o) Provisions, contingent liabilities and contingent assets
A provision is recognised when the Company has a present legal or constructive obligation as a result of a past event and it is probable that an outflow of economic resources will be required from the Company and amounts can be estimated reliably. Timing or amount of the outflow may still be uncertain.
Provisions are measured at the estimated expenditure required to settle the present obligation, based on the most reliable evidence available at the reporting date, including the risks and uncertainties associated with the present obligation. Where there are a number of similar obligations, the likelihood that an outflow will be required in settlement is determined by considering the class of obligations as a whole. Provisions are discounted to their present values, where the time value of money is material.
In those cases where the possible outflow of economic resources as a result of present obligations is considered improbable or remote, no liability is recognized or disclosure is made.
Contingent liabilities are disclosed in case of present obligation arising from past events, when it is not probable that an outflow of resources will be required to settle the obligation or the amount cannot be estimated reliably.
Contingent assets are not recognised. However, when inflow of economic benefit is probable, related asset is disclosed.
p) Government grants
Government grants are recognised if it is sufficiently certain that the assistance will be granted and the conditions attached to assistance are satisfied. Where the grant relates to specified asset, it is recognised as deferred income, and amortized over the expected useful life of the asset. Other grants are recognised in the statement of profit and loss concurrent to the expenses to which such grants relate/ are intended to cover.
Where the Company receives non-monetary grants, the asset and the grant are recorded gross at fair amounts and released to the statement of profit and loss over the expected useful life and pattern of consumption of the benefit of the underlying asset.
q) Cash and cash equivalents
Cash and cash equivalents comprise cash on hand and demand deposits, together with other short-term, highly liquid investments (original maturity less than 3 months) that are readily convertible into known amounts of cash and which are subject to an insignificant risk of changes in value.
r) Statement of Cash flow
Statement of cash flow is being prepare in accordance with the requirements of Indian Accounting Standard (Ind AS) 7 "Statement of Cash Flows". Cash flows from operating activities is reported using the indirect method whereby profit or loss is adjusted for the effects of transactions of a non-cash nature, any deferrals or accruals of past or future operating cash receipts or payments, and items of income or expense associated with investing orfinancing cash flows.
s) Adjustment pertaining to earlier years
Income from services and other income pertaining to prior years is not disclosed as prior period item for each individual transaction not exceeding ' 1.00 lakh and similarly items of expenditure for each individual transaction not exceeding ' 1.00 lakh are considered as expenditure of current year.
In respect of other items of income (including operating income and other income) and expenditure relating to prior periods, the net effect of which on retained earning does not exceed 1% of turnover is treated as income/expenditure of current year.
t) Equity, reserves and dividend payments
Share capital represents the nominal value of shares that have been issued. Share premium includes any premiums received on issue of share capital. Any transaction costs associated with issuing of shares are deducted from share premium account, net of any related income tax benefits.
Other components of equity include the following:
• Re-measurement of defined benefit liability - comprises the actuarial gain or loss from changes in demographic and financial assumptions and return on plan assets
• Reserve for contingencies
• Promoter's contribution - fair value of waiver of guarantee fee on debentures (NCD)
• General reserve
• Other transactions recorded directly in other comprehensive income.
Retained earnings include all current and prior period retained profits. All transactions with owners of the parent are recorded separately within equity. Dividend distributions payable to equity shareholders are included in other liabilities when the dividends have been approved in a general meeting prior to the reporting date.
Standards issued but not yet effective:
Ministry of Corporate Affairs ("MCA") notifies new standards or amendments to the existing standards under Companies (Indian Accounting Standards) Rules as issued from time to time. During the year ended March 31, 2024, MCA has not notified any new standards or amendments to the existing standards applicable to the Company.
Notes:
(a) As of March 31, 2024, two properties located in GN Block, Mumbai, and Naupada, Mumbai, have been classified as Non-Current Assets held for sale. The carrying values of these properties are Rs. 3.81 Crores (fair values Rs. 317.07 Crores). By virtue of Union Cabinet approval for the monetization of land and buildings, management is actively engaged in the process of monetisation of eligible assets. The generated proceeds will be directed towards BSNL/MTNL to address debt, capital expenditures (CAPEX), and other financial obligations. The aim of these monetization endeavors is to strengthen MTNL's fiscal health, encompassing debt servicing, funding of capital expenditures, and provision for various financial needs to bolster the company's financial position. In Mumbai
unit, the tender to sell the scrapped assets (switches, BTS batteries) having net the carrying value of Rs. 0.24 Crore is under process for auction at the year March 31, 2024 and favourable resolution is expected. Therefore, such assets continue to classifed as held for sale.
"(b) As per article 12.19 (b) of Shareholders' agreement together with para 27 of the amendatory agreement (together referred to as 'amended agreement') entered into between MTNL, TCIL, TCL and NVPL (Nepal), together referred to as 'Investors' pursuant to their investment in United Telecom Limited ('UTL'), in case NVPL (the local partner in Nepal) decides to sell its stake to any third party, it requires prior consent of other Investors. Further, at any such point of time or otherwise also, as per exit clause in the agreement, any of the other Investors (India partners) other than NVPL can exit the arrangement after 2 years from the amended agreement by issuing 3 months' notice.
Pursuant to this exit clause, the Company had issued notice to UTL on 30 January, 2018 for making an exit. The notice were valid up to 30 April 2018 and subsequent to 30 April 2018, the local partner had sought time extension of another 3 months i.e. till 30 July, 2018 for giving effect to the exit requested by the Company. However M/S NVPL vide its letter dated 31 March 2021, has sent a draft SPA and requested MTNL & other associates to submit response in respect of the draft Share Purchase Agreement ('SPA') for acquisition of shares held by Indian Investors at face value of Nepalese Rupees 100 per share and also CFO of UTL reminded on email on 17-6-21 to return agreed SPA. MTNL and other partners submitted their consent to the SPA in September 2021. In view of inordinate delay in closing the issue all the Indian partners met in May, 2023 and decided to explore legal option from local counsel of Nepal for enforcing the exit option. Accordingly, the investment has been classified as 'held for sale' in the financial statements for year ended 31 March 2023.
There is no further progress for giving effect to the exit clause from M/s NVPL. The net worth of the company is already negative and there is no cash flow to support the investment and the company has not been involved in revenue generating activities since long period and even has not paid duties and taxes for the past years. The repatriation of funds seems to be impossible unless clearance of dues of local government. Accordingly, management has assessed that the criteria as per Para 7-9 considered for classification of UTL investment for held for sale based on the exit clause as per draft SPA no longer exists.
In view of above, the investment which was classified as ""Assets held for sale"" has been reclassified as Investment for the year ended 31 March 2024 and the investment further tested for impairment in line with Ind AS 28 and impaired to the zero value having an impact of Rs 35.85 Crs on the statement of Profit & Loss for the year ended March 31, 2024. However, the efforts to recover the investment proceeds as per exit clause will continue, as is being done, and the same shall be accounted for in the year of receipt, in the event of suc
Rate of interest- The Company's total borrowings from banks and others have a effective weighted average rate of 7.95% per annum calculated using the interest rate effective as on 31 March 2023.
*Debentures-Series 2A
The Debentures as mentioned above are Government of India guaranteed, unsecured, listed, 9.38 % Redeemable Non Convertible Debentures (in the form of Bonds) having tenure/maturity period of 10 years redeemed on 05 December 2023.
*Debentures-Series 5
The Debentures as mentioned above are Government of India guaranteed, unsecured, listed, 7.05 % Redeemable Non Convertible Debentures (in the form of Bonds) having tenure/maturity period of 10 years with redemption date being 11th October 2030. The coupon payment frequency is semi annual interest payment. There was no instalment due as on the reporting date.
The Debentures as mentioned above are Government of India guaranteed, unsecured, listed, 6.85 % Redeemable Non Convertible Debentures (in the form of Bonds) having tenure/maturity period of 10 years with redemption date being 20th December 2030. The coupon payment frequency is semi annual interest payment. There was no instalment due as on the reporting date.
*Debentures-Series 7A
The Debentures as mentioned above are Government of India guaranteed, unsecured, listed, 8.00% Redeemable Non Convertible Debentures (in the form of Bonds) having tenure/maturity period of 10 years with redemption date being 15th November 2032. The coupon payment frequency is semi annual interest payment. There was no instalment due as on the reporting date.
*Debentures-Series 7B
The Debentures as mentioned above are Government of India guaranteed, unsecured, listed, 7.87% Redeemable Non Convertible Debentures (in the form of Bonds) having tenure/maturity period of 10 years with redemption date being 01st December 2032. The coupon payment frequency is semi annual interest payment. There was no instalment due as on the reporting date.
*Debentures-Series 7C
The Debentures as mentioned above are Government of India guaranteed, unsecured, listed, 7.78% Redeemable Non Convertible Debentures (in the form of Bonds) having tenure/maturity period of 10 years with redemption date being 10th February 2033. The coupon payment frequency is semi annual interest payment. There was no instalment due as on the reporting date.
*Debentures-Series 7D
The Debentures as mentioned above are Government of India guaranteed, unsecured, listed, 7.80% Redeemable Non Convertible Debentures (in the form of Bonds) having tenure/maturity period of 10 years with redemption date being 24th February 2033. The coupon payment frequency is semi annual interest payment. There was no instalment due as on the reporting date.
*Debentures-Series 7E
The Debentures as mentioned above are Government of India guaranteed, unsecured, listed, 7.75% Redeemable Non Convertible Debentures (in the form of Bonds) having tenure/maturity period of 10 years with redemption date being 24th March 2033. The coupon payment frequency is semi annual interest payment. There was no instalment due as on the reporting date.
*Debentures-Series 8A
The Debentures as mentioned above are Government of India guaranteed, unsecured, listed, 7.59% Redeemable Non Convertible Debentures (in the form of Bonds) having tenure/maturity period of 10 years with redemption date being 20th July 2033. The coupon payment frequency is semi annual interest payment. There was no instalment due as on the reporting date.
*Debentures-Series 8B
The Debentures as mentioned above are Government of India guaranteed, unsecured, listed, 7.61% Redeemable Non Convertible Debentures (in the form of Bonds) having tenure/maturity period of 10 years with redemption date being 24th August 2033. The coupon payment frequency is semi annual interest payment. There was no instalment due as on the reporting date.
*Debentures-Series 8C
The Debentures as mentioned above are Government of India guaranteed, unsecured, listed, 7.80% Redeemable Non Convertible Debentures (in the form of Bonds) having tenure/maturity period of 10 years with redemption date being 07th November 2033. The coupon payment frequency is semi annual interest payment. There was no instalment due as on the reporting date.
The Debentures as mentioned above are Government of India guaranteed, unsecured, listed, 7.51% Redeemable Non Convertible Debentures (in the form of Bonds) having tenure/maturity period of 10 years with redemption date being 06th March 2034. The coupon payment frequency is semi annual interest payment. There was no instalment due as on the reporting date.
(iv) Government of India approved the financial support to the Company in the year 2014 and on surrender of Broadband Wireless Access (BWA) Spectrum by MTNL, upfront charges paid by the Company in the year 2011 for such spectrum amounting to Rs. 4,533.97 crores were agreed to be funded by way of issuance of debentures by the Company on behalf of Government of India (GOI) and for which GOI provided sovereign guarantee with attendant condition for repayment of principal on maturity as well as the interest payments through DOT. Accordingly, the Company does not have any liability towards repayment of principal and interest on the bonds issued and has been offset against the amount recoverable from DoT of equivalent amount. Out of Rs. 4,533.97 crores,NonConvertible Debentures of Rs. 865 Crores were redeemed during the year
(v) Refer note 45 - Financial instruments for disclosure of fair values in respect of financial liabilities measured at amortised cost and analysis of their maturity profiles.
(vi) Leasehold given as mortgage to Bank of India and Union Bank of India:
(a) Goregaon Telephone Exchange & Staff Quarters CTS No-1387 Pt. & 1388 Pt. S V Road, Goregaon (West),Mumbai-400062 mortgage to UBI
(b) Malabar Telephone Exchange at CTS No-256, Dr. A G Bell Road, Malabar Hills, Mumbai-400006 mortgage to BOI"
45. Fair value disclosures
i) Fair values hierarchy
Financial assets and financial liabilities measured at fair value in the statement of financial position are divided into three Levels of a fair value hierarchy. The three levels are defined based on the observability of significant inputs to the measurement, as follows:
Level 1: quoted prices (unadjusted) in active markets for financial instruments.
Level 2: The fair value of financial instruments that are not traded in an active market is determined using valuation techniques which maximise the use of observable market data rely as little as possible on entity specific estimates.
Level 3: If one or more of the significant inputs is not based on observable market data, the instrument is included in level 3.
ii) Financial assets and liabilities measured at fair value - recurring fair value measurements (iii) Fair value of instruments measured at amortised cost
Fair value of instruments measured at amortised cost for which fair value is disclosed is as follows:
The management assessed that cash and cash equivalents, other bank balances, trade receivables, other receivables, trade payables and short-term borrowings approximate their carrying amounts largely due to the short-term maturities of these instruments. The fair value of the financial assets and liabilities is included at the amount at which the instrument could be exchanged in a current transaction between willing parties, other than in a forced or liquidation sale. The following methods and assumptions were used to estimate the fair values:
(i) Long-term fixed-rate and variable-rate receivables are evaluated by the Company based on parameters such as interest rates, individual creditworthiness of the customer and other market risk factors. Based on this evaluation, allowances are taken into account for the expected credit losses of these receivables.
(ii) The fair values of the Company's interest-bearing borrowings, loans and receivables are determined
by applying discounted cash flows ('DCF') method, using discount rate that reflects the issuer's borrowing rate as at the end of the reporting period. The own non-performance risk as at 31 March 2024 was assessed to be insignificant.
46. Financial risk management
The Company's risk management is carried out by a central treasury department (of the Company) under policies approved by the board of directors. The board of directors provides written principles for overall risk management, as well as policies covering specific areas, such as foreign exchange risk, interest rate risk, credit risk and investment of excess liquidity.
A) Credit risk
"Credit risk is the risk that a counterparty fails to discharge an obligation to tire company. The company is exposed to this risk for various financial instruments, for example by granting loans and receivables to customers, placing deposits, etc. The company's maximum exposure to credit risk is limited to the carrying amount of following types of financial assets.
- cash and cash equivalents,
- trade receivables,
- loans & receivables carried at amortised cost, and
- deposits with banks and financial institutions."
a) Credit risk management
The Company assesses and manages credit risk based on internal credit rating system, continuously monitoring defaults of customers and other counterparties, identified either individually or by the company, and incorporates this information into its credit risk controls. Internal credit rating is performed for each class of financial instruments with different characteristics. The Company assigns the following credit ratings to each class of financial assets based on the assumptions, inputs and factors specific to the class of financial assets.
A: Low B: Medium C: Hieh
Cash & cash equivalents and bank deposits
Credit risk related to cash and cash equivalents and bank deposits is managed by only accepting highly rated banks and diversifying bank deposits and accounts in different banks across the country.
Trade receivables
Credit risk related to trade receivables are mitigated by taking bank guarantees from customers where credit risk is high. The Company closely monitors the credit-worthiness of the debtors through internal systems that are configured to define credit limits of customers, thereby, limiting the credit risk to precalculated amounts. The Group assesses increase in credit risk on an ongoing basis for amounts receivable that become past due and default is considered to have occurred when amounts receivable become past due in each business segment as follows:
(i) Cellular: Six months pastdue
(i) Basic & other services: Three years past due
Other financial assets measured at amortised cost
Other financial assets measured at amortized cost includes loans and advances to employees, security deposits and others. Credit risk related to these other financial assets is managed by monitoring the recoverability of such amounts continuously, while at the same time internal control system in place ensure the amounts are within defined limits.
b) Expected credit losses
The Company provides for expected credit losses based on the following:
Trade receivables
(i) The company recognizes lifetime expected credit losses on trade receivables using a simplified approach, wherein Company has defined percentage of provision by analysing historical trend of default relevant to each business segment based on the criteria defined above. And such provision percentage determined have been considered to recognise life time expected credit losses on trade receivables (other than those where default criteria are met).
Other financial assets measured at amortised cost
Company provides for expected credit losses on loans and advances other than trade receivables by assessing individual financial instruments for expectation of any credit losses. Since this category includes loans and receivables of varied natures and purpose, there is no trend that the company can draws to apply consistently to entire population For such financial assets, the Company's policy is to provides for 12 month expected credit losses upon initial recognition and provides for lifetime expected credit losses upon significant increase in credit risk. The Company does not have any expected loss based impairment recognised on such assets considering their low credit risk nature, though incurred loss provisions are disclosed under each sub-category of such financial assets.
B) Liquidity risk
"Prudent liquidity risk management implies maintaining sufficient cash and marketable securities and the availability of funding through an adequate amount of committed credit facilities to meet obligations when due. Due to the nature of the business, the Company maintains flexibility in funding by maintaining availability under committed facilities.
Management monitors rolling forecasts of the Company's liquidity position and cash and cash equivalents on the basis of expected cash flows. The Company takes into account the liquidity of the market in which the entity operates. In addition, the Company's liquidity management policy involves projecting cash flows in major currencies and considering the level of liquid assets necessary to meet these, monitoring balance sheet liquidity ratios against internal and external regulatory requirements and maintaining debt financing plans."
a) Financing arrangements
The Company had access to the following undrawn borrowing facilities at the end of the reporting period:
C) Market Risk
a) Foreign currency risk
The Company is exposed to foreign exchange risk arising from foreign currency transactions, primarily with respect to the US Dollar and Euro. Foreign exchange risk arises from recognised assets and liabilities denominated in a currency that is not the functional currency of any of the Company entities. Considering the low volume of foreign currency transactions, the Company's exposure to foreign currency risk is limited and the Company hence does not use any derivative instruments to manage its exposure. Also, the Company does not use forward contracts and swaps for speculative purposes.
ii) Assets
The Company's fixed deposits are carried at amortised cost and are fixed rate deposits. They are therefore not subject to interest rate risk as defined in Ind AS 107, since neither the carrying amount nor the future cash flows will fluctuate because of a change in market interest rates.
c) Price risk
The Company does not have any significant investments in equity instruments which create an exposure to price risk.
47 Capital management
The Company' s capital management objectives are
- to ensurethe Company's ability to continue as a going concern
- to provide an adequate return to shareholders
The Company monitors capital on the basis of the carrying amount of equity less cash and cash equivalents as presented on the face of balance sheet.
Management assesses the Company's capital requirements in order to maintain an efficient overall financing structure while avoiding excessive leverage. This takes into account the subordination levels of the Company's various classes of debt. The Company manages the capital structure and makes adjustments to it in the light of changes in economic conditions and the risk characteristics of the underlying assets. In order to maintain or adjust the capital structure, the Company may adjust the amount of dividends paid to shareholders, return capital to shareholders, issue new shares, or sell assets to reduce debt.
Gratuity
"The Company provides for gratuity for employees in India as per the Payment of Gratuity Act, 1972. Employees who are in continuous service for a period of 5 years are eligible for gratuity. The amount of gratuity payable on retirement/termination is the employees last drawn basic salary per month computed proportionately for 15 days salary multiplied for the number of years of service. For the funded plan, the Company makes contributions to recognised debt base funds in India. The Company does not fully fund the liability and maintains a target level of funding to be maintained over a period of time based on estimations of expected payments. The expected contribution to the plan for next annual reporting period amounts to Rs. 7.49 crores (previous year - Rs. 7.62 crores). The weighted average duration of the defined benefit obligation as at 31 March 2024 is 10 to 11 years (31 March 2023: 11 to 12 years)."
B Compensated absences
The leave obligations cover the Company's liability for sick and earned leaves. The Company does not have an unconditional right to defer settlement for the obligation shown as current provision balance above. However based on past experience, the Company does not expect all employees to take the full amount of accrued leave or require payment within the next 12 months, therefore based on the independent actuarial report, only a certain amount of provision has been presented as current and remaining as non-current. Amount of Rs. 32.02 crores (previous year: Rs. 27.08 crores) has been recognised in the statement of profit and loss.
C Defined contribution plans
Contributions are made to the Government Provident Fund and Family Pension Fund which cover all regular employees eligible under applicable Acts. Both the eligible employees and the Company make pre-determined contributions to the Provident Fund. The contributions are normally based upon a proportion of the employee's salary.
The Company is in the process of seeking confirmation from its vendors regarding their status under the Micro, Small and Medium Exterprises Development Act, 2006. The above disclosure has been determined to the extent such parties have been identified on the basis of information available with the Company.
56A The Company is covered under Section 135 of the Companies Act, 2013 and accordingly constituted a Corporate Social Responsibility Committee of the Board. However, as the Company did not have average net profits based on the immediately preceding three financial years, the Company is not required to spend amounts towards Corporate Social Responsibility in terms of the 2013 Act.
56B During the year the Company has made expenditure in foreign currency equivalent to Rs. 0.32 crores (previous year Rs.1.39 crores). Whereas earnings in foreign currency are Rs. 0.12 crores (previous year Rs. 4.45 crores).
57 Revenue from contracts with customers
"Indian Accounting Standard 115 Revenue from Contracts with Customers ("Ind AS 115"), establishes a framework for determining whether, how much and when revenue is recognised and requires disclosures about the nature, amount, timing and uncertainty of revenues and cash flows arising from customer contracts. Under Ind AS 115, revenue is recognised through a 5-step approach:
(i) Identify the contract(s) with customer;
(ii) Identify separate performance obligations in the contract;
(iii) Determine the transaction price;
(iv) Allocate the transaction price to the performance obligations; and
(v) Recognise revenue when a performance obligation is satisfied.
The Company has adopted the standard on 1 April 2018 using modified retrospective approach with a cumulative catch-up adjustment made in retained earnings at the beginning of the current financial year, ie, 1 April 2018 as if the standard had always been in effect. The standard is applied only to contracts that are not completed as at 1 April 2018. Comparative information has not been restated and continues to be reported under the accounting standards in effect for those periods. The
Notes:
A Since the change in ratio is less than 25%, no explanation is required to be furnished.
B The variation is because the revenue from operation has declined significantly due to disconnections and the working capital employeed has increased considering the lower cash inflows.
C The variation is because the revenue from operation has declined significantly due to disconnections and the loss after tax has increased due to no resultant decline in the expenses.
D The variation is because the employee benefit cost has increased significantly.
E The variation is because the revenue from operation has declined significantly due to disconnections and employee benefit cost has increased significantly.
F As the principal activities of the company are in the nature of services, so Inventory Turnover ratio is not relevant.
G The variation in Trade payable is due to correction in composition of base figures in this year. If the same is done in the last year the variance comes less than 25%
60 Certain Lands and Buildings capitalized in the books are pending registration/legal vesting in the name of the company and the landed properties acquired from DOT have not been transferred in the name of the company and in the case of leasehold lands. Stamp Duty on the lands and buildings acquired from DOT is payable by DOT as per sale deed and in respect of properties acquired after 01 April 1986, the documentation shall be contemplated at the time of sale or disposal as and when effected. In certain cases of freehold and leasehold land, the company is having title deeds which are in the name of the Company but the value of which are not lying in books of accounts.
61 Department of Telecommunications (DOT) vide letter No. P-11014/19/2008-PP(Pt.I) dt. 28/12/2012 has levied One Time Spectrum Charges (OTSC) for the GSM and CDMA spectrum on MTNL. The charges also includes the spectrum given on trial basis to the extent of 4.4 MHz in 1800 MHz frequency. For the period from 01/07/2008 to 31/12/2012, initial 6.2 MHz spectrum was kept free and for the period from 01/01/2013 onwards, initial 4.4 MHz spectrum has been kept free. The calculations are further subject to change in accordance with the changes in the quantum of spectrum held by MTNL and the remaining valid period of license as per DOT. MTNL has surrendered some of the spectrum allotted on trial basis and does not require to pay for CDMA spectrum since it holds only 2.5 MHz spectrum in respect of CDMA. DOT has been apprised of the same and the matter is still under correspondence. Apart from this, the issue of charges for spectrum given on trial basis is also to be decided. Further MTNL has finally surrendered CDMA spectrum w.e.f. 28 February 2016. DOT has demanded an amount of Rs. 3,205.71 crores from MTNL on account of OTSC.
"Besides, ab-initio, the very policy of levy of one time spectrum charges by DOT itself has been challenged by private operators and is sub judice as on date whereas MTNL's case is also to be decided by DOT on the basis of outcome of the court case and the spectrum surrendered or retained. The finalisation of charges and the modalities of payment are therefore to be crystallized yet and as on date the position is totally indeterminable as to the quantum of charges and also the liability if any. Pending final outcome of the issue which itself is sub judice and non finality of quantum of charges payable, if at all, to DOT, no provision is made in the books of accounts as the amount is totally indeterminable. However the contingent liability of Rs. 3,205.71 crores is shown on the basis of the
demand raised by DOT in respect of GSM which is very old and not insisted till date. As per industry related issue in litigation and TDSAT judgment there upon the estimated liability could not be more than Rs. 455.15 crore. As there is no further demand after the demand of Rs. 3,205.71 crores dated 08 January 2013 till now, the contingent liablity aslo, if the same fructified, can not be more than Rs. 455.15 crore. As such the same is disclosed accordingly."
62 Certain claims in respect of damaged/lost fixed assets and inventory has been lodged with Insurance Companies by MTNL but the settlement of the claims is pending. Final adjustment in respect of difference between amount claimed and assets withdrawn will be made in the year of settlement of claim.
63 The Company had claimed benefit under section 80IA of the Income Tax Act, 1961 for the financial year from 1996-97 to 2005-06. The appellate authorities have allowed the claim to the extent of 75% of the amount claimed. The Company has preferred appeals for the remaining claim before the Hon'ble Court of Delhi. The Company has retained the provision of Rs. 375.96 crores (previous year Rs. 375.96 crores) for this claim for the assessment years 1998-99, 1999-00 and 2000-2001, however, the demands on this account amounting to Rs. 243.22 crores (previous year Rs. 243.22 crores) for the assessment years 2001-02 to 2006-07 have been shown as contingent reserve to meet the contingency that may arise out of disallowances of claim of benefit u/s 80IA of Income Tax Act, 1961.
64 Litigations
a) The arbitrator, Mr. A. P. Shah published the award on 03.03.2022 against MTNL for Rs. 160 crores with simple interest payable @6% P.A. from 21-10-1993 and Rs.0. 61 Crores was also awarded to Canara Bank and Rs.0.32 Crore to CANFINA as costs. MTNL filed OMP (COMM) No.312 of 2022 before Hon'ble Delhi High Court to set aside the Award along with an IA No.14319 0f 2022 seeking unconditional stay on the operation of said award. Further Canara Bank and Canfina also filed applications for enforcement of said award dated 03.03.2022. Canara Bank's-OMP (ENF) (COMM) NO.147 of 2022 and CANFINA's OMP (ENF) (COMM) NO.155 of 2022. Hon'ble HC deferredthe hearing of MTNL's OMP (COMM) No.312 of 2022 along with Canara Banks OMP and Canfina OMP to 07.09.2024. The amount of award along with interest to the tune of Rs.452.44 crores therefore has been disclosed as contingent liability.
b) MTNL entered into contracts with M/s. M & N Publications Limited for printing, publishing and supply of telephone directories for Delhi and Mumbai unit for a period of 5 years starting from 1993. After printing and issue of 1993 (main & supplementary) and 1994 main directory, M/s. M & N Publications Ltd terminated the contract prematurely on 04 April 1996. MTNL, Mumbai & Delhi invoked Bank Guarantees on 09 April 1996, issued Legal Notice on 22 July 1996 and terminated the contract. Sole Arbitrator has been appointed by CMD, MTNL. The Sole Arbitrator has since given his award on 09 April 2013 partly in favour of MTNL, Mumbai and on 31 July 2013 in favour of MTNL, Delhi. The claim and counter claim under arbitration will be accounted for in the year when the ultimate collection/payment of the same becomes reasonably certain. M/s. M & N Publications has approached the Bombay & Delhi High Courts against the arbitration awards and MTNL also approached the Bombay & Delhi High Courts for balance amount due. The claim of Rs. 66.98 crores on this account has been shown as contingent liability in Delhi unit.
c) "As per directions of the Hon'ble Delhi High Court one UASL operator had paid to MTNL, Mumbai Rs. 124.93 crores and Rs. 33.99 crores in 2004-05 and 2005-06 respectively against the claim of Rs. 158.92 crores. The Company has recognised the amount realized as revenue in the respective period. The Hon'ble TDSAT has ordered for refund of Rs. 96.71 crores. MTNL has filed a Civil Appeal and application for stay of operation of the order of TDSAT in the Hon'ble Supreme Court of India in which Supreme Court directed on 08 May 2014 that TDSAT will review the impugned order on seeking of it by appellant. MTNL filed review application which had been disposed off by Hon'ble TDSAT vide order dated 27 May 2014 on which MTNL filed CWP no.022764 dated 16 July 2014 in Hon'ble Supreme Court and the same is pending. Meanwhile UASL operator also filed appeal in Hon'ble Supreme Court. The claim of Rs. 96.71 crores on this account has been shown as contingent liability.
d) MTNL Mumbai has received claims from M/s. BEST, Electricity supply provider categorizing MTNL at Commercial tariff instead of Industrial tariff. The claim has been made with retrospective effect for the period Feb-2007 to May-2009 in respect of HT connection and Jan-2002 to Apr-2011 in respect of LT connection. MTNL has represented to BEST for reconsideration which has not been accepted by BEST. Hence MTNL has approached Hon'ble Mumbai High Court and got a stay on the arrears claimed by BEST amounting to Rs. 20.82 crores. In the opinion of the management, there is remote possibility of the case being settled against MTNL.
e) "In respect of Mobile Services Delhi, a sum of Rs. 25.78 crores claimed by TCL towards ILD charges for the period Oct-09 to March-10 has not been paid due to heavy spurt in ILD traffic towards M/S TCL. On technical analysis it was found that these calls were made to some dubious and tiny destination. These destinations do not confirm to international numbering plan of the respective countries and are not approved destinations as per approved interconnect agreement. Further these calls have not got physically terminated to the destinations. The observations were shared with M/S TCL. M/S TCL has also been advised that the balance, which relates to fraudulent calls, is not payable and accordingly no provision has been made in the books of accounts. The matter was handed over to the committee for investigation. Subsequently M/S TCL filed a case in Hon'ble TDSAT for recovery of the amount, decision for which is awaited. The claim of Rs. 25.78 crores on this account has been shown as contingent liability.
In addition, the Company is subject to legal proceedings and claims, which have arisen in the ordinary course of business. The Company's management perceives that these legal actions, when ultimately concluded and determined, will not have any material impact on the Company's financial statements.
65 Settlements with BSNL:
The amount recoverable from BSNL is Rs. 5,758.00 crores ( previous year Rs.5,713.65 crores) and amount payable is Rs.2,181.04 crores (previous year Rs. 2,174.76 crores). The net recoverable of Rs. 3,576.96 crores (previous year Rs. 3,538.89 crores) is subject to reconciliation and confirmation. The carrying value of the net recoverable from BSNL is Rs. 3,569.08 crores (previous year - Rs. 3,535.34 crores) measured at amortised cost.
66 Subscribers' dues and deposits:
Other current liabilities include credits on account of receipts including service tax/GST from subscribers amounting to Rs. 86.63 crores ( previous year Rs.88.70 crores), which could not be matched
with corresponding debtors or identified as liability, as the case may be. Appropriate adjustments/ payments shall be made inclusive of service tax/GST, when these credits are matched or reconciled. Therefore, it could not be adjusted against making provision for doubtful debts.
67 The amounts of receivables and payables (including NLD / ILD Roaming operators) are subject to confirmation and reconciliation. The recoverable and payable from operators are under constant review and regular efforts are being taken for reconciliation and recovery of old outstanding dues. Dues from the Operators being on account of revenue sharing agreements are not treated as debtors and consequently are not taken into account for making provision for doubtful debts.
68 "The matching of billing for roaming receivables / payables with the actual traffic intimated by the MACH is being done. Further the roaming income is booked on the basis of actual invoices raised by MACH on behalf of MTNL. Similarly the roaming expenditure is booked on the basis of actual invoices received by MTNL from MACH on behalf of the other operators. However, regarding collection, the payment is directly received in the bank from other operators for varying periods.
69 In case of Mumbai Unit, the balances with non-scheduled banks comprise of:
70 Settlements with DoT:
a) Amount recoverable from DoT is Rs.657.06 crores (previous year Rs.641.40 crores) and amount payable is Rs.649.90 crores (previous year Rs. 517.36 crores). The net recoverable of Rs. 7.16 crores (previous year Rs.124.04 crores), (including Rs.0.15 crores against ex-gratia (Previous year Rs.0.15 crores)), Out of which Rs. 7.01 Crores (Previous year Rs.123.89 crores) is subject to reconciliation and confirmation . There is no agreement between the MTNL and DoT for interest recoverable/ payable on current account. Accordingly, no provision has been made for interest payable/receivable on balances during the year except charging of interest on GPF claims receivable from DoT.
b) Deposits from applicants and subscribers as on 31 March 1986 were Rs. 81.32 crores ( previous year Rs. 81.32 crores) in Mumbai unit as intimated provisionally by DoT. At the year end, these deposits amounted to Rs. 103.28 crores ( previous year Rs. 103.28 crores), the difference being attributable to connections/refunds granted in respect of deposits received prior to 31 March 1986. Balance on this account still recoverable from DoT is Rs. 55.85 crores ( previous year Rs. 55.85 crores).
c) The total provision for Leave encashment is Rs. 246.87 crores up to 31 March 2024 ( previous year Rs. 236.91 crores). Out of this, an amount of Rs. 45.49 crores ( previous year Rs. 45.49 crores ) and Rs. 43.37 crores (previous year Rs. 43.37 crores) is recoverable from DOT in respect of Company C & D and Company B employees respectively for the period prior to their absorption in MTNL.
d) An amount of Rs.6.52 crores (previous year Rs. 6.52 crores) towards GPF contribution is recoverable from DOT as on 31 March 2024. The amount pertains to Company C& D and Company B employees absorbed in MTNL w.e.f. 01 November 1998 and 01 October 2000 respectively.
71 As per gazette notification no.GSR 138(E) dated 3rd March 2014 pensionary benefits in respect of absorbed combined service pension optees are being paid by the Government of India on BSNL
pay scales. Gratuity provision for other than combined service pension optee employees of MTNL, and Leave Encashment provision for all of the employees of MTNL has been made on the basis of actuarial valuation.
72 There is no indication of any impairment of assets of the Company, on the basis of the company as a whole as a CGU under Indian Accounting Standards - 36 "Impairment of assets" as specified under Section 133 of the Companies Act, 2013.
73 As per the accounting policy, Bonus/ Exgratia is paid based on the productivity linked parameters and it is to be provided accordingly subject to the profitability of the Company. In view of losses, no provision for Bonus/ Exgratia has been made during the year.
74 Debenture Redemption Reserve: Being a listed company and mode of issue of debentures is private placement basis, there is no adequacy to maintain Debenture Redemption Reserve (DRR) under Rule 18 (7) (b) (iii) (B) B of Companies (Share Capital and Debenture) Rules, 2014.
75 There is no amount which is required to be transferred to Investor Education and Protection Fund by the Company.
76 The Company has no foreseeable losses, which requires provision under applicable laws or accounting standards on long-term contracts and not dealing into derivative contracts at all.
77 The Bank Reconciliation Statements as at 31 March 2024 include unmatched/unlinked credits amounting to Rs. 2.03 crore (previous year Rs. 3.68 crore) and unmatched/unlinked debits Rs. 2.21 crore (previous year Rs. 1.13 crore) respectively. Reconciliation and follow up with the bank to match/rectify the same is in process.
78 The Company has incurred a loss of Rs. 3,302.19 crores during the period under report. The company has been incurring continuous losses since year 2009-10 (except in FY 2013-14) and the net worth has been fully eroded for the year under report. Considering the continuous losses and negative net worth, the management has made an assessment of its ability to continue as a going concern. In pursuance DoT letter No. F. No. 30-04/2019-PSU Affairs dated 29th October, 2019 and decision of Board of Directors of MTNL through circular regulation on 04th November 2019, the MTNL Voluntary Retirement Scheme was introduced with effect from 04th November 2019 under which 14,387 number of MTNL employees of all grades opted and granted VRS to reduce the legacy staff costs inherited on account of absorption of employees recruited under government w.e.f. 01.11.1998 and also on 01.10.2000 and the expenditure of ex-gratia on account of compensation was borne by the DOT/Government of India through budgetary supports as per approval of cabinet. The company therefore reduced the staff expenses by more than 75 % which helped the company to reduce its costs and also thereby losses since 2019-20 onwards. Besides, the Government approved the monetization of the lands and buildings of the company with assistance from DIPAM in order the get rid of the huge debt burden on the company. The monetization of land and buildings of the company is in process.
In addition to this, Government approved providing 4G license to BSNL and an infusion of fresh capital by the Government in lieu of granting 4G license is also being done. As per the deliberations, the maintenance and running of MTNL wireless network is also to be done by BSNL from 01.04.2021 (in the case of Delhi) and from 01.09.2021 (in the case of Mumbai) onwards to improve the quality of services and also the launching of 4G services of MTNL as and when BSNL launches which also is likely to stabilize the revenue streams.With support of sovereign guarantee MTNL raised Rs 6500 crs towards working capital in FY 20-21 and despite negative networth MTNL continued as a going concern in FYs 19-20 & 20-21.
Besides these, DOT issued directions to all govt. departments and Ministries to use MTNL services invariably. As per F.NO.20-28/2022-PR dated 2nd August, 2022, DOT conveyed the decisions of the Union Cabinet in its meeting held on 27.07.2022 for the raising of Sovereign Guarantee backed bonds for MTNL with a tenure of 10 years for an amount of Rs. 17,571 crores for the next two financial years i.e. 2022-23 & 2023-24 with waiver of guarantee fee to repay its high-cost debt and restructure it with new sustainable loan. Out of which bonds to the tune of Rs. 10,910 crs & Rs 6,661 Crs raised during the year 2022-23 & 2023-24 respectively. Also in view of such unsustainable debts of MTNL, a committee of Secretaries was constituted by the Govt. to examine matters such as asset monetization, AGR dues, debt restructuring etc. for further course of action for the merger of MTNL & BSNL. The government provides budgetary support of Rs. 1851 crores for for network upgradadtion of MTNL by BSNL as a precursor to operational integration. Also, BSNL has to provide all telecom services in Delhi & Mumbai through leasing of operational assets or other appropriate models. Once operations are fully taken over by BSNL in Delhi & Mumbai, MTNL would be left with land/building assets which it will continue to monetize through NLMC to discharge its loan liabilities. For the issue of operational take over by BSNL as well as other issues to be referred to Committee of Secretaries, MTNL with the support of external consultant prepared a detailed note to explore all possibilities and present viable and fast tracking solutions to the issues of MTNL. The same are at present under review and before COS recommend way forward in case of MTNL, the case for further support to MTNL to manage its working capital is being contemplated.
All of the above aspects are considered by the management while preparing the financial statements and an assessment of its ability to continue as a going concern is made accordingly as required in SA (570) and Para 25 & 26 of Ind AS 1 "Presentation of Financial Statements"as the company is continuously having support of Govt. in managing its issues.
79 The amount recoverable from Reliance Communication and Reliance Infratel is Rs. 69.61 crores and Rs. 5.28 crores. The companies are under insolvency proceedings before Hon'ble NCLT under IBC, 2016. The provision/write-off against the outstanding dues will be considered on final decision in this matter.
80 The maintenance and running of MTNL wireless network has been handed over to BSNL as an outsource agency from 01.04.2021 (in case of Delhi) and from 01.09.2021 (in case of Mumbai) onwards to improve the quality of services. MTNL has initiated the process for raising the claims for gap funding. It is likely to be concretized in the next financial year and the financial impact of same, if any, will be accounted for on finalisation of operational modalties.
81 The GPF Trust is currently in the process of reconciling and recomputing its liabilities to determine the provident funds payable to employees. The adjustments, if any, resulting from this recomputation/ reconciliation will be recognized in the financial statements in the year the reconciliation is finalized.
82 "License fee on the Adjusted Gross Revenue (AGR) was calculated and accounted for on accrual basis in respect of both revenue and revenue sharing with other operators till F.Y. 2011-12. As per the directions of Supreme Court given earlier in respect of calculation of License Fees and AGR, the matter was referred back to TDSAT. TDSAT vide its judgment dated 23.04.2015 set aside the impugned demands of DOT and DOT was directed to rework the license fee in the light of their findings. However, MTNL is not a party to the dispute and the AGR is calculated as per License Agreement. The issue of deduction claimed in AGR upto F.Y. 2011-12 in respect of revenue sharing on netting basis with BSNL has been taken up with DOT and BSNL while paying License Fees on actual payment basis from 2012-13 onwards. The impact of Rs. 140.36 crores on this account upto the year 2011-12 has been included in contingent liability. DOT has assessed the LF calculated on the basis of AGR of MTNL. The payables towards license fees and spectrum usage charges have been adjusted with excess pension payouts to Combined Pensioners Optees recoverable from DOT in respect of which matter is under consideration and correspondence in going on between the Company and DOT. The License agreement between Company and DOT does not have any guidance on change in method of calculation of Adjusted Gross Revenue (AGR) due to migration to Ind-AS from I-GAAP. Provisioning and payment of liability in respect of license fees and spectrum usage charges payable to DOT has been done on the basis of Ind-AS based financial statements. The amount of difference in computation of Adjusted Gross Revenue (AGR) is under consideration of DOT. Further, DOT has disallowed certain deductions claimed in the AGR e.g. PSTN charges, IUC payment to other operators etc. The deductions claimed in AGR were disallowed for want of documents from MTNL. MTNL has submitted the documents and the revision of assessment of LF is pending at the end of DOT. The provision assessment order of LF from 2006-07 to 2022-23 and SUC from 2011-12 to 202223 issued by DOT shows demand of Rs. 4,687.02 crores. The assessment is under revision in view of documents submitted by MTNL to CCA/ DOT. However an amount of Rs. 4,687.02 crores is shown as contingent liability. The list of LF related contingent liability is shown hereafter. Calculation of LF demand is not feasible to include in the notes. The Detail of LF Contingent Liability towards License Fee payable to DOT is given below."
For D K Chhajer & Co. For B M Chatrath & Co. LLP Sd/- Sd/-
Chartered Accountants Chartered Accountants (P.K. Purwar) (Rajiv Kumar)
FRN No. 304138E FRN No. 301011E / E300025 Chairman and Managing Director Director (Finance)
DIN 06619060 DIN 09811051
Sd/- Sd/- Sd/- Sd/-
(CA Nand Kishore Sarraf) (CA Sanjay Sarkar) (Sultan Ahmed) (Ratan Mani Sumit)
Partner Partner Chief Financial Officer Company Secretary
Membership No. 510708 Membership No. 064305 Membership No. 15193
Place: New Delhi Date: 29th May 2024
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