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Company Information

Home » Market » Company Information

Vodafone Idea Ltd.

Dec 02
12.81 +0.14 (+ 1.10 %)
 
VOLUME : 179988202
Prev. Close 12.67
Open Price 12.38
TODAY'S LOW / HIGH
12.38
 
 
 
13.40
Bid PRICE (QTY.) 0.00 (0)
Offer PRICE (Qty.) 0.00 (0)
52 WK LOW / HIGH
4.55
 
 
 
13.80
Dec 02
12.80 +0.00 (+ 0.00 %)
 
VOLUME : 865489758
Prev. Close 12.80
Open Price 12.40
TODAY'S LOW / HIGH
12.40
 
 
 
13.45
Bid PRICE (QTY.) 0.00 (0)
Offer PRICE (Qty.) 0.00 (0)
52 WK LOW / HIGH
4.55
 
 
 
13.80
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Market Cap. ( ₹ ) 36781.30 Cr. P/BV -0.96 Book Value ( ₹ ) -13.32
52 Week High/Low ( ₹ ) 14/5 FV/ML 10/1 P/E(X) 0.00
Bookclosure 30/09/2020 TTM EPS ( ₹ ) -9.05 Div Yield (%) 0.00
NOTES TO ACCOUNTS
You can view the entire text of Notes to accounts of the company for the latest year
Year End :2021-03 

1. Refer note 21(C) for assets pledged as securities towards borrowings and non-fund based facilities.

2. Disposals/Adjustments include accelerated depreciation charge of ' 5,716 Mn (March 31, 2020 : ' 59,441 Mn) on account of network re-alignment and integration cost and disclosed under exceptional items (refer note 39).

3. Plant & Machinery and CWIP includes certain assets acquired on extended credit terms for which the title will be transferred to the company upon final payment to the equipment suppliers as per the contract terms. Gross Block, Net Block and CWIP of such assets as on March 31, 2021 is ' 49,982 Mn, ' 39,805 Mn and ' 314 Mn respectively (March 31, 2020 is ' 44,597 Mn, ' 41,650 Mn and ' 2,603 Mn respectively).

4. Capital work-in-progress as on March 31, 2021 is ' 5,343 Mn (March 31, 2020: ' 8,598 Mn).

*Numbers are below one million under the rounding off convention adopted by the Company and accordingly not reported.

1. Computer-software includes gross block of assets capitalised under finance lease ' 5,489 Mn (March 31, 2020: ' 5,507 Mn) and corresponding accumulated amortisation being ' 5,433 Mn (March 31, 2020 : ' 5,105 Mn).

2. Entry/license fee and spectrum gross block ' 46,583 Mn and Net block ' 18,517 Mn range from 0.4 years to 6.4 years and Entry/ license fee and spectrum gross block ' 1,482,209 Mn and Net block ' 1,062,061 Mn range from 9 years to 17.3 years (March 31, 2020 : gross block ' 46,583 Mn and Net block ' 28,545 Mn range from 1.4 years to 7.4 years and Entry/license fee and spectrum gross block ' 1,482,209 Mn and Net block ' 1,138,292 Mn range from 10 years to 18.3 years).

3. Refer note 21(C) for computer software pledged as securities towards funded and non-funded facilities.

4. During the year, pursuant to the launch of V! brand, the company has reassessed the estimated useful life of Vodafone brand from 15 years to 10 years and taken an additional amortisation charge of ' 109 Mn (net of reduction on account of impairment amounting to ' 323 Mn) (refer note 40(x)).

5. Intangible Assets under development as at March 31, 2021 is ' 63 Mn (March 31, 2020: ' 966 Mn). Amount added during the year ' 2,321 Mn (March 31, 2020: ' 42,296 Mn), and amount capitalized during the year of ' 3,224 Mn (March 31, 2020: ' 68,773 Mn).

6. Includes ' 38,871 Mn on account of One Time Spectrum Charges (refer note 40(vii)).

Terms/rights attached to issued, subscribed and paid up equity shares

The Company has only one class of equity shares having par value of ' 10 per share. Each holder of equity shares is entitled to one vote per share. The Company declares and pays dividends in Indian rupees. In the event of liquidation of the Company, the holders of equity shares will be entitled to receive remaining assets of the Company, after distribution of all preferential amounts. The distribution will be in proportion to the number of equity shares held by the shareholders.

(1) Capital reserve comprises of capital receipt, received as compensation from an erstwhile Joint Venture partner for failure to subscribe in the equity shares of VInL in earlier years, settlement liability created on merger of erstwhile Vodafone with the Company and amounts pursuant to merger of ABTL with the Company.

(2) Capital reduction reserve was created by VInL on distribution of VInL’s share in Indus to share holders of VInL in accordance with capital reduction scheme. This reserve is not available for distribution as dividend.

(3) The Company has incurred losses during the current/previous year. Accordingly, the Company is not required to create any further DRR as per the Act and hence no DRR has been created during the year ended March 31, 2021 and March 31, 2020.

(4) The Company has accounted for the merger of VInL and VMSL with the Company under ‘pooling of interest’ method. Consequently, investment of VInL in VMSL, share capital of VInL and VMSL has been cancelled. The difference between the face value of shares issued by the Company and the value of shares and investment so cancelled has been recognized in Amalgamation Adjustment Deficit Account of ' (488,408) Mn. Also pursuant to merger of ITL with the Company, share capital of ITL and investment of the Company have been cancelled. The difference between equity of ITL and investment of the Company of ' (36) Mn has been recongized in Amalgamation Adjustment Deficit Account (refer note 40 (vi)). From utilisation perspective, this is an unrestricted reserve.

(5) Includes ' 1,393 Mn is not available for distribution of dividend.

(1) Some of the Company’s loans are subjected to covenant clauses, whereby the Company is required to meet certain specified financial ratios. The Company has not met certain financial ratios for some of these arrangements, the gross outstanding amount for which as at March 31, 2021 was ' 144,370 Mn (March 31, 2020: ' 155,208 Mn). Subsequent to the Balance Sheet date, the Company has received waivers for loans amounting to ' 45,625 Mn (March 31, 2020: ' Nil). Accordingly, as at March 31, 2021 loans amounting to ' 85,472 Mn (March 31, 2020: ' 142,757 Mn)) has been re-classified from non-current borrowings to current maturities of long term debt. The unamortised arrangement fees on such borrowings of ' Nil (March 31, 2020: ' 32 Mn) has been charged in statement of profit and loss. As on the reporting date, none of the banks have approached for early repayment.

(2) The Company had availed option for moratorium of 6 months for repayment of Interest and principal in accordance with the notification issued by RBI.

(1)Department of Telecommunication (DoT) has provided an option for deferment of payment of spectrum auction instalment due for the financial years 2020-21 and 2021-22 on submission of additional Bank Guarantees for the increased instalment amounts basis the moratorium availed. During the year, to avail such moratorium, the Company has provided Bank Guarantees amounting to ' 27,628 Mn which is equivalent to 2 year differential amount on certain spectrum and 1 year differential amount on certain spectrum. Accordingly, current maturities of long term borrowings includes ' 20,941 Mn of deferred payment obligation towards spectrum towards which additional Bank Guarantees of ' 9,757 Mn is to be provided to avail the additional 1 year moratorium.

(F) Interest rate for Rupee Term Loan ranges from 8.53% to 11.40% (March 31, 2020: from 4.0% to 12.75%). Foreign currency loan ranges from 1.21% to 1.37% (March 31, 2020: from 1.40% to 4.15%) and Deferred Payment obligation from 8% to 10% (March 31, 2020: from 9.30% to 10%).

(1) Amounts given in above Exceptional items (net) represents Exceptional gain/(loss)

(2) During the previous year, the Company had taken an accelerated depreciation charge of ' 40,320 Mn towards certain 3G network equipment which were no longer usable on the basis of its revised business plan of re-farming 3G spectrum for 4G services.

(3) During the previous year, the Company, had taken a provision for impairment of loan given to VIBSL amounting to ' 2,630 Mn based on the future cash flow projections of VIBSL. Further, the Company has also taken a provision for impairment of loan given to VMPL amounting to ' 806 Mn (refer note 40(iii)).

(4) During the previous year, the Company had taken provision for impairment towards its investments in ABIPBL amounting to ' 2,788 Mn (refer note 40(ii)).

i) On May 4, 2019, the Company had allotted 19,999,830,911 Equity Shares of face value of ' 10 each to the eligible equity shareholders under a Rights Issue at a price of ' 12.50 (including a premium of ' 2.50) per equity share aggregating to ' 249,998 Mn. Entire proceeds from the Rights Issue has been utilised in accordance with the issue object(s) stated in offer document (as amended).

ii) Aditya Birla Idea Payment Bank Limited (ABIPBL), an associate of the Company had decided to wind up business voluntarily (voluntary winding up) on July 19, 2019 subject to requisite regulatory approvals and consent. Accordingly, during the previous year the Company had made a provision for impairment of the entire amount of investments in ABIPBL of ' 2,788 Mn and additional amount of ' 98 Mn contributed in proportion to shareholding towards liquidation expenses under exceptional items. ABIPBL is currently under liquidation.

iii) Vodafone M-Pesa Limited (VMPL), a 100% subsidiary of the Company into the business of Prepaid Payment Instruments (PPI) and Business Correspondence (BC) decided to wind up both these business voluntarily on July 8, 2019 subject to requisite regulatory approvals and consent. It had thereby written to Reserve Bank of India (RBI) for surrendering its PPI Licence which has been accepted by the RBI, subject to certain conditions. Accordingly, the Company, on a prudence basis, during the previous year has recorded a provision for impairment amounting to ' 806 Mn towards loan given to VMPL.

iv) The Scheme of Arrangement under section 230 to 232 of the Companies Act, 2013 between the Company and its wholly owned subsidiary Vodafone Idea Telecom Infrastructure Limited (VITIL) (formerly known as Vodafone Towers Limited) for transfer of Fibre Infrastructure undertaking to VITIL on an as is basis has been approved by the National Company Law Tribunal, Ahmedabad bench (NCLT) vide its order dated September 18, 2019. On filing of the said order with the Registrar of Companies (RoC) on October 15, 2019, the Scheme has become effective with an appointed date of October 1, 2019.

Pursuant to the above, during the previous year, the Company has de-recognized the fibre assets and liabilities from the appointed date and has recognized the net amount of ' 46,579 Mn as business consideration receivable from VITIL. Effective October 1, 2019 the Company is receiving fibre infrastructure services from the VITIL and accordingly expenses has been accounted in the books under “Network Expenses and IT Outsourcing Cost”

v) The scheme of amalgamation and arrangement between Bharti Infratel Limited and Indus became effective from November 19, 2020. Pursuant to aforesaid, Indus was dissolved without being wound up and got merged with Bharti Infratel Limited (the merged entity is thereafter named as Indus Towers Limited) on a going concern basis.

On November 19, 2020, the Company sold its 11.15% stake in Indus for a consideration of ' 37,472 Mn (net of expenses incurred on sale) to Bharti Infratel Limited. As the carrying value of the investment as on such date was ' 37,642 Mn, the Company recognised a loss on sale amounting to ' 170 Mn as exceptional items.

vi) On August 13, 2019, the Company had filed a Scheme of Amalgamation under sections 230 to 232 and other applicable provisions of the Companies Act, 2013 for the merger of Vodafone India Digital Limited (VIDL) and Idea Telesystems Limited (ITL), wholly owned subsidiaries of the Company, with the Company with an appointed date of April 1, 2019. During the previous year, the Company had received the requisite regulatory approvals and the merger became effective on March 1, 2020 on filing the certified copies of the orders sanctioning the scheme with the RoC. This transaction had been accounted in the previous year as per Ind AS 103 using the pooling of interest method and maintaining the identity of the reserves as those appeared in the standalone financial statements of VIDL and ITL.

vii) One Time Spectrum Charges (Beyond 4.4 MHz):

During the financial year 2012-13, DoT had issued demand notices towards one time spectrum charges (hereinafter referred to as “OTSC”). The demands on the Company i.e. formerly Idea Cellular Limited have been challenged by way of writ petition before the Bombay High Court (BHC). The erstwhile Vodafone India Limited (VInL) and erstwhile Vodafone Mobile Services Limited (VMSL) had challenged the demands before the TDSAT. The grounds taken before BHC and TDSAT were different though.

On July 4, 2019 TDSAT in its judgement quashed the demands levied on erstwhile VInL and VMSL and inter alia held that:

- For spectrum up to 6.2 MHz, OTSC is not chargeable and accordingly demand set aside.

- For spectrum beyond 6.2 MHz,

• Allotment after July 1, 2008, OTSC shall be levied from the date of allotment of such spectrum.

• Allotment before July 1, 2008, OTSC shall be levied from January 1, 2013 till the date of expiry of license.

• Conditions as stated in para 1 (v) of the impugned order dated December 28, 2012 (given hereunder) is arbitrary and illegal and is accordingly set aside, i.e. Upfront charges in the case of spectrum holding in multiple bands (900 MHz and 1800 MHz), spectrum in 1800 MHz band will be accounted for first, towards the limit of 4.4 MHz was held to be arbitrary and illegal and accordingly set aside.

Thereafter VIL filed an appeal before the Hon’ble Supreme Court against the TDSAT judgement. On March 16, 2020, Hon’ble Supreme Court dismissed the petition filed by the Company challenging the levy of OTSC beyond 6.2 MHz. Following the dismissal of the Company’s appeal by the Hon’ble Supreme Court on March 16, 2020, the Company is yet to receive any demand from DoT in line with the TDSAT order. VIL proceedings before the BHC in respect of Idea Cellular Limited remains pending. In July 2020, DoT had filed an appeal against the TDSAT judgement and sought stay on the impugned judgement. Subsequently as per court directive, the Company also filed its reply against DoT appeal, which is currently pending with Hon’ble Supreme Court.

The Company, on prudence basis, has recognized a charge for spectrum holding beyond 6.2 MHz in line with the TDSAT order. The amount has been calculated basis the demand computation that was raised by DoT in July 2018 for Bank Guarantees to be given for OTSC in line with the M&A guidelines at the time of merger. Accordingly, an amount of ' 5,027 Mn (March 31, 2020: ' 38,871 Mn) has been recognised as exceptional items.

viii) The Department of Telecommunications (DoT) conducted auctions for frequency blocks in the 900 and 1800 MHz spectrum bands in March 2021. The Company successfully bid for its spectrum requirements at a total cost of ' 19,934 Mn as under:

- 5.8 MHz of 900 MHz spectrum in 2 service areas of Tamilnadu and West Bengal

- 6 MHz of 1800 MHz spectrum in 3 service areas of Karnataka, Uttar Pradesh (East) and Uttar Pradesh (West)

The validity of the above spectrum is for a 20 year period starting from the effective date as mentioned in the Frequency Assignment Letter for respective service areas. As on the Balance Sheet date, the Company had not received the frequency assignment letter from DoT. As per the payment options available, the Company has chosen the deferred payment option. The upfront payment amount of ' 5,747 Mn under the deferred payment option was paid on March 18, 2021, the due date for payment.

The amount of ' 5,747 Mn paid towards the upfront payment for the unassigned spectrum is included in Capital Advances and the deferred payment obligation of ' 14,187 Mn along with accrued interest of ' 37 Mn is disclosed under Capital Commitments.

ix) The Implementation Agreement entered between the parties define a settlement mechanism between the Company and the promoters of erstwhile VInL for any cash inflow/outflow that could possibly arise to/by the company towards settlement of certain outstanding disputes pertaining to the period until May 31, 2018. As at March 31, 2020, the Company had recognized settlement assets amounting to ' 83,687 Mn being capped basis Implementation Agreement. The settlement of such assets recognized was

to happen periodically based on cash inflow/outflow incurred as defined in the Agreement starting from June 2020 but not beyond June 2025. During current year, the Company has received ' 19,748 Mn as part of settlement due for June 2020. The balance of ' 63,939 Mn as at March 31, 2021 is subject to further cash inflows/outflows incurred till next settlement period falling in financial year 2022-23 and hence classified as non-current financial assets. In the event such disputed matters do not finally result in cash inflows/outflows to/by the company up to June 2025, there would be no settlement to/from the erstwhile VInL promoters by/to the Company. The settlement between the Company and VInL promoters for any cash outflow that could possibly arise shall be subject to requisite approvals, if any, which would be evaluated/obtained at the time of actual settlement if any, to VInL promoters.

x) The company unveiled a new integrated brand identity V! on September 04, 2020. As a result, with the expected increased usage of Vi, the utility of its existing intangible asset of Vodafone brand is expected to decline over the contractual useful life of the asset as a result of gradual diminution in company’s inclination on developing & maintaining the existing Vodafone Marks, though VIL continues to have the right to use it over its remaining life. Accordingly, the company has carried out an impairment assessment as well as re-estimated the useful economic life of its intangible asset of Vodafone brand as at the integrated brand launch date.

As per the assessment, the carrying value of the intangible asset stands at ' 15,039 Mn as at the integrated brand launch date. The value has been determined using Relief from Royalty method applying a royalty rate to the royalty base to estimate the royalty payments over the remaining life of the asset. Royalty base represents revenue attributable to Vodafone Marks over the remaining life of the asset.

As a result of this analysis, an impairment charge of ' 7,246 Mn has been recognized as exceptional item.

Key assumptions used in value-in-use calculations:

- Revenue CAGR considered for royalty base: Based on the estimated growth rate over the five-year budget period for the Company and thereafter based on terminal growth rate of 5%.

- Royalty rate: Pre-tax Royalty rate charged for use of brand in India.

- Discount rate: Based on the risk-free rate for a ten-year Government bonds benchmark yields as on the valuation date adjusted for risk premium to reflect both the increased risk of investing in equities and the systematic risk of VIL. In making this adjustment, inputs required are the equity market risk premium and the risk adjustment beta applied to reflect the risk of the specific operating company relative to the market as a whole. Discount rate considered for determining the value is 13.1%.

NOTE 41 : CAPITAL AND OTHER COMMITMENTS

Estimated amount of commitments are as follows:

• Spectrum won in auctions and not assigned to the Company as on the balance sheet date ' 14,224 Mn (March 31, 2020: ' Nil) (refer note 40(viii)).

• Contracts remaining to be executed for capital expenditure (net of advances) and not provided for are ' 24,596 Mn (March 31, 2020: ' 25,110 Mn).

• Long term contracts remaining to be executed including early termination commitments (if any) are ' 40,920 Mn (March 31, 2020: ' 40,164 Mn).

NOTE 42 : CONTINGENT LIABILITIES NOT PROVIDED FOR

A) Licensing Disputes:

i. OTSC (Less than 4.4 MHz) - ' 38,570 Mn (March 31, 2020: ' 38,570 Mn):

In FY 2015-16 erstwhile VMSL received demands from DoT towards One time spectrum charges for less than 4.4 MHz pursuant to the transfer of licenses of certain subsidiaries amounting to ' 33,495 Mn. The Company believes the charges levied by DoT are not tenable, since the merger guidelines are not applicable considering that the said merger did not involve any intra-circle merger and did not result in increase in spectrum holding of the Company. The Demand is challenged and remains sub-judice at TDSAT.

Also, in FY 2015-16, erstwhile VMSL received demand from DoT towards extension of license of Tamil Nadu circle for making it co-terminus with license of Chennai circle amounting to ' 5,075 Mn. The Company believes the charges levied by DoT are not tenable, considering the merger of licenses is as per the guidelines issued by DoT in 2005 and as such does not get covered under as per clause 3 (i) and (m) of the M&A guidelines dated February 20, 2014. The Demand is challenged and remains sub-judice at TDSAT.

ii. Other Licensing Disputes - ' 70,648 Mn (March 31, 2020: ' 25,248 Mn):

- Additional demands towards AGR dues for which the company has written to DoT requesting corrections of certain computational errors, admissible pass-through not considered based on the principles laid down in the AGR judgement (refer note 3).

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

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

- Demand with respect to upfront spectrum amounts for continuation of services from February 2, 2012 till various dates in the service areas where the licenses were quashed following the Hon’ble Supreme Court Order.

In October 2015, DoT issued interim guidelines, wherein Microwave Spectrum held by expired/expiring licenses was declared as being held on a provisional basis subject to final outcome of DoT’s decision on recommendation by TRAI on the allocation and pricing of Microwave Spectrum. The interim guidelines issued by DoT are not in line with the understanding provided during the earlier auctions as part of Notice Inviting Application (NIA) for the spectrum auction. Basis the interim guidelines, DoT has instructed the Company to provide an undertaking that the pricing and allocation decisions of DoT would be considered final in this respect. The Company has not provided the said undertaking or signed the agreement being against the express and binding confirmations under NIA. Further TDSAT vide its order dated March 13, 2019 set aside the Impugned guidelines and stated 2006 rates hold to be valid, which should be applied from future date as and when notified by DoT as per the judgment. The Hon’ble Supreme Court vide its order dated November 8, 2019 stayed the TDSAT order and directed the Company to furnish bank guarantee till the next date of hearing. Accordingly, the implication of the said order is not considered in the financial statement.

i. Income Tax Matters (including Tax deducted at source)

- Appeals filed by the Company against the demands raised by the Income Tax Authorities relates to disputes on nonapplicability of tax deductions at source on prepaid margin allowed to prepaid distributors, disputes relating to denial of tax holiday benefit from certain business receipts etc.

The above matters contested by the Company are pending at various appellate authorities against the tax authorities.

ii. Sales Tax and Entertainment Tax

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

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

- In one state entertainment tax is being demanded on revenue from value added services.

iii. Service Tax/Goods and Service Tax (GST)

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

- Denial of Cenvat credit related to Towers and Shelters.

- Disallowance of Cenvat Credit on input services viewed as ineligible credit.

- Demand of service tax on SMS termination charges, Demand of service tax on reversal of input credit on various matters.

iv. Entry Tax and Customs

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

- Demand of customs duty/anti-dumping duty on dispute relating to classification issue. The Company has challenged these demands which are pending at various forums.

v. Other claims not acknowledged as debts

- Mainly include consumer forum cases, disputed matters with local Municipal Corporation, Regional Provident Fund Commission and other miscellaneous sub-judiced disputes.

- Disputes with the Electricity Boards on matters relating to classification of Mobility Towers into Industrial v/s Commercial.

The future cash outflows in respect of the above matters are determinable only on receipt of judgments/decisions from such forums/ authorities. Further, based on the Company’s evaluation, it believes that it is not probable that the claims will materialise and therefore, no provision has been recognised for the above.

a) Employee stock option plan - options granted by Vodafone Idea Limited

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

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

There were no modifications to the options/RSU’s during the year ended March 31, 2021 and March 31, 2020. During the previous year, certain unvested options were cancelled on non-fulfilment of certain vesting conditions under ESOS 2013. In the current year, ' 295 Mn (March 31, 2020: ' Nil) is adjusted against Retained earnings in respect of cancellation/expiration of vested stock option.

b) Employee stock option plan - options granted by Vodafone Group Plc

i. Global Long Term Incentive (“GLTI”):

GLTI is a restricted share plan granted to incentivise delivery of sustained performance over the long term plan to selected employees of the Group. In addition to the 3 years vesting conditions, options of certain schemes would depend on achievement of the performance conditions of the Group and Vodafone Group Plc. The plans are administered by Vodafone Group Plc. and the information disclosed is to the extent available.

ii. Global Long Term Retention (“GLTR”):

GLTR plan is a restricted share plan granted as a retention tool to selected employees in the middle management. The options vest in 3 years/2 years after the grant date provided the employees remain in the continued employment of the Group during the vesting period.

iii. Vodafone Global Incentive Plan (“VGIP”):

VGIP is a restricted plan granted as an investment plan to senior management. These options vest in 3 years after the grant date provided the employee remains in the continued employment of the Group during the vesting period. The vesting of these options were subject to satisfaction of performance conditions of the Group and Vodafone Group Plc and market based condition, based on total shareholder return (TSR), which is taken into account when calculating the fair value of share awards. The valuation for the TSR is based on Vodafone’s ranking within the same group of companies, where possible over the past five years.

A. Defined Benefit Plan (Gratuity)

General description and benefits of the plan

The Company operates a defined benefit final salary gratuity plan through a trust. The gratuity benefits payable to the employees are based on the employee’s service and last drawn salary at the time of leaving. The benefit is payable on termination of service or retirement, whichever is earlier. The employees do not contribute towards this plan and the full cost of providing these benefits are borne by the Company.

Regulatory framework, funding arrangement and governance of the Plan

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

Inherent risks

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

(Figures in bracket are for the year ended March 31, 2020)

(1) Remuneration includes amounts towards LTIP and ESOP basis actual payment/exercise. There is no remuneration paid to Mr. Ravinder Takkar from VIL and neither any amount is charged back to the Company by any other entity towards his remuneration during the current year and previous period.

*Numbers are below one million under the rounding off convention adopted by the Company and accordingly not reported. includes amounts accrued on account of onerous contract (Site Exits) involving invoicing and settlements over a 3 years period.

#The Company is one of the members of ABMCPL, a Company limited by guarantee, which has been formed to provide common pool of facilities and resources to its members with a view to optimise the benefits of specialisation and minimize cost to each member. The Company’s share of expenses incurred under the common pool has been accounted for at actuals in the respective heads in the Statement of Profit and Loss. Further, the Company had entered into a recharge agreement with ABMPCL pursuant to amalgamation of VMSL and VInL with the Company effective August 31, 2018 for availing such services. During the year, effective October 1, 2020, the Company has terminated the arrangement with ABMCPL. Purchase of Services includes the charge towards such Business Support Services for ABMCPL amounting to ' 656 Mn (March 31, 2020'2,259 Mn).

Further, the Company had also entered into a recharge agreement with VGSL for Business Support services effective August 31, 2018. During the year, effective October 1, 2020, the Company has revised the arrangement with VGSL. Purchase of Services includes the charge towards such Business Support Services for VGSL amounting to ' 3,528 Mn (March 31, 2020'5,395 Mn).

-Lease liability includes amount for services availed till March 31, 2021 and for services to be received in future which is payable over the lease period. The same has been created pursuant to adoption of Ind AS 116.

(i) Related Party transactions excludes assets/liabilities transferred to VIL pursuant to ITL and VIDL merger and transferred from VIL to VITIL on account of demerger of fiber undertaking.

(ii) Above excludes any cash inflow/outflow that could possibly arise from the settlement of certain outstanding disputes pertaining to the period until May 31, 2018 pursuant to the implementation agreement entered between the Company and VInL shareholders. The Company has recognised a settlement asset of ' 63,939 Mn as at March 31, 2021 (March 31, 2020: ' 83,687 Mn) towards the same.

(iii) Guarantees given by bankers to third party on behalf of the Company, counter guaranteed by the VITIL of ' 19,350 Mn, is availed by the Company.

(iv) With respect to options that have already exercised there is an outstanding liability of ' 1,150 Mn payable to entities having significant influence. (March 31, 2020: ' 666 Mn).

(v) During the year the Company has Contributed to Gratuity Fund amounting to ' 2,750 Mn (March 31, 2020: ' 5 Mn)

C) Valuation Technique used to determine fair value including fair value though OCI:

Investments traded in active markets are determined by reference to quotes from the financial institutions; for example: Net asset value (NAV) for investments in mutual funds declared by mutual fund house.

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

The Company enters into derivative financial instruments such as forward, interest rate swap and cross currency swaps with various counterparties. The fair value of such derivatives instruments are determined using forward exchange rates, currency basis spreads between respective currencies and interest rate curves.

NOTE 59 : FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES

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

The Company is exposed to various financial risks such as market risk, credit risk and liquidity risk. The Company’s senior management comprising of a team of qualified finance professionals with appropriate skills and experience oversees management of these risks and provides assurance to the management that financial risks are identified, measured and managed in accordance with the Company’s policies and risk objectives. All derivative activity for risk management purposes are carried by specialist team having appropriate skills and experience. The risks and measures to mitigate such risks is reviewed by the committee of Board of Directors periodically.

Market risk

Market risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in market prices. Market risk comprises three types of risk: interest rate risk, currency risk and other price risk, such as equity price risk. Financial instruments affected by market risk include borrowings, bank deposits, investments and derivative financial instruments.

The sensitivity of the relevant profit or loss item is the effect of the assumed changes in respective market risks. This is based on the financial assets and financial liabilities held at March 31, 2021 and March 31, 2020.

a) Interest rate risk

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

The Company manages its interest rate risk by having a balanced portfolio of fixed and variable rate loans and borrowings. To manage this, the Company enters into interest rate swaps, in which it agrees to exchange, at specified intervals, the difference between fixed and variable rate interest amounts calculated by reference to an agreed-upon notional principal amount. At March 31, 2021, after taking into account the effect of interest rate swaps, approximately 92.00% of the Company’s borrowings are at a fixed rate of interest (March 31, 2020: 86.46%).

b) Foreign currency risk

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

The Company’s foreign currency risks are identified, measured and managed at periodic intervals in accordance with the Company’s policies. When a derivative is entered into for the purpose of hedging any foreign currency exposure, the Company negotiates the terms of those derivatives to match the terms of the hedged exposure. The Company has major foreign currency risk in USD EURO and GBP. The Company hedged 6.94% (March 31, 2020: 9.84%) of its foreign currency trade payables and other financial liabilities in USD and 36.66% (March 31, 2020: 36.65%) of its foreign currency loans in USD. This foreign currency risk is hedged by using foreign currency forward contracts and cross currency rate swaps (refer note 45). However, the Company has not hedged the foreign currency trade payables in EURO and GBP.

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

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

d) Credit risk

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

- Trade receivables

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

The Company follows a ‘simplified approach’ (i.e. based on lifetime Expected credit losses (ECL)) for recognition of impairment loss allowance on Trade receivables (including lease receivables). A large number of minor receivables are grouped into homogeneous groups and assessed for impairment collectively. For the purpose of measuring lifetime ECL allowance for trade receivables, the Company estimates irrecoverable amounts based on the ageing of the receivable balances and historical experience. The Company, based on past trends, recognizes allowance for trade receivables: a) for retail subscribers (net of security deposit) remaining unpaid beyond 90/120 days from date of billing and b) for other trade receivables on account of Interconnect, Roaming, Fixed line Voice and data service etc. remaining unpaid beyond 180/365 days. Further, allowance is also recognised for cases indicating any specific trail of credit loss within the ageing brackets mentioned above. Individual trade receivables are written off when management deems them not to be collectible. Any subsequent recovery is recognized as Income in the Statement of Profit and Loss. Refer Note 13 for the carrying amount of credit exposure as on the Balance Sheet date.

- Other financial assets and cash deposits

Credit risk from balances with banks is managed by the Company’s treasury department. Investments of surplus funds are made only with approved counterparties and within credit limits assigned to each counter party. Counterparty credit limits are reviewed by the Company’s Treasury Department periodically, and may be updated throughout the year. The limits are intended to minimise the concentration of risks and therefore mitigate financial loss through counterparty’s potential failure to make payments.

The Company’s maximum exposure to credit risk for the components of the balance sheet as at March 31, 2021 and March 31, 2020 on its carrying amounts as disclosed in notes 10, 14, 16 and 17 except for derivative financial instruments. The Company’s maximum exposure relating to financial derivative instrument is noted in note 59 (e) and liquidity table below.

e) Liquidity risk

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

The Company’s objective is to maintain a balance between continuity of funding and flexibility through the use of bank overdrafts, bank loans and finance leases. As at March 31, 2021, approximately 7.99% of the Company’s debt excluding interest will mature in less than one year, without considering reclassification into current maturity of debt due to convent breach (March 31, 2020: 3.96%) based on the carrying value of borrowings reflected in the financial statements. Based on the past performance and future expectation, the Company believes that the existing cash balance along with cash generated from operations, working capital management, successful negotiations with lenders including re-financing of debts, acceptance of its request to defer the April 2022 instalment by DoT, clarity with respect to the AGR Judgement instalment amount in line with the modification application filed with the Hon’ble Supreme Court and available sources of raising funds (including monetisation of certain assets) as needed will satisfy its cash flow requirement associated with repayment of borrowings and other liabilities from its operation (refer note 4, 21(D) and 21 (E)).

*The Company has classified an amount of ' 85,472 Mn (March 31, 2020: ' 142,757 Mn) from non-current borrowings to current maturities of long term debt although the Company believes that there will be no acceleration of payment in this regard (refer note 21(D)) includes deferred payment liability towards spectrum (including interest thereon) of ' 64,392 Mn which is considered as payable within one year basis current correspondence with DoT and additional Bank Guarantees of ' 9,757 Mn is to be provided to avail the additional moratorium of 1 year. (refer note 21(E)).

(1) Interest accrued but not due of ' 3,055 Mn (March 31, 2020: ' 5,645 Mn) has been excluded from other financial liabilities and included in Loans from banks and others and interest thereon.

(2) Interest accrued but not due of ' 60,902 Mn (March 31, 2020: ' 55,440 Mn) has been excluded from other financial liabilities and included in Deferred Payment Obligations and interest thereon.

(3) Payable for capital expenditure of ' 82,004 Mn (March 31, 2020: ' 88,581 Mn) and Accrual towards One Time Spectrum Charges (OTSC) of ' 43,898 Mn (March 31, 2020: ' 38,871 Mn) has been excluded from other financial liabilities and included in trade and other payables.

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

NOTE 60 : CAPITAL MANAGEMENT

For the purpose of the Company’s capital management, capital includes issued equity capital, share premium and all other equity reserves attributable to the equity holders. The primary objective of the Company’s capital management is to maximise the value of shareholders.

The Company manages its capital structure and makes adjustments in light of changes in economic conditions. To maintain or adjust the capital structure, the Company may adjust the dividend payment to shareholders, return capital to shareholders or issue new shares. The Company monitors capital using the net debt-equity ratio, which is net debt divided by total equity. The Company includes within net debt, interest bearing loans and borrowings less cash and cash equivalents, unencumbered fixed deposit with banks having maturity of 3 to 12 months and investment in liquid mutual funds.

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