Use of estimates

The brparation of the financial statements in conformity with generally accepted accounting principles requires management to make estimates

and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent liabilities at the date of the financial

statements and the results of operations during the reporting year end. Although these estimates are based upon management’s best knowledge of

current events and actions, uncertainty about these assumptions and estimates could result in the outcomes requiring a material adjustment to the

carrying amounts of assets and liabilities in future periods.

Summary of significant accounting policies

a.     Asset retirement obligations (ARO)

Asset retirement obligations (ARO) are provided for those operating lease arrangements where the Company has a binding obligation at the end of the lease period to restore the leased brmises in a condition similar to inception of lease. The estimated future costs of decommissioning are reviewed annually and adjusted as appropriate. Changes in the estimated future costs are added to or deducted from the cost of the asset and debrciated prospectively over the remaining useful life.

j.    Inventory

Inventory is valued at the lower of cost and net realisable value. Cost is determined on First in First out basis. Net realizable value is the estimated selling price in the ordinary course of business, less estimated costs of completion and the estimated costs necessary to make the sale.

The Company provides for obsolete and slow-moving inventory based on management estimates of the usability of inventory.

a.     Multiple element contracts with various vendors

The Company enters into multiple element contracts with vendors for supply of goods and rendering of services.  The consideration paid is/may be determined independent of the value of supplies received and services availed. Accordingly, the supplies and services are accounted for based on their relative fair values to the overall consideration. The supplier with finite life under such contracts are accounted as tangible assets or as intangible assets in view of the substance of these contracts and existence of economic ownership in these assets.

1.     Bharti Airtel Limited has granted stock options to the employees of the Company and the corresponding compensation cost is borne by Bharti Airtel Limited.

2.     As resolved in the meeting of the Board of Directors of the Company held on May 2, 2011, the Company is required to pay, with effect from April 1, 2011 to Bharti Airtel Limited (‘BAL’), Development and Know how fees on account of the benefits that the Company derives from using Airtel Brand and towards economic benefits and savings to the Company by virtue of various contracts centrally negotiated by Bharti Airtel Limited. The rationale for this charge is based on an independent exercise carried out by a leading consulting firm. Though approved, no accounting for development & know how fees payable to BAL has been done. Review report of another independent agency, as proposed by one of the Shareholders of the Company has been issued and is under review by the Board of Directors. Pending approval of the report by the Board of Directors of the Company and uncertainty with respect to determination of the quantum of this charge, no amounts are recorded in these financial statements.

1.     Based upon the scope of its UASL and the NIA for 3G/BWA with its clarifications the Company has been providing 3G service under a commercial arrangement i.e (3G Intra Circle Roaming Agreement) to the other operators who have not been awarded 3G spectrum in those circles in which the company operates. The Department of Telecommunication (DOT) has issued notices to the other operators and directed them to withdraw such services. On appeal by these operators, the Hon‘ble Subrme Court vide its interim order dated April 11, 2013, restrained DoT from taking any coercive action pending final hearing and while adjourning the matter to May 09, 2013, also directed these operators for not acquiring new customers on the basis of Intra Circle Roaming Arrangements. Pending final decision, the Company continues to provide such services under the agreement.

2.     During the year ended March 31, 2013, the Company was awarded a favorable order by the TDSAT in respect of an outstanding dispute pertaining to inter-connect agreements. The Company, based on the TDSAT judgment and independent legal opinion, has recognized revenue of Rs. 239 Mn, resulting in higher profit before tax by Rs. 148 Mn, and and net profit by Rs. 108 Mn, respectively, relating to brvious years.

3.     Amount below Rs.0.5 mn has been rounded off and disclosed as '0' and Nil amount has been disclosed as '-', as applicable, in these financial statements.

4.     Previous year figures have been regrouped / reclassified where necessary to conform to current year’s classification.

    Use of estimates

The brparation of the financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent liabilities at the date of the financial statements and the results of operations during the reporting year end. Although these estimates are based upon management’s best knowledge of current events and actions, uncertainty about these assumptions and estimates could result in the outcomes requiring a material adjustment to the carrying amounts of assets and liabilities in future periods.

 

		(Rupees Millions)
	As of	As of
	March 31, 2013	March 31, 2012
Provision for employee benefits (refer note 31)
Provision for Gratuity	16	12
Provision for Deferred bonus & Long Service Award	2	4
Total	18	16
Provision for asset retirement obligation	158	158
	176	174
Provision for asset  retirement obligation: The Company uses various brmises on lease to install the equipment. A provision is recognized for the costs to be incurred for the restoration of these brmises at the end of the lease period. It is expected that this provision will be utilized at the end of the lease period of the respective sites as per the respective lease agreements. The movement of Provision in accordance with AS-29 Provisions, Contingent liabilities and Contingent Assets’  notified under Companies Accounting Standards Rules, 2006 (‘as amended’) , is given below:
		(Rupees Millions)
	As of	As of
	March 31, 2013	March 31, 2012
Opening balance	158	157
Addition during the year	-	1
Closing balance	158	158

 

			(Rupees Millions)
	As of		As of
	March 31, 2013		March 31, 2012
Provision for employee benefits (refer note 31)
Provision for Gratuity	5		4
Provision for Leave Encashment	15		13
Total	20		17
Others
Proposed Dividend	125		125
Tax on Dividend	21		20
Total	146		145
	166		162

During the year, the Company has recognized the following amounts in the Statement of Profit and Loss:

Defined Contribution Plans

 

					(Rupees Millions)
Particulars			For the year ended		For the year ended
			March 31, 2013		March 31, 2012
Employer’s Contribution to Provident Fund *			14		11
Employer’s Contribution to ESI *			0		0

*Included in Contribution to Provident and Other Funds

				(Rupees Millions)
		For the year ended		For the year ended
		March 31, 2013		March 31, 2012
Salaries and Wages		632		653
Contribution to provident and other funds		14		11
Staff welfare expenses		13		15
Others		6		7
		665		686

Defined Benefit Plans

For the Year ended March 31, 2013:
		(Rupees Millions)
Particulars	Gratuity #	Leave Encashment #
Current service cost	5	4
Interest cost	2	1
Expected Return on plan assets	(0)	-
Actuarial (gain) / loss	0	(3)
Net gratuity/Leave encashment cost	7	2

 

For the Year ended March 31, 2012:
		(Rupees Millions)
Particulars	Gratuity #	Leave Encashment #
Current service cost	4	3
Interest cost	1	1
Expected Return on plan assets	(0)	-
Actuarial (gain) / loss	4	(2)
Net gratuity/Leave encashment cost	9	2

# Included in Salaries, wages and Bonus

				(Rupees Millions)
		For the year ended		For the year ended
		March 31, 2013		March 31, 2012
Salaries and Wages		632		653
Contribution to provident and other funds		14		11
Staff welfare expenses		13		15
Others		6		7
		665		686

The assumptions used to determine the defined benefit obligations are as follows:

For the Year ended March 31, 2013
Particulars	Gratuity	Leave Encashment
Discount Rate	8.50%	8.50%
Expected Rate of increase in Compensation levels	10.00%	10.00%
Expected Rate of Return on Plan Assets	8.00%	N.A.
Expected Average remaining working lives of employees (years)	27.85 years	27.85 years

 

For the Year ended March 31, 2012:
Particulars	Gratuity	Leave Encashment
Discount Rate	8.00%	8.00%
Expected Rate of increase in Compensation levels	9.00%	9.00%
Expected Rate of Return on Plan Assets	8.00%	N.A.
Expected Average remaining working lives of employees (years)	24.84 years	24.84 years

Reconciliation of opening and closing balances of defined benefit obligations and plan assets is as follows:

For the Year ended March 31, 2013:

		(Rupees Millions)
Particulars	Gratuity	Leave Encashment
Change in Projected Benefit Obligation (PBO)
Projected benefit obligation at beginning of year	20	13
Current service cost	5	4
Interest cost	2	1
Benefits paid	(4)	(2)
Acquisition	-
Curtailment and Settlement cost	-
Contribution by plan participants	-
Past service cost	-
Actuarial (gain) / loss	(0)	(3)
Projected benefit obligation at year end	23	14
Change in plan assets :
Fair value of plan assets at beginning of year	5	-
Expected return on plan assets	0	-
Actuarial gain / (loss)	(0)	-
Employer contribution	-	-
Contribution by plan participants	-	-
Settlement cost	-	-
Benefits paid	-	-
Fair value of plan assets at year end	5	-
Net funded status of the plan	(17)	(14)
Net amount recognized	(17)	(14)

For the Year ended March 31,2012:

				(Rupees Millions)
Particulars			Gratuity	Leave Encashment
Change in Projected Benefit Obligation (PBO)
Projected benefit obligation at beginning of year			17	12
Current service cost			4	3
Interest cost			1	1
Benefits paid			(5)	(1)
Acquisition			-	-
Curtailment and Settlement cost			-	-
Contribution by plan participants			-	-
Past service cost			-	-
Actuarial (gain) / loss			3	(2)
Projected benefit obligation at year end			20	13
Change in plan assets :
Fair value of plan assets at beginning of year			5	-
Expected return on plan assets			0	-
Actuarial gain / (loss)			(0)	-
Employer contribution			-	-
Contribution by plan participants			-	-
Settlement cost			-	-
Benefits paid			-	-
Fair value of plan assets at year end			5	-
Net funded status of the plan			(15)	(13)
Net amount recognized			(15)	(13)

(d) The expected rate of return on plan assets was based on the average long – term rate of return expected to brvail over the next 15 to 20 years on the investments made by the LIC. This was based on the historical returns suitably adjusted for movements in long-term government bond interest rates. The discount rate is based on the average yield on government bonds of 20 years.

(e)The estimates of future salary increases, considered in actuarial valuation, take account of inflation, seniority, promotion and other relevant factors, such as supply and demand in the employment market.

(f) Movement in provision for Deferred Incentive Plan:

		(Rupees Millions)
Particulars	For the year ended March 31, 2013	For the year ended March 31, 2012
Opening Balance	-	3
Addition during the year	-	-
Less : Utilized during the year	-	(3)
Closing Balance	-	-

Long term service award provided by the Company as of March 31, 2013 is Rs 2 Mn (March 31,2012 Rs. 4 Mn)

a.     Employee benefits

The Company’s post employment benefits include defined benefit plan and defined contribution plans. The Company also provides other benefits in the form of deferred compensation and compensated absences.

Under the defined benefit retirement plan, the Company provides retirement obligation in the form of Gratuity. Under the plan, a lump sum payment is made to eligible employees at retirement or termination of employment based on respective employee salary and years of experience with the Company.

For defined benefit retirement plans, the difference between the fair value of the plan assets and the brsent value of the plan liabilities is recognised as an asset or liability in the balance sheet. Scheme liabilities are calculated using the projected unit funding method and applying the principal actuarial assumptions as at the date of balance sheet. Plan assets are assets that are held by a long-term employee benefit fund or qualifying insurance policies.

All expenses in respect of defined benefit plans, including actuarial gains and losses, are recognised in the statement of profit and loss as incurred.

The amount charged to the statement of profit and loss in respect of these plans is included within operating costs.

The Company’s contributions to defined contribution plans are recognised in statement of profit and loss as they fall due. The Company has no further obligations under these plans beyond its periodic contributions.

The employees of the Company are entitled to compensated absences based on the unavailed leave balance as well as other long term benefits. The Company records liability based on actuarial valuation computed under projected unit credit method.

The distinction between short-term and long-term employee benefits is based on expected timing of settlement rather than the employee’s entitlement benefits.

a.     Segment reporting

a) Primary Segment

The Company operates in two primary business segments viz. Mobile Services and Telemedia Services.

b) Secondary Segment

The Company caters only to the needs of Indian market rebrsenting a singular economic environment with similar risks and rewards and hence there are no reportable geographical segments.

1.     Information about Business Segments-Primary

   Segment Definitions:

The Company’s operating businesses are organized and managed separately according to the nature of products and services provided, with each segment rebrsenting a strategic business unit that offers different products and serves different markets.

Mobile Services — These services cover voice and data telecom services provided through wireless technology in India (2G/3G).

 Telemedia Services — These services cover voice and data communications based on fixed network and broadband technology.

Summary of segmental information for the year ended March 31,2013

					(Rupees Millions)
Reportable Segments	Mobile Services	Telemedia Services	Unallocated	Eliminations	Total
Revenue
Revenue from operations	36,274	387	-	-	36,661
Inter Segment Revenue	18	6		(24)	-
Total Revenue	36,292	393	-	(24)	36,661
Results
Segment Result, Profit / (Loss)*	6,921	34	-	-	6,955
Net Finance Expense / ( Income ) net*	-	-	(1,127)	-	(1,127)
Net Profit / (Loss) before tax	6,921	34	1,127	-	8,082
-Current tax (including MAT credit)	-	-	2,347	-	2,347
Deferred Tax Expense/(Credit)	-	-	(86)	-	(86)
Net Profit after tax	6,921	34	(1,133)	-	5,821
Other Information
Capital Expenditure	3,767	98	-	-	3,866
Debrciation & Amortisation	4,044	113	-	(6)	4,151
As of March 31, 2013
Segment Assets	47,467	233	-	-	47,700
Inter Segement Assets	78	-		(78)	-
Advance Tax (Net of provision for tax)	-	-	264	-	264
MAT Credit	-	-	399	-	399
Total Assets	47,545	233	663	(78)	48,363
Segmental Liabilities	10,729	163	-	-	10,892
Inter Segment Liabilities	-	78	-	(78)	-
Deferred Tax Liability	-	-	344	-	344
Total Liabilities	10,729	241	344	(78)	11,236

* Segment results exclude finance income of Rs 1,196 Mn whic has been netted off from finance expenses for th purpsoe of segment reporting.

Summary of segmental information for the year ended March 31,2012

					(Rupees Millions)
Reportable Segments	Mobile Services	Telemedia Services	Unallocated	Eliminations	Total
Revenue
Revenue from operations	33,402	389	-	-	33,791
Inter Segment Revenue	12	8		(20)	-
Total Revenue	33,414	397	-	(20)	33,791
Results
Segment Result, Profit / (Loss)*	7,570	45	-	-	7,615
Net Finance Expense / ( Income ) net*	-	-	(42)	-	(42)
Net Profit / (Loss) before tax	7,570	45	42	-	7657
-Current tax (including MAT credit)	-	-	1,479	-	1,479
Deferred Tax Expense/(Credit)	-	-	160	-	160
Net Profit after tax	7,570	45	(1,597)	-	6,018
Other Information
Capital Expenditure	2,550	198	-	-	2,748
Debrciation & Amortisation	3,567	105	-	(5)	3,667
As of March 31, 2013
Segment Assets	38,368	876	-	-	39,244
Inter Segement Assets	69	-		(69)	-
Advance Tax (Net of provision for tax)	-	-	287	-	287
MAT Credit	-	-	803	-	803
Total Assets	38,437	876	1,090	(69)	40,334
Segmental Liabilities	7,166	848	-	-	8,014
Inter Segment Liabilities	-	69	-	(69)	-
Deferred Tax Liability	-	-	429	-	429
Total Liabilities	7,166	917	429	(69)	8,443

* Segment results exclude finance income of Rs 446 Mn which is netted off from finance expenses for the purpose of segment reporting.

  Notes:

1.      Segment results rebrsent profit/(loss) before finance expenses (net of finance income) and tax.

2.      Capital expenditure rebrsents gross additions made to fixed assets during the year.

3.      Segment assets include fixed assets, current and other non current assets.

4.      Segment liabilities include current and non current liabilities.

5.      Inter segment assets / liabilities rebrsent the inter segment account balances.

6.      Inter segment revenue is accounted for on terms established by the management on arm’s length basis. These transactions have been eliminated at the Company level.

7.      Unallocated includes finance expenses, advance tax and deferred tax liability