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You can view the entire text of Notes to accounts of the company for the latest year

BSE: 532454ISIN: INE397D01024INDUSTRY: Telecom Services

BSE   ` 310.20   Open: 307.00   Today's Range 302.95
311.00
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436.70
Year End :2018-03 

e. Contingent liability

Refer note 23 for details of contingent liability.

1. Standards issued but not effective until the date of authorisation for issuance of the said financial statements

The new significant standards, amendments to Standards that are issued but not yet effective until the date of authorization for issuance of the said financial statements are discussed below, The Company has not early adopted these amendments and intends to adopt when they become effective,

Ind AS 115, ‘Revenue from Contracts with Customers’

In March 2018, MCA has notified the Ind AS 115, Revenue from Contract with Customers, As a consequence of issuance of Ind AS 115, relevant paragraphs have been inserted / amended in various other standards,

The Standard establishes a new five-step model that will apply to revenue arising from contracts with customers, Under this standard, revenue is recognized at an amount that reflects the consideration to which an entity expects to be entitled in exchange for transferring goods or services to a customer, The principles in Ind AS 115 provide a more structured approach to measuring and recognizing revenue, The new revenue standard is applicable to all entities and will supersede all current revenue recognition requirements under Ind AS, The effective date of Ind AS 115 is annual periods beginning on or after April 1, 2018, The Company does not expect that the adoption of the said standard and related amendments will have any significant impact on the financial statements per se,

2. Significant transactions / new developments

(i) During the year ended March 31, 2018, the Company has transferred its 100% equity stake in Bharti Airtel (Hong Kong) Limited and 37,03% equity stake in Bharti Airtel (UK) Limited to Bharti International (Singapore) Pte, Limited (‘BISPL’), an indirect subsidiary of the Company against a consideration of H429 and H1,806 respectively and 44% stake in Bharti Telemedia Limited, a subsidiary of the Company to Nettle Infrastructure Investments Limited, another subsidiary of the Company, against a consideration of H47,632. Accordingly the excess of cost of investments over the proceeds amounting to H28,498 has been recognized in other equity

(ii) During the year ended March 31, 2018, the Company has increased its equity investment in Indo Teleports Limited from 95% to 100% for a consideration of H23.

(iii) During the year ended March 31, 2018, an understanding for demerger of consumer mobile businesses of Tata Teleservices Limited and Tata Teleservices Maharashtra Limited into the Company was entered into, Further, the board of directors have approved the scheme(s) of arrangement under section 230 to section 232 of the Companies Act, 2013 for the said demerger, The said transaction is subject to requisite regulatory approvals,

(iv) During the year ended March 31, 2018, the Board of Directors approved a scheme of arrangement, under section 230 to section 232 of the Companies Act, 2013, for the transfer of the optical fiber cable business to the Telesonic Networks Limited, a wholly owned subsidiary of the Company, The said transaction is subject to requisite regulatory approvals,

(v) During the year ended March 31, 2018, the Company has completed the acquisition of 100% equity stake and compulsorily convertible debentures of Tikona Digital Networks Pvt Ltd (‘TDNPL’) as all necessary closing conditions have been fulfilled and filed an application under section 230 to section 232 of the Companies Act, 2013 before the Delhi bench of the National Company Law Tribunal for the merger of TDNPL with the Company

(vi) During the year ended March 31, 2017, the Company had entered into an agreement to sell the investment in subsidiaries Bharti Airtel International (Netherlands) B.V. (‘BAIN’), Bharti International (Singapore) Pte Ltd (‘BISPL’) and Bharti Airtel International (Mauritius) Limited (‘BAIML’) to its wholly owned subsidiary Network i2i Limited. However, sale of investment in BISPL is subject to certain customary closing conditions, hence had not consummated. The same was classified as assets-held-for-sale. Accordingly, the excess of cost of investment over sales consideration, amounting to H118,582 and H14,906 pertaining to BAIN / BAIML and BISPL respectively was recognized as loss under exceptional items,

Further, during the year ended March 31, 2018, the transaction of BISPL stake transfer to Network i2i has been consummated,

(vii) During the year ended March 31, 2017, the Company had entered into a scheme of amalgamation for the merger of Telenor (India) Communication Private Limited with the Company. The said transaction is subject to requisite regulatory approvals and other closing conditions,

(viii) During the year ended March 31, 2017, Bharti Telemedia Limited, a subsidiary of the Company, had allotted 475 Mn shares to the Company against a consideration of H4,750,

(ix) During the year ended March 31, 2017, the Company had sold 400 Mn shares in BIL, against a consideration aggregating to H130,000 and accordingly the excess of cost of investment over the proceeds (net of associated costs, taxes and regulatory levies) amounting to H25,375 was recognized as loss under exceptional items. Subsequent to the transaction, the shareholding of the Company in BIL had reduced to 50.3%,

(x) During the year ended March 31, 2017, Bharti Infratel Limited (‘BIL’), a subsidiary of the Company had bought back approx.

47.05 Mn shares against a consideration of H425 per share. Out of which the Company had tendered approx. 29.10 Mn shares and received the consideration of H12,368 and accordingly, the excess of proceeds (net of associated costs, taxes and levies) over the cost of investment amounting to H1,687 was recognized as gain and disclosed as other income,

(xi) During the year ended March 31, 2017, the Company acquired rights to use spectrum in the 1800 MHz band for six circles against a consideration of H46,530 from Videocon Telecommunications Limited,

(xii) During the year ended March 31, 2017, the Company acquired rights to use spectrum in the 2300 MHz band for seven circles against a consideration of H34,840 from Aircel Limited and its subsidiaries Dishnet Wireless Limited,

(xiii) During the year ended March 31, 2017, the Company was allotted 155.60 MHz spectrum across 1800 / 2100 / 2300 MHz, Consequently, the Company had paid amount of H67,764 upfront and opted the deferred payment option for H66,764.

(xiv) During the year ended March 31, 2017, the Company had acquired 100% equity stake of Augere Wireless Broadband India Private Limited (‘AWBPL’). Further, with effect from February 15, 2017, AWBPL had merged with the Company through the scheme of arrangement under Sections 391 to 394 of the Companies Act, 1956. Accordingly, AWBPL had ceased to exist and had merged with the Company. Accordingly entire assets (mainly spectrum amounting to H899), liabilities and the differential value of equity in the books of AWBPL; have been recognized by the Company as the date of the transaction at same carrying values as in the books of AWBPL. The difference of H445 between the share capital and the carrying values of investment in AWBPL in the books of the Company had been adjusted with general reserve,

The proposed dividend being subject to approval at respective annual general meeting, accordingly no corresponding liability has been recognized in the respective financial year,

*However against this, the Company has availed credit of J3,125 and H1,087 during the year ended March 31, 2018 and March 31, 2017 respectively, on account of dividend distribution tax on dividend received from subsidiary companies.

3. Reserve and surplus

a) Retained earnings: Retained earnings represent the amount of accumulated earnings of the Company, and re-measurement differences on defined benefit plans and gains / (losses) on common control transactions and any transfer from general reserve,

b) General reserve: The Company has transferred a portion of its profit before declaring dividend in respective prior years to general reserve, as stipulated under the erstwhile Companies Act 1956, Mandatory transfer to general reserve is not required under the Companies Act 2013 (‘Act’),

Further, on exercise of the stock options, the difference between the consideration (i.e. the exercise price and the related amount of share-based payment reserve) and the cost (viz. related amount of loan provided to Bharti Airtel Welfare Trust) of the corresponding stock options, is transferred to general reserve,

The difference between the share capital and the carrying values of the investment pursuant to the scheme of arrangement under sections 391 to 394 of the Companies Act, 1956 with respect to the amalgamation of Augere Wireless Broadband Private Limited has been recognized in general reserve,

c) Business restructuring reserve: It represents mainly the excess of the fair values over the original book values of the assets transferred to one of its subsidiary Bharti Infratel Limited pursuant to the scheme of arrangement under sections 391 to 394 of the Companies Act, 1956,

d) Debenture redemption reserve: Pursuant to the provisions of the Act, the Company is required to create debenture redemption reserve out of the profits and is to be utilized for the purpose of redemption of debentures. On redemption of the debentures, the related amount of this reserve gets transferred to retained earnings,

e) Capital reserve: It mainly includes capital reserve acquired pursuant to the scheme of arrangement under sections 391 to 394 of the Companies Act, 1956 with respect to the amalgamation (pooling of interest) of Airtel Broadband Services Private Limited,

Note: In absence of any specific provision under Ind AS with respect to court schemes, and the fact that the court schemes are part of the law, accounting prescribed therein will continue to prevail,

*These loans are secured by hypothecation of the vehicles.

**During the year ended March 31, 2018, the Company has issued 30,000 listed, unsecured, rated, redeemable, Non - Convertible Debentures (‘NCDs’), Series I and series II of face value of H10 Lakhs each, at par aggregating to H30,000 on private placement basis, carrying interest rates 8.25% p.a. and 8.35% p.a. (payable annually) and principal repayable in year 2020 and 2021, respectively.

*** During the year ended March 31, 2018, the Government of India has provided one time option to elect higher number of annual installments prospectively (upto a maximum of 16 installments) towards the repayment of spectrum liability viz-a-viz currently allowed 10 installments. Accordingly, the Company has exercised the option, increasing the remaining number of installments by 6 annual installments for all its existing deferred payment liabilities.

The category wise detail of the contingent liability has been given below:-

a) Sales and Service Tax

The claims for sales tax comprised of cases relating to the appropriateness of declarations made by the Company under relevant sales tax legislations which were primarily procedural in nature and the applicable sales tax on disposals of certain property and equipment items, Pending final decisions, the Company has deposited amounts under protest with statutory authorities for certain cases,

The service tax demands relate to cenvat claimed on tower and related material, levy of service tax on SIM cards and employee talk time, cenvat credit disallowed for procedural lapses and usage in excess of 20% limit,

b) Income Tax demand

Income tax demands mainly include the appeals filed by the Company before various appellate authorities against the disallowance by income tax authorities of certain expenses being claimed and non-deduction of tax at source with respect to pre-paid dealers / distributor’s margin,

c) Access charges / Port charges

(i) Despite the interconnect usage charges (‘IUC’) rates being governed by the Regulations issued by Telecom Regulatory Authority of India (‘TRAI’); BSNL had raised a demand for IUC at the rates contrary to the regulations issued by TRAI in 2009. Accordingly, the Company filed a petition against the demand with the TDSAT which allowed payments by the Company based on the existing regulations. The matter was then challenged by BSNL and is currently pending with the Hon’ble Supreme Court,

(ii) The Hon’ble TDSAT allowed BSNL to recover distance based carriage charges. The private telecom operators have jointly filed an appeal against the said order and the matter is currently pending before the Hon’ble Supreme Court,

(iii) BSNL challenged before TDSAT the port charges reduction contemplated by the regulations issued by TRAI in 2007 which passed its judgment in favour of BSNL. The said judgment has been challenged by the private operators in Hon’ble Supreme Court, Pending disposal of the said appeal, in the interim, private operators were allowed to continue paying BSNL as per the revised rates i.e. TRAI regulation issued in 2007, subject to the bank guarantee being provided for the disputed amount. The rates were further reduced by TRAI in 2012 which was challenged by BSNL before the

Hon’ble Delhi High Court. The Hon’ble Delhi High Court, in the interim, without staying the rate revision, directed the private operators to secure the difference between TRAI regulation of 2007 and 2012 rates by way of bank guarantee pending final disposal of appeal,

d) Customs Duty

The custom authorities, in some states, demanded custom duty for the imports of special software on the ground that this would form part of the hardware on which it was pre-loaded at the time of import. The view of the Company is that such imports should not be subject to any custom duty as it is operating software exempt from any custom duty. In response to the application filed by the Company, the Hon’ble Central Excise and Service Tax Appellate Tribunal (‘CESTAT’) has passed an order in favour of the custom authorities. The Company has filed an appeal with Hon’ble Supreme Court against the CESTAT order.

e) Entry Tax

In certain states, an entry tax is levied on receipt of material from outside the state. This position has been challenged by the Company in the respective states, on the grounds that the specific entry tax is ultra vires the Constitution. Classification issues has also been raised, whereby in view of the Company, the material proposed to be taxed is not covered under the specific category,

During the year ended March 31, 2017, the Hon’ble Supreme Court of India upheld the constitutional validity of entry tax levied by few States. However, Supreme Court did not conclude certain aspects such as present levies in each State is discriminatory in nature or not, leaving them open to be decided by regular benches of the Courts. Pending disposition by the regular benches, the Company has decided to maintain status-quo on its position and hence continues to disclose it as contingent liability

f) DoT demands

(i) Demand for license fees pertaining to computation of Adjusted Gross Revenue (‘AGR’) and the interest thereon, due to difference in its interpretation. The definition of AGR is sub-judice and under dispute since 2005 before the TDSAT TDSAT had pronounced its judgment in 2015, quashed all demands raised by DoT and directed DoT to rework the demands basis the principles enunciated in its judgment. Subsequently, the Union of India (‘UOI’) and the Company along with various other operators have filed appeals / cross appeals before the Hon’ble Supreme Court of India against the TDSAT judgment. In 2016, all the appeals were tagged together and Hon’ble Supreme Court has permitted DOT to raise demands with a direction not to enforce any demand till the final adjudication of the matter by Hon’ble Supreme Court. Accordingly, DoT has raised the demand basis special audit done by DoT and Comptroller and Auditor General of India. The contingent liability includes such demand and interest thereto (excluding certain contentious matters, penalty and interest thereto) for the financial year for which demands have been received by the Company

(ii) Demands for the contentious matters in respect of subscriber verification norms and regulations including validity of certain documents allowed as proof of address / identity

(iii) Penalty for alleged failure to meet certain procedural requirements for EMF radiation self-certification compliance,

The matters stated above are being contested by the Company and based on legal advice, the Company believes that it has complied with all license related regulations and does not expect any financial impact due to these matters,

In addition to the amounts disclosed in the table above, the contingent liability on DOT matters includes the following:

(iv) Post the Hon’ble Supreme Court judgment in 2011, on components of AGR for computation of license fee, based on the legal advice, the Company believes that the foreign exchange gain should not be included in AGR for computation of license fee thereon. Further as per TDSAT judgement in 2015, foreign exchange fluctuation does not have any bearing on the license fees. Accordingly, the license fee on foreign exchange gain has not been provided in the financial statements. Also, due to ambiguity of interpretation of ‘foreign exchange differences’, the license fee impact on such exchange differences is not quantifiable. The matter is currently pending adjudication by Hon’ble Supreme Court,

(v) On January 8, 2013, DoT issued a demand on the Company for H51,353 towards levy of one time spectrum charge, The demand includes a retrospective charge of H8,940 for holding GSM Spectrum beyond 6.2 MHz for the period from July 1, 2008 to December 31, 2012 and also a prospective charge of H42,413 for GSM spectrum held beyond 4.4 MHz for the period from January 1, 2013, till the expiry of the initial terms of the respective licenses,

In the opinion of the Company, inter-alia, the above demand amounts to alteration of financial terms of the licenses issued in the past. Based on a petition filed by the Company, the Hon’ble High Court of Bombay, vide its order dated January 28, 2013, has directed the DoT to respond and not to take any coercive action until the next date of hearing, The DoT has filed its reply and the matter is currently pending with the Hon’ble High Court of Bombay. The Company, based on independent legal opinions, till date has not given any effect to the above demand,

(vi) DoT had issued notices to the Company (as well as other telecom service providers) to stop provision of services (under 3G Intra Circle Roaming (‘ICR’) arrangements) in the service areas where such service providers had not been allocated 3G Spectrum and levied a financial penalty of H3,500 on the Company. The Company contested the notices in response to which TDSAT in 2014 held 3G ICR arrangements to be competent and compliant with the licensing conditions and quashed the notice imposing penalty. The DoT has challenged the order of TDSAT before the Hon’ble Supreme Court which is yet to be listed for hearing,

Guarantees:

Guarantees outstanding as of March 31, 2018 and March 31, 2017 amounting to H123,796 and H123,614 respectively have been issued by banks and financial institutions on behalf of the Company. These guarantees include certain financial bank guarantees which have been given for subjudice matters/compliance with licensing requirements, the amount with respect to these have been disclosed under capital commitments, contingencies and liabilities, as applicable, in compliance with the applicable accounting standards,

(ii) Commitments Capital commitments

The Company has contractual commitments towards capital expenditure (net of related advances) of H105,618 and H69,623 as of March 31, 2018 and March 31, 2017 respectively.

The carrying value of cash settled plans liability is H66 and H141 as of March 31, 2018 and March 31, 2017, respectively.

The expected life of the stock options is based on the Company’s expectations and is not necessarily indicative of exercise patterns that may actually occur. The expected volatility reflects the assumption that the historical volatility over a period similar to the expected life of the options is indicative of future trends, which may not necessarily be the actual outcome. Further, the expected volatility is based on the weighted average volatility of the comparable benchmark companies,

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

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

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

The above sensitivity analysis is determined based on a method that extrapolates the impact on the net defined benefits obligations, as a result of reasonable possible changes in the significant actuarial assumptions. Further, the above sensitivity analysis is based on a reasonably possible change in a particular under-lying actuarial assumption, while assuming all other assumptions to be constant, In practice, this is unlikely to occur, and changes in some of the assumptions may be correlated,

The table below summarizes the maturity profile and duration of the gratuity liability:

* As per the requirements of section 135 of the Companies Act, 2013, the Company was required to spend an amount of H2,145 and H2,079 for the year ended March 31, 2018 and 2017 on corporate social responsibility expenditure. During the year ended March 31, 2018 and 2017, the Company has spent in cash an amount of H245 and H56 towards education and sanitation respectively. Further, amount paid to Prudent Electoral Trust (formerly known as Satya Electoral Trust) for political purpose amounting to H250 and H170 during the year ended March 31, 2018 and 2017 respectively.

# It includes rent, printing and stationary, security, rent and communication expenses etc.

*It includes bank charges, trade finance charges, charges relating to derivative instruments and interest charges towards sub judice matters.

4. Exceptional items

Exceptional items comprise of the following: (i) For the year ended March 31, 2018:

a. Charge of RS,1,572 towards operating costs on network re-farming and up-gradation program

b. Provision of RS,720 towards one major delinquent receivable balance

c. Charge of RS,3,749 mainly due to levies and taxes pertaining to internal restructuring

(ii) For the year ended March 31, 2017:

a. Charge of RS,2,396 towards operating costs (including accelerated depreciation) on network re-farming and up-gradation program

b. Charge of RS,2,920 resulting from reassessment of the useful life of certain categories of network assets of the Company due to technological advancements

c. Net charge aggregating to RS,7,506 pertaining to regulatory levies related assessment / provisions, settlement of tax related contingent liability and reconciliation of balances

d. Loss of RS,159,886 pertains to internal restructuring and divestment

Tax expense includes:

(a) Tax benefit of RS,2,129 and RS,5,864 for the year ended March 31, 2018 and 2017 respectively, on above exceptional items

(b) Tax benefit of Nil and RS,1,892 for the year ended March 31, 2018 and 2017 respectively, on account of re-assessment of tax provisions for previous periods

5. Segment reporting

The Company’s operating segments are organized and managed separately through the respective business managers, according to the nature of products and services provided with each segment representing a strategic business unit. These business units are reviewed by the Chairman of the Company (Chief Operating Decision Maker - ‘CODM’).

The amounts reported to CODM are based on the accounting principles used in the preparation of financial statements as per Ind AS, Segment’s performance is evaluated based on segment revenue and segment result viz. profit or loss from operating activities before exceptional items and tax. Accordingly, finance costs / income, non - operating expenses and exceptional items are not allocated to individual segment,

Inter-segment pricing and terms are reviewed and changed by the management to reflect changes in market conditions and changes to such terms are reflected in the period in which the changes occur. Inter-segment revenues are eliminated upon consolidation of segments and reflected in the ‘Eliminations’ column,

Segment assets / liabilities comprise assets / liabilities directly managed by each segment. Segment assets primarily includes receivables, property, plant and equipment, capital work-in-progress, intangibles assets, intangible assets under development, noncurrent investments, inventories and cash and cash equivalents. Segment liabilities primarily includes operating liabilities. Segment capital expenditure comprises of additions to PPE, CWIP, intangible assets, intangible assets under development, and capital advances,

The reporting segments of the Company are as below:

Mobile Services: These services cover voice and data telecom services provided through wireless technology (2G / 3G / 4G) in India, This includes the captive national long distance networks which primarily provide connectivity to the mobile services business in India, This also includes intra-city fibre networks,

Airtel Business: These services cover end-to-end telecom solutions being provided to large Indian and global corporations by serving as a single point of contact for all telecommunication needs across data and voice (domestic as well as international long distance), network integration and managed services,

Homes Services: These services cover voice and data communications through fixed-line network and broadband technology.

Unallocated: Unallocated items include expenses / results, assets and liabilities of corporate headquarters of the Company, noncurrent investment, current taxes, deferred taxes, borrowings and certain financial assets and liabilities, not allocated to the operating segments,

*Basis location of the customers / assets

Non-current assets for this purpose consist of PPE, CWIP, intangible assets, intangible assets under development and capital advances.

6. Related party disclosures

i. Subsidiaries

- Indian

Airtel Payments Bank Limited

Bharti Airtel Services Limited

Bharti Hexacom Limited

Bharti Infratel Limited

Bharti Telemedia Limited

Indo Teleports Limited

Nxtra Data Limited

Wynk Limited

Smartx Services Limited

Telesonic Networks Limited

Nettle Infrastructure Investments Limited

Bharti Digital Networks Private Limited (formerly known as Tikona Digital Networks Private Limited,subsidiary w.e.f August 24, 2017)

- Foreign

Africa Towers N.V.

Africa Towers Services Limited ##

Airtel (Seychelles) Limited Airtel Congo (RDC) S.A,

Airtel Congo S.A,

Airtel DTH Services Nigeria Limited #

Airtel Gabon S,A,

Airtel Ghana Limited (ceased to be subsidiary w.e.f. October 12, 2017)

Airtel Madagascar S.A,

Airtel Malawi Limited

Airtel Mobile Commerce (Ghana) Limited (ceased to be subsidiary w.e.f. October 12, 2017)

Airtel Mobile Commerce (Kenya) Limited Airtel Mobile Commerce (Seychelles) Limited

Airtel Mobile Commerce (Tanzania) Limited Airtel Mobile Commerce B.V.

Airtel Mobile Commerce Holdings B.V.

Airtel Mobile Commerce Nigeria Limited (incorporated w.e.f August 31, 2017)

Airtel Mobile Commerce Limited, Malawi Airtel Mobile Commerce Madagascar S.A,

Airtel Mobile Commerce Rwanda Limited Airtel Mobile Commerce Tchad S.a.r.l,

Airtel Mobile Commerce Uganda Limited Airtel Mobile Commerce Zambia Limited Airtel Money (RDC) S.A,

Airtel Money Niger S.A,

Airtel Money S.A. (Gabon)

Airtel Money Transfer Limited Airtel Money Tanzania Limited Airtel Networks Kenya Limited Airtel Networks Limited Airtel Networks Zambia Plc Airtel Rwanda Limited

Airtel Tanzania Public Limited (formerly known as Airtel Tanzania Limited)

Airtel Tchad S.A.

Airtel Uganda Limited

Bangladesh Infratel Networks Limited #

Bharti Airtel (France) SAS Bharti Airtel (Hong Kong) Limited Bharti Airtel (Japan) Private Limited Bharti Airtel (UK) Limited Bharti Airtel (USA) Limited Bharti Airtel Africa B.V.

Bharti Airtel Burkina Faso Holdings B.V.

Bharti Airtel Chad Holdings B.V.

Bharti Airtel Congo Holdings B.V.

Bharti Airtel Developers Forum Limited Bharti Airtel DTH Holdings B.V.#

Bharti Airtel Gabon Holdings B.V.

Bharti Airtel Ghana Holdings B.V. (ceased to be subsidiary w.e.f. October 12, 2017)

Bharti Airtel International (Mauritius) Limited

Bharti Airtel International (Mauritius) Investment Limited ( incorporated on March 26, 2018) Bharti Airtel International (Netherlands) B.V.

Bharti Airtel Kenya B.V.

Bharti Airtel Kenya Holdings B.V.

Bharti Airtel Lanka (Private) Limited Bharti Infratel Lanka (Private) Limited #

Bharti Airtel Madagascar Holdings B.V.

Bharti Airtel Malawi Holdings B.V.

Bharti Airtel Mali Holdings B.V.

Bharti Airtel Niger Holdings B.V.

Bharti Airtel Nigeria B.V.

Bharti Airtel Nigeria Holdings B.V. #

Bharti Airtel Nigeria Holdings II B.V.

Bharti Airtel RDC Holdings B.V.

Bharti Airtel Rwanda Holdings Limited Bharti Airtel Services B.V.

Bharti Airtel Tanzania B.V.

Bharti Airtel Uganda Holdings B.V.

Bharti Airtel Zambia Holdings B.V.

Bharti International (Singapore) Pte. Ltd Celtel (Mauritius) Holdings Limited Celtel Niger S.A.

Channel Sea Management Company (Mauritius) Limited Congo RDC Towers S.A,

Gabon Towers S.A. ##

Indian Ocean Telecom Limited Madagascar Towers S.A,

Malawi Towers Limited Mobile Commerce Congo S.A,

Montana International MSI-Celtel Nigeria Limited #

Network i2i Limited Partnership Investment S.a.r.l,

Societe Malgache de Telephone Cellulaire S.A,

Tanzania Towers Limited Towers Support Nigeria Limited #

Zap Trust Company Nigeria Limited #

Tigo Rwanda Limited ( w.e.f January 31, 2018)

ii. Ultimate controlling entity (w.e.f. November 3, 2017)*

Bharti Enterprises (Holding) Private Limited. It is held by private trusts of Bharti family with Mr. Sunil Mittal’s family trust effectively controlling the same company

iii. Entities having control over the Company (w.e.f. November 3, 2017)* -Indian

Bharti Telecom Limited

*Significant influence until November 2, 2017

iv. Entities having significant influence over the Company

- Foreign

Singapore Telecommunications Limited Pastel Limited

v. Associates

- Indian

Seynse Technologies Private Limited

Juggernaut Books Private Limited (acquired on November 29, 2017)

- Foreign

Seychelles Cable Systems Company Limited Robi Axiata Limited

vi. Joint Ventures

- Indian

Indus Towers Limited FireFly Networks Limited

- Foreign

Bridge Mobile Pte Limited

Bharti Airtel Ghana Holdings B.V (w.e.f October 12, 2017)

Airtel Ghana Limited (w.e.f October 12, 2017)

Airtel Mobile Commerce (Ghana) Limited (w.e.f October 12, 2017)

Milicom Ghana Company Limited (w.e.f October 12, 2017)

Mobile Financial Services Limited (w.e.f October 12, 2017)

vii. Other entities with whom transactions have taken place during the reporting periods

a. Fellow companies (subsidiaries / joint ventures / associates other than that of the Company)

Subsidiaries

- Indian

Bharti Enterprises Limited Cedar Support Services Limited Bharti Insurance Holding Private Limited Bharti Axa General Insurance Company Limited Bharti Axa Life Insurance Company Limited

Associates

- Indian

Bharti Life Ventures Private Limited Bharti General Private Limited

b. Others related parties *

Entities where Key Management Personnel and their relatives exercise significant influence

- Indian

Bharti Foundation

Bharti Airtel Employees Welfare Trust

Hike Private Limited (formerly known as Hike Limited)

Others

- Indian

Brightstar Telecommunication India Limited

Bharti Realty Holdings Limited

Bharti Realty Limited

Deber Technologies Private Limited

Hike Messenger Limited

Centum Learning Limited

Fieldfresh Foods Private Limited

Indian Continent Investment Limited

Jersey Airtel Limited

Nile Tech Limited

Bharti Support Services Private Limited (formerly known as Atrium Restaurants India Private Limited)

Bharti Land Limited Centum Work skills India Limited Oak Infrastructure Developers Limited Gourmet Investments Private Limited

* ‘Other related parties’ though not ‘Related Parties’ as per the definition under Ind AS 24, ‘Related party disclosures’, have been included by way of a voluntary disclosure, following the best corporate governance practices,

viii. Key Management Personnel (‘KMP’)

Sunil Bharti Mittal Gopal Vittal

# Liquidated during the financial year 2017-18 ## Under liquidation,

# Value of PLI considered above represents incentive at 100% performance level. However, same will be paid on the basis of actual performance parameters in next year. Additional provision of H21 and H28 has been recorded in the books towards PLI for the year ended March 31, 2018 and March 31, 2017 respectively. During the year ended March 31, 2018 and 2017, PLI of H143 and H116 respectively, pertaining to previous year has been paid.

As the liabilities for the gratuity and compensated absences are provided on an actuarial basis, and calculated for the Company as a whole rather than each of the individual employees, the said liabilities pertaining specifically to KMP are not known and hence, not included in the above table,

In addition to above, H1,122 thousand and H313 thousand have been paid as dividend to key management personnel during the year ended March 31, 2018 and March 31, 2017 respectively.

The Company has agreed to ensure appropriate financial support only if and to the extent required by its subsidiaries (namely, Bharti Airtel Services Limited, Bharti Telemedia Limited, Airtel Payments Bank Limited, Bharti Teleports Limited, Bharti Airtel Lanka (Private) Limited and Bharti Airtel International (Netherlands) B.V. including its subsidiaries).

7. Financial and capital risk

1. Financial risk

The business activities of the Company expose it to a variety of financial risks, namely market risks (that is, foreign exchange risk, interest rate risk and price risk), credit risk and liquidity risk. The Company’s risk management strategies focus on the unpredictability of these elements and seek to minimize the potential adverse effects on its financial performance. Further, the Company uses certain derivative financial instruments to mitigate some of these risk exposures (as discussed below in this note),

The financial risk management for the Company is driven by the Company’s senior management (‘CSM’), in close co-ordination with the operating entities and internal / external experts subject to necessary supervision. The Company does not undertake any speculative transactions either through derivatives or otherwise. The CSM are accountable to the Board of Directors and Audit Committee. They ensure that the Company’s financial risk-taking activities are governed by appropriate financial risk governance frame work, policies and procedures. The BoD of the respective operating entities periodically reviews the exposures to financial risks, and the measures taken for risk mitigation and the results thereof.

(i) Foreign currency risk

Foreign exchange risk arises on all recognized monetary assets and liabilities, and any highly probable forecasted transactions, which are denominated in a currency other than the functional currency of the Company. The Company has foreign currency trade payables, receivables and borrowings. However, foreign exchange exposure mainly arises from borrowings and trade payables denominated in foreign currencies,

The foreign exchange risk management policy of the Company requires it to manage the foreign exchange risk by transacting as far as possible in the functional currency. Moreover, the Company monitors the movements in currencies in which the borrowings / capex vendors are payable and manage any related foreign exchange risk, which inter-alia include entering into foreign exchange derivative contracts - as considered appropriate and whenever necessary. For further details as to foreign currency borrowings, refer note 18. Further, for the details as to the fair value of various outstanding derivative financial instruments, refer note 36,

The sensitivity disclosed in the above table is mainly attributable to, in case of to foreign exchange gains / (losses) on translation of USD denominated borrowings, derivative financial instruments, trade payables, and trade receivables,

The above sensitivity analysis is based on a reasonably possible change in the under-lying foreign currency against the respective functional currency while assuming all other variables to be constant,

Based on the movements in the foreign exchange rates historically and the prevailing market conditions as at the reporting date, the Company’s management has concluded that the above mentioned rates used for sensitivity are reasonable benchmarks,

(ii) Interest rate risk

As the Company does not have exposure to any floating-interest bearing assets, or any significant long-term fixed-interest bearing assets, its interest income and related cash inflows are not affected by changes in market interest rates. Consequently, the Company’s interest rate risk arises mainly from borrowings,

Borrowings

Borrowings with floating and fixed interest rates expose the Company to cash flow and fair value interest rate risk respectively. However, the short-term borrowings of the Company do not have a significant fair value or cash flow interest rate risk due to their short tenure. Accordingly, the components of the debt portfolio are determined by the CSM in a manner which enables the Company to achieve an optimum debt-mix basis its overall objectives and future market expectations,

The Company monitors the interest rate movement and manages the interest rate risk based on its risk management policies, which inter-alia include entering into interest swaps contracts - as considered appropriate and whenever necessary.

The sensitivity disclosed in the above table is attributable to floating-interest rate borrowings and the interest swaps,

The above sensitivity analysis is based on a reasonably possible change in the under-lying interest rate of the Company’s borrowings in INR, USD (being the significant currencies in which it has borrowed funds), while assuming all other variables (in particular foreign currency rates) to be constant,

Based on the movements in the interest rates historically and the prevailing market conditions as at the reporting date, the Company’s management has concluded that the above mentioned rates used for sensitivity are reasonable benchmarks,

(iii) Price risk

The Company invests its surplus funds in various mutual funds (debt fund, equity fund, liquid schemes and income funds etc.), short term debt funds, government securities and fixed deposits. In order to manage its price risk arising from investments, the Company diversifies its portfolio in accordance with the limits set by the risk management policies,

(iv) Credit risk

Credit risk refers to the risk of default on its obligation by the counter-party, the risk of deterioration of credit-worthiness of the counter-party as well as concentration risks of financial assets, and thereby exposing the Company to potential financial losses,

The Company is exposed to credit risk mainly with respect to trade receivables, investment in bank deposits / debt securities / mutual funds and derivative financial instruments,

Trade receivables

The Trade receivables of the Company are typically non-interest bearing un-secured and derived from sales made to a large number of independent customers. As the customer base is widely distributed both economically and geographically, there is no concentration of credit risk,

As there is no independent credit rating of the customers available with the Company, the management reviews the creditworthiness of its customers based on their financial position, past experience and other factors. The credit risk related to the trade receivables is managed / mitigated by each business unit, basis the Company’s established policy and procedures, by setting appropriate payment terms and credit period, and by setting and monitoring internal limits on exposure to individual customers. The credit period provided by the Company to its customers generally ranges from 14-30 days except Airtel business segment wherein it ranges from 7-90 days,

The Company uses a provision matrix to measure the expected credit loss of trade receivables, which comprise a very large numbers of small balances. Refer note 14 for details on the impairment of trade receivables. Based on the industry practices and the business environment in which the entity operates, management considers that the trade receivables are credit impaired if the payments are more than 90 days past due,

The Company performs on-going credit evaluations of its customers’ financial condition and monitors the credit-worthiness of its customers to which it grants credit in its ordinary course of business. The gross carrying amount of a financial asset is written off (either partially or in full) to the extent that there is no realistic prospect of recovery. This is generally the case when the Company determines that the debtor does not have assets or sources of income that could generate sufficient cash flows to repay the amount due. Where the financial asset has been written-off, the Company continues to engage in enforcement activity to attempt to recover the receivable due. Where recoveries are made, these are recognized in profit and loss,

Financial instruments and cash deposits

The Company’s treasury, in accordance with the board approved policy, maintains its cash and cash equivalents, deposits and investment in mutual funds and enters into derivative financial instruments - with banks, financial and other institutions, having good reputation and past track record, and high credit rating. Similarly, counter-parties of the Company’s other receivables carry either no or very minimal credit risk. Further, the Company reviews the credit-worthiness of the counterparties (on the basis of its ratings, credit spreads and financial strength) of all the above assets on an on-going basis, and if required, takes necessary mitigation measures,

(v) Liquidity risk

Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they become due. Accordingly, as a prudent liquidity risk management measure, the Company closely monitors its liquidity position and deploys a robust cash management system. It maintains adequate sources of financing including bilateral loans, debt, and overdraft from both domestic and international banks at an optimized cost. It also enjoys strong access to domestic and international capital markets across debt and equity.

Moreover, the Company’s senior management regularly monitors the rolling forecasts of the entities’ liquidity reserve (comprising of the amount of available un-drawn credit facilities and Cash and cash equivalents) and the related requirements, to ensure they have sufficient cash on an on-going basis to meet operational needs while maintaining sufficient headroom at all times on its available un-drawn committed credit facilities, so that there is no breach of borrowing limits or relevant covenants on any of its borrowings. For details as to the Borrowings, refer note 18,

Based on past performance and current expectations, the Company believes that the Cash and cash equivalents, cash generated from operations and available un-drawn credit facilities, will satisfy its working capital needs, capital expenditure, investment requirements, commitments and other liquidity requirements associated with its existing operations, through at least the next twelve months,

* It includes contractual interest payment based on interest rate prevailing at the end of the reporting period after adjustment for the impact of interest swaps, over the tenor of the borrowings.

# Interest accrued but not due has been included in interest bearing borrowings and excluded from other financial liabilities.

The Company from time to time in its usual course of business guarantees certain indebtedness of its subsidiaries, Accordingly, as of March 31, 2018 and March 31, 2017 Company has issued corporate guarantee for debt / advance aggregating to H353,114 and H340,855, respectively. The outflow in respect of these guarantees arises only on any default/ non-performance of the subsidiary with respect to the guaranteed debt / advance and substantial amount of such loans are due for payment after two years from the reporting date,

8. Capital risk

The Company’s objective while managing capital is to safeguard its ability to continue as a going concern (so that it is enabled to provide returns and create value for its shareholders, and benefits for other stakeholders), support business stability and growth, ensure adherence to the covenants and restrictions imposed by lenders and / or relevant laws and regulations, and maintain an optimal and efficient capital structure so as to reduce the cost of capital. However, the key objective of the Company’s capital management is to, ensure that it maintains a stable capital structure with the focus on total equity, uphold investor; creditor and customer confidence, and ensure future development of its business activities. In order to maintain or adjust the capital structure, the Company may issue new shares, declare dividends, return capital to shareholders, etc,

The Company manages its capital structure and makes adjustments to it, in light of changes in economic conditions or its business requirements,

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

i. The carrying value of trade receivables, trade payables, short-term borrowings, floating-rate long-term borrowings, other current financial assets and liabilities approximate their fair value mainly due to the short-term maturities of these instruments being subject to floating-rates,

ii. Fair value of quoted financial instruments is based on quoted market price at the reporting date,

iii. The fair value of other long-term borrowings and non-current financial assets / liabilities is estimated by discounting future cash flows using current rates applicable to instruments with similar terms, currency, credit risk and remaining maturities,

iv. The fair values of derivatives are estimated by using pricing models, wherein the inputs to those models are based on readily observable market parameters. The valuation models used by the Company reflect the contractual terms of the derivatives (including the period to maturity), and market-based parameters such as interest rates, foreign exchange rates, volatility etc, These models do not contain a high level of subjectivity as the valuation techniques used do not require significant judgment and inputs thereto are readily observable,

During the year ended March 31, 2018 and March 31, 2017, there were no transfers between Level 1 and Level 2 fair value measurements. None of the financial assets and financial liabilities are in Level 3,

The following table describes the key inputs used in the valuation (basis discounted cash flow technique) of the Level 2 financial assets / liabilities as of March 31, 2018 and March 31, 2017:

Financial assets / liabilities Inputs used

Derivatives

- Currency swaps, forward and option contracts Forward currency exchange rates, interest rates

- Interest swaps Prevailing / forward interest rates in market, interest rates

- Embedded derivatives Forward currency exchange rates, interest rates

- Investments Prevailing interest rates in market, interest rates

- Other financial assets / Other fixed rate borrowings / Other Prevailing interest rates in market, future payouts, interest rates financial liabilities

9. Other matters

(i) In 1996, the Company had obtained the permission from DoT to operate its Punjab license through one of its wholly owned subsidiary. However DoT cancelled the permission to operate in April, 1996 and subsequently reinstated in March, 1998, Accordingly, for the period from April 1996 to March, 1998 (‘blackout period’) the license fee was disputed and not paid by the Company,

Subsequently, basis the demand from DoT in 2001, the Company paid the disputed license fee of H4,856 for blackout period under protest. Consequently the license was restored subject to arbitrator’s adjudication on the dispute. The arbitrator adjudicated the matter in favour of DoT which was challenged by the Company before Hon’ble Delhi High Court. In 2012, Hon’ble Delhi High Court passed an order setting aside the arbitrator’s award, which was challenged by DoT and is pending before its division bench, Meanwhile, the Company had filed a writ petition for recovery of the disputed license fee and interest thereto. However, the single bench, despite taking the view that the Company is entitled to refund, dismissed the writ petition on the ground that the case is still pending with the larger bench. The Company therefore has filed appeal against the said order with division bench and is currently pending. DoT had also filed an appeal against the single judge order. Both these appeals are tagged together and are listed for final hearing. The Hon’ble court has directed both the parties to file comprehensive written submission,

(ii) TRAI vide Telecom Interconnect Usages Charges Regulation (Eleventh Amendment) 2015 has reduced the IUC charges for mobile termination charges to 14 paisa from 20 paisa and abolished the fixed-line termination charges. The Company has challenged the said Regulation before the Hon’ble Delhi High Court and the matter is currently pending,