1. CORPORATE INFORMATION

The Company is a public company domiciled in India and is incorporated under the provisions of the Companies Act, applicable in India. Its shares are listed on Bombay Stock Exchange and National Stock Exchange of India. The registered office of the Company is located at GTL Limited, Global Vision, Electronic Sadan II, MIDC, TTC Industrial Area, Mahape, Navi Mumbai.

The Company engaged in providing network services to telecom operators, OEM’s and tower companies.

The financial statements were authorised for issue in accordance with a resolution passed in the meeting of the Board of directors held on May 03, 2018.

2.1 Deemed cost of leasehold building includes subscription towards share capital of co-operative societies amounting to Rs.2,750/- (Previous Year Rs.2,750/-)

2.2 For lien and charge on the above assets refer note no 23.2

2.3 In accordance with the Indian Accounting Standard (Ind AS 36) on “Impairment of Assets” the Management carried out an exercise of identifying assets that may have been impaired and on the basis of this review carried out by the Management, there was no impairment loss on Property, plant and equipment during the year ended March 31, 2018 and March 31, 2017

2.2 For lien and charge on the above assets refer note no 23.2

Estimation of Fair Value

2.3.1 The company’s investment properties consist of land parcels in the state of Gujarat and Maharashtra

2.3.2 The company obtains independent valuations for its investment properties at least annually. These valuations are performed by independent valuers who are specialists in valuing these types of investment properties. The valuation methodology is based on the prevailing rate of sale of land in said locality with the same specification and amenities. This valuation methodology is categorised under level 2 of fair value hierarchy.

3.1 The Company has measured all its investments at fair value and tested these investment for expected credit loss and differences have been accounted through Profit and Loss Account.

3.2 The Current financial year saw unprecedented consolidation in telecom industry with five operators ceasing to exist either on account of mergers or outright shut down of operations. One of the group’s major customer’s Aircel group filed for voluntary liquidation on account of significant headwinds within the telecom sector. This has substantially impacted the projected cash flow of the Company’s associate GTL Infrastructure Limited (GIL) and accordingly the Company has recognized impairment provision of Rs.1,784.55 Crore in respect of its investment in GIL. Accordingly, these provisions are shown under “Exceptional items”

3.3 During the current financial year Chennai Network Infrastructure Limited (CNIL) merged with GTL infrastructure Limited (GIL) accordingly, investment in CNIL is added to the investment in GIL.

4.1 The Current financial year saw unprecedented consolidation in telecom industry with five operators ceasing to exist either on account of mergers or outright shut down of operations. One of the group’s major customer’s Aircel group filed for voluntary liquidation on account of significant headwinds within the telecom sector. This has impacted realisation of advances since Aircel is not settling vendor dues. The Company performed an Impairment test based on current expectation of the impact of the Bankruptcy on projected cash flows of the Company related to Aircel projects. As a result an impairment of Rs.727.79 Crore has been taken. Accordingly, these provisions are shown under “Exceptional items”

5.1 The Company has sought the balance confirmations from the customers and has received such confirmations from some customers. In respect of remaining customers, balances are subject to confirmation and appropriate adjustment, if necessary, will be considered in the year of reconciliation.

5.2 ’The recent headwinds faced by telecom operators and single largest customer of the company has filed for insolvency has material adverse impact on the Company. This has resulted in difficulty in making recovery of trade receivable. Considering this aspect, as prudent practice the Company has impaired receivables of Rs.85.21 Crore based on Expected Credit Loss (ECL).

6.1 I n accordance with the negotiated settlement in-principally approved by the lenders, the Company had obtained necessary consent of the Shareholders for divestment in subsidiaries. During the year the Company has executed Share Purchase agreement for divestment in its subsidiaries. The sale is subject to final approval of lenders of the Company and its subsidiaries and other necessary regulatory approvals. Pending completion of transactions, the said Non Current investment in the subsidiaries is treated as “Assets Held for Sale “ in terms of Ind AS 105.

6.2 During the financial year 2014-15 Distribution Franchise (DF) agreement between the Company and MSEDCL got terminated. With regards to Distribution Franchise activity The reconciliation and settlement of several claims of the Company and MSEDCL are under process. The amount payable of Rs.210.76 Crore to MSEDCL is adjustable against receivable of Rs.254.59 Crore from them and accordingly has been presented net. The Company has tested the amount receivable from MSEDCL for expected credit loss and accordingly Rs.43.83 crore is provided for during Previous financial year 2016-17

7.1 Terms/ rights attached to equity shares

The Company has only one class of equity shares having a face value of Rs.10/- per share. Each holder of equity share is entitled to one vote on show of hands and in case of poll, one vote per equity share. A member shall not have any right to vote whilst any call or other sum shall be due and payable to the Company in respect of any of the equity shares of such member. All equity shares of the Company rank pari-passu in all respects including the right to dividend.

In the event of winding-up of the Company, the holders of equity shares will be entitled to receive any of the remaining assets of the Company, if any, after distribution of all preferential amounts in proportion to the number of shares held at the time of commencement of winding-up.

The equity shareholders have all other rights as available to equity shareholders as per the provisions of Companies Act, 2013 , read together with Memorandum and Articles of Association of the Company.

7.2 Terms, Rights, Preferences and restrictions attached to 0.01% - Non Participating Optionally Convertible Cumulative Preference Shares (OCPS):

The Company has only one class of preference shares, having face value of Rs.10/- per share allotted to GTL Infrastructure Limited (GIL), a Company’s associate. In terms of the issue, GIL had right to convert OCPS into equity shares from the expiry of 6 months from the date of allotment till 18 months of the date of allotment. However, GIL has opted for nonconversion of OCPS into equity shares.

The OCPS carry a dividend of 0.01 % per annum, payable on a cumulative basis on the date of conversion / redemption as the case may be. Any declaration and payment of dividend shall at all times be subject to the availability of Profits and the terms of the restructuring of the debts under the Corporate Debt Restructure (CDR) Mechanism, unless otherwise agreed by the CDR Lenders. Further, in the event of inability of the Company to declare / pay dividend due to nonavailability of Profits / pursuant to the terms of restructuring, the dividend may be waived by GIL.

After the expiry of a period of 6 months from the Allotment Date, the OCPS may at the Option of the Company be redeemed at any time prior to the expiry of 20 years from the date of the allotment, in part or in full, after providing a prior written notice of 30 days to GIL. As agreed by the OCPS holder, the original term providing Yield to Maturity of 8% by way of redemption premium has been repealed by the Board.

Other than as permitted under applicable laws, GIL will not have a right to vote at the Company’s General Meetings. CNIL has also agreed to waive the right to vote in the event it waives the right to receive dividend.

In the event of winding-up of the Company, the OCPS holder/s will be entitled to receive in proportion to the number of shares held at the time of commencement of winding-up, any of the remaining assets of the Company, if any, after distribution to all secured creditors and their right to receive monies out of the remaining assets of the Company shall be reckoned pari-passu with other unsecured creditors, however, in priority to the equity shareholders. The OCPS holder/s shall have such rights as per the provisions of Companies Act, 2013, read together with Memorandum of Association of the Company.

The OCPS holder/s shall have all other rights as avaialble as per the provisions of Companies Act, 2013, read together with Memorandum and Articles of Association of the Company.

8.1 Liability component of compound financial instrument i.e 0.01% Non-Participating Optionally Convertible Cumulative Preference Shares (OCPS) is determined considering effective interest rate.

8.2 Refer note 19.2 for Terms, Rights, Preferences, redemption details and restrictions attached to 0.01% - Non Participating Optionally Convertible Cumulative Preference Shares (OCPS)

9.1 The Company has sought the balance confirmations from the trade payables and has received such confirmations from some purchasers. In respect of remaining purchaser, balances are subject to confirmation and appropriate adjustment, if necessary, will be considered in the year of reconciliation.

9.2 Disclosure in accordance with Micro, Small and Medium Enterprises Development (MSMED) Act, 2006. The information required to be disclosed has been furnished to the extent parties have been identified as Micro, Small and Medium Enterprises on the basis of information available in this regard with the Company.

10.1 In view of non-adherance to the agreed CDR terms for repayment of principal loan, interest and other conditions, the entire liability towards Consortium Lenders is presented under current financial liability on implementation of Ind AS. Company’s proposal for negotiated settlement of debts was agreed in principle by all sets of lenders viz. Consortium Lenders, NCD and ECB Lenders.

10.2 Nature of security

I) Security created in favor of CDR Lenders:

a) A first charge and mortgage on all immovable properties, present and future;

b) A first charge by way of hypothecation over all movable assets, present and future;

c) A first charge on the Trust and Retention Account and other reserves and any other bank accounts wherever maintained, present & future;

d) A first charge, by way of assignment or creation of charge, over:

i. all the right, title, interest, benefits, claims and demands whatsoever in the Project Documents duly acknowledged and consented to by the relevant counter-parties to such Project Documents, all as amended, varied or supplemented from time to time;

ii. all the rights, title, interest, benefits, claims and demands, whatsoever, in the Clearances;

iii. all the right title, interest, benefits, claims and demands, whatsoever, in any letter of credit, guarantee, performance bond provided by any party to the Project Documents;

iv. all the rights, title, interest, benefits, claims and demands, whatsoever, in Insurance Contracts / proceeds under Insurance Contracts;

e) Pledge of all shares held in the Company by one of the Promoters of the Company namely Mr. Manoj G. Tirodkar;

f) Pledge of all investments of the Company, except investment in Global Rural Netco Ltd (GRNL) which will be pledged on fulfillment of financial covenant agreed with the lenders of GRNL;

g) Mr. Manoj G. Tirodkar, one of the promoters of the Company, has extended a personal guarantee. The guarantee is limited to an amount of Rs.394.28 Crore; and

h) Mr. Manoj G. Tirodkar and Global Holding Corporation Private Limited (GHC), promoters of the Company, have executed sponsor support agreement to meet any shortfall or expected shortfall in the cash flows towards the debt servicing obligations of the Company;

II) Security offered to CDR Lender’s pending creation of charge

a) The Company’s one of the promoters namely GHC along with its step down subsidiaries has to extend corporate guarantee; and

b) GHC has to pledge its holding in the Company that is currently pledged by GHC in favor of its lenders, as and when released, either in full or part.

III) Prior to the restructuring of the Company’s debts under CDR Mechanism, the Company created security on certain specified tangible assets of the Company in favour of Andhra Bank, Punjab National Bank, Union Bank of India, Vijaya Bank, IDBI Bank Limited, State Bank of Hyderabad, Bank of Baroda, UCO Bank, Indian Overseas Bank, Indian Bank, Canara Bank and Dena Bank for their respective credit facilities other than term loans, aggregating Rs.1,572 Crore. In terms of CDR Documents inter-alia Master Restructuring Agreement, the earlier charges are not satisfied by the Company after creation of new security as stated in I above.

10.3 As stated in the previous years, the JLF in its meeting held on 4th December 2015 agreed to the One Time Settlement Proposal (OTS) and requested the lenders to give their individual approvals for monetization of the assets, business and investments for settling the dues of the lenders. Subsequently, the unprecedented consolidation in the telecom industry resulted in tenancy surrender by Reliance Infocom (R.Com), Telenor and Tata Teleservices and filing of voluntary insolvency by Aircel Group, all of which led to the business and valuation of the Company going down. RBI vide its letter dated 12th February 2018, also withdrew the CDR, SDR and other Schemes. On this background, the CDR lenders considered the revised proposal of the Company and asked the Company to improve the offer to acceptable level and submit the same for consideration of the consortium, in order to proceed with recovery measures. Accordingly the Company has submitted its further revised proposal to the lenders. In the meanwhile, while in the winding up petition filed by the NCD Holder, parties have resolved the matter to their mutual satisfaction and filed the consent terms before the Bombay High Court on 19th March 2018, based on which the Bombay High Court has disposed of the winding up petition, In the ECB matter some of the ECB lenders have filed recovery suit following the court order got by some other ECB lenders which is subjudice.

10.4 Details of Interest accrued and due on borrowings comprises of:

a) Overdue Interest of Rs.502.79 Crore relating to the period March 14 to March 17 on amounts due to holders of Rated Redeemable Unsecured Rupee Non-convertible Debentures;

b) Overdue Interest of Rs.164.79 Crore relating to the period for December 12,2011 to March 31,2017 on External Commercial Borrowings; the variation in the interest accrued amount as at March 18 is on account of exchange fluctuation

c) Overdue Interest of Rs.727.80 Crore relating to the period June 2014 to March 2017 on Secured Term Loan;

d) Overdue interest of Rs.22.64 Crore relating to the period June 2014 to March 2017on Secured Funded Interest Term Loan;

e) Overdue interest of Rs.23.00 Crore September 2014 to March 2017 on Cash Credit facility;

f) Overdue interest of Rs.20.27 Crore November 2014 to March 2017 on Dues towards BG Invocation.

11.1 The Company has not provided and recognized interest on its borrowing during the financial year based on the in principle approval given by the lenders in respect of negotiated settlement proposal. Had such interest been recognized the Finance Cost for the year ended would have been more by Rs.641.56 Cores.

11.1 Includes Rs. Nil Crore (March 31, 2017 Rs.43.83 Crore) towards receivable of distribution franchisee business.

12.1 The Current financial year saw unprecedented consolidation in telecom industry with five operators ceasing to exist either on account of mergers or outright shut down of operations. One of the group’s major customer’s Aircel group filed for voluntary liquidation on account of significant headwinds within the telecom sector. This has impacted realisation of advances since Aircel is not settling vendor dues. The Company performed an Impairment test based on current expectation of the impact of the Bankruptcy on projected cash flows of the Company related to Aircel projects. As a result an impairment of Rs.727.79 Crore has been taken.

12.2 The Current financial year saw unprecedented consolidation in telecom industry with five operators ceasing to exist either on account of mergers or outright shut down of operations. One of the group’s major customer’s Aircel group filed for voluntary liquidation on account of significant headwinds within the telecom sector. This has substantially impacted the projected cash flow of the Company’s associate GTL Infrastructure Limited (GIL) and accordingly the Company has recognized impairment provision of Rs.1,784.55 Crore in respect of its investment in GIL.

13.1 There have been no other transactions involving Equity shares or potential Equity shares between the reporting date and the date of authorisation of these financial statements.

13.2 There were no potentially dilutive equity shares which would have been outstanding as at the year end

14. SIGNIFICANT ACCOUNTING JUDGEMENTS, ESTIMATES AND ASSUMPTIONS

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

Judgements

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

Estimates and assumptions

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

The Management believes that the judgments and estimates used in preparation of financial statement are prudent and reasonable.

Taxes

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

Defined benefit plans (gratuity benefits)

The cost of the defined benefit gratuity plan and the present value of the gratuity obligation are determined using actuarial valuations. An actuarial valuation involves making various assumptions that may differ from actual developments in the future. These include the determination of the discount rate, future salary increases and mortality rates. Due to the complexities involved in the valuation and its long-term nature, a defined benefit obligation is highly sensitive to changes in these assumptions. All assumptions are reviewed at each reporting date.

Fair value measurement of financial instruments

When the fair values of financial assets and financial liabilities recorded in the balance sheet cannot be measured based on quoted prices in active markets, their fair value is measured using valuation techniques including the DCF model. The inputs to these models are taken from observable markets where possible, but where this is not feasible, a degree of judgement is required in establishing fair values. Judgements include considerations of inputs such as liquidity risk, credit risk and volatility. Changes in assumptions about these factors could affect the reported fair value of financial instruments. See Note 40 for further disclosures.

Allowances for credit loss on Trade Receivable , Advance to supplier and other receivable

The Provision for allowances for credit loss for Trade Receivable , Advance to supplier and other receivable are based on assumptions about the risk of defaults and expected credit loss. The Company uses judgment in making these assumption and selecting the inputs to the calculation of provision for allowance based on the past history, existing market conditions as well as forward looking estimates at the end of each reporting period.

Provisions for impairment loss on Investment

Provisions for impairment loss on Investment is based on evaluation of financial position of investee companies to meet their obligations for honouring their commitments towards the investment held by the Company.

The Company makes contribution towards provided fund and superannuation fund which are in nature of defined contribution post employee benefit plan. Under the plan, the Company is required to contribute a specified percentage of payroll cost to fund the benefits. amount recognised as an expense in the statement of Profit and Loss - included in note 30 - “Contribution to provident and other funds” Rs.2.21 crore ( previous year Rs.2.04 Crore) is given in table above

b) Defined Benefit Plan

The employee’s Gratuity Fund Scheme, which is defined benefit plan, is managed by Trust maintained with Life Insurance Corporation of India (LIC). The present value of obligation is determined based on actuarial valuation using Projected Unit Credit Method, which recognizes each period of service as giving rise to additional unit of employee benefit entitlement and measures each unit separately to build up the final obligation. The obligation for compensated absences is recognized in same manner as gratuity.

Based on accturial valuation obtained as at the Balance Sheet date the following table sets out the details of Defined Benefit obligation.

The above sensitivity analysis is 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 (projected unit credit method) has been applied as when calculating the defined benefit obligation recognised within the Balance Sheet.

15. COMMITMENTS, CONTINGENCIES AND PROVISIONS

a. Leases

Operating lease commitments — Company as lessee

The Company’s lease agreements are in respect of operating lease for office premises, guesthouses, warehouses, and vehicles. These lease arrangements are cancellable by either parties there to as per the terms and conditions of the agreements. The lease rental recognised in the Statement of Profit and Loss during the year under the heading ‘Rent’ in ‘Other Expenses’ is Rs.3.19 Crore (Rs.3.57 Crore.).

The lease obligations due within next five-years are Rs.3.58 Crore. (Rs.4.19 Crore.). Future minimum rentals payable under non-cancellable operating leases as at 31 March are, as follows:

Future cash outflows in respect of v and vi matters are determinable only on receipt of judgments or decisions pending at various forum. The Company has assessed that it is only possible, but not probable, that outflow of economic resources will be required in respect of above liability.

C.1 Claims against the Company not acknowledged as debts

As on March 31, 2018, there were 48 cases against the Company, pending in various Courts and other Dispute Redressal Forums.

i) In 8 out of 48 cases, the Company has been implicated as proforma defendant i.e. there are no monetary claims against the Company. In most of these cases, dispute concerns matters like loss of share certificate, title claim / ownership / transfer of the shares etc. The Company’s implication in these matters is with a view to protect the interest of the lawful owners of the shares. Upon the final orders passed by the Court(s), the Company shall have to release the shares, which are presently under ‘stop transfer’, in this regard to the rightful claimants. There is no direct liability or adverse impact on the business of the Company on account of the said 8 cases.

ii) Out of the balance 40 cases, 21 cases are from its earlier power business, 9 cases are from telecom related businesses and 1 case is in respect of non-allotment / non-refund of money in its IPO, which are handled by the Company’s advocates, who have the necessary expertise on the subject. It is found that in most of the cases the claims are unsubstantiated and therefore the Company is resisting and defending these claims. (In the aforesaid 21 case, 9 cases pertain to Labour Court matter wherein the employees filed for reinstatement on termination consequent to termination of Aurangabad Distribution Franchisee Agreement of the Company. These are being settled with affected employees). The contingent liability in respect of these 31 cases is Rs.1.34 Crore

There are 5 cases in which the Company has invoked arbitration proceedings against MSEDCL and the contingent liability towards counter claims of MSEDCL is Rs.147.76 Crore In 1 case, a bank has filed commercial suit against the Company in the Hon’ble Bombay High Court in respect of the Company’s comfort letter issued in favour of one of its Wholly Owned Subsidiaries (WOS) towards WOS’s credit facilities. The contingent liability in respect of which is Rs.237.28 Crore.

iii) I n 2 cases of winding up filed against the Company, one by the NCD Lender and another by the lender of the Company’s one of the associate company, both the matters were disposed off based on consent term(s) filed by both the parties. The contingent liability in respect of these 2 cases is Rs.206.60 Crore.

iv) In the balance 1 case, the Department of Telecom (DoT) has raised a frivolous demand of Rs.1,509.50 Crore based on Adjusted Gross Revenue for ISP license fee pertaining to the business carried out by the Company well before the year 2009 and the relevant ISP license was surrendered to DoT in 2009 for which DoT had issued a no-dues certificate in November 2010. The Company is contesting this demand in an appropriate forum.

The contingent liability in respect of 48 cases is Rs.2,102.47 Crore

v) Claim of Rs.179.00 Crore from Global Holding Corporation, an associate of the Company towards loss occurred to the associate on account of invocation by lender of share investment held by the associate in the Company which was offered as pledge for the credit facility availed by the Company.

vi) Apart from the above, in respect of ECB some of the Lenders have filed recovery suit, following the court order got by some other ECB lenders

16. 1. Related Parties

A Subsidiaries

a) International Global Tele Systems Ltd.

b) GTL International Ltd.

c) Ada Cellworks Wireless Engineering Pvt. Ltd.

B Fellow Subsidiaries (Subsidiaries of GTL International Ltd.)

a) GTL (Singapore) Pte Ltd.

b) GTL Overseas Middle East JLT

c) GTL Europe Limited.

d) GTL Nepal Limited.

e) IGTL Myanmar Limited

C Associates

a) GTL Infrastructure Limited

b) Global Rural Netco Pvt. Ltd.

c) Global Holding Corporation Private Limited D Key Managerial Personnel

a) Mr. Manoj Tirodkar, Chairman and Managing Director

b) Mr. Sunil S. Valavalkar - Whole Time Director

c) Mr. Vidyadhar Apte, Company Secretary

d) Mr. Milind Bapat, Chief Financial Officer

16.2.1 The Above amounts with respect to advances & debtors are before making allowances for credit loss.

16.2.2 Claim from Global Holding Corporation Pvt.Ltd. of Rs.179 Crore which is not acknowledged as debt is considered in “ Contingent liability” and hence not shown in the above Statement.

16.2.3 During the current financial year Chennai Network Infrastructure Limited (CNIL) merged with GTL infrastructure Limited (GIL) and hence current year figures are shown under GIL

16.2.4 Terms and conditions of transactions with related parties

The credit period towards sale to related parties are in line with other external customers. The outstanding balances at the year-end are unsecured and interest free and settlement occurs in cash. There have been no guarantees provided to or received from any related party with resepct to receivables or payables. For the year ended 31 March 2017, the Company has provided impairment loss against amount due from related parties and the impairment provision as at March 31, 2017 is Rs.333.90 Crore (31 March 2017: Rs.335.71 Crore). This assessment is undertaken each financial year through examining the financial position of the related party and the market in which the related party operates.

16.2.5 In view of being dormant, operations of step down subsidiary in Kenya, Tanzania, Indonesia, Bangladesh, Saudi Arabia and Philippines were discontinued / liquidated / under process of liquidation.

16.3.1 The sales to and purchases from related parties are made on terms equivalent to those that prevail for arm ‘s length transactions.

16.3.2 The amounts disclosed in the table related to key management personnel are the amounts recognised as an expense during the reporting period .

16.3.3 Provision for contribution to Gratuity fund and Leave encashment on retirement which are made based on actuarial valuation on an overall Company basis are not included in remuneration details of key managerial personnel

17.1 The management assessed that trade receivables cash and bank balances, loans, other financial assets, trade payables and other financial liabilities approximate their carrying amounts largely due to the short-term maturities of these instruments.

17.2 The fair values of the Company’s fixed interest-bearing borrowings and loans is determined by using 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 as borrowing are fixed interest bearings

18. FAIR VALUE HIERARCHY

The following table provides the fair value measurement hierarchy of the Company’s assets and liabilities.

19. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES

The Company’s principal financial liabilities comprise of loans and borrowings, trade and other payables and financial guarantee contracts. The main purpose of these financial liabilities is to manage finance for the Company’s operations. The Company’s principal financial assets includes investments, trade and other receivables, supplier advance and cash and cash equivalents that derive directly from its operations.

The Company is exposed to market risk, credit risk and liquidity risk. The Company’s senior management oversees the management of these risks. The Company’s senior management is supported by Risk Management Group (RMG), Investment committee and Resource committee that advises on financial risks and the appropriate financial risk governance framework for the Company. The Risk Management Group, Investment committee and Resource committee provides assurance to the Company’s senior management that the Company’s financial risk activities are governed by appropriate policies and procedures and that financial risks are identified, measured and managed in accordance with the Company’s policies and risk objectives. It is the Company’s policy that no trading in derivatives for speculative purposes may be undertaken. The Audit Committe of the Board and the Board of Directors review and monitor risk management and mitigation plans. The financial risks are summarised below.

19.1 Market risk

Market risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in market prices. Market risk comprises three types of risk: interest rate risk, currency risk and other price risk, such as equity price risk and commodity risk. Financial instruments affected by market risk include loans, borrowings and deposits. As the revenues from the Company’s network service business is dependent on the sustainability of telecom sector, Company believes that Macro - economic factor, including the growth of Indian economy as well as political and economic environment, have a significant direct impact on the Company’s business, results of operations and financial position.

19.2 Interest rate risk

Interest rate risk is the risk that the fair value or future cash flow of financial instrument will fluctuate because of changes in market interest rates. The significant part of financial instrument which can be considered in case of the Company as subject to interest rate risk are borrowings . However the Company’s borrowings carry fixed interest rate and therefore the Company is not exposed to significant interest rate risk.

19.3 Foreign currency risk

Foreign currency risk is the risk that the fair value or future cash flows of an exposure will fluctuate because of changes in foreign exchange rates. The Company’s exposure to the risk of changes in foreign exchange rates relates primarily to the External Commercial Borrowings and except for the the same , the Company is not exposed to foreign currency risk as the Company’s business operations do not involve any significant transactions in foreign currency.

Foreign currency sensitivity

The impact on the Company’s loss before tax on account of variation in exchange rates can be on account of fluctuation in USD as the Company’s External Commercial borrowings liability is USD denominated liability .The following table demonstrates the sensitivity to a reasonably possible change in USD exchange rates, with all other variables held constant. 1% increase or decrease in USD rate will have the following impact on loss before tax :

19.4 Equity price risk

The Company’s equity investment in one of its associates is listed and all other investments are in unlisted entities. All the investments of the Company are trade and strategic investments and therefore are not considered to be exposed or susceptible to market risk.

19.5 Commodity price risk

The Company is engaged in business of providing “Network Services” comprising mainly of Operation maintenance and energy management (OME) and other network services. In OME the major component of cost are electricity and Fuel. The variation in the price of electricity and fuel is index based i.e. additionally charged to customer. With regards to other services the contracts are cost plus margin and therefore commodity price risk is mitigated

19.6 Credit risk

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

Trade receivables

Customer credit risk is managed subject to the Company’s established policy, procedures and controls relating to customer credit risk management. Credit quality of a customer is assessed based on individual credit limits and defined in accordance with customer assessment. Outstanding customer receivables are regularly monitored.

The Company follows a ‘simplified approach’ (i.e. based on lifetime ECL) for recognition of impairment loss allowance on Trade receivables. For the purpose of measuring lifetime ECL allowance for trade receivables, the Company estimates irrecoverable amounts based on the ageing of the receivable balances . Individual trade receivables are written off when management deems them not to be collectible. The Company does not hold any collateral as security against these trade receivables. The contractually agreed terms effectively manage the concentration risk.

Financial Assets and bank deposits

Credit risk from balances with banks is managed by the Company’s treasury department in accordance with the Company’s policy. The Company considers factors such as track record, size of the institution, market reputation and service standards to select the banks with which its balances and deposits are maintained. Generally, the balances are maintained with the institutions with which the Company has also availed borrowings. The Company does not maintain significant cash and deposit balances other than those required for its day to day operations.

The Company’s maximum exposure to credit risk for the components of the balance sheet at 31 March 2018 and 31 March 2017 is the carrying amounts as appearing in Note 8,12,13,14,15,16 and 19.

19.7 Liquidity risk

Liquidity risk is that the Company will not be able to settle or meet its obligation on time or at reasonable price. Company’s principal sources of liquidity are cash flows generated from its operations.

The Company continues to take various measures such as cost optimisation, improving operating efficiency to increase Company’s operating results and cash flows. Further the Company has made a proposal for a negotiated settlement of debts which has been agreed in principle by all set of lenders. The management is of the view that upon the implementation of the Company’s negotiated settlement proposal, the Company would be in a position to meet its liabilities and continue its operations.

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

20. CAPITAL MANAGEMENT

For the purpose of the Company’s capital management, capital includes issued equity capital, convertible preference shares, Securities premium and all other equity reserves attributable to the equity holders of the Company. The primary objective of the Company’s capital management is to safeguard continuity of the business operations.

In view of slow down in telecom industry in last few years, the Company’s business received a set back which resulted in incurrence of huge losses and adversely impacting the capital of the Company. The Company therefore for effective capital management has submitted a proposal for negotiated settlement of debts and the same has been agreed in principle by all set lenders. On implementation of Company’s proposal for negotiated settlement, there will be substantial improvement in capital structure of the Company.

20.1 The Company has a Deferred Tax Asset of Rs.438.97 Crore as on March 31, 2018 (Rs.789.55 Crore as on March 31, 2017). The same has not been recognised in the financial statement in the absence of probable taxable profits against which the same can be utilised.

20.2 Amount and expiry date of unused tax losses which are not considered in deferred tax assets disclosed above

From last few years the Company is incurring losses and doesn’t expect sufficient future taxable income in the near future against which the unused business losses can be utilised and therefore the Company has not considered the same for working of unrecognised DTA disclosed above .

21. GOING CONCERN

In last few years, the Company has incurred cash losses, resulting in erosion of its entire net worth. The Company’s current liabilities are higher than its current assets. While winding up petitions have been disposed of based on consent terms filed.

The management is of a view that upon acceptance and implementation of the Company’s revised negotiated settlement proposal, it would be in a position to meet its liabilities and continue its operations. In view of the above, the Company continues to prepare above results on Going Concern basis.

22. DISCLOSURE OF INFORMATION AS REQUIRED BY REGULATION 34(3) OF LISTING OBLIGATIONS AND DISCLOSURE REQUIREMENTS

a) Details of Loans or Advances in the nature of loans given to wholly owned Subsidiaries and step-down Subsidiaries.

Note : 1) Increase in outstanding amount and maximum balance during the respective years is on account of exchange variation

2) The Company has made full provision for impairment against the said advances during the FY 2015-2016.

b) None of the Subsidiaries to whom advances are given per se, have investment in the shares of the Company.

23. DETAILS OF ROUNDED OFF AMOUNTS

The financial statements are presented in Rs. in Crore. Those items which are required to be disclosed and which were not presented in the financial statement due to rounding off to the nearest Rs. in Crore are as follows

24. The previous year figures, wherever necessary, have been regrouped/rearranged/recast to make them comparable with those of the current year.

25. Figures in brackets relate to the previous year unless otherwise stated.