum w.e.f. 28 February 2016.

Besides, ab-initio, the very policy of levy of one time spectrum charges by DOT itself has been challenged by private operators and is sub judice as on date whereas MTNL’s case is also to be decided by DOT on the basis of outcome of the court case and the spectrum surrendered or retained. The finalisation of charges and the modalities of payment are therefore to be crystallized yet and as on date the position is totally indeterminable as to the quantum of charges and also the liability. Pending final outcome of the issue which itself is sub judice and non finality of quantum of charges payable, if at all, to DOT, no provision is made in the books of accounts as the amount is totally indeterminable. However the contingent liability of Rs. 3,205.71 crores is shown on the basis of the demand raised by DOT in respect of GSM.

14 License fee on the Adjusted Gross Revenue (AGR) was calculated and accounted for on accrual basis in respect of both revenue and revenue sharing with other operators till FY 2011-12. As per the directions of Supreme Court given earlier in respect of calculation of License Fees and AGR, the matter was referred back to TDSAT. TDSAT vide its judgment dated 23.04.2015 set aside the impugned demands of DOT and DOT was directed to rework the license fee in the light of their findings. However, MTNL is not a party to the dispute and the AGR is calculated as per License Agreement. The issue of deduction claimed in AGR upto FY 2011-12 in respect of revenue sharing on netting basis with BSNL has been taken up with DOT and BSNL while paying License Fees on actual payment basis from 2012-13 onwards. The impact of ‘140.36 crores on this account upto the year 2011-12 has been shown as contingent liability.

15 The Company had subscribed to 8.75% Cumulative Preference Shares of M/s. ITI Limited, amounting to Rs. 100 crores during the year 2001-02. As per the terms of allotment, the above Preference Shares were proposed to be redeemed in five equal instalments. Accordingly, five instalments amounting to Rs. 20 crores each, aggregating to ‘100 crores have become redeemable, which have not been redeemed by ITI Limited. As per letter No.U-59011-10/2002-FAC dated 31.07.2009 issued by DOT, the repayment schedule of the above cumulative Preference Shares was deferred to 2012-13 onwards in five equal instalments. The instalments which were due in 2012-13, 2013-14, 2014-15, 2015-16 and 2016-17 have not been paid, therefore necessary provision for the overdue instalments has been made. Though in letter of Dept. of Telecom No: 20-37/2012-FAC.II dated 25-4-2014, the Cabinet Committee on Economic Affairs has approved the financial assistance to M/S ITI which includes the grants -in -aid for payment of commitments made by M/S ITI and as funds will be made available after budget 2014-15 is passed and hence repayment issue may be held in abeyance till such time. Subsequently M/S ITI vide letter no: ITI/Corp/Fin/MTNL dated 7 May 2014 informed that upon receipt of the financial assistance from the Govt. the redemption process would be initiated. Further DOT has also been reminded to issue directions to M/S ITI to redeem Preference Share capital and make repayment vide letter no. MTNL/CO/ GM (BB & IA)/ITI Inve / 2013-14 dated 06 May 2015, 21 July 2015, 27 August 2015 and 29 January 2016. Further a proposal for conversion of above cumulative Preference Shares to Equity Shares of ITI was given by ITI vide its letter no. K/B3/Pref-Shares/2016 dated 20 January 2016 but the same was rejected by MTNL and communicated to ITI vide letter no. MTNL/CO/GM(BB&IA)/ITI Investment/2013-14 dated 09 February 2016. Subsequently MTNL has initiated the required actions as per Section 55(3) of Companies Act 2013 effected from 1 June 2016 and the issue is taken up again vide letter no. MTNL/ CO/BKG/ITI Investment/2013-14/127 dated 19 May 2017 for issuing of cumulative preference shares for the entire amount due inclusive of dividend.

16 Certain claims in respect of damaged/lost fixed assets and inventory has been lodged with Insurance Companies by MTNL but the settlement of the claims is pending. Final adjustment in respect of difference between amount claimed and assets withdrawn will be made in the year of settlement of claim.

17 The Company had claimed benefit under section 80IA of the Income Tax Act, 1961 for the financial year from 1996-97 to 2005-06. The appellate authorities have allowed the claim to the extent of 75% of the amount claimed. The Company has preferred appeals for the remaining claim before the Hon’ble Court of Delhi. The Company has retained the provision of Rs. 375.96 crores (previous year Rs. 400.33 crores) for this claim for the assessment years 1998-99, 1999-00 and 2000-2001, however, the demands on this account amounting to Rs. 243.22 crores (previous year Rs. 345.72 crores) for the assessment years 2000-01 to 2005-06 have been shown as contingent reserve to meet the contingency that may arise out of disallowances of claim of benefit u/s 80IA of Income Tax Act, 1961.

18. Litigations

a) MTNL entered into contracts with M/s. M & N Publications Limited for printing, publishing and supply of telephone directories for Delhi and Mumbai unit for a period of 5 years starting from 1993. After printing and issue of 1993 (main & supplementary) and 1994 main directory, M/s. M & N Publications Ltd terminated the contract prematurely on 04 April 1996. MTNL, Mumbai & Delhi invoked Bank Guarantees on 09 April 1996, issued Legal Notice on 22 July 1996 and terminated the contract.

Sole Arbitrator has been appointed by CMD, MTNL. The Sole Arbitrator has since given his award on 09 April 2013 partly in favour of MTNL, Mumbai and on 31 July 2013 in favour of MTNL, Delhi. The claim and counter claim under arbitration will be accounted for in the year when the ultimate collection/ payment of the same becomes reasonably certain. M/s. M & N Publications has approached the Bombay & Delhi High Courts against the arbitration awards and MTNL also approached the Bombay & Delhi High Courts for balance amount due.

b As per directions of the Hon’ble Delhi High Court one UASL operator had paid to MTNL, Mumbai ‘124.93 crores and Rs. 33.99 crores in 2004-05 and 2005-06 respectively against the claim of Rs. 158.92 crores. The Company has recognised the amount realized as revenue in the respective period. The Hon’ble TDSAT has ordered for refund of Rs. 96.71 crores. MTNL has filed a Civil Appeal and application for stay of operation of the order of TDSAT in the Hon’ble Supreme Court of India in which Supreme Court directed on 08 May 2014 that TDSAT will review the impugned order on seeking of it by appellant. MTNL filed review application which had been disposed off by Hon’ble TDSAT vide order dated 27 May 2014 on which MTNL filed CWP no.022764 dated 16 July 2014 in Hon’ble Supreme Court and the same is pending. Meanwhile UASL operator also filed appeal in Hon’ble Supreme Court. The claim of Rs. 96.71 crores on this account has been shown as contingent liability C MTNL Mumbai has received claims from M/s. BEST, Electricity supply provider categorizing MTNL at Commercial tariff instead of Industrial tariff. The claim has been made with retrospective effect for the period Feb-2007 to May-2009 in respect of HT connection and Jan-2002 to Apr-2011 in respect of LT connection. MTNL has represented to BEST for reconsideration which has not been accepted by BEST. Hence MTNL has approached Hon’ble Mumbai High Court and got a stay on the arrears claimed by BEST amounting to Rs. 20.82 crores. In the opinion of the management, there is remote possibility of the case being settled against MTNL.

d) In respect of Mobile Services Delhi, a sum of Rs. 25.89 crores claimed by TCL towards ILD charges for the period 0ct-09 to March-10 has not been paid due to heavy spurt in ILD traffic towards M/S TCL. On technical analysis it was found that these calls were made to some dubious and tiny destination. These destinations do not confirm to international numbering plan of the respective countries and are not approved destinations as per approved interconnect agreement. Further these calls have not got physically terminated to the destinations. The observations were shared with M/S TCL. M/S TCL has also been advised that the balance, which relates to fraudulent calls, is not payable and accordingly no provision has been made in the books of accounts. The matter was handed over to the committee for investigation. Subsequently M/S TCL filed a case in Hon’ble TDSAT for recovery of the amount, decision for which is awaited. The claim of Rs. 172.83 crores on this account has been shown as contingent liability.

In addition, the Company is subject to legal proceedings and claims, which have arisen in the ordinary course of business. The Company’s management perceives that these legal actions, when ultimately concluded and determined, will not have any material impact on the Company’s financial statements.

19 Settlements with BSNL:

a) The amount recoverable from BSNL is Rs. 5,396.52 crores ( previous year Rs. 5,671.54 crores) and amount payable is Rs. 2,009.37 crores (previous year Rs. 1,941.76 crores). The net recoverable of Rs. 3,387.15 crores (previous year Rs. 3,729.78 crores) is subject to reconciliation and confirmation. The carrying value of the net recoverable from BSNL is Rs. 3,282.45 crores (previous year - Rs. 3,422.58 crores) measured at amortised cost.

b) Certain claims of BSNL on account of Signalling charges Rs. 21.93 crores (previous year Rs. 21.93 crores), Transit tariff Rs. 25.19 crores (previous year Rs. 25.19 crores), MP Billing Rs. 6.01 crores (Rs. 6.01 crores), Service Connections Rs. 40.15 crores (previous year Rs. 40.15 crores), IUC Rs. 10.14 crores (previous year Rs. 10.14 crores) and IUC from Gujrat Circle Rs. 1.11 crore (previous year Rs. 1.11 crore) are being reviewed. Pending settlement of similar other claims from BSNL, no provision is considered necessary

c) Delhi Unit has accounted for the expenditure on account of telephone bills of service connections raised by BSNL towards MTNL for the period from 01 October 2000 to 30 September 2006 to the tune of Rs. 9.80 crores (previous year Rs. 9.80 crores) on the basis of actual reimbursement made for subsequent periods against the disputed claim of Rs. 31.27 crores (previous year Rs. 31.27 crores), since no details / justifications are received till date from BSNL in spite of repeated persuasion. The balance amount of Rs. 21.47 crores ( previous year Rs. 21.47 crores) is shown as contingent liability

20 Subscribers’ dues and deposits:

Other current liabilities include credits on account of receipts including service tax from subscribers amounting to Rs. 36.07 crores (previous year Rs. 34.58 crores), which could not be matched with corresponding debtors or identified as liability, as the case may be. Appropriate adjustments/ payments shall be made inclusive of service tax, when these credits are matched or reconciled. Therefore, it could not be adjusted against making provision for doubtful debts.

21 The amounts of receivables and payables (including NLD / ILD Roaming operators) are subject to confirmation and reconciliation.

22 The matching of billing for roaming receivables / payables with the actual traffic intimated by the MACH is being done. Further the roaming income is booked on the basis of actual invoices raised by MACH on behalf of MTNL. Similarly the roaming expenditure is booked on the basis of actual invoices received by MTNL from MACH on behalf of the other operators. However, regarding collection, the payment is directly received in the bank from other operators for varying periods.

23 In case of Mumbai Unit, the balances with non-scheduled banks comprise of:

24 Settlements with DoT:

a Amount recoverable on current account from DoT is Rs. 6,807.97 crores (previous year Rs. 7,318.54 crores) and amount payable is Rs. 38.71 crores (previous year Rs. 54.93 crores). The net recoverable of Rs. 6,769.26 crores (previous year Rs. 7,263.61 crores) is subject to reconciliation and confirmation. There is no agreement between the MTNL and DoT for interest recoverable/payable on current account. Accordingly, no provision has been made for interest payable/receivable on balances during the year except charging of interest on GPF claims receivable from DoT

b Deposits from applicants and subscribers as on 31 March 1986 were Rs. 81.32 crores ( previous year Rs. 81.32 crores) in Mumbai unit as intimated provisionally by DoT. At the year end, these deposits amounted to Rs. 103.28 crores (previous year Rs. 103.28 crores), the difference being attributable to connections/refunds granted in respect of deposits received prior to 31 March 1986. Balance on this account still recoverable from DoT is Rs. 55.85 crores (previous year Rs. 55.85 crores).

c The total provision for Leave encashment is Rs. 1,113.39 crores up to 31 March 2018 ( previous year Rs. 1,117.10 crores). Out of this, an amount of Rs. 65.37 crores ( previous year Rs. 65.37 crores ) and Rs. 43.37 crores (previous year Rs. 43.37 crores) is recoverable from DOT in respect of Company C & D and Company B employees respectively for the period prior to their absorption in MTNL.

d An amount of Rs. 1,150.97 crores (previous year Rs. 1,886.76 crores) towards GPF contribution is recoverable from DOT as on 31 March 2018. The amount pertains to Company C& D and Company B employees absorbed in MTNL w.e.f. 01 November 1998 and 01 October 2000 respectively.

25 As per gazette notification no.GSR 138(E) dated 3rd March 2014 pensionary benefits in respect of absorbed combined service pension optees are being paid by the Government of India on BSNL pay scales. Gratuity provision for other than combined service pension optee employees of MTNL, and Leave Encashment provision for all of the employees of MTNL has been made on the basis of actuarial valuation.

26 There is no indication of any impairment of assets of the Company, on the basis of the company as a whole as a CGU under Indian Accounting Standards - 36 “Impairment of assets” as specified under Section 133 of the Companies Act, 2013.

27 As per the accounting policy, Bonus/ Exgratia is paid based on the productivity linked parameters and it is to be provided accordingly subject to the profitability of the Company. In view of losses, no provision for Bonus/ Exgratia has been made during the year

28 Debenture Redemption Reserve: In view of losses, Debenture Redemption Reserve had not been created in respect of Redeemable Non-Convertible Debentures since 2014-15 (in the form of Bonds).

29 There is no amount which is required to be transferred to Investor Education and Protection Fund by the Company

30 The Company has no foreseeable losses, which requires provision under applicable laws or accounting standards on long-term contracts and not dealing into derivative contracts at all.

31 The Bank Reconciliation Statements as at 31 March 2018 include unmatched/unlinked credits/ debits amounting to Rs. 1.61 crore (previous Rs. 2.33 crore) and Rs. 3.11 crore (Rs. 1.04 crore) respectively Reconciliation and follow up with the bank to match/rectify the same is in process.

32 The Company has incurred a loss of Rs. 2,973.10 crores during the year under report. The company has been incurring continuous losses since year 2009-10 (except in FY 2013-14) and the net worth has been fully eroded for the year under report. Considering the continuous losses and negative net worth, the management has made an assessment of its ability to continue as a going concern. The Company has taken up a VRS proposal with the Government., employees of all grades going to retire in next 10 years to reduce the legacy staff costs inherited on account of absorption of employees recruited under government w.e.f. 1-11-1998 and also on 1-10-2000, which has been under active consideration of Govt. of India. On approval and implementation of the scheme, the company is likely to reduce the staff expenses which will help the company to reduce its costs and thereby losses. Besides, the Company has taken for monetization of the lands and buildings of the company which is also under consideration of the Govt. In addition to this, proposal of Govt to provide 4G license to the company and infusion of fresh capital by the Govt in lieu of granting 4G license is also under consideration All these cases are under consideration of the Govt. Besides, the CMTS License which was earlier valid up to 10 October 2017, the validity is revised by Govt. up to 5 April 2019 which facilitates the continuation of services without any additional upfront Spectrum cost till the year 2019 and in addition the proposal for monetization of assets is also taken up with Govt.. All these aspects are considered by the management while preparing the financial statements, and an assessment of an entity’s ability to continue as a going concern is made accordingly

33 In Mumbai Unit, the Company has been awarded a long duration contract from Larsen & Turbro (L&T) for design, development, implementation & Maintenance of CCTV based surveillance system for Mumbai City. The recognition of profit/loss on the basis of percentage of completion method of accounting as prescribed under Indian Accounting Standard (Ind-AS) - 18 on “Revenue” is pending till the finalisation of fresh addendum.

34 During the year, the Company has booked an income amounting to Rs. 136.74 crores as other income on account of difference between the estimated amounts of Pension Payout Orders (PPO), accounted for in the past years pertaining to Delhi Units and actual arrived on completion of issuance of PPO’s by the Department of Telecommunication (DOT), Government of India (GOI). Similar effect of the same in respect of Mumbai Units is pending due to finalization of detailed report on the basis of PPOs issued in respect of Mumbai unit is under process. On completion of the same necessary effect will be taken to accounts.

35 Certain items of property, plant and equipments such as batteries, Air conditioners, transformers, lifts and cables etc. are capitalized on account of replacement of old assets in existing property, plant and equipments. The removal of WDV of existing assets is pending till the relocation/ decommissioning of existing assets which is under scrutiny and the consequential impact of the residual value will be considered at the time of scrap in the ensuing year