IDEA CELLULAR LIMITED

Placement Document
Not for Circulation
Serial Number: ___
Strictly Confidential
IDEA CELLULAR LIMITED
(Incorporated on March 14, 1995 in India with limited liability under the Companies Act with CIN L32100GJ1996PLC030976)
Idea Cellular Limited (the “Company”) is issuing 223,880,597 equity shares of face value of ₹ 10 each (the “Equity Shares”) at a price of ₹ 134 per Equity Share (the
“Issue Price”), including a premium of ₹ 124 per Equity Share, aggregating to ₹ 30,000 million (the “Issue”).
_________________________________
ISSUE IN RELIANCE UPON CHAPTER VIII OF THE
SECURITIES AND EXCHANGE BOARD OF INDIA (ISSUE OF CAPITAL AND DISCLOSURE REQUIREMENTS) REGULATIONS, 2009, AS AMENDED
(“SEBI REGULATIONS”) AND SECTION 42 OF THE COMPANIES ACT, 2013 AND THE RULES MADE THEREUNDER
_________________________________
The Equity Shares are listed on BSE Limited (the “BSE”) and National Stock Exchange of India Limited (the “NSE”, together with the BSE, the “Stock Exchanges”). The
closing price of the outstanding Equity Shares on the BSE and the NSE on June 4, 2014 was ₹ 135.80 and ₹ 135.90 per Equity Share, respectively. In-principle approvals
under Clause 24(a) of the Listing Agreement for listing of the Equity Shares have been received from the BSE on June 5, 2014 and the NSE on June 5, 2014. Applications
shall be made for obtaining the listing and trading approvals for the Equity Shares to be issued pursuant to the Issue on the Stock Exchanges. The Stock Exchanges assume
no responsibility for the correctness of any statements made, opinions expressed or reports contained herein. Admission of the Equity Shares to be issued pursuant to the
Issue for trading on the Stock Exchanges should not be taken as an indication of the merits of our Company or the Equity Shares.
OUR COMPANY HAS PREPARED THIS PLACEMENT DOCUMENT SOLELY FOR PROVIDING INFORMATION IN CONNECTION WITH THE
PROPOSED ISSUE.
A copy of the Preliminary Placement Document has been delivered to the Stock Exchanges and a copy of this Placement Document will be delivered to the Stock
Exchanges. Our Company shall also make the requisite filings with the Registrar of Companies, Gujarat (“RoC”) and the Securities and Exchange Board of India (the
“SEBI”) within the stipulated period as required under the Companies Act, 2013 and the Companies (Prospectus and Allotment of Securities) Rules, 2014. This Placement
Document has not been reviewed by SEBI, the Reserve Bank of India (the “RBI”), the Stock Exchanges or any other regulatory or listing authority and is intended only for
use by qualified institutional buyers (“QIBs”), as defined in the SEBI Regulations. This Placement Document has not been and will not be registered as a prospectus with
the RoC in India, will not be circulated or distributed to the public in India or any other jurisdiction, and will not constitute a public offer in India or any other jurisdiction.
THE ISSUE AND THE DISTRIBUTION OF THIS PLACEMENT DOCUMENT IS BEING DONE IN RELIANCE UPON SECTION 42 OF THE COMPANIES
ACT, 2013 AND THE RULES MADE THEREUNDER AND CHAPTER VIII OF THE SEBI REGULATIONS. THIS PLACEMENT DOCUMENT IS
PERSONAL TO EACH PROSPECTIVE INVESTOR AND DOES NOT CONSTITUTE AN OFFER OR INVITATION OR SOLICITATION OF AN OFFER TO
THE PUBLIC OR ANY OTHER PERSON OR CLASS OF INVESTORS WITHIN OR OUTSIDE INDIA OTHER THAN QIBS, AS DEFINED IN THE SEBI
REGULATIONS.
YOU MAY NOT AND ARE NOT AUTHORISED TO (1) DELIVER THIS PLACEMENT DOCUMENT TO ANY OTHER PERSON; OR (2) REPRODUCE
THIS PLACEMENT DOCUMENT IN ANY MANNER WHATSOEVER. ANY DISTRIBUTION OR REPRODUCTION OF THIS PLACEMENT DOCUMENT
IN WHOLE OR IN PART IS UNAUTHORISED. FAILURE TO COMPLY WITH THIS INSTRUCTION MAY RESULT IN A VIOLATION OF THE SEBI
REGULATIONS OR OTHER APPLICABLE LAWS OF INDIA AND OTHER JURISDICTIONS.
INVESTMENTS IN EQUITY SHARES INVOLVE A DEGREE OF RISK AND PROSPECTIVE INVESTORS SHOULD NOT INVEST IN THE ISSUE
UNLESS THEY ARE PREPARED TO TAKE THE RISK OF LOSING ALL OR PART OF THEIR INVESTMENT. PROSPECTIVE INVESTORS ARE
ADVISED TO CAREFULLY READ THE SECTION “RISK FACTORS” ON PAGE 39 BEFORE MAKING AN INVESTMENT DECISION RELATING TO
THE ISSUE. EACH PROSPECTIVE INVESTOR IS ADVISED TO CONSULT ITS OWN ADVISORS ABOUT THE PARTICULAR CONSEQUENCES OF AN
INVESTMENT IN THE EQUITY SHARES BEING ISSUED PURSUANT TO THIS PLACEMENT DOCUMENT.
Invitations for subscription of Equity Shares shall only be made pursuant to the Preliminary Placement Document (as defined hereinafter) together with the respective
Application Form (as defined hereinafter) and this Placement Document and the Confirmation of Allocation Note (as defined hereinafter). For further information, see the
section “Issue Procedure” on page 121. The distribution of this Placement Document or the disclosure of its contents without our Company’s prior consent to any person,
other than QIBs and persons retained by QIBs to advise them with respect to their purchase of Equity Shares, is unauthorised and prohibited. Each prospective investor, by
accepting delivery of this Placement Document, agrees to observe the foregoing restrictions and to make no copies of this Placement Document or any documents referred to
in this Placement Document.
The Equity Shares have not been and will not be registered under the U.S. Securities Act of 1933, as amended (the “Securities Act”), and may not be offered or sold within
the United States except pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act and applicable state securities
laws. Accordingly, the Equity Shares are being offered and sold (a) in the United States only to persons reasonably believed to be qualified institutional buyers (as defined in
Rule 144A under the Securities Act) pursuant to Section 4(a)(2) under the Securities Act, and (b) outside the United States, in offshore transactions, in reliance on
Regulation S under the Securities Act. For further information, see the sections “Distribution and Solicitation Restrictions” and “Transfer Restrictions” on pages 133
and 137, respectively.
The information on our Company’s website, any website directly or indirectly linked to our Company’s website, or the website of the Lead Managers or their respective
affiliates does not form part of this Placement Document and prospective investors should not rely on such information contained in, or available through, any such websites.
GLOBAL CO-ORDINATOR AND BOOK
RUNNING LEAD MANAGERS
This Placement Document is dated June 9, 2014.
BOOK RUNNING LEAD
MANAGER
TABLE OF CONTENTS
NOTICE TO INVESTORS .................................................................................................................................. 1
REPRESENTATIONS BY INVESTORS .......................................................................................................... 3
OFFSHORE DERIVATIVE INSTRUMENTS .................................................................................................. 7
DISCLAIMER CLAUSE OF THE STOCK EXCHANGES ............................................................................ 8
PRESENTATION OF FINANCIAL AND OTHER INFORMATION ........................................................... 9
INDUSTRY AND MARKET DATA................................................................................................................. 10
AVAILABLE INFORMATION ........................................................................................................................ 11
FORWARD-LOOKING STATEMENTS ........................................................................................................ 12
ENFORCEMENT OF CIVIL LIABILITIES .................................................................................................. 13
EXCHANGE RATES ......................................................................................................................................... 14
DEFINITIONS AND ABBREVIATIONS ........................................................................................................ 15
DISCLOSURE REQUIREMENTS UNDER FORM PAS-4 PRESCRIBED UNDER THE COMPANIES
ACT, 2013 ............................................................................................................................................................ 23
SUMMARY OF BUSINESS .............................................................................................................................. 27
SUMMARY OF THE ISSUE ............................................................................................................................ 31
SELECTED FINANCIAL INFORMATION ................................................................................................... 34
RISK FACTORS ................................................................................................................................................ 39
MARKET PRICE INFORMATION ................................................................................................................ 54
USE OF PROCEEDS ......................................................................................................................................... 56
CAPITALISATION STATEMENT ................................................................................................................. 57
CAPITAL STRUCTURE ................................................................................................................................... 58
DIVIDENDS ........................................................................................................................................................ 60
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS .................................................................................................................................................... 61
INDUSTRY OVERVIEW .................................................................................................................................. 77
OUR BUSINESS ................................................................................................................................................. 87
REGULATIONS AND POLICIES ................................................................................................................. 101
BOARD OF DIRECTORS AND SENIOR MANAGEMENT ...................................................................... 107
PRINCIPAL SHAREHOLDERS .................................................................................................................... 119
ISSUE PROCEDURE ...................................................................................................................................... 121
PLACEMENT ................................................................................................................................................... 131
DISTRIBUTION AND SOLICITATION RESTRICTIONS ....................................................................... 133
TRANSFER RESTRICTIONS........................................................................................................................ 137
THE SECURITIES MARKET OF INDIA..................................................................................................... 139
DESCRIPTION OF THE EQUITY SHARES ............................................................................................... 142
STATEMENT OF TAX BENEFITS............................................................................................................... 145
LEGAL PROCEEDINGS ................................................................................................................................ 162
INDEPENDENT ACCOUNTANTS ............................................................................................................... 178
GENERAL INFORMATION .......................................................................................................................... 179
FINANCIAL STATEMENTS ......................................................................................................................... 180
DECLARATION .............................................................................................................................................. 220
(i)
NOTICE TO INVESTORS
Our Company has furnished and accepts full responsibility for all of the information contained in this Placement
Document and confirms that to its best knowledge and belief, having made all reasonable enquiries, this
Placement Document contains all information with respect to our Company and the Equity Shares that is
material in the context of the Issue. The statements contained in this Placement Document relating to our
Company, its Subsidiaries, its Joint Venture and the Equity Shares are, in all material respects, true and accurate
and not misleading. The opinions and intentions expressed in this Placement Document with regard to our
Company, its Subsidiaries, its Joint Venture and the Equity Shares are honestly held, have been reached after
considering all relevant circumstances and are based on reasonable assumptions and information presently
available to our Company. There are no other facts in relation to our Company, its Subsidiaries, its Joint Venture
and the Equity Shares, the omission of which would, in the context of the Issue, make any statement in this
Placement Document misleading in any material respect. Further, our Company has made all reasonable
enquiries to ascertain such facts and to verify the accuracy of all such information and statements.
The Lead Managers have not separately verified the information contained in this Placement Document
(financial, legal or otherwise). Accordingly, neither the Lead Managers nor any of their respective shareholders,
employees, counsel, officers, directors, representatives, agents or affiliates makes any express or implied
representation, warranty or undertaking, and no responsibility or liability is accepted by any of the Lead
Managers as to the accuracy or completeness of the information contained in this Placement Document or any
other information supplied in connection with the Equity Shares. Each person receiving this Placement
Document acknowledges that such person has not relied on either the Lead Managers or on any of their
respective shareholders, employees, counsel, officers, directors, representatives, agents or affiliates in
connection with its investigation of the accuracy of such information or its investment decision, and each such
person must rely on its own examination of our Company, its Subsidiaries, its Joint Venture and the merits and
risks involved in investing in the Equity Shares.
No person is authorised to give any information or to make any representation not contained in this Placement
Document and any information or representation not so contained must not be relied upon as having been
authorised by or on behalf of our Company or by or on behalf of the Lead Managers. The delivery of this
Placement Document at any time does not imply that the information contained in it is correct as of any time
subsequent to its date.
The Equity Shares to be issued pursuant to the Issue have not been approved, disapproved or
recommended by the U.S. Securities and Exchange Commission, any other federal or state authorities in
the United States or the securities authorities of any non-United States jurisdiction or any other United
States or non-United States regulatory authority. No authority has passed on or endorsed the merits of
the Issue or the accuracy or adequacy of this Placement Document. Any representation to the contrary is
a criminal offense in the United States and may be a criminal offense in other jurisdictions.
The Equity Shares have not been and will not be registered under the Securities Act, and may not be
offered or sold within the United States except pursuant to an exemption from, or in a transaction not
subject to, the registration requirements of the Securities Act and applicable state securities laws.
Within the United States, this Placement Document is being provided only to persons who are “qualified
institutional buyers” as defined in Rule 144A. Distribution of this Placement Document to any person other than
the offeree specified by the Lead Managers or their representatives, and those persons, if any, retained to advise
such offeree with respect thereto, is unauthorized and any disclosure of its contents, without the prior written
consent of our Company, is prohibited. Any reproduction or distribution of this Placement Document in the
United States, in whole or in part, and any disclosure of its contents to any other person is prohibited.
The distribution of this Placement Document and the issue of the Equity Shares may be restricted in certain
jurisdictions by law. As such, this Placement Document does not constitute, and may not be used for or in
connection with, an offer or solicitation by anyone in any jurisdiction in which such offer or solicitation is not
authorised or to any person to whom it is unlawful to make such offer or solicitation. In particular, no action has
been taken by our Company and the Lead Managers which would permit an offering of the Equity Shares or
distribution of this Placement Document in any jurisdiction, other than India, where action for that purpose is
required. Accordingly, the Equity Shares may not be offered or sold, directly or indirectly, and neither this
Placement Document nor any offering material in connection with the Equity Shares may be distributed or
published in or from any country or jurisdiction, except under circumstances that will result in compliance with
any applicable rules and regulations of any such country or jurisdiction.
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In making an investment decision, prospective investors must rely on their own examination of our Company,
its Subsidiaries, its Joint Venture and the terms of the Issue, including the merits and risks involved. Investors
should not construe the contents of this Placement Document as legal, tax, accounting or investment advice.
Investors should consult their own counsel and advisors as to business, legal, tax, accounting and related matters
concerning the Issue. In addition, neither our Company nor the Lead Managers is making any representation to
any offeree or subscriber of the Equity Shares regarding the legality of an investment in the Equity Shares by
such offeree or subscriber under applicable legal, investment or similar laws or regulations. Each subscriber of
the Equity Shares in the Issue is deemed to have acknowledged, represented and agreed that it is eligible to
invest in India and in our Company under Indian law, including Chapter VIII of the SEBI Regulations and
Section 42 of the Companies Act, 2013, and that it is not prohibited by SEBI or any other statutory authority
from buying, selling or dealing in the securities including the Equity Shares. Each subscriber of the Equity
Shares in the Issue also acknowledges that it has been afforded an opportunity to request from our Company and
review information relating to our Company and the Equity Shares.
This Placement Document contains summaries of certain terms of certain documents, which summaries are
qualified in their entirety by the terms and conditions of such document.
The information on our Company’s website, www.ideacellular.com, any website directly and indirectly linked
to the website of our Company or on the website of the Lead Managers or affiliates, does not constitute nor form
part of this Placement Document. The prospective investors should not rely on such information contained in, or
available through, any such websites.
NOTICE TO HAMPSHIRE RESIDENTS ONLY
NEITHER THE FACT THAT A REGISTRATION STATEMENT OR AN APPLICATION FOR A LICENSE
HAS BEEN FILED UNDER CHAPTER 421-B OF THE NEW HAMPSHIRE REVISED STATUTES
(“RSA 421-B”) WITH THE STATE OF NEW HAMPSHIRE, NOR THE FACT THAT A SECURITY IS
EFFECTIVELY REGISTERED OR A PERSON IS LICENSED IN THE STATE OF NEW HAMPSHIRE,
CONSTITUTES A FINDING BY THE SECRETARY OF STATE OF NEW HAMPSHIRE THAT ANY
DOCUMENT FILED UNDER RSA 421-B IS TRUE, COMPLETE AND NOT MISLEADING. NEITHER
ANY SUCH FACT, NOR THE FACT THAT AN EXEMPTION OR EXCEPTION IS AVAILABLE FOR A
SECURITY OR A TRANSACTION, MEANS THAT THE SECRETARY OF STATE OF NEW HAMPSHIRE
HAS PASSED IN ANY WAY UPON THE MERITS OR QUALIFICATIONS OF, OR RECOMMENDED OR
GIVEN APPROVAL TO, ANY PERSON, SECURITY, OR TRANSACTION. IT IS UNLAWFUL TO MAKE,
OR CAUSE TO BE MADE, TO ANY PROSPECTIVE PURCHASER, CUSTOMER, OR CLIENT, ANY
REPRESENTATION INCONSISTENT WITH THE PROVISIONS OF THIS PARAGRAPH.
2
REPRESENTATIONS BY INVESTORS
References herein to “you” or “your” is to the prospective investors in the Issue.
By Bidding for and/or subscribing to any Equity Shares in the Issue, you are deemed to have represented,
warranted, acknowledged and agreed to our Company and the Lead Managers, as follows:

You are a ‘QIB’ as defined in Regulation 2(1)(zd) of the SEBI Regulations and not excluded pursuant
to Regulation 86(1)(b) of the SEBI Regulations, having a valid and existing registration under
applicable laws and regulations of India, and undertake to acquire, hold, manage or dispose of any
Equity Shares that are Allocated to you in accordance with Chapter VIII of the SEBI Regulations and
undertake to comply with the SEBI Regulations, the Companies Act and all other applicable laws,
including any reporting obligations;

If you are not a resident of India, but a QIB, you are an Eligible FPI or an FII (including a sub-account
other than a sub-account which is a foreign corporate or a foreign individual) having a valid and
existing registration with SEBI under the applicable laws in India or a multilateral or bilateral
development financial institution or an FVCI, and are eligible to invest in India under applicable law,
including FEMA 20, and any notifications, circulars or clarifications issued thereunder, and have not
been prohibited by SEBI or any other regulatory authority, from buying, selling or dealing in securities.

You will make all necessary filings with appropriate regulatory authorities, including RBI, as required
pursuant to applicable laws;

If you are Allotted Equity Shares, you shall not, for a period of one year from the date of Allotment,
sell the Equity Shares so acquired except on the floor of the Stock Exchanges (additional requirements
apply if you are within the United States or a U.S. Person, see the section “Transfer Restrictions” on
page 137);

You have made, or been deemed to have made, as applicable, the representations set forth under the
section “Transfer Restrictions” and “Distribution and Solicitation Restrictions” on pages 137 and
133, respectively;

You are aware that the Equity Shares have not been and will not be registered through a prospectus
under the Companies Act, 2013, the SEBI Regulations or under any other law in force in India. This
Placement Document has not been reviewed or affirmed by the RBI, SEBI, the Stock Exchanges, the
RoC or any other regulatory or listing authority and is intended only for use by QIBs;

You are entitled to subscribe for, and acquire, the Equity Shares under the laws of all relevant
jurisdictions that apply to you and you have: (i) fully observed such laws; (ii) the necessary capacity,
and (iii) obtained all necessary consents, governmental or otherwise, and authorizations and complied
with all necessary formalities, to enable you to commit to participation in the Issue and to perform your
obligations in relation thereto (including, without limitation, in the case of any person on whose behalf
you are acting, all necessary consents and authorizations to agree to the terms set out or referred to in
this Placement Document), and will honour such obligations;

Neither our Company nor the Lead Managers or any of their respective shareholders, directors,
officers, employees, counsel, representatives, agents or affiliates is making any recommendations to
you or advising you regarding the suitability of any transactions it may enter into in connection with
the Issue and your participation in the Issue is on the basis that you are not, and will not, up to the
Allotment, be a client of any of the Lead Managers. Neither the Lead Managers nor any of their
respective shareholders, directors, officers, employees, counsel, representatives, agents or affiliates has
any duties or responsibilities to you for providing the protection afforded to their clients or customers
or for providing advice in relation to the Issue and are not in any way acting in any fiduciary capacity;

You confirm that, either: (i) you have not participated in or attended any investor meetings or
presentations by our Company or its agents (“Company Presentations”) with regard to our Company
or the Issue; or (ii) if you have participated in or attended any Company Presentations: (a) you
understand and acknowledge that the Lead Managers may not have knowledge of the statements that
our Company or its agents may have made at such Company Presentations and are therefore unable to
determine whether the information provided to you at such Company Presentations may have included
3
any material misstatements or omissions, and, accordingly you acknowledge that the Lead Managers
have advised you not to rely in any way on any information that was provided to you at such Company
Presentations, and (b) confirm that you have not been provided any material information relating to our
Company and the Issue that was not publicly available;

All statements other than statements of historical fact included in this Placement Document, including,
without limitation, those regarding our Company’s financial position, business strategy, plans and
objectives of management for future operations (including development plans and objectives relating to
our Company’s business), are forward-looking statements. Such forward-looking statements involve
known and unknown risks, uncertainties and other important factors that could cause actual results to
be materially different from future results, performance or achievements expressed or implied by such
forward-looking statements. Such forward-looking statements are based on numerous assumptions
regarding our Company’s present and future business strategies and environment in which our
Company will operate in the future. You should not place undue reliance on forward-looking
statements, which speak only as at the date of this Placement Document. Our Company assumes no
responsibility to update any of the forward-looking statements contained in this Placement Document;

You are aware and understand that the Equity Shares are being offered only to QIBs and are not being
offered to the general public, and the Allotment of the same shall be on a discretionary basis;

You are aware that if you are Allotted more than 5% of the Equity Shares in the Issue, our Company
shall be required to disclose your name and the number of the Equity Shares Allotted to you to the
Stock Exchanges and the Stock Exchanges will make the same available on their websites and you
consent to such disclosures;

You have been provided a serially numbered copy of this Placement Document and have read it in its
entirety, including in particular, the section “Risk Factors” on page 39;

In making your investment decision, you have (i) relied on your own examination of our Company, its
Subsidiaries, its Joint Venture and the terms of the Issue, including the merits and risks involved, (ii)
made your own assessment of our Company, the Equity Shares and the terms of the Issue based solely
on the information contained in this Placement Document and no other disclosure or representation by
our Company, its Directors, Promoters and affiliates or any other party, (iii) consulted your own
independent counsel and advisors or otherwise have satisfied yourself concerning, without limitation,
the effects of local laws, (iv) relied solely on the information contained in this Placement Document
and no other disclosure or representation by our Company or any other party, (iv) received all
information that you believe is necessary or appropriate in order to make an investment decision in
respect of our Company and the Equity Shares, and (vi) relied upon your own investigation and
resources in deciding to invest in the Issue;

Neither the Lead Managers nor any of their respective shareholders, directors, officers, employees,
counsel, representatives, agents or affiliates has provided you with any tax advice or otherwise made
any representations regarding the tax consequences of purchase, ownership and disposal of the Equity
Shares (including but not limited to the Issue and the use of the proceeds from the Equity Shares). You
will obtain your own independent tax advice from a reputable service provider and will not rely on the
Lead Managers or any of their respective shareholders, directors, officers, employees, counsel,
representatives, agents or affiliates when evaluating the tax consequences in relation to the Equity
Shares (including but not limited to the Issue and the use of the proceeds from the Equity Shares). You
waive, and agree not to assert any claim against our Company or the Lead Managers or any of their
respective shareholders, directors, officers, employees, counsel, representatives, agents or affiliates
with respect to the tax aspects of the Equity Shares or as a result of any tax audits by tax authorities,
wherever situated;

You are a sophisticated investor and have such knowledge and experience in financial, business and
investment matters as to be capable of evaluating the merits and risks of an investment in the Equity
Shares. You are experienced in investing in private placement transactions of securities of companies
in a similar nature of business, similar stage of development and in similar jurisdictions. You and any
accounts for which you are subscribing for the Equity Shares (i) are each able to bear the economic risk
of your investment in the Equity Shares, (ii) will not look to our Company and/or the Lead Managers or
any of their respective shareholders, directors, officers, employees, counsel, representatives, agents or
affiliates for all or part of any such loss or losses that may be suffered in connection with the Issue,
4
including losses arising out of non-performance by our Company of any of its obligations or any
breach of any representations and warranties by our Company, whether to you or otherwise, (iii) are
able to sustain a complete loss on the investment in the Equity Shares, (iv) have no need for liquidity
with respect to the investment in the Equity Shares and (v) have no reason to anticipate any change in
your or their circumstances, financial or otherwise, which may cause or require any sale or distribution
by you or them of all or any part of the Equity Shares. You acknowledge that an investment in the
Equity Shares involves a high degree of risk and that the Equity Shares are, therefore, a speculative
investment. You are seeking to subscribe to the Equity Shares in the Issue for your own investment and
not with a view to resell or distribute;

If you are acquiring the Equity Shares to be issued pursuant to the Issue, for one or more managed
accounts, you represent and warrant that you are authorised in writing, by each such managed account
to acquire such Equity Shares for each managed account and to make (and you hereby make) the
representations, warranties, acknowledgements and agreements herein for and on behalf of each such
account, reading the reference to “you” to include such accounts;

You are not a ‘Promoter’ (as defined under the SEBI Regulations) of our Company or any of its
affiliates and are not a person related to the Promoters, either directly or indirectly, and your Bid does
not directly or indirectly represent the ‘Promoter’, or ‘Promoter Group’, (as defined under the SEBI
Regulations) of our Company or persons relating to the Promoter;

You have no rights under a shareholders’ agreement or voting agreement with the Promoters or persons
related to the Promoters, no veto rights or right to appoint any nominee director on the Board of
Directors of our Company other than the rights acquired, if any, in the capacity of a lender not holding
any Equity Shares, which shall not be deemed to be a person related to the Promoter;

You will have no right to withdraw your Bid after the Bid/Issue Closing Date;

You are eligible to apply for and hold the Equity Shares Allotted to you together with any Equity
Shares held by you prior to the Issue. Further, you confirm that your aggregate holding after the
Allotment of the Equity Shares shall not exceed the level permissible as per any applicable regulation;

The Bid made by you would not result in triggering a tender offer under the Securities and Exchange
Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 2011, as amended (the
“Takeover Code”);

To the best of your knowledge and belief, the number of Equity Shares Allotted to you pursuant to the
Issue, together with other Allottees that belong to the same group or are under common control, shall
not exceed 50% of the Issue. For the purposes of this representation:
a.
The expression ‘belong to the same group’ shall derive meaning from the concept of
‘companies under the same group’ as provided in sub-section (11) of Section 372 of the
Companies Act; and
b.
‘Control’ shall have the same meaning as is assigned to it by Regulation 2(1)(e) of the
Takeover Code;

You shall not undertake any trade in the Equity Shares credited to your beneficiary account until such
time that the final listing and trading approvals for such Equity Shares are issued by the Stock
Exchanges;

You are aware that (i) applications for in-principle approval, in terms of Clause 24(a) of the Listing
Agreements, for listing and admission of the Equity Shares and for trading on the Stock Exchanges,
were made and an approval has been received from each of the Stock Exchanges, and (ii) the
application for the final listing and trading approvals will be made only after Allotment. There can be
no assurance that the final approvals for listing and trading in the Equity Shares will be obtained in
time or at all. Our Company shall not be responsible for any delay or non-receipt of such final
approvals or any loss arising from such delay or non-receipt;
5

You are aware and understand that the Lead Managers have entered into a placement agreement with
our Company whereby the Lead Managers have, subject to the satisfaction of certain conditions set out
therein, agreed to manage the Issue and to procure subscriptions for the Equity Shares;

You understand that the contents of this Placement Document are exclusively the responsibility of our
Company, and neither the Lead Managers nor any person acting on their behalf has or shall have any
liability for any information, representation or statement contained in this Placement Document or any
information previously published by or on behalf of our Company and will not be liable for your
decision to participate in the Issue based on any information, representation or statement contained in
this Placement Document or otherwise. By participating in the Issue, you agree to the same and
confirm that the only information you are entitled to rely on, and on which you have relied in
committing yourself to acquire the Equity Shares is contained in this Placement Document, such
information being all that you deem necessary to make an investment decision in respect of the Equity
Shares, you have neither received nor relied on any other information, representation, warranty or
statement made by or on behalf of the Lead Managers or our Company or any of their respective
affiliates or any other person, and neither the Lead Managers nor our Company nor any other person
will be liable for your decision to participate in the Issue based on any other information,
representation, warranty or statement that you may have obtained or received;

You understand that the Lead Managers do not have any obligation to purchase or acquire all or any
part of the Equity Shares purchased by you in the Issue or to support any losses directly or indirectly
sustained or incurred by you for any reason whatsoever in connection with the Issue, including nonperformance by us or any of our respective obligations or any breach of any representations or
warranties by us, whether to you or otherwise;

You understand that the Equity Shares have not been and will not be registered under the Securities Act
or with any securities regulatory authority of any state of the United States and accordingly, may not be
offered or sold within the United States, except in reliance on an exemption from the registration
requirements of the Securities Act;

If you are within the United States, you are a “qualified institutional buyer” as defined in Rule 144A
under the Securities Act, are acquiring the Equity Shares for your own account or for the account of an
institutional investor who also meets the requirements of a “qualified institutional buyer”, for
investment purposes only, and not with a view to, or for resale in connection with, the distribution
(within the meaning of any United States securities laws) thereof, in whole or in part;

You agree that any dispute arising in connection with the Issue will be governed by and construed in
accordance with the laws of India, and the courts in Mumbai, India shall have exclusive jurisdiction to
settle any disputes which may arise out of or in connection with the Preliminary Placement Document
and the Placement Document;

Each of the representations, warranties, acknowledgements and agreements set out above shall
continue to be true and accurate at all times up to and including the Allotment, listing and trading of the
Equity Shares in the Issue;

You agree to indemnify and hold our Company and the Lead Managers harmless from any and all
costs, claims, liabilities and expenses (including legal fees and expenses) arising out of or in connection
with any breach of the foregoing representations, warranties, acknowledgements and undertakings
made by you in this Placement Document. You agree that the indemnity set forth in this paragraph
shall survive the resale of the Equity Shares by, or on behalf of, the managed accounts; and

Our Company, the Lead Managers, their respective affiliates and others will rely on the truth and
accuracy of the foregoing representations, warranties, acknowledgements and undertakings, which are
given to the Lead Managers on their own behalf and on behalf of our Company, and are irrevocable.
6
OFFSHORE DERIVATIVE INSTRUMENTS
Subject to compliance with all applicable Indian laws, rules, regulations, guidelines and approvals in terms of
Regulation 22 of the Securities and Exchange Board of India (Foreign Portfolio Investors) Regulations, 2014
(“SEBI FPI Regulations”), FPIs (which include FIIs) other than Category III Foreign Portfolio Investors (as
defined hereinafter) and unregulated broad based funds, which are classified as Category II foreign portfolio
investor (as defined under the SEBI FPI Regulations) by virtue of their investment manager being appropriately
regulated, may issue, subscribe or otherwise deal in offshore derivative instruments (as defined under the SEBI
FPI Regulations as any instrument, by whatever name called, which is issued overseas by an FPI against
securities held by it that are listed or proposed to be listed on any recognised stock exchange in India, as its
underlying) (all such offshore derivative instruments are referred to herein as “P-Notes”), for which they may
receive compensation from the purchasers of such instruments. P-Notes may be issued only in favour of those
entities which are regulated by any appropriate foreign regulatory authorities in the countries of their
incorporation, subject to compliance with ‘know your client’ requirements. An FPI shall also ensure that no
further issue or transfer of any instrument referred to above is made to any person other than such entities
regulated by appropriate foreign regulatory authorities. P-Notes have not been, and are not being offered, or sold
pursuant to this Placement Document. This Placement Document does not contain any information concerning
P-Notes or the issuer(s) of any P-notes, including any information regarding any risk factors relating thereto.
Any P-Notes that may be issued are not securities of our Company and do not constitute any obligation of,
claims on or interests in our Company. Our Company has not participated in any offer of any P-Notes, or in the
establishment of the terms of any P-Notes, or in the preparation of any disclosure related to any P-Notes. Any PNotes that may be offered are issued by, and are the sole obligations of, third parties that are unrelated to our
Company. Our Company and the Lead Managers do not make any recommendation as to any investment in PNotes and do not accept any responsibility whatsoever in connection with any P-Notes. Any P-Notes that may
be issued are not securities of the Lead Managers and do not constitute any obligations of or claims on the Lead
Managers. Affiliates of the Lead Managers which are FPIs may purchase, to the extent permissible under law,
the Equity Shares in the Issue, and may issue P-Notes in respect thereof.
Prospective investors interested in purchasing any P-Notes have the responsibility to obtain adequate
disclosures as to the issuer(s) of such P-Notes and the terms and conditions of any such P-Notes from the
issuer(s) of such P-Notes. Neither SEBI nor any other regulatory authority has reviewed or approved any
P-Notes or any disclosure related thereto. Prospective investors are urged to consult their own financial,
legal, accounting and tax advisors regarding any contemplated investment in P-Notes, including whether
P-Notes are issued in compliance with applicable laws and regulations.
7
DISCLAIMER CLAUSE OF THE STOCK EXCHANGES
As required, a copy of this Placement Document has been submitted to each of the Stock Exchanges. The Stock
Exchanges do not in any manner:
(i)
warrant, certify or endorse the correctness or completeness of the contents of this Placement
Document;
(ii)
warrant that the Equity Shares will be listed or will continue to be listed on the Stock Exchanges; or
(iii)
take any responsibility for the financial or other soundness of our Company, its Promoters, its
management or any scheme or project of our Company;
and it should not for any reason be deemed or construed to mean that this Placement Document has been cleared
or approved by the Stock Exchanges. Every person who desires to apply for or otherwise acquire any Equity
Shares, may do so pursuant to an independent inquiry, investigation and analysis and shall not have any claim
against the Stock Exchanges whatsoever, by reason of any loss which may be suffered by such person
consequent to or in connection with, such subscription/acquisition, whether by reason of anything stated or
omitted to be stated herein, or for any other reason whatsoever.
8
PRESENTATION OF FINANCIAL AND OTHER INFORMATION
In this Placement Document, unless otherwise specified or the context otherwise indicates or implies, references
to ‘you’, ‘your’, ‘offeree’, ‘purchaser’, ‘subscriber’, ‘recipient’, ‘investors’, ‘prospective investors’ and
‘potential investor’ are to the prospective investors in the Issue, references to the ‘Company’, ‘Idea Cellular’,
‘Issuer’ are to Idea Cellular Limited and references to ‘we’, ‘us’ or ‘our’ are to our Company, its Subsidiaries
and its Joint Venture.
In this Placement Document, references to ‘US$’, ‘USD’ and ‘U.S. dollars’ are to the legal currency of the
United States of America, and references to ‘INR’, ‘₹’, ‘Indian Rupees’ and ‘Rupees’ are to the legal currency
of India. All references herein to the ‘US’ or ‘U.S.’ or the ‘United States’ are to the United States of America
and its territories and possessions. All references herein to “India” are to the Republic of India and its territories
and possessions and the ‘Government’ or ‘GoI’ or the ‘Central Government’ or the ‘State Government’ are to
the Government of India, central or state, as applicable.
References to the singular also refer to the plural and one gender also refers to any other gender, wherever
applicable. Our Company has presented certain numerical information in this Placement Document in “million”
units. One million represents 1,000,000 and one billion represents 1,000,000,000.
Our fiscal year commences on April 1 of each calendar year and ends on March 31 of the succeeding calendar
year, so, unless otherwise specified or if the context requires otherwise, all references to a particular ‘financial
year’ or ‘fiscal year’ or ‘fiscal’ or ‘FY’ are to the twelve month period ended on March 31 of that year. Our
consolidated audited financial statements as of and for the years ended March 31, 2014, 2013 and 2012,
prepared in accordance with Indian GAAP, and the Companies Act, 1956 are included in this Placement
Document and are referred to herein as the “Financial Statements” on page 180.
Our Company publishes its financial statements in Indian Rupees. Unless otherwise indicated, all financial data
in this Placement Document is derived from our consolidated financial statements prepared in accordance with
Indian GAAP. Indian GAAP differs in certain respects significantly from International Financial Reporting
Standards (“IFRS”) and U.S. GAAP. We have not attempted to quantify the impact of U.S. GAAP or IFRS on
the financial data included in this Placement Document, nor have we provided a reconciliation of our
consolidated financial statements to those of U.S. GAAP or IFRS. Accordingly, the degree to which the
consolidated financial statements prepared in accordance with Indian GAAP included in this Placement
Document will provide meaningful information is entirely dependent on the reader’s level of familiarity with the
respective accounting practices. Any reliance by persons not familiar with Indian accounting practices on the
financial disclosures presented in this Placement Document should accordingly be limited.
The revenue as reflected in the consolidated financial statements included herein have been prepared using
standards differing in certain respects from those adopted by TRAI in preparation of the TRAI Reported
Revenue. We have not attempted to reconcile our consolidated revenue based on the standards adopted by
TRAI. Accordingly, the revenue of our Company in this Placement Document may differ from revenue
represented through the TRAI Reported Revenue.
In this Placement Document, certain monetary thresholds have been subjected to rounding adjustments.
Accordingly, figures shown as totals in certain tables may not be an arithmetic aggregation of the figures which
precede them.
9
INDUSTRY AND MARKET DATA
Information included in this Placement Document regarding market position, growth rates and other industry
data pertaining to our Company’s business consists of estimates based on data reports compiled by government
bodies, professional organisations and analysts, data from other external sources and knowledge of the markets
in which our Company competes. Unless otherwise stated, statistical information included in this Placement
Document pertaining to the business in which our Company operates, has been reproduced from trade, industry
and government publications and websites. Our Company confirms that such information and data has been
accurately reproduced, and that as far as it is aware and is able to ascertain from information published by third
parties, no material facts have been omitted that would render the reproduced information inaccurate or
misleading.
This information is subject to change and cannot be verified with complete certainty due to limits on the
availability and reliability of the raw data and other limitations and uncertainties inherent in any statistical
survey. In many cases, there is no readily available external information (whether from trade or industry
associations, government bodies or other organisations) to validate market-related analysis and estimates, so our
Company has relied on internally developed estimates.
Neither our Company nor the Lead Managers have independently verified this data, nor does it or the Lead
Managers make any representation regarding the accuracy of such data. Similarly, while our Company believes
its internal estimates to be reasonable, such estimates have not been verified by any independent sources, and
neither our Company nor the Lead Managers can assure potential investors as to their accuracy.
10
AVAILABLE INFORMATION
For so long as any Equity Shares are “restricted securities” within the meaning of Rule 144(a)(3) under the
Securities Act, and our Company is neither subject to Section 13 or 15(d) of the U.S. Securities Exchange Act of
1934, as amended, nor exempt from reporting pursuant to Rule 12g3-2(b) thereunder, our Company will furnish
to any holder or beneficial owner of such restricted securities or to any prospective purchaser of such restricted
securities designated by such holder or beneficial owner, upon the request of such holder, beneficial owner or
prospective purchaser, the information required to be provided by Rule 144A(d)(4) under the Securities Act,
subject to compliance with the applicable provisions of Indian law.
11
FORWARD-LOOKING STATEMENTS
Certain statements contained in this Placement Document that are not statements of historical facts constitute
‘forward-looking statements’. Investors can generally identify forward-looking statements by terminology such
as ‘aim’, ‘anticipate’, ‘believe’, ‘continue’, ‘can’, ‘could’, ‘estimate’, ‘expect’, ‘intend’, ‘may’, ‘objective’,
‘plan’, ‘potential’, ‘project’, ‘pursue’, ‘shall’, ‘should’, ‘will’, ‘would’, or other words or phrases of similar
import. Similarly, statements that describe the strategies, objectives, plans or goals of our Company are also
forward-looking statements. However, these are not the exclusive means of identifying forward-looking
statements.
All statements regarding our Company’s expected financial conditions, results of operations, business plans and
prospects are forward-looking statements. These forward-looking statements include statements as to our
Company’s business strategy, planned projects, revenue and profitability (including, without limitation, any
financial or operating projections or forecasts), new business and other matters discussed in this Placement
Document that are not historical facts. These forward-looking statements contained in this Placement Document
(whether made by our Company or any third party), are predictions and involve known and unknown risks,
uncertainties, assumptions and other factors that may cause the actual results, performance or achievements of
our Company to be materially different from any future results, performance or achievements expressed or
implied by such forward-looking statements or other projections. All forward-looking statements are subject to
risks, uncertainties and assumptions about our Company that could cause actual results to differ materially from
those contemplated by the relevant forward-looking statement. Important factors that could cause the actual
results, performances and achievements of our Company to be materially different from any of the forwardlooking statements include, among others:

failure to continue to provide telecommunications or related services that are technologically up to
date;

intense competition in the Indian telecommunications industry;

inability to raise additional funds required to meet the substantial capital requirements;

reliance on ten of the Established Service Areas for a significant proportion of our revenues;

telecommunications licenses, permits, spectrum allocations and spectrum auctions being subject to
terms and conditions, ongoing review and extensions and varying interpretations; and

changes in laws, rules and regulations and legal uncertainties.
Additional factors that could cause actual results, performance or achievements of our Company to differ
materially include, but are not limited to, those discussed under the sections “Risk Factors”, “Industry
Overview”, “Our Business” and “Management’s Discussion and Analysis of Financial Condition and
Results of Operations” on pages 39, 77, 87 and 61, respectively.
The forward-looking statements contained in this Placement Document are based on the beliefs of management,
as well as the assumptions made by, and information currently available to, management of our Company.
Although our Company believes that the expectations reflected in such forward-looking statements are
reasonable at this time, it cannot assure investors that such expectations will prove to be correct. Given these
uncertainties, investors are cautioned not to place undue reliance on such forward-looking statements. In any
event, these statements speak only as of the date of this Placement Document or the respective dates indicated in
this Placement Document and neither our Company nor the Lead Managers undertake any obligation to update
or revise any of them, whether as a result of new information, future events, changes in assumptions or changes
in factors affecting these forward looking statements or otherwise. If any of these risks and uncertainties
materialise, or if any of our Company’s underlying assumptions prove to be incorrect, the actual results of
operations or financial condition of our Company could differ materially from that described herein as
anticipated, believed, estimated or expected. All subsequent forward-looking statements attributable to our
Company are expressly qualified in their entirety by reference to these cautionary statements.
12
ENFORCEMENT OF CIVIL LIABILITIES
Our Company is a limited liability company incorporated under the laws of India. Majority of the Directors and
the key managerial personnel named herein are residents of India and all or a substantial portion of the assets of
our Company and such persons are located in India. As a result, it may be difficult for investors outside India to
effect service of process upon our Company or such persons in India, or to enforce judgments obtained against
such parties outside India.
Recognition and enforcement of foreign judgments is provided for under Section 13 and Section 44A of the
Code of Civil Procedure, 1908, as amended (the “Civil Procedure Code”), on a statutory basis. Section 13 of
the Civil Procedure Code provides that a foreign judgment shall be conclusive regarding any matter directly
adjudicated upon, except: (i) where the judgment has not been pronounced by a court of competent jurisdiction;
(ii) where the judgment has not been given on the merits of the case; (iii) where it appears on the face of the
proceedings that the judgment is founded on an incorrect view of international law or a refusal to recognise the
law of India in cases in which such law is applicable; (iv) where the proceedings in which the judgment was
obtained were opposed to natural justice; (v) where the judgment has been obtained by fraud; and (vi) where the
judgment sustains a claim founded on a breach of any law then in force in India.
India is not a party to any international treaty in relation to the recognition or enforcement of foreign judgments.
However, Section 44A of the Civil Procedure Code provides that a foreign judgment rendered by a superior
court (within the meaning of that section) in any jurisdiction outside India which the Government has by
notification declared to be a reciprocating territory, may be enforced in India by proceedings in execution as if
the judgment had been rendered by a district court in India. However, Section 44A of the Civil Procedure Code
is applicable only to monetary decrees not being in the nature of any amounts payable in respect of taxes or
other charges of a like nature or in respect of a fine or other penalties and does not include arbitration awards.
Each of the United Kingdom, Republic of Singapore and Hong Kong (among others) are some of the countries
that have been declared by the Government to be a reciprocating territory for the purposes of Section 44A of the
Civil Procedure Code, but the United States of America has not been so declared. A judgment of a court in a
jurisdiction which is not a reciprocating territory may be enforced only by a fresh suit upon the judgment and
not by proceedings in execution. The suit must be brought in India within three years from the date of the
foreign judgment in the same manner as any other suit filed to enforce a civil liability in India. It is unlikely that
a court in India would award damages on the same basis as a foreign court if an action is brought in India.
Furthermore, it is unlikely that an Indian court would enforce foreign judgments if it viewed the amount of
damages awarded as excessive or inconsistent with public policy of India. Additionally, any judgment or award
in a foreign currency would be converted into Rupees on the date of such judgment or award and not on the date
of payment. A party seeking to enforce a foreign judgment in India is required to obtain approval from the RBI
to repatriate outside India any amount recovered, and any such amount may be subject to income tax in
accordance with applicable laws.
13
EXCHANGE RATES
Fluctuations in the exchange rate between the Rupee and foreign currencies will affect the foreign currency
equivalent of the Rupee price of the Equity Shares on the Stock Exchanges. These fluctuations will also affect
the conversion into foreign currencies of any cash dividends paid in Rupees on the Equity Shares.
The following table sets forth information with respect to the exchange rates between the Rupee and the U.S.
dollar (in ₹ per US$), for the periods indicated. The exchange rates are based on the reference rates released by
RBI, which are available on the website of RBI. No representation is made that any Rupee amounts could have
been, or could be, converted into U.S. dollars at any particular rate, the rates stated below, or at all.
On June 4, 2014 the exchange rate (RBI reference rate) was ₹ 59.34 to US$ 1. (Source: www.rbi.org.in)
Period end
Average(1)
Fiscal Year:
2012
2013
2014
51.16
54.39
60.10
47.95
54.45
60.50
Low
(₹ Per US$)
54.24
43.95
57.22
50.56
68.36
53.74
Quarter ended:
September 30, 2013
December 31, 2013
March 31, 2014
62.78
61.90
60.10
62.13
62.03
61.79
68.36
63.65
62.99
58.91
61.16
60.10
Month ended:
December 31, 2013
January 31, 2014
February 28, 2014
March 31, 2014
April 30, 2014
May 31, 2014
61.90
62.48
62.07
60.10
60.34
59.03
61.91
62.08
62.25
61.01
60.36
59.31
62.38
62.99
62.69
61.90
61.12
60.23
61.18
61.35
61.94
60.10
59.65
58.43
(1)
Average of the official rate for each working day of the relevant period.
14
High
DEFINITIONS AND ABBREVIATIONS
This Placement Document uses certain definitions and abbreviations which, unless the context otherwise
indicates or implies, shall have the meaning as provided below. References to any legislation, act or regulation
shall be to such legislation, act or regulation as amended from time to time.
Company Related Terms
Term
Description
ABNL
Aditya Birla Nuvo Limited
ABTL
Aditya Birla Telecom Limited
Articles / Articles of Association
Articles of association of our Company, as amended from time to time
Auditors
Deloitte Haskins & Sells LLP*, Chartered Accountants, statutory
auditors of our Company
*Deloitte Haskins & Sells, Chartered Accountants, Mumbai (ICAI Firm Registration No.
117366W), has been converted into a Limited Liability Partnership with the name Deloitte
Haskins & Sells LLP (DHS LLP) (ICAI Firm Registration No. 117366W /W–100018)
under Section 58 of the Limited Liability Partnership Act, 2008 with effect from November
20, 2013
Board of Directors / Board
The board of directors of our Company or any duly constituted
committee thereof
Our Company / the Company / the
Issuer / Idea Cellular
Idea Cellular Limited, a public limited company incorporated under the
Companies Act, 1956
Corporate Office
Windsor, 5th floor, off. CST Road, Near Vidya Nagari, Kalina, Santacruz
(East), Mumbai 400 098, India
Directors
The directors of our Company
Equity Shares
ESOP 2006
Equity shares of our Company of face value ₹ 10 each
Employee Stock Option Scheme 2006
ESOP 2013
Idea Cellular Limited Employee Stock Option Scheme 2013
Established Service Areas
15 established Service Areas comprising Kerala, Madhya Pradesh, Uttar
Pradesh (West), Maharashtra, Haryana, Punjab, Andhra Pradesh,
Gujarat, Uttar Pradesh (East), Rajasthan, Delhi, Bihar, Karnataka,
Himachal Pradesh and Mumbai
Grasim
Grasim Industries Limited
ICSL
Idea Cellular Services Limited
ICTIL
Idea Cellular Towers Infrastructure Limited (erstwhile subsidiary of our
Company which has merged with Indus Towers with effect from June
11, 2013)
IMCSL
Idea Mobile Commerce Service Limited
Indus Towers / Joint Venture
Indus Towers Limited, a company incorporated under the Companies
Act and having its registered office at Bharti Crescent, 1, Nelson
Mandela Road, Vasant Kunj, Phase-II, New Delhi 110 070. Indus
Towers is a joint venture among our Company, Bharti Infratel Limited
and Vodafone India Limited
Memorandum or Memorandum of
Association
Memorandum of association of our Company, as amended from time to
time
New Service Areas
Seven new Service Areas comprising West Bengal, Kolkata, North East,
Jammu & Kashmir, Assam, Orissa and Tamil Nadu (including Chennai)
Promoter Group
Promoter group of our Company as per the definition provided in
Regulation 2(1)(zb) of the SEBI Regulations
Promoters
Hindalco Industries Limited, Grasim Industries Limited, Aditya Birla
Nuvo Limited, Birla TMT Holdings Private Limited and Kumar
Mangalam Birla
Registered Office
Suman Tower, Plot No. 18, Sector-11, Gandhinagar 382 011, Gujarat,
15
Term
Description
India
Spice
Spice Communications Limited
Subsidiaries
ABTL, Idea Cellular Infrastructure Services Limited, ICSL, IMCSL, and
Idea Telesystems Limited
we / us / our
Our Company, its Subsidiaries and its Joint Venture, on a consolidated
basis
Issue Related Terms
Term
Allocated/ Allocation
Description
The allocation of Equity Shares by our Company (in consultation with
the Lead Managers) to successful Bidders on the basis of the
Application Form submitted by such successful Bidders, and in
compliance with Chapter VIII of the SEBI Regulations
Allot/ Allotment/ Allotted
The issue and allotment of Equity Shares pursuant to the Issue
Allottees
Successful Bidders to whom Equity Shares Allotted pursuant to the
Issue
Application Form
The form (including any revisions thereof) pursuant to which a QIB
shall submit a Bid for the Equity Shares in the Issue
Bid(s)
Indication of interest of a Bidder, including all revisions and
modifications thereto, as provided in the Application Form, to subscribe
for the Equity Shares
Bid/Issue Closing Date
June 9, 2014, which is the last date up to which the Application Forms
shall be accepted
Bid/Issue Opening Date
June 5, 2014
Bidder
Any prospective investor, being a QIB, who makes a Bid pursuant to the
terms of the Preliminary Placement Document and the Application Form
Bidding Period
The period between the Bid/Issue Opening Date and Bid/Issue Closing
Date, inclusive of both dates, during which prospective Bidders can
submit Bids
Book Running Lead Manager
Axis Capital Limited
CAN or Confirmation of Allocation
Note
Note or advice or intimation to successful Bidders confirming
Allocation of Equity Shares to such successful Bidders after
determination of the Issue Price and requesting payment for the entire
applicable Issue Price for all Equity Shares Allocated to such successful
Bidders
Closing Date
The date on which Allotment of Equity Shares pursuant to the Issue
shall be made, i.e. on or about June 11, 2014
Cut-off Price
The Issue Price of the Equity Shares to be issued pursuant to the Issue
which shall be finalised by our Company in consultation with the Lead
Managers
Designated Date
The date of credit of Equity Shares to the successful Bidders demat
accounts, as applicable to the respective successful Bidders
Escrow Agreement
Agreement dated June 5, 2014, entered into amongst our Company, the
Escrow Bank and the Lead Managers for collection of the Bid Amounts
and for remitting refunds, if any, of the amounts collected, to the
Bidders
Escrow Bank
Standard Chartered Bank
Escrow Bank Account
The account entitled “Idea – QIP Escrow Account” opened with the
Escrow Bank for collection of the Bid Amounts and remitting refunds, if
any, of the Bid Amounts to the Bidders, subject to the terms of the
Escrow Agreement
16
Term
Description
Floor Price
The floor price of ₹ 136.98, which has been calculated in accordance
with Chapter VIII of the SEBI Regulations. Our Board, on June 9, 2014,
approved discount of ₹ 2.98 to the Floor Price of ₹ 136.98 in accordance
with the approval of the shareholders accorded on September 16, 2013
and Regulation 85(1) of the SEBI Regulations.
Global Co-ordinator and Book
Running Lead Managers
DSP Merrill Lynch Limited, Citigroup Global Markets India Private
Limited, Morgan Stanley India Private Limited and Standard Chartered
Securities (India) Limited
Issue
The issue and Allotment of 223,880,597 Equity Shares to QIBs pursuant
to Chapter VIII of the SEBI Regulations and Section 42 of the
Companies Act, 2013
Issue Price
₹ 134 per Equity Share
Issue Size
The aggregate size of the Issue, which is up to ₹ 30,000 million
Lead Managers
Global Co-ordinator and Book Running Lead Managers and the Book
Running Lead Manager
Listing Agreement
The agreement entered into between our Company and each of the Stock
Exchanges in relation to listing of the Equity Shares on each of the
Stock Exchanges
Mutual Fund
A mutual fund registered with SEBI under the Securities and Exchange
Board of India (Mutual Funds) Regulations, 1996, as amended
Mutual Fund Portion
10% of the Equity Shares proposed to be Allotted in the Issue, which is
available for Allocation to Mutual Funds
Pay-in Date
The last date specified in the CAN for payment of application monies by
the successful Bidders
Placement Agreement
Placement agreement dated June 5, 2014 entered into between our
Company and the Lead Manager
Placement Document
This placement document dated June 9, 2014 issued by our Company in
accordance with Chapter VIII of the SEBI Regulations and Section 42 of
the Companies Act, 2013
Preliminary Placement Document
The preliminary placement document dated June 5, 2014 issued in
accordance with Chapter VIII of the SEBI Regulations and Section 42 of
the Companies Act, 2013
Pricing Date
The date of determination of the number of Equity Shares to be placed
through the Issue and the Issue Price for the same
QIBs or Qualified Institutional
Buyers
Qualified institutional buyers as defined under Regulation 2(1)(zd) of
the SEBI Regulations
QIP
Private placement to QIBs under Chapter VIII of the SEBI Regulations
and Section 42 of the Companies Act, 2013
Relevant Date
June 5, 2014 which is the date of the meeting of the Board of Directors
deciding to open the Issue
Industry Related Terms
2G
Term
Description
Second generation mobile telecommunication technology
3G
Third generation mobile telecommunication technology
3G Subscriber
Any Subscriber with any usage event on 3G network, during last 30 days
Adjusted Gross Revenues
Total service revenue less pass-through charges payable to other telecom
service providers. This net revenue figure is the basis for computation of
license fees and spectrum usage charge payable to DoT
ARMB
Average realisation per mega byte (MB) of data
17
Term
ARPM
Description
Average realisation per minute
ARPU
Average revenue per user per month
BSC
Base station controller
BSNL
Bharat Sanchar Nigam Limited
BTS
Base transceiver stations
BWA
Broadband wireless access
CDMA
Code division multiple access
Churn
Churn relates to subscribers who are removed from the end of period
base for discontinuing to use the service of the company
CMS
Customer market share
CMTS
Cellular Mobile Telephone Service
CPP
Calling party pays
Data ARMB
Data ARMB is calculated by dividing data revenue for the relevant
period by the data usage in MB during the period
Data Subscriber
Any subscriber with data usage of more than zero kb in last 30 days till
the second quarter of the financial year 2014
Any subscriber with data usage of more than 100 Kb in last 30 days for
the third quarter of the financial year 2014
Any subscriber with data usage of more than 1MB in last 30 days from
the fourth quarter of the financial year 2014 onwards
DoT
Department of Telecommunications, Ministry of Communications and
Information Technology, Government of India
EDR
Exchange Data Records
GSM
Global System for Mobile Communication
ICR
Intra circle roaming
ILD
International long distance
Incremental Revenue Market Share
Incremental revenue market shares is calculated as change in absolute
revenue for the Company divided by change in absolute revenue for
Industry during the relevant period
IP
Internet protocol
IP1
Infrastructure provider category – I
IRU
Indefeasible right to use
ISP
Internet service provider
IUC
Interconnection usage charges
Merger Guidelines
Guidelines for transfer or merger of various categories of
telecommunication service license or authorisation under UL on
compromises, arrangements and amalgamation of the companies,
notified by DoT on February 20, 2014.
MHz
Mega hertz
MNP
Mobile Number Portability
MoU
Minutes of use per month
MTNL
Mahanagar Telephone Nigam Limited
NB
Node B
NLD
National long distance
NTP 1994
National Telecommunications Policy, 1994
NTP 1999
National Telecommunications Policy, 1999
NTP 2012
National Telecommunication Policy, 2012
OFC
Optical fibre cable
18
Term
Out-roamers
Description
A telecom operator’s subscribers roaming to other networks / service
areas
POIs
Points of interconnection
PoP
Points of presence
Revenue Market Share
Revenue market share derived by our Company from TRAI Reported
Revenue for CMTS, UASL and mobile licenses.
RMS
Revenue market share
RNC
Radio Network Controller
SACFA
Standing Advisory Committee on Radio Frequency Allocations
Serious Resident Indian Investor
Any resident Indian promoter holding at least 10 % of the equity share
capital of the Company and registered as a promoter with the DoT for
the licenses enjoyed by the Company or such requirements laid down by
the DoT from time to time
Service Areas
22 service areas that the Indian telecommunications market has been
segregated into by DoT for issuing telecom licenses
SIM
Subscriber identification module
SMP
Significant market power
SMS
Short messaging service
TDSAT
Telecom Disputes Settlement Appellate Tribunal
TRAI
Telecom Regulatory Authority of India, constituted under the Telecom
Regulatory Authority of India Act, 1997
TRAI Reported Revenue
Revenue data provided to TRAI by mobile telecommunication service
providers in India as per the requirements of TRAI, which is
consolidated and reported by TRAI
UAS
Unified Access Service
UASL
Unified Access Service License
UL / Unified License
Unified license
UL Guidelines
Guidelines for Grant of Unified License
VAS
Value added services
VLR
Visitor Location Register, which is a temporary database of the
subscribers who have roamed into the particular area, which it serves
WiMAX
Worldwide Interoperability for Microwave Access
WLL
Wireless Local Loop
WPC
Wireless Planning and Co-ordination wing of the Ministry of
Communication and Information Technology, Government of India
Conventional and General Terms/Abbreviations
Term
Description
₹ / Rupees / INR
Indian Rupees
AAEC
Appreciable adverse effect on competition
AGM
Annual general meeting
AIF(s)
Alternative investment funds, as defined and registered with SEBI under
the Securities and Exchange Board of India (Alternative Investment
Funds) Regulations, 2012, as amended
AMC
Asset management company
AS
Accounting Standards issued by the Institute of Chartered Accountants
of India
AY
Assessment year
19
Term
Description
BSE
BSE Limited
Calendar Year
Year ending on December 31
Category III Foreign Portfolio
Investors
An FPI registered as a category III foreign portfolio investor under the
SEBI FPI Regulations
CCI
Competition Commission of India
CDSL
Central Depository Services (India) Limited
CEO
Chief executive officer
CII
Confederation of Indian Industry
CIN
Corporate identity number
Civil Procedure Code
The Code of Civil Procedure, 1908
Companies Act
The Companies Act, 1956 or the Companies Act, 2013, as applicable
Companies Act, 1956
The Companies Act, 1956 and the rules made thereunder (without
reference to the provisions thereof that have ceased to have effect upon
the notification of the otified Sections)
Companies Act, 2013
The Companies Act, 2013 and the rules made thereunder to the extent in
force pursuant to the notification of the Notified Sections
Competition Act
The Competition Act, 2002
Depositories Act
The Depositories Act, 1996
Depository
A depository registered with SEBI under the Securities and Exchange
Board of India (Depositories and Participant) Regulations, 1996, as
amended
Depository Participant
A depository participant as defined under the Depositories Act
DTC
Direct Tax Code, 2013, proposed by the Ministry of Finance,
Government of India
EGM
Extraordinary general meeting
Eligible FPIs
FPIs that are eligible to participate in the Issue and does not include
qualified foreign investors or Category III Foreign Portfolio Investors
(who are not eligible to participate in the Issue)
EPS
Earnings per share
ESOPs
Employee stock options
F&O
Future and Options
FDI
Foreign Direct Investment
FDI Policy
Consolidated Foreign Direct Investment Policy notified under Circular
No. 1 of 2014, effective from April 17, 2014, as amended from time to
time
FEMA 20
The Foreign Exchange Management (Transfer or Issue of Security by a
Person Resident Outside India) Regulations, 2000, as amended
FIIs
Foreign institutional investors as defined under the SEBI FPI
Regulations
FII Regulations
The Securities and Exchange Board of India (Foreign Institutional
Investors) Regulations, 1995
Financial Year / Fiscal Year / Fiscal
Period of 12 months ended March 31 of that particular year, unless
otherwise stated
FIPB
Foreign Investment Promotion Board
FPI
Foreign portfolio investors as defined under the SEBI FPI Regulations
and includes a person who has been registered under the SEBI FPI
Regulations. Any foreign institutional investor or qualified foreign
investor who holds a valid certificate of registration is deemed to be a
foreign portfolio investor till the expiry of the block of three years for
which fees have been paid as per the Securities and Exchange Board of
20
Term
FVCI
Description
India (Foreign Institutional Investors) Regulations, 1995
Foreign venture capital investors as defined under and registered with
SEBI pursuant to the Securities and Exchange Board of India (Foreign
Venture Capital Investors) Regulations, 2000 registered with SEBI
GAAP
Generally accepted accounting principles
GDP
Gross domestic product
GoI / Government
Government of India
ICAI
Institute of Chartered Accountants of India
IFRS
International Financial Reporting Standards issued by the International
Accounting Standards Board
IND-AS
Indian accounting standards converged with IFRS, which has been
proposed for implementation by the ICAI
Indian GAAP
Generally accepted accounting principles in India
IT Act
The Income Tax Act, 1961
ITAT
Income Tax Appellate Tribunal
Mn / million
million
Notified Sections
Sections of Companies Act, 2013 that have been notified by the
Government of India
NSDL
National Securities Depository Limited
NSE
National Stock Exchange of India Limited
PAN
Permanent account number
RBI
Reserve Bank of India
RBI Act
The Reserve Bank of India Act, 1934
Regulation S
Regulation S under the Securities Act
RoC
Registrar of Companies, Gujarat
RSU/s
Employee restricted stock units granted in terms of ESOP 2013
Rule 144A
Rule 144 A under the Securities Act
SCR (SECC) Rules
Securities Contracts (Regulation) (Stock Exchanges and Clearing
Corporations) Regulations, 2012, notified by the SEBI
SCRA
Securities Contracts (Regulation) Act, 1956
SCRR
Securities Contracts (Regulation) Rules, 1957
SEBI
Securities and Exchange Board of India
SEBI Act
The Securities and Exchange Board of India Act, 1992
SEBI FPI Regulations
Securities and Exchange Board of India (Foreign Portfolio Investors)
Regulations, 2014
SEBI Prohibition of Insider Trading
Regulations
Securities and Exchange Board of India (Prohibition of Insider Trading)
Regulations, 1992
SEBI Regulations
The Securities and Exchange Board of India (Issue of Capital and
Disclosure Requirements) Regulations, 2009
Securities Act
The U.S. Securities Act of 1933
Stock Exchanges
The BSE and the NSE
STT
Securities transaction tax
Takeover Code
Securities and Exchange Board of India (Substantial Acquisition of
Shares and Takeovers) Regulations 2011
U.K.
United Kingdom
U.S. GAAP
Generally accepted accounting principles in the United States of
America
U.S.$ / USD / U.S. dollar
United States Dollar, the legal currency of the United States of America
21
Term
USA / U.S. / United States
Description
The United States of America
VCF
Venture capital fund
22
DISCLOSURE REQUIREMENTS UNDER FORM PAS-4 PRESCRIBED UNDER THE COMPANIES
ACT, 2013
The table below sets out the disclosure requirements as provided in PAS-4 and the relevant pages in this
Placement Document where these disclosures, to the extent applicable, have been provided.
Sr. No.
Disclosure Requirements
Relevant Page of this
Placement Document
1.
GENERAL INFORMATION
a.
Name, address, website and other contact details of the company
indicating both registered office and corporate office.
222
b.
Date of incorporation of the company.
179
c.
Business carried on by the company and its subsidiaries with the
details of branches or units, if any.
87 to 100
d.
Brief particulars of the management of the company.
107 to 118
e.
Names, addresses, DIN and occupations of the directors.
107 to 110
f.
Management’s perception of risk factors.
g.
Details of default, if any, including therein the amount involved,
duration of default and present status, in repayment of:
i)
Statutory dues;
Not applicable
ii)
Debentures and interest thereon;
Not applicable
iii)
Deposits and interest thereon; and
Not applicable
iv)
Loan from any bank or financial institution and interest thereon.
Not applicable
h.
Names, designation, address and phone number, email ID of the
nodal/ compliance officer of the company, if any, for the private
placement offer process.
2.
PARTICULARS OF THE OFFER
a.
Date of passing of board resolution.
179
b.
Date of passing of resolution in the general meeting, authorizing the
offer of securities.
179
c.
Kinds of securities offered (i.e. whether share or debenture) and
class of security.
31
d.
Price at which the security is being offered including the premium,
if any, along with justification of the price.
31
e.
Name and address of the valuer who performed valuation of the
security offered.
Not applicable
f.
Amount which the company intends to raise by way of securities.
g.
Terms of raising of securities:
(i).
Duration, if applicable;
39 to 53
222
56
Not applicable
23
Sr. No.
Relevant Page of this
Placement Document
Disclosure Requirements
(ii).
Rate of dividend;
60
(iii).
Rate of interest;
Not applicable
(iv).
Mode of payment; and
Not applicable
(v)
Mode of repayment.
Not applicable
h.
Proposed time schedule for which the offer letter is valid.
32
i.
Purposes and objects of the offer.
56
j.
Contribution being made by the promoters or directors either as part
of the offer or separately in furtherance of such objects.
Not applicable
k.
Principle terms of assets charged as security, if applicable.
Not applicable
3.
DISCLOSURES WITH REGARD
DIRECTORS, LITIGATION ETC
a.
Any financial or other material interest of the directors, promoters
or key managerial personnel in the offer and the effect of such
interest in so far as it is different from the interests of other persons.
118
b.
Details of any litigation or legal action pending or taken by any
Ministry or Department of the Government or a statutory authority
against any promoter of the offeree company during the last three
years immediately preceding the year of the circulation of the offer
letter and any direction issued by such Ministry or Department or
statutory authority upon conclusion of such litigation or legal action
shall be disclosed.
172 to 177
c.
Remuneration of directors (during the current year and last three
financial years).
113 to 114
d.
Related party transactions entered during the last three financial
years immediately preceding the year of circulation of offer letter
including with regard to loans made or, guarantees given or
securities provided.
214 to 215
e.
Summary of reservations or qualifications or adverse remarks of
auditors in the last five financial years immediately preceding the
year of circulation of offer letter and of their impact on the financial
statements and financial position of the company and the corrective
steps taken and proposed to be taken by the company for each of the
said reservations or qualifications or adverse remark.
181
f.
Details of any inquiry, inspections or investigations initiated or
conducted under the Companies Act or any previous company law
in the last three years immediately preceding the year of circulation
of offer letter in the case of company and all of its subsidiaries. Also
if there were any prosecutions filed (whether pending or not) fines
imposed, compounding of offences in the last three years
immediately preceding the year of the offer letter and if so, sectionwise details thereof for the company and all of its subsidiaries.
Not applicable
g.
Details of acts of material frauds committed against the company in
the last three years, if any, and if so, the action taken by the
172
24
TO
INTEREST
OF
Sr. No.
Disclosure Requirements
Relevant Page of this
Placement Document
company.
4.
FINANCIAL POSITION OF THE COMPANY
a.
The capital structure of the company in the following manner in a
tabular form:
(i)(a)
The authorised, issued, subscribed and paid up capital (number of
securities, description and aggregate nominal value);
58
(b)
Size of the present offer; and
31
(c)
Paid up capital:
58
(A)
After the offer; and
58
(B)
After conversion of convertible instruments (if applicable);
(d)
Share premium account (before and after the offer).
(ii)
The details of the existing share capital of the issuer company in a
tabular form, indicating therein with regard to each allotment, the
date of allotment, the number of shares allotted, the face value of the
shares allotted, the price and the form of consideration.
58 to 59
Provided that the issuer company shall also disclose the number and
price at which each of the allotments were made in the last one year
preceding the date of the offer letter separately indicating the
allotments made for considerations other than cash and the details of
the consideration in each case.
Not applicable
b.
Profits of the company, before and after making provision for tax,
for the three financial years immediately preceding the date of
circulation of offer letter.
180 to 219
c.
Dividends declared by the company in respect of the said three
financial years; interest coverage ratio for last three years (Cash
profit after tax plus interest paid/interest paid).
60 and 74
d.
A summary of the financial position of the company as in the three
audited balance sheets immediately preceding the date of circulation
of offer letter.
34 to 38
e.
Audited Cash Flow Statement for the three years immediately
preceding the date of circulation of offer letter.
37 to 38
f.
Any change in accounting policies during the last three years and
their effect on the profits and the reserves of the company.
63
5.
A DECLARATION BY THE DIRECTORS THAT
221
a.
The company has complied with the provisions of the Act and the
rules made thereunder.
b.
The compliance with the Act and the rules does not imply that
payment of dividend or interest or repayment of debentures, if
applicable, is guaranteed by the Central Government.
25
Not applicable
58
Sr. No.
Disclosure Requirements
c.
The monies received under the offer shall be used only for the
purposes and objects indicated in the Offer letter.
26
Relevant Page of this
Placement Document
SUMMARY OF BUSINESS
Overview
We are the third largest mobile telecommunications operator in India, based on TRAI Reported Revenue and
number of VLR subscribers. For the quarter ended December 31, 2013, we had a Revenue Market Share of
approximately 16.1% of the Indian mobile telecommunications services industry (as reported by TRAI) and as
of March 31, 2014, we had 135.8 million subscribers and 137.9 million VLR subscribers. For the quarter ended
March 31, 2014, we carried 157.1 billion voice minutes with an average realized rate per minute of 43.6 paise.
As of March 2013, we were also the seventh largest mobile telecommunications company (with operations in a
single country) in the world based on number of subscribers (as determined from data from WCIS).
We are a part of the Aditya Birla Group, which is one of the largest business groups in India. The Aditya Birla
Group is a conglomerate with operations in more than 30 countries. The Aditya Birla Group has a history of
over 50 years and has businesses in, among others, metals and mining, cement, carbon black, textiles, garments,
chemicals, fertilizers, life insurance, financial services and mobile telecommunications industries. Our
Company’s other large beneficial shareholders include Axiata Group Berhad, a leading Asian
telecommunications company, through its subsidiaries, Axiata Investments 1 (India) Limited and Axiata
Investments 2 (India) Limited, and Providence Equity Partners, a leading private equity fund, through its entity
P5 Asia Investments (Mauritius) Limited.
We are a pure play pan India mobile telecommunications operator offering voice, data and other VAS. All of
our mobile telecommunications services, other than voice, are classified as VAS. We provide GSM-based
mobile telecommunications services in all 22 Service Areas in India, and 3G services in 21 Service Areas. We
offer 3G services in 11 Service Areas pursuant to spectrum allocated to us. We provide 3G services in 10
additional Service Areas through intra-circle roaming arrangements with other mobile telecommunications
service providers. In the recent spectrum auctions held in February 2014, we won 5.0 MHz of spectrum in the
900 MHz band for the Delhi Service Area and intend to utilise this spectrum to launch 3G services. We also
won LTE compatible 1800 MHz spectrum in eight Service Areas (see “– Our Licenses and Spectrum” for
partial allocation in four Service Areas), which offer an opportunity to provide 4G LTE services. We have also
won spectrum in 1800 MHz band intended to be used for the provision of GSM services in selected Service
Areas. The spectrum won by us in February 2014 is yet to be allocated to us.
All of our services and products are offered under the
brand. The strength of our brand and our advertising
is reflected in several brand recognition awards we have won at various events, including the “Best Storyboard
Brand Campaign of the Year” award at the C BC TV18 India Business Leader Awards 2013.
We classify our service areas into Established Service Areas and New Service Areas, depending on the age of
our operations and profitability achieved in the respective Service Areas. Our 15 Established Service Areas
comprise Kerala, Madhya Pradesh, Uttar Pradesh (West), Maharashtra, Haryana, Punjab, Andhra Pradesh,
Gujarat, Uttar Pradesh (East), Rajasthan, Delhi, Bihar, Karnataka, Himachal Pradesh and Mumbai and our seven
New Service Areas comprise West Bengal, Kolkata, North East, Jammu & Kashmir, Assam, Orissa and Tamil
Nadu (including Chennai).
We also hold licenses for the provision of NLD, ILD, ISP and IP1 services in India. Our optical fibre cable
transmission network, either owned or through IRU arrangements mainly with other telecommunications
operators, extends to approximately 82,000 km and has 2,500 PoPs. Our mobile telecommunication operations
are spread over approximately 340,000 towns and villages. Approximately 98% of our captive NLD traffic and
approximately 97% of our ILD outgoing traffic was carried on our own infrastructure for the quarter ended
March 31, 2014. We also derive revenue from carrying India inbound ILD traffic through arrangements with
other mobile telecommunications companies and long distance carriers operating outside India. Our ISP services
launched during the financial year 2012, carried approximately 98% of our data traffic for the quarter ended
March 31, 2014.
As of March 31, 2014, we had a network of 104,778 2G cell sites and 21,381 3G cell sites. We own 9,446
telecommunications towers as of March 31, 2014. In addition, our subsidiary, ABTL, holds 16% of the issued
and outstanding equity shares of Indus Towers, a joint venture with Bharti Infratel Limited and Vodafone India
Limited. Providence Equity Partners, through its entity P5 Asia Holding Investments (Mauritius) Limited,
beneficially holds 1,925,000 compulsorily convertible preference shares, convertible into equity shares
representing 30.3% of the total equity share capital post conversion of these preference shares of ABTL, which
in turn reflects Providence Equity Partners’ beneficial equity interest in Indus Towers of 4.85% (assuming no
27
other change in the equity share capital of Indus Towers). Indus Towers is one of the leading independent
telecommunications tower companies and owns and operates approximately 113,000 telecommunications
towers as of March 31, 2014.
Our consolidated total income and profit after tax for the financial year 2014, was ₹ 265,189.05 million and ₹
19,678.20 million, respectively, and for the financial year 2013, was ₹ 224,576.54 million and ₹ 10,109.27
million, respectively.
We have won several industry awards, including awards for the Most Innovative Service Provider award under
Enterprise category and My Favourite Service Provider award at the ET Telecom Awards 2013, the “Best Rural
Service Provider of the Year” – 2012 and 2013 by Amity Telecom Excellence Award.
Our Competitive Strengths
We believe that we are well positioned to exploit the growth opportunities in India’s rapidly expanding mobile
telecommunications industry. Our key competitive strengths are set out below:
Established Leadership Position and Large Subscriber Base
We are the third largest mobile telecommunications operator in India, based on TRAI Reported Revenue and
number of VLR subscribers. For the quarter ended December 31, 2013, we had a Revenue Market Share of
approximately 16.1% of the Indian mobile telecommunications services industry. As of March 31, 2014,
101.5% of our subscribers were VLR subscribers (as disclosed by TRAI). For the quarter ended December 31,
2013, by TRAI Reported Revenues, we are the largest operator in the four Service Areas of Kerala, Madhya
Pradesh, Uttar Pradesh (West) and Maharashtra and the second largest operator in the four Service Areas of
Haryana, Punjab, Andhra Pradesh and Gujarat. We have a combined Revenue Market Share of 26.8% in these
eight Service Areas which collectively represent approximately 40.9% of the TRAI Reported Revenue of the
Indian mobile telecommunications services industry for the quarter ended December 31, 2013. With the
competitive scenario easing in the Indian mobile telecommunications industry, we believe that we have been
able to attract new subscribers and subscribers from other operators because of our strong market position and
large and spread-out distribution network. We believe this position also allows us to market our data and other
VAS more extensively.
Extensive Mobile Telecommunications and Distribution Network
Our mobile telecommunications operations are spread over approximately 340,000 towns and villages. Our
optical fibre cable transmission network, either owned or through IRU arrangements mainly with other
telecommunications operators, extends to approximately 82,000 km and has 2,500 PoPs. As of March 31, 2014,
we had a network of 104,778 2G cell sites and 21,381 3G cell sites. Our joint venture, Indus Towers owns and
operates approximately 113,000 telecommunications towers which are spread across 15 Service Areas as of
March 31, 2014. Additionally, we own 9,446 telecommunications towers as of March 31, 2014. Our suppliers
for our mobile telecommunications network include leading equipment manufacturers such as Ericsson India
Private Limited, Nokia Solutions and Networks India Private Limited, HUAWEI International Pte. Limited and
ZTE Corporation.
We maintain an extensive sales and distribution network in our Service Areas. Our sales network entails
approximately 29,000 third party distributors servicing approximately 1.4 million third party retailers for our
voice services, of which approximately 1.1 million retailers sell data products and recharges. We currently have
approximately 150 outlets per 100,000 persons in the population we cover. In addition, we have over 5,500 Idea
service stores catering to the demands of our subscribers in both urban and rural areas.
Strong Brand
We believe that the strength of our brand and our advertising campaigns have contributed significantly to our
strong market position and subscriber growth and loyalty. Our brand,
, is widely recognized countrywide.
Our brand excellence is confirmed by several awards such as the Aegis Graham Bell Award 2013 for Best
Brand Campaign, Pitch ‘Top 50 Brands’ Award, Silver and Bronze at the APAC EFFIES for the ‘Honey
Bunny’ campaign, Silver at Emvies, 2013 for Integrated Media Campaign for the Honey Bunny campaign, two
Golds, one Silver and one Bronze for ‘Honey Bunny’, ‘Telephone Exchange’, and ‘What an Idea’ series of
brand campaigns at EFFIES 2013.
28
One of the Fastest Growing Mobile Telecommunications Operators in India
We are one of the fastest growing mobile telecommunications operators in India. We increased our Revenue
Market Share by approximately 1.3% to approximately 16.1% for quarter ended December 31, 2013 from
14.8% for quarter ended December 31, 2012, which we believe is the highest increase among all mobile
telecommunications operators in India in such period. Over the last 12 quarters ended December 31, 2013, we
had an incremental Revenue Market Share of 23.7%. Similarly, our total subscribers increased by 11.7% to
135.8 million as of March 31, 2014 from 121.6 million as of March 31, 2013, and total voice minutes carried
increased by 10.5% to 588 billion for the financial year 2014 from 532 billion for the financial year 2013. We
have enjoyed a leading position in terms of net subscribers added pursuant to the MNP program, which was
launched in the Haryana Service Area in November 2010 and became effective nationwide in January 2011.
From November 2010 until March 31, 2014, we had a net gain of approximately 9.14 million subscribers
through this program, which we believe is the highest among all mobile telecommunications operators in India.
We believe that owing to our extensive network, better quality of services and brand value, we are ideally
positioned to take advantage of the changing competitive landscape in the Indian mobile telecommunications
industry.
Cost Management
India continues to have one of the lowest voice and data tariff in the world. A low tariff requires us to
continuously focus on cost reduction. Our cost management initiatives are focused on optimizing network
operating costs, increasing the utilization of our infrastructure, subscriber acquisition and servicing costs,
business promotion costs and general administrative costs. In addition, our extensive telecommunications and
distribution network infrastructure and subscriber base enables us to realize significant benefits from economies
of scale in many aspects of our operations, such as subscriber acquisition, sales and marketing, billing and
subscriber service and support, telecommunications network usage, and equipment procurement.
Consistent Financial Performance and Strong Balance Sheet
Despite the tough economic scenario and the difficult industry conditions, we have increased our total income
and profit after tax by a compound annual growth rate of 16.5% and 65.0%, respectively, between the financial
year 2012 and the financial year 2014. The increase in our total income also resulted in an increase in our
revenue market share. Our data and other VAS revenues have also consistently increased during this period. As
a result of our financial performance, our net debt (after considering deferred payment liabilities towards
spectrum of ₹ 87,418.17 million) to equity ratio was 1.22 as of March 31, 2014. We believe that because of our
consistent performance and robust financial condition, we are well placed to compete effectively and further
grow our market share and profitability.
Aditya Birla Group Parentage
We are a part of the Aditya Birla Group, which is one of the largest business groups in India. The Aditya Birla
group has businesses in, among others, metals and mining, cement, carbon black, textiles, garments, chemicals,
fertilizers, life insurance, financial services industries and mobile telecommunications. The Aditya Birla Group
is one of the most respected business houses in India and we benefit from the confidence that consumers,
lenders, vendors and others place in the Aditya Birla Group. Our parentage also enhances our ability to attract
talented employees from premier educational institutions. We believe that the Aditya Birla Group is known for
its best corporate governance practices. Our governance framework is aimed at demonstrating high levels of
accountability, transparency and integrity in all our transactions. We believe that the combination of our
management structure and our being a part of the Aditya Birla Group enables us to effectively manage a
dynamic business and to respond quickly to rapidly changing market situations.
Our Growth Strategies
We believe that we are well positioned to grow in the rapidly evolving Indian mobile telecommunications
industry. Our growth strategies are set out below:
Strengthen our Leadership Position in the Established Service Areas
For the quarter ended December 31, 2013, our 15 Established Service Areas covered approximately 79.5% of
the TRAI Reported Revenue of India’s mobile telecommunications services industry. We enjoy a strong market
position based on our extensive network coverage, distribution strengths and brand recognition in these Service
Areas. We also own 3G spectrum in 11 of these Established Service Areas, which accounted for more than 79%
29
of our total TRAI Reported Revenue for the quarter ended December 31, 2013. We won LTE compatible 1800
MHz spectrum in seven of these Established Service Areas in the recent spectrum auction in February 2014 (see
“– Our Licenses and Spectrum”), which covers approximately 58% of our total TRAI Reported Revenue for
the quarter ended December 31, 2013. We intend to leverage our investment in our mobile telecommunications
and distribution networks and the brand equity that we have built, to strengthen our market position in these
Service Areas. We will continue to focus on network coverage and enhancing subscriber experience to
differentiate us from other operators. We also believe that our ability to leverage the economies of scale of our
operations and our spectrum profile will provide us an opportunity to compete effectively.
Focus on Sustainable Growth in the New Service Areas
Our New Service Areas, where we launched our operations during the financial year 2010 are strategically
important to us. In addition to strengthening our pan India presence, these Service Areas offer us an opportunity
to achieve higher growth rates. For the quarter ended December 31, 2013, these seven New Service Areas
contributed approximately 5.1% of our total TRAI Reported Revenue. The Supreme Court direction of February
2012 quashing licenses issued in 2008 impacted the licenses for these Services Areas. However, we won back
the spectrum in the 1800 MHz band for these Service Areas in November 2012 auction and we now intend to
further expand our operations to take advantage of the reduction in competition. We have also been awarded
Unified Licenses in October 2013 for these Service Areas. We won an additional 5.0 MHz of spectrum in the
1800 MHz band for the North East Service Area during the recently concluded spectrum auction in February
2014 (see “– Our Licenses and Spectrum”), which offer an opportunity to provide 4G LTE services. We also
intend to leverage the synergies arising from our existing presence in our Established Service Areas and the
scale of our operations to improve margins in the New Service Areas. We intend to achieve sustainable growth
in these Service Areas, which we believe will provide impetus to our overall revenue market share and results of
operations.
Focus on Data and other Revenue Streams
We believe that data and other VAS offers a substantial opportunity for additional growth in the Indian mobile
telecommunications industry. We intend to focus on expanding our non-voice service offerings across our
network. We own 3G spectrum in all eight Service Areas where we are either the largest or the second largest
operator based on Revenue Market Share, which gives us the ability to focus on differentiating our service
offerings and focus on VAS, particularly data. We believe our 3G network is currently under-utilized and we
have the ability to grow our 3G revenue stream without significant additional investment. Since the launch of
3G services, we took multiple initiatives such as introducing innovative pricing and a range of
branded
smart phones to increase data usage. We provide 3G services in 10 additional Service Areas through intra-circle
roaming arrangements with other mobile telecommunications service providers. We recently won spectrum in
the 900 MHz band for the Delhi Service Area and intend to launch 3G services on such spectrum. We also won
LTE compatible 1800 MHz spectrum in eight Service Areas (see “– Our Licenses and Spectrum” for partial
allocation in four Service Areas), which offers an opportunity to provide 4G LTE services in these Service
Areas. We will continue to focus on data consumption on smartphones to leverage our large subscriber base. We
believe that mobile commerce will become increasingly popular in the Indian market and we intend to grow in
the areas of mobile banking and commerce. We have launched mobile banking services in select districts of
some of our Service Areas. Further, we will continue to expand our optical fibre cable network to take
advantage of the growth potential of mobile broadband services. Additionally, we intend to focus on our ILD
and ISP capabilities to diversify our revenue streams. For example, we recently launched wi-fi services in select
cities.
Focus on Subscriber Service
We place significant emphasis upon delivering an efficient and friendly experience at all contact points in the
subscriber life cycle. Our service plans and tariffs are designed to be transparent and easy to understand. We
have established call centers to focus on our subscribers’ needs for service and to cross-sell our various
products. While the rate of churn is generally determined by competitive market forces, we believe that our
focus on subscriber service has also led to the reduction in our churn. Each of these factors applied at all our
Service Areas also led to the enhancement of our brand.
30
SUMMARY OF THE ISSUE
The following is a general summary of the terms of the Issue. This summary should be read in conjunction with,
and is qualified in its entirety by, the more detailed information appearing elsewhere in this Placement
Document, including the sections “Risk Factors”, “Use of Proceeds”, “Placement”, “Issue Procedure” and
“Description of the Equity Shares” on pages 39, 56, 131, and 121 and 142, respectively.
Issuer
Idea Cellular Limited
Issue Price
₹ 134 per Equity Share
Floor Price
₹ 136.98 per Equity Share. In terms of the SEBI Regulations, the
Issue Price cannot be lower than the Floor Price. Our Board, on June
9, 2014, approved discount of ₹ 2.98 to the Floor Price of ₹ 136.98
in accordance with the approval of the shareholders accorded on
September 16, 2013 and Regulation 85(1) of the SEBI Regulations.
Issue Size
Issue of 223,880,597 Equity Shares, aggregating to ₹ 30,000 million.
A minimum of 10 % of the Issue Size i.e. up to 22,388,060 Equity
Shares shall be available for Allocation to Mutual Funds only, and
up to 223,880,597 Equity Shares shall be available for Allocation to
all QIBs, including Mutual Funds. If no Mutual Fund is agreeable to
take up the minimum portion mentioned above, such minimum
portion or part thereof may be Allotted to other eligible QIBs.
Date of Board Resolution
August 1, 2013
Date of Shareholders’ Resolution
September 16, 2013
Eligible Investors
QIBs as defined in regulation 2(1)(zd) of the SEBI Regulations and
not excluded pursuant to Regulation 86 of the SEBI Regulations. See
the section “Issue Procedure – Qualified Institutional Buyers” on
page 124.
Equity Shares issued and outstanding
immediately prior to the Issue
3,320,063,905 Equity Shares
Equity Shares issued and outstanding
immediately after the Issue
Immediately after the Issue, 3,543,944,502 Equity Shares will be
issued and outstanding(1)
Listing
Our Company has obtained in-principle approvals in terms of Clause
24(a) of the Listing Agreements, for listing of the Equity Shares
issued pursuant to the Issue from the Stock Exchanges. Our
Company will make applications to each of the Stock Exchanges
after Allotment to obtain final listing and trading approvals for the
Equity Shares.
Lock-up
The Comp Our Company has agreed that it will not, for a period of 60 days from
the Pricing Date, without the prior written consent of each of the
Lead Managers, directly or indirectly, (i) offer, sell or announce the
intention to sell, pledge, issue, contract to issue, grant any option,
right or warrant for the issuance and allotment, or otherwise dispose
of or transfer, or establish or increase a put equivalent position or
liquidate or decrease a call equivalent position with respect to, any
Equity Shares or securities convertible into or exchangeable or
exercisable for Equity Shares (including any warrants or other rights
to subscribe for any Equity Shares), (ii) enter into a transaction
which would have the same effect, or enter into any swap, hedge or
other arrangement that transfers, in whole or in part, any of the
economic consequences of ownership of any Equity Shares, whether
any such aforementioned transaction is to be settled by allotment of
31
any Equity Shares, in cash or otherwise, or (iii) publicly disclose the
intention to make any such offer, issuance and allotment or
disposition, or to enter into any such transaction, swap, hedge or
other arrangement. Provided, however, that the Company may issue
and allot (a) Equity Shares or grant any options pursuant to any
employee stock option plan of the Company, which is in effect on
the date hereof, and the Company may issue Equity Shares issuable
upon the exercise of existing options outstanding on the date hereof,
in each case, as described in each of the Preliminary Placement
Document and this Placement Document, as the case may be; and (b)
such number of Equity Shares to Axiata Investments 2 (India) Ltd,
as may be approved by the shareholders of the Company, in
accordance with the provisions of the SEBI Regulations.
The Promoters of our Company have agreed that they will not, from
the date of the Placement Agreement and for a period of 60 days
from the date of this Placement Document, directly or indirectly: (i)
directly or indirectly, issue, offer, lend, sell, contract to sell or issue,
sell any option or contract to sell, grant any option, or otherwise
transfer or dispose of any Equity Shares or any securities convertible
into or exercisable or exchangeable for Equity Shares or publicly
announce an intention with respect to any of the foregoing, (ii) enter
into any swap or any other agreement or any transaction that
transfers, in whole or in part, directly or indirectly, any of the
economic consequences of ownership of the Equity Shares or any
securities convertible into or exercisable or exchangeable for Equity
Shares or publicly announce an intention to enter into any such
transaction, whether any such swap or transaction described in
clause (i) or (ii) hereof is to be settled by delivery of Equity Shares
or such other securities, in cash or otherwise, or (iii) deposit Equity
Shares or any securities convertible into or exercisable or
exchangeable for Equity Shares or which carry the right to subscribe
for or purchase Equity Shares in depositary receipt facilities or enter
into any transaction (including a transaction involving derivatives)
having an economic effect similar to that of a sale or a deposit of
Equity Shares in any depositary receipt facility, or publicly announce
any intention to enter into any such transaction. See the section
“Placement” on page 131 for additional information.
Transferability Restrictions
The Equity Shares Allotted pursuant to this Issue shall not be sold
for a period of one year from the date of Allotment, except on the
floor of the Stock Exchanges. See the section “Transfer
Restrictions” on page 137.
Use of Proceeds
The gross proceeds from the Issue are ₹ 30,000 million. The net
proceeds from the Issue, after deducting fees, commissions and
expenses of the Issue, will be approximately ₹ 29,682 million. See
the section “Use of Proceeds” on page 56 for additional information.
Risk Factors
See the section “Risk Factors” on page 39 for a discussion of risks
you should consider before deciding whether to subscribe for the
Equity Shares.
Pay-In Date
Last date specified in the CAN sent to the QIBs for payment of
application money.
Closing
The Allotment of the Equity Shares offered pursuant to the Issue is
expected to be made on or about June 11, 2014.
Ranking
The Equity Shares to be issued pursuant to the Issue shall be subject
to the provisions of the Memorandum of Association and Articles of
32
Association and shall rank pari passu with the existing Equity
Shares of our Company, including rights in respect of dividends.
The shareholders of our Company will be entitled to participate in
dividends and other corporate benefits, if any, declared by our
Company after the Closing Date, in compliance with the Companies
Act, 2013, the Listing Agreements and other applicable laws and
regulations. Shareholders of our Company may attend and vote in
shareholders’ meetings on the basis of one vote for every Equity
Share held.
Security Codes for the Equity Shares
(1)
ISIN
BSE Code
NSE Code
INE669E01016
532822
IDEA
Pursuant to its resolution dated August 1, 2013, the Board of Directors has approved (subject to approval of
the shareholders of our Company) further issue of Equity Shares for an amount not exceeding ₹ 7,500
million by way of preferential allotment to Axiata Group Berhad or its nominee entity. Subject to market
conditions and other considerations, our Company may undertake this preferential issue in accordance with
Chapter VII of the SEBI Regulations for an amount not exceeding ₹ 7,500 million or such other amount as
may be approved by the Board of Directors.
33
SELECTED FINANCIAL INFORMATION
The following selected financial information is extracted from and should be read in conjunction with, the
audited consolidated financial statements and notes thereto of our Company as at, and for the, fiscal years
ended March 31, 2014, 2013 and 2012 prepared in accordance with Indian GAAP, each included elsewhere in
this Placement Document. You should refer to “Management's Discussion and Analysis of Financial
Condition and Results of Operations”, on page 61, for further discussion and analysis of the financial
statements of our Company.
The financial information included in this Placement Document does not reflect our Company’s results of
operations, financial position and cash flows for the future and its past operating results are no guarantee of its
future operating performance.
34
CONSOLIDATED BALANCE SHEET AS AT MARCH 31, 2014, 2013 AND 2012
₹ Mn.
Particulars
31-Mar-14
As at
31-Mar-13
31-Mar-12
EQUITY AND LIABILITIES
Shareholders' Funds
Share Capital
Reserves and Surplus
Compulsorily Convertible Preference Shares
(issued by Subsidiary Company)
Non-Current Liabilities
Long-Term Borrowings
Deferred Tax Liabilities (Net)
Other Long-Term Liabilities
Long-Term Provisions
Current Liabilities
Short-Term Borrowings
Trade Payables
Other Current Liabilities
Short-Term Provisions
TOTAL
33,196.32
132,054.17
165,250.49
33,143.22
109,890.42
143,033.64
33,088.45
97,394.48
130,482.93
19.25
19.25
19.25
181,284.05
18,132.83
9,229.11
4,985.96
213,631.95
118,047.16
11,180.31
7,946.08
3,142.13
140,315.68
95,221.56
6,272.98
6,057.97
1,920.41
109,472.92
6,471.63
27,879.98
50,444.38
1,876.89
86,672.88
4,585.31
26,871.01
47,707.33
1,248.48
80,412.13
17,275.34
21,840.43
47,188.21
72.72
86,376.70
465,574.57
363,780.70
326,351.80
218,632.38
77,326.08
114,194.13
61.20
28,970.68
1,448.37
440,632.84
208,947.36
82,591.76
8,810.81
61.20
30,479.18
330,890.31
201,304.80
68,571.84
6,798.50
61.20
22,562.74
299,299.08
2,155.34
683.08
8,006.20
1,880.96
12,181.50
34.65
24,941.73
10,280.15
726.42
9,600.77
1,429.05
10,845.34
8.66
32,890.39
976.00
925.66
8,226.98
1,520.73
15,385.67
17.68
27,052.72
465,574.57
363,780.70
326,351.80
ASSETS
Non-Current Assets
Fixed Assets
Tangible Assets
Intangible Assets
Capital Work-in-Progress
Goodwill on Consolidation
Long-Term Loans and Advances
Other Non-Current Assets
Current Assets
Current Investments
Inventories
Trade Receivables
Cash and Bank Balances
Short-Term Loans and Advances
Other Current Assets
TOTAL
Significant Accounting Policies
The accompanying notes are an integral part of the
financial statements
35
CONSOLIDATED STATEMENT OF PROFIT & LOSS FOR THE YEARS ENDED MARCH 31, 2014,
2013 AND 2012
₹ Mn.
For the year ended
31-Mar-14
31-Mar-13
31-Mar-12
Particulars
INCOME
Service Revenue
Sale of Trading Goods
Other Income
262,071.27
2,248.41
869.37
221,409.87
2,664.58
502.09
193,381.85
1,505.00
524.78
TOTAL
265,189.05
224,576.54
195,411.63
1,927.00
13,121.17
64,990.27
29,237.98
41,615.64
19,806.63
4,867.01
6,286.57
2,318.36
11,225.28
55,360.60
24,752.50
40,145.27
20,467.29
4,720.29
5,541.57
1,413.72
9,499.16
48,608.39
23,231.83
32,798.75
19,869.00
4,281.21
4,786.20
181,852.27
164,531.16
144,488.26
83,336.78
60,045.38
50,923.37
7,700.13
38,855.15
6,338.85
9,494.50
29,589.50
5,188.15
10,557.29
24,356.93
5,456.42
30,442.65
6,687.95
5,454.11
(1,377.61)
19,678.20
15,773.23
3,506.98
4,907.46
(2,750.48)
10,109.27
10,552.73
2,227.52
3,173.60
(2,078.27)
7,229.88
5.93
5.92
3.05
3.05
2.19
2.18
OPERATING EXPENDITURE
Cost of Trading Goods Sold
Personnel Expenditure
Network Expenses and IT outsourcing cost
License Fees and WPC Charges
Roaming & Access Charges
Subscriber Acquisition & Servicing Expenditure
Advertisement and Business Promotion Expenditure
Administration & other Expenses
PROFIT BEFORE FINANCE CHARGES,
DEPRECIATION, AMORTISATION & TAXES
Finance & Treasury Charges (Net)
Depreciation
Amortisation of Intangible Assets
PROFIT BEFORE TAX
Provision for Taxation - Current
- Deferred
- MAT Credit
PROFIT AFTER TAX
Earnings Per Share of ₹10 each fully paid up (in ₹)
Basic
Diluted
Significant Accounting Policies
The accompanying notes are an integral part of the
financial statements
36
CONSOLIDATED CASH FLOW STATEMENT FOR THE YEARS ENDED MARCH 31, 2014, 2013
AND 2012
₹ Mn.
For the year ended
31-Mar-14
A) Cash Flow from Operating Activities
Net Profit after Tax
Adjustments For
Depreciation
Amortisation of Intangible Assets
Interest and Financing Charges
Dividend Income and Profit on sale of Current
Investments
Bad Debts / Advances written off
Provision for Bad & Doubtful Debts / Advances
Employee Stock Option Cost
Provision for Gratuity, Leave Encashment
Provision for Deferred Tax
Provision for Current Tax (Net of MAT Credit
Entitlement)
Liabilities / Provisions no longer required written
back
Interest Income
(Profit) / Loss on sale of Fixed Assets / Assets
Discarded
19,678.20
C) Cash Flow from Financing Activities
Proceeds from issue of Equity Share Capital
Proceeds from Long Term Borrowings*
Repayment of Long Term Borrowings
Proceeds from Short Term Borrowings
Repayment of Short Term Borrowings
Payment of Dividend, including dividend tax
Payment of Interest and Financing Charges
Net Cash from / (used in) Financing Activities
10,109.27
7,229.88
29,589.50
5,188.15
10,156.96
(667.37)
24,356.93
5,456.42
10,481.74
(291.71)
1,152.28
(114.76)
43.07
175.62
5,454.11
5,310.34
829.85
0.32
669.54
4,907.46
756.50
597.31
35.88
174.03
3,173.60
149.25
(749.20)
(414.83)
(450.89)
(987.68)
(205.22)
(193.89)
53.27
(134.52)
11.95
63,544.04
83,222.24
50,875.46
60,984.73
43,559.99
50,789.87
469.03
43.34
(1,890.38)
(2,203.64)
199.24
(3.97)
(3,267.17)
(266.48)
(3.37)
3,695.66
(371.99)
(13,291.34)
3,036.16
8,476.13
8,360.20
5,353.80
88,576.04
(6,383.99)
82,192.05
Cash generated from Operations
Tax paid (including TDS) (Net)
Net Cash from / (used in) Operating Activities
B) Cash Flow from Investing Activities
Purchase of Fixed assets & Intangible assets
(including CWIP)
Payment towards Spectrum and Licenses *
Proceeds from sale of Fixed Assets
Profit on sale of Current Investments, Dividend and
Interest Received
Net Cash from / (used in) Investing Activities
For the year ended
31-Mar-12
38,855.15
6,338.85
9,551.85
(1,280.37)
Operating profit before Working Capital Changes
Adjustments for changes in Working Capital
(Increase)/Decrease in Trade Receivables
(Increase)/Decrease in Inventories
(Increase)/Decrease in Other Current and Non
Current Assets
(Increase)/Decrease in Long Term and Short Term
Loans and Advances
Increase /(Decrease) in Trade Payables, Other Current
and Non Current Liabilities and Provisions
For the year ended
31-Mar-13
6,095.77
67,080.50
(4,109.58)
62,970.92
(8,468.16)
42,321.71
(4,140.89)
38,180.82
(36,984.63)
(34,986.76)
(47,326.59)
(31,436.07)
536.22
2,242.06
(213.22)
220.70
870.28
59.04
416.63
(65,642.42)
262.75
4,465.34
(22,019.96)
6,905.62
(5,286.68)
(1,305.88)
(7,681.99)
(34,109.00)
248.20
40,154.25
(37,832.52)
10,547.22
(23,237.33)
(250.24)
(9,283.00)
(46,850.92)
237.10
38,322.60
(30,345.21)
42,521.84
(43,150.47)
(11,199.84)
(24,660.80)
(19,653.42)
(3,613.98)
(8,111.17)
9,208.50
(12,284.08)
11,658.10
(3.74)
2,449.60
14,733.68
3,543.19
11,658.10
2,449.60
Net Increase / (Decrease) in Cash and Cash
Equivalents
Cash and Cash Equivalents at the beginning
Decrease in Cash and Cash Equivalents pursuant to
merger of Subsidiary and certain other Companies
into Joint Venture
Cash and Cash Equivalents at the end
37
* Excluding deferred payment liability towards spectrum won in auction, being non cash transaction during
the respective years
Notes to Cash flow Statement
1.
Cash and Cash Equivalents include the following Balance Sheet amounts:
Cash on hand
26.01
26.48
16.66
Cheques on hand
183.93
223.18
135.06
Balances with banks
- In Current Accounts
235.62
750.43
354.48
- In Deposit Accounts
942.29
377.86
967.40
Investment in Units of Liquid Mutual
2,155.34
10,280.15
976.00
Funds
3,543.19
11,658.10
2,449.60
2. The above cash flow statement has been prepared under the indirect method as set out in Accounting Standard
3 on Cash Flow Statement.
38
RISK FACTORS
Prospective investors should carefully consider the risk factors described below together with all other
information contained in this Placement Document before making any investment decision relating to the Equity
Shares. These risks and uncertainties are not the only issues that we face. These risks and uncertainties and
additional risks and uncertainties not presently known to us or that we currently believe to be immaterial may
have an adverse effect on our business, results of operations, financial condition or prospects and cause the
market price of the Equity Shares to fall significantly and you to lose all or part of your investment in the Equity
Shares. Prospective investors should pay particular attention to the fact that our Company is incorporated
under the laws of India and that our Company is subject to a legal and regulatory environment which may differ
in certain respects from other countries.
Risks relating to our business
If we do not continue to provide telecommunications or related services that are technologically up to date,
we may not remain competitive, and our business, prospects and results of operations may be adversely
affected.
The telecommunications industry is characterized by technological changes, including an increasing pace of
change in existing mobile systems, industry standards and ongoing improvements in the capacity and quality of
technology. As new technologies develop, our equipment may need to be replaced or upgraded, or our networks
may need to be rebuilt in whole or in part in order to sustain our strong competitive position in the Indian mobile
telecommunications industry. As a result, we may require substantial capital expenditures and access to related
technologies in order to integrate new technologies with our existing technology and phase out outdated and
unprofitable technologies. If we are unable to modify our networks and equipment on a timely and cost effective
basis, we may lose subscribers.
Many of the services we offer are technology-intensive and the deployment or acceptance of new technologies,
such as 4G, may render such services non-competitive or obsolete and we may need to reduce the prices we
charge for such services. In addition, we face the risk of unforeseen complications in the deployment of new
services and technologies, and we cannot assure you that these new technologies will be commercially
successful. Our results of operations would also suffer if our new services and products are not well-received by
our subscribers, are not appropriately timed with market opportunities or are not effectively brought to market.
It is possible that the development of technologies, products and services may intensify competition due to the
entrance of new competitors or the expansion of services offered by existing competitors. For example, Internetbased services, such as Google Voice, Yahoo Voice and Skype, allow users to make calls, send SMSs and offer
other advanced features such as the ability to route calls to multiple handsets and access to Internet services. In
addition, applications such as WhatsApp, Line and Viber also provide alternate modes of connectivity. We
cannot predict which of many possible future technologies, products, or services will be important to maintain
our competitive position. To the extent we do not keep pace with technological advances or fail to respond in a
timely manner to changes in the competitive environment affecting our industry, we could lose market share or
experience a decline in our business, prospects and results of operations.
There are several regulatory, tax and other disputes pending against our Company. In the event that these
cases are decided against our Company, it could have an adverse effect on our results of operations and
financial condition.
Our Company is involved in a number of legal cases, including, regulatory, tax, and other claims, pending at
various levels of adjudication before several courts and tribunals. For example, our Company has received
demands for payment of tax of ₹ 2.32 billion and ₹ 2.38 billion in March 2014 and ₹ 15.18 billion in March
2013 (which was revised and reduced to ₹ 12.00 billion) in connection with the tax assessment years 2012-13,
2011-12 and 2010-11, respectively. Such demands were primarily in relation to certain disallowances that were
made by the tax department in relation to, among other things, revenue share license fees, interest attributable to
interest free advances that were given to our Subsidiaries, discounts given to prepaid dealers, roaming charges
paid to other operators and addition of ₹ 20.69 billion worth of net value of assets of the telecom undertaking
vested in our Company from ABTL pursuant to the scheme of arrangement between our Company and ABTL,
to the taxable income of our Company. In addition, ABTL has received two demands for payment of tax for an
aggregate amount of ₹ 33.49 billion in matters relating to the tax treatment of consideration received from P5
Asia Holding Investments (Mauritius) Limited for the subscription of compulsorily convertible preference
shares of ABTL and demerging ABTL’s telecommunications business into our Company. We have challenged
39
each of these demands and the disputes are pending.
In addition, we have disputes with the DoT on several matters that are pending. Such matters include, among
other things, proceedings relating to (i) levy of a one-time charge for excess spectrum held by
telecommunication service providers; (ii) alleged shortfall in payment of license fee by our Company; (iii)
alleged delay in payment of license fee by our Company; and (iv) alleged breach of terms and conditions of
certain licenses by our Company. In the event that these cases are decided against our Company, it could have
an adverse effect on our results of operations and financial condition. For further details of our material
outstanding litigation, see “Legal Proceedings” on page 162.
Our telecommunications licenses and spectrum allocations are subject to terms and conditions, ongoing
review and extensions and varying interpretations, each of which may result in modification, early
termination, expiry on completion of the term or additional payments, which could adversely affect our
business, prospects, financial condition and results of operations.
Our licenses and spectrum allocations are subject to the terms and conditions contained in the licenses, ongoing
review and extensions and approval of such extensions by the relevant authorities. While we do not expect our
business to cease operations when our licenses come up for extension, there can be no assurance that these
licenses will be extended on satisfactory terms, or at all. Additionally, these licenses and allocations are subject
to varying interpretations and the related uncertainty, as a result, may have an adverse effect on our business and
results of operations.
The DoT in its NTP, recommended re-farming spectrum and allotment of alternative frequency bands to service
providers from time to time. In February 2014, the DoT auctioned spectrum in the 900 MHz band for three
Metro Service Areas and auctioned spectrum in the 1800 MHz band for all 22 Service Areas. The spectrum we
have won in the February 2014 auction is in the process of being allocated to us and we cannot assure you that
the allocation will complete in a timely manner. The licensees whose licenses were also due for extension had to
participate in the auction and had no reservation of spectrum in connection with the extension of their licences.
Our 900 MHz band licenses come up for extension between December 2015 and April 2016. As a result, there
can be no assurance that we will be able to continue to hold our existing spectrum and some of the spectrum
under which we operate may need to be replaced with another spectrum, which could have an adverse effect on
our business. Our inability to extend the term of our license or win spectrum in the 900 MHz band when it is
auctioned may result in an adverse effect on our business. Our Company has filed an appeal before the Supreme
Court of India challenging the order of TDSAT denying our confirmation that we have a right to extend beyond
the original terms of the licenses. Such appeal is pending. Additionally, the endorsement of the licenses held by
erstwhile Spice pertaining to Punjab and Karnataka Service Areas in favour of our Company is subject to the
outcome of a petition filed by our Company before the TDSAT. For further details, see “Legal Proceedings” on
page 162. Further, there continues to be uncertainty as to the fees and costs of the grant and any limitations or
other terms that may be imposed upon successful bids. We have, in the past, paid significant amounts for certain
of our telecommunications licenses and spectrum, and we anticipate that we may have to pay substantial entry
fees and license fees and spectrum usage charges for certain Service Areas, as well as meet specified network
build-out requirements. We cannot assure you that we will be successful in obtaining or funding these licenses
and spectrum, or, if licenses and spectrum are awarded, that they will be obtained on commercially acceptable
terms. Furthermore, to obtain or extend our licenses or spectrum, we may need to seek further funding through
additional borrowings or offerings, and we cannot assure you that such funding will be obtained on satisfactory
terms, or at all, which could adversely affect our business, prospects, financial condition and results of
operations.
Recently, the DoT also announced Guidelines for Grant of Unified License (the “UL Guidelines”) which delinks the allocation of spectrum from the grant of licenses and provides the procedure for the grant of Unified
Licenses. The UL Guidelines provide, among other things: (i) the procedure for grant of, or migration to,
Unified License, (ii) the fee payable for the Unified License, (iii) term of the Unified License and its renewal
mechanism, and (iv) restrictions applicable to licensees, such as prohibition on cross-holding in licensees within
the same Service Area. We have been granted the Unified License in October 2013 for seven new Service
Areas. As the UL Guidelines have been recently announced, we cannot predict with any certainty the effect of
the UL Guidelines on our existing licenses and operations. For details about the UL Guidelines, see
“Regulations and Policies” on page 101.
We face intense competition that may reduce our market share and lower our profits.
Competition in the Indian telecommunications industry is intense. We face significant competition from other
40
companies, including from those with pan-India footprints such as Bharti Airtel Limited, Vodafone India
Limited and Reliance Communications Limited. Competition may affect our ability to bid competitively for
spectrum that the Government intends to auction, may result in our subscriber base declining, could cause a
decrease in tariff rates and ARPU, could cause an increase in subscriber churn and an increase in selling and
promotional expenses, all of which could have an adverse effect on our business and results of operations.
In addition, mobile number portability, which enables subscribers to switch their mobile telecommunications
services providers without changing their phone numbers, was introduced across all 22 Service Areas in January
2011. This could lead to greater movement of subscribers among providers of mobile telecommunications
services, which could increase our marketing, distribution and administrative costs, slow growth in subscribers
and reduce revenues.
Certain of our competitors may be able to offer mobile services at relatively lower costs and may be able to
bundle services and offer complete telecommunications solutions to their subscribers in ways that we cannot
provide. If we are not able to successfully compete, our business and results of operations could be adversely
affected.
We have substantial capital requirements and may not be able to raise the additional funds required to meet
these requirements.
We operate in a capital-intensive industry with relatively long gestation periods. Our funding requirements are
primarily for award of licenses, purchase of spectrum, network expansion and upgrades, the roll-out of new
networks following awards of new licenses and spectrum and technological advancements. Currently, we plan
to expand our network in the Established Service Areas and to further build and roll-out networks in the New
Service Areas, all of which will require additional capital resources. We also require capital for purchase of
spectrum and for general corporate purposes. The actual amount and timing of our future capital requirements
may differ from our estimates as a result of, among other things, unforeseen delays or cost overruns, future cash
flows being less than anticipated, price increases, unanticipated expenses, imposition of taxes, regulatory and
technological changes, limitations on spectrum availability, market developments and new opportunities in the
industry.
The financing required for such investments may not be available to us on acceptable terms or at all and we may
be restricted by our existing or future financing arrangements. If we decide to raise additional funds through the
incurrence of debt, our interest obligations will increase, which could significantly affect financial measures
such as our earnings per share (“EPS”). If our Company does raise additional funds through the issuance of
equity, your ownership interest in our Company will be diluted. Our ability to finance our capital expenditure
plans is also subject to a number of risks, contingencies and other factors, some of which are beyond our
control, including borrowing or lending restrictions under applicable laws, any restrictions on the amount of
dividend payable and general economic and markets conditions. Any inability to obtain sufficient financing
could result in the delay or abandonment of our development and expansion plans, the failure to meet roll-out
obligations pursuant to our licenses or our inability to continue to provide appropriate levels of service in all or a
portion of our Service Areas (which may lead to penalties or loss of license). As a result, if adequate amount of
capital is not available, there could be an adverse effect on our business, results of operations and prospects.
Our lenders have substantial rights to determine how we conduct our business.
We have substantial amount of indebtedness. See “Capitalisation Statement” on page 57. We have entered into
several financing arrangements that contain provisions that restrict our ability to do, among other things, the
following:

create security over existing and future assets;

incur additional indebtedness or service subordinated indebtedness;

make certain restricted payments;

invest in equity interests or purchase assets, other than in ordinary course of our business;

sell or otherwise dispose or revalue assets;

change or expand the scope of business;
41

enter into certain corporate transactions such as reorganizations, amalgamations and mergers;

dilute our promoter’s shareholding in our Company beyond specified levels; and

change the capital structure of our Company.
We must obtain the approval of the lenders under our financing arrangements before undertaking these
significant actions. We cannot assure you that the lenders will grant the required approvals in a timely manner,
or at all. The time required to secure consents may hinder us from taking advantage of a dynamic market
environment. In addition to the restrictions listed above, we are required to maintain certain financial ratios
under our financing arrangements. These financial ratios and the restrictive provisions could limit our flexibility
to engage in certain business transactions or activities, which could put us at a competitive disadvantage and
could have an adverse effect on our business, results of operations and financial condition.
Most of our financing arrangements are secured by our movable (in addition to a limitation on transfer of equity
shares of our Subsidiaries), immovable and intangible assets, whether existing or future.
Additionally, the application for creation of certain security interests in favour of certain lenders in relation to a
loan for an aggregate amount of ₹ 32,000.00 million incurred by our Company is pending before the DoT. In the
past, the lenders have, from time to time, extended the period for creating such security interest. We have
approached the relevant lenders for obtaining further extension for creation of this security interest. However, in
the event the lenders do not extend or approve the extension of such time limit, it may be tantamount to an event
of default under the relevant debt agreement.
Certain of our financing agreements enable the lenders under these agreements to cancel any outstanding
commitments, accelerate the facilities, exercise cross default provisions, convert their loans into equity and
enforce their security interests on the occurrence of events of default such as a breach of financial covenants,
failure to obtain the proper consents, failure to perfect security as specified and such other covenants that are not
cured. It is possible that we would not have sufficient funds upon such an acceleration of our financial
obligations to pay the principal and interest in full. If we are forced to issue equity to the lenders, your
ownership interest in us will be diluted. It is also possible that future financing arrangements may contain
similar or more onerous covenants.
Any failure to comply with a condition or covenant under our financing agreements that is not waived by our
lenders or is otherwise not cured by us may also trigger cross default provisions under certain of our other
financing agreements and may adversely affect our ability to conduct our business.
Our revenues are derived primarily from providing mobility services and we are dependent on 10 out of the
15 Established Service Areas for a significant proportion of our revenues.
We are focused on providing mobility services, which constituted 89.4%, 89.0% and 89.8%, of our total income
(before inter segmental eliminations) for the financial years 2012, 2013 and 2014, respectively. Our future
success depends, to a large extent, on the continued growth of the mobile telecommunications market in India
and there being no adverse regulatory, technological or other changes impacting this industry, our ability to add
new revenue streams profitably and our ability to offer complete mobile telecommunications solutions to our
subscribers.
Further, we are substantially dependent on 10 Service Areas, namely, Kerala, Madhya Pradesh, Uttar Pradesh
(West), Maharashtra, Haryana, Punjab, Andhra Pradesh, Gujarat, Delhi and Uttar Pradesh (East), out of our 15
Established Service Areas for our income and profits. According to TRAI, we had, in aggregate, approximately
86.49 million, 92.24 million and 102.45 million subscribers in our 10 Established Service Areas as of March 31,
2012, 2013, and 2014, respectively, which represented approximately 76.7%, 75.9% and 75.5%, respectively, of
our total subscribers as of those dates. We believe that these Service Areas will continue to contribute
significantly to our income and profit in the foreseeable future. Any changes in subscriber preferences or other
related factors, such as increased competition in these Service Areas, could have an adverse effect on our
business and results of operations.
Churn in the mobile telecommunications industry in India is high and we cannot assure you that we will be
able to retain all our existing subscribers or that we will be successful in subscriber additions, which may
have an adverse effect on our business and results of operations.
The Indian mobile telecommunications industry has historically experienced a high rate of churn. This high
42
churn rate has been a consequence of hyper competition and resultant promotional tariffs for new connections.
Churn rates are especially high among pre-paid subscribers, who constitute a significant portion of our
subscriber base.
Our average monthly churn rate for the quarters ended March 31, 2012, March 31, 2013 and March 31, 2014
were 9.9%, 4.3% and 4.2%, respectively. Our ability to retain our existing subscribers and to compete
effectively for new subscribers and reduce our rate of churn depends on, among other things:

actual or perceived quality and coverage of our networks;

executing our marketing and sales strategies, service delivery, subscriber service activities including
account set-up and billing;

our ability to anticipate and respond to various competitive factors affecting the industry, including
new technologies, products and services, subscriber preferences, demographic trends, economic
conditions and discount pricing or other strategies; and

public perception of our brand.
Churn may also increase due to factors beyond our control, including, a slowing economy, a maturing subscriber
base and competitive offers. A high rate of churn could have an adverse effect on our business and results of
operations and we cannot assure you that we will be able to retain all our existing subscribers.
We are dependent on third party telecommunication providers.
Our ability to provide high quality and commercially viable mobile telecommunications services depends, in
some cases, on our ability to interconnect with the telecommunications networks and services of other domestic
and international mobile and fixed-line operators, including our optical fibre cable transmission network, which
we either own or have indefeasible right to use (“IRU”) arrangements with other telecommunication operators.
We also rely on other telecommunications operators for the provision of international roaming services for our
subscribers. While we have interconnection and international roaming agreements in place with other
telecommunications operators, we have no direct control over the quality of their networks and the
interconnections and international roaming services they provide. Any difficulties or delays in interconnecting
with other networks and services, or the failure of any operator to provide reliable interconnections or roaming
services to us on a consistent basis, could result in loss of subscribers or a decrease in traffic, which could
adversely affect our business and results of operations.
Our ability to grow our business and our number of subscribers is dependent on the quality and quantity of
spectrum owned by us.
The operation of our mobile telecommunications network is limited by the quality and quantity of spectrum
owned by us in the Service Areas. DoT generally auctions spectrum. The current spectrum owned by us may not
be sufficient for our expected subscriber growth, and our future profitability and growth may be adversely
affected if our spectrum proves inadequate or of inferior quality or if we are unable to procure additional
spectrum in the future for the expansion of our mobile telecommunications business.
Additional spectrum is also required to maintain quality of service. As the number of callers simultaneously
using the same spectrum capacity in a particular Service Area (or areas therein) increases towards the maximum
capacity of that spectrum, the quality of the service may suffer which may lead to a loss of subscribers and
revenues. This could have an adverse effect on our business and results of operations.
We are dependent on a limited number of vendors to supply critical network and other equipment and
services.
We depend upon key suppliers and vendors to provide us with equipment and services that we need to build,
develop, maintain and rollout our networks and operate our businesses. Ericsson India Private Limited, Nokia
Solutions and Networks India Private Limited, HUAWEI International Pte. Limited and ZTE Corporation are
our principal suppliers. These vendors also provide maintenance support. We are substantially dependent on
these vendors for critical components for future expansions. We cannot be certain that we will be able to obtain
satisfactory equipment and service on commercially acceptable terms or that our vendors will perform as
expected. Should we fail to receive the quality of equipment and maintenance services that we require, to
negotiate appropriate financial terms for equipment and services or to obtain adequate supplies of equipment in
43
a timely manner, or if our key suppliers discontinue the supply of such equipment and services due to
withdrawal from the Indian mobile telecommunications market or otherwise, we may find it difficult to replace
a vendor on a timely basis without significant capital expenditure which could significantly disrupt our services.
This could have an adverse effect on our business and results of operations.
Our outsourcing policy has made and may make us further dependent upon certain external suppliers of
important services both to us and to our subscribers. For example, external vendors provide services relating to
our subscriber service functions. As a result, we are exposed to the supply and service capabilities of each of
these vendors, which may be impacted by their ability to retain and attract appropriate personnel, their financial
position and many other factors which are outside our control. If such a vendor fails to perform adequately or
we terminate the vendor, we may not be able to provide such services ourselves or find an alternative supplier
without disruption to our services or incurring additional costs.
We rely on sophisticated billing and credit control systems any failure of which could lead to a loss of income
and subscribers.
We are dependent on several sophisticated processes, IT systems and software packages for mobile services
usage, billing and credit control. We also have outsourced certain aspects of these systems to specialist service
providers. For example, we have outsourced most of our information technology operations, including
information technology services, processes, applications and software to IBM India Private Limited. Any failure
of critical IT systems, including those provided by third parties, could have an adverse effect on our business
and results of operations, and lead to a loss of income and subscribers.
We are dependent on several complex software packages that record minutes used, calculate the appropriate
charge and then deduct the amount due from the account of the pre-paid subscriber or record the amount
payable by the relevant post-paid subscriber. Any failure to properly capture the services provided or to charge
the appropriate fees could have an adverse effect on our revenue. No system or process can ensure total capture
and some loss of income is common. However, if our income leakages increase, or are greater than those of our
competitors, then our business and results of operations could be negatively affected.
We are dependent on the services of several management personnel and our ability to recruit and retain
employees. Our business may be adversely affected if we are unable to retain and recruit management and
other personnel.
We have, over time, built a strong team of experienced professionals to oversee the operations and growth of
our businesses. We have a full-time Managing Director, two senior professionals heading operations in the
Service Areas and eight senior professionals overseeing various other functions. We believe that our success in
the future is substantially dependent on the expertise of our management team, the loss of any of whom could
have an adverse effect on our business and results of operations. We do not own key person insurance on any of
our management personnel. We may not be able to locate or employ qualified executives on acceptable terms.
The telecommunications industry requires personnel with diverse skills. Any failure to recruit and retain
appropriate employees would adversely affect our business. We also face significant challenges in training our
employees in the rapidly changing mobile telecommunications industry and our inability to do so successfully
could adversely affect our operations.
Our Promoters will continue to have the right to approve certain corporate actions.
We are part of the Aditya Birla Group. Following the completion of the Issue, the Aditya Birla Group, will
continue to hold 42.91% of our outstanding equity shares, and therefore will have the ability to significantly
influence our operations. This will include the ability to conduct business at shareholders’ meetings, including
the issue of equity shares and dividend payments, election of Directors, approval of business plans, mergers and
acquisitions, consolidation and joint venture arrangements, amendments to our Memorandum and Articles of
Association, and any assignment or transfer of our interest in any of our licenses. There can be no assurance that
the Aditya Birla Group will not have conflicts of interest with other shareholders or with us. Any such conflicts
may adversely affect our ability to execute our business strategy or operate our business.
We have only limited protection for our trademarks.
We operate in a competitive environment where generating and maintaining brand recognition is a significant
element of our business strategy. We have obtained 48 trademark registrations of brands, including our pre-paid
service marks, and have 36 pending trademark applications. See “Our Business – Intellectual Property” on
44
page 99. We may not be able to prevent infringement of our trademarks and a passing off action may not
provide sufficient protection. Additionally, we may be required to litigate to protect our trademarks, which may
adversely affect our business. We cannot assure you that we will successfully obtain or enforce our trademarks
and any such it could have an adverse effect on our business, results of operations and prospects.
We are subject to risks associated with product liability and warranty as a result of sales of
mobile handsets.
branded
We also sell
branded mobile handsets. We have entered into agreements with mobile phone manufacturing
companies such as TCT Mobile International Limited, who supply us with the handsets which we then sell. Our
agreements with these suppliers contain customary warranty provisions where the manufacturer provides a
warranty to the user for any defects, as stipulated in the agreement. Purchasers of these handsets could, however,
potentially claim damages from us. There can be no assurance that we will not be subject to the risks and costs
associated with product liability and warranties, and negative publicity, which may adversely affect our brand,
our business and our results of operations.
We rely on the value of our brand, and any failure to maintain or enhance subscriber awareness of our
brand could have an adverse effect on our business and results of operations.
We believe continued investment in our brand,
, is critical to retain and expand our business. We believe
that our brand is well respected and recognized in the Indian mobile telecommunications market. We have
invested significantly in developing and promoting our brand and expect to continue to spend on maintaining
our brand value to enable us to compete effectively with our competitors, and to expand into the New Service
Areas where our brand is relatively not well known. Even if we are successful in our branding efforts, such
efforts may not be cost-effective. If we are unable to maintain or enhance subscriber awareness of our brand and
generate demand in a cost-effective manner, it would adversely affect our ability to compete in the mobile
telecommunications industry and would have an adverse effect on our business and results of operations.
A large part of our passive infrastructure is not owned by us and as a result there can be no assurance that
such passive infrastructure will be adequately maintained or that our strategy for the continued upgrade or
rollout of our network will be implemented in a timely manner or on a cost-effective basis.
As of March 31, 2014, out of the total 104,778 2G cell sites that we use for our network infrastructure, we own
passive infrastructure only for 9,446 cell sites. We have cell sites that are located at towers not owned by us but
leased from Indus Towers and other third parties. While we have infrastructure sharing arrangements in place
with Indus Towers and the other third parties, we have no direct control over these entities and we are dependent
on these entities for the maintenance and continual upgrade or rollout of our network in our Service Areas. Any
difficulties or delays in acquiring cell sites, or setting up towers, or the failure of any passive infrastructure
provider to execute our rollout initiatives, could result in loss of opportunity to grow our network which could
result in a decrease in traffic, which could, as a result, adversely affect our business and results of operations.
We cannot assure you that we will be able to identify new cell sites in a timely or cost-effective basis or that we
or they will be able to secure or renew leases for existing cell sites on acceptable terms or that any such leases
can be renewed on economically acceptable terms.
We have also been named as a party to several litigation proceedings relating to the lease of private land for our
towers. A majority of these proceedings pertain to disputes regarding title to such land or our ability to use such
land for erecting towers, as well as suits for permanent and mandatory injunctions and determination of leases.
Any inability to protect our rights to the land on which our towers are located could have an adverse effect on
our business and results of operations.
Increasing competition in the tower infrastructure industry may create pricing pressures that may adversely
affect us and Indus Towers.
Our and Indus Towers’ tower infrastructure business faces competition from other mobile telecommunications
operators that share their own passive infrastructure with other carriers, other tower infrastructure companies,
site development companies that purchase antenna space on existing towers for mobile telecommunications
operators, and public sector entities. We believe that Indian mobile telecommunications operators may
increasingly share passive infrastructure which could adversely affect the pricing of our and Indus Towers’
passive infrastructure business and consequently adversely affect our results of operations.
Competitive pricing pressures for tenants from these competitors could adversely affect our and Indus Towers’
45
passive infrastructure business and results of operations. If we or Indus Towers lose subscribers due to pricing
or other reasons, we or Indus Towers may not be able to find new subscribers, and our results of operations may
be adversely affected. Increasing competition in this business could also make the acquisition of high quality
tower assets, and securing the rights to land for the towers, more costly. We cannot therefore assure you that we
or Indus Towers will be able to successfully compete within this increasingly competitive business sector.
Additionally, factors adversely affecting the demand for mobile telecommunications services also adversely
affect the demand for tower space in India. If the Indian mobile telecommunications services market does not
grow or grows at a slower rate than we expect, or the behaviours of market participants do not meet current
expectations, the demand for our and Indus Towers’ services and growth prospects will be adversely affected,
which would have an adverse effect on this business and our results of operations.
Our reputation and business may be harmed and we may be subject to legal claims if there is loss, disclosure
or misappropriation of or access to our subscribers’ or our own information or other breaches of our
information security.
We make extensive use of online services and centralized data processing, including through third-party service
providers. The secure maintenance and transmission of subscriber information is an important element of our
operations. Our information technology and other systems that maintain and transmit subscriber information, or
those of service providers, may be compromised by a malicious third-party penetration of our network security,
or that of a third-party service provider, or impacted by advertent or inadvertent actions or inactions by our
employees, or those of a third-party service provider. As a result, our subscribers’ information may be lost,
disclosed, accessed or taken without the subscribers’ consent.
In addition, third-party service providers and us process and maintain our proprietary business information and
data related to our subscribers or suppliers. Our information technology and other systems that maintain and
transmit this information, or those of third party service providers, may also be compromised by a malicious
third-party penetration of our network security or that of a third-party service provider, or impacted by
intentional or inadvertent actions or inactions by our employees or those of a third-party service provider. As a
result, our business information, or subscriber or supplier data may be lost, disclosed, accessed or taken without
consent.
Any major compromise of our data or network security, failure to prevent or mitigate the loss of our services or
any subscriber information and delays in detecting any such compromise or loss could disrupt our operations,
damage our reputation and subscribers’ willingness to purchase our service and subject us to additional costs
and liabilities, including litigation.
Our business depends on the delivery of an adequate and uninterrupted supply of electrical power and fuel at
a reasonable cost.
The tower sites require an adequate and cost-effective supply of electrical power to function effectively. We
principally depend on power supplied by regional and local electricity transmission grids operated by the
various state electricity providers in which our sites are located. In order to ensure that the power supply to the
sites is constant and uninterrupted, we also rely on batteries and diesel generators, the latter of which requires
diesel fuel.
Our operating costs will increase if the price of electrical power from the state electricity providers or cost of
diesel fuel increases. While we believe that our current supply of electricity from third parties is sufficient to
meet our existing requirements, we cannot assure you that we will have an adequate or cost effective supply of
electrical power at our tower sites, the lack of which could disrupt our operations, adversely affecting our
business and results of operations. Further, any increase in the cost of electrical power or diesel fuel, to the
extent that we are not able to pass this through to our subscribers, would also adversely affect our profitability.
Additionally, DoT has issued a circular dated January 4, 2012 on implementation of green technologies in the
mobile telecommunications sector. The circular stipulates, among other things, that 50% and 20% of the rural
and urban towers, respectively, should be powered by a hybrid of renewable and non-renewable power by the
year 2015. The circular further states that this percentage will increase to 75% and 33% for rural and urban
towers, respectively, for compliance by the year 2020. The circular also includes other requirements, such as
rating for energy efficiency, declaration of carbon footprint to TRAI, cap of 500 Watts on power consumption of
BTS by the year 2020. We may need to undertake additional capital expenditure to ensure compliance with
these requirements, which may adversely affect our results of operations.
46
Our ability to exercise any influence over Indus Towers is dependent upon the consent and cooperation of
the other joint venture partners who are not under our control.
Our Subsidiary, ABTL, holds a 16% equity interest in Indus Towers, a joint venture entity. Our ability to
exercise any influence over Indus Towers depends on the consent of our partners in this joint venture. Any
failure to reach a consensus or to resolve any disputes with our partners could disrupt the operations of Indus
Towers and have an adverse effect on our business.
Additionally, Providence Equity Partners, through its entity P5 Asia Holding Investments (Mauritius) Limited,
beneficially holds 1,925,000 compulsorily convertible preference shares, convertible into equity shares
representing 30.3% of the total equity share capital, of ABTL. P5 Asia Holding Investments (Mauritius) Limited
has certain rights including nomination rights, anti-dilution rights and restrictions on change of control of ABTL
and our Company. Our Company also has a contingent obligation to buy compulsorily convertible preference
shares from the holder of such shares at fair market value plus agreed consideration in the event ABTL is not
able to redeem such shares (which were issued by ABTL for ₹ 20,982.50 million including premium thereon).
See “Financial Statements – Contingent Liabilities”. If P5 Asia Holding Investments (Mauritius) Limited
exercises its conversion rights with respect to the compulsorily convertible preference shares, our Company’s
equity interest in ABTL would be reduced significantly.
Additionally, 60% of the equity interest that ABTL holds in Indus Towers is pledged in favour of IDBI Bank
Limited (as security trustee on behalf of several lenders) in connection with loans for an outstanding principal
amount of ₹ 51,938.56 million incurred by our Company as of March 31, 2014. In the event that we are in
default of such loan facility and such security was enforced, our Company’s effective equity interest in Indus
Towers would be reduced.
Risks relating to the mobile telecommunications industry
Reductions in prices for mobile telecommunications services in India may have an adverse effect on our
business and results of operations.
Telecommunications tariffs in India have declined significantly in recent years. The prices for our mobile
telecommunications services in India may continue to decrease:

as a result of increase in competition;

as we and our competitors, existing and new, increase transmission capacity on existing and new
networks;

as a result of technological advances;

as a result of synergies realized by us and our competitors; and

as we and our competitors compete to acquire new subscribers or retain existing subscriber base.
Any decline in tariffs may adversely affect our business and results of operations.
If mobile telecommunications service providers consolidate or merge to any significant degree, our business,
prospects and results of operations could be adversely affected.
We cannot assure you that there will not be further consolidation of Indian mobile telecommunications
providers in the future. If any of our competitors combine or merge or begin to engage in extensive sharing,
roaming or resale arrangements it could adversely affect our business and results of operations. Furthermore, the
DoT has recently issued guidelines for mergers and acquisitions in the mobile telecommunications industry,
which may facilitate consolidation in the industry that could increase competition and, as a result, adversely
affect our business and results of operations.
Concerns about health risks associated with mobile telecommunications equipment may reduce the demand
for our services.
The effects of any damage caused by exposure to an electromagnetic field have been and continue to be the
subject of careful evaluations by the international scientific community, but to date there is no conclusive
scientific evidence of harmful effects on health. However, we cannot rule out that exposure to electromagnetic
47
fields or other emissions originating from transmission infrastructure is not, or will not be found to be, a health
risk.
Our costs could increase and our revenue could decrease due to perceived health risks from radio emissions,
especially if these perceived risks are substantiated. Public perception of potential health risks associated with
mobile telecommunications could slow the growth of mobile telecommunications services companies such as
us. In particular, negative public perception of, and regulations regarding, these perceived health risks could
slow the market acceptance of mobile telecommunications services, which could restrict our ability to expand
our business. Such perception could also increase opposition to the development and expansion of passive
infrastructure, which could force us, Indus Towers and our passive infrastructure providers to relocate existing
sites, which could adversely affect the quality of our services and, in turn, our business and results of operations.
Numerous health related lawsuits have been filed against mobile telecommunications operators and mobile
device manufacturers in various jurisdictions, including India. Petitions have also been filed against the
installation of towers near residential areas owing to concerns relating to the adverse effects of electromagnetic
radiation in India. Beginning September 1, 2012, the DoT implemented new standards in relation to
electromagnetic radiation emitted by cell sites. The DoT also issued new guidelines to all state Governments
with regard to clearance for installation of mobile towers. If a scientific study resulted in a finding that radio
frequency emissions posed health risks to consumers, it could negatively affect the market for mobile
telecommunications services, which would adversely affect our business and results of operations.
We are subject to extensive Government regulation of the mobile telecommunications industry in India.
The Government along with TRAI regulates many aspects of the mobile telecommunications industry in India.
The extensive regulatory structure under which we operate constrains our flexibility to respond to market
conditions, technological developments, competition or changes in our cost structure.
In addition, we are required to obtain a wide variety of approvals from various regulatory bodies. There can be
no assurance that these approvals will be forthcoming on a timely basis, or at all, which could have an adverse
effect on our business and results of operations.
The Government may replace or amend laws, regulations or policies, including guidelines for licensing,
spectrum allocation and pricing rules. We also may incur additional expenditure to comply with changes in
regulation. For example, on December 28, 2012, the DoT issued an order levying of one-time charge for excess
spectrum. For spectrum beyond 6.2 MHz in the 1800 MHz and the 900 MHz bands, the DoT imposed a Service
Area wide excess charge from July 1, 2008 till December 31, 2012, which for us amounted to approximately ₹
3.69 billion and for spectrum beyond 4.4 MHz in the 900 MHz and the 1800 MHz bands, the DoT imposed a
Service Area wide excess charge from January 1, 2013 until the validity of the license, which for us amounted to
approximately ₹ 17.44 billion. We have challenged this order in the Bombay High Court. See “Legal
Proceedings” on page 162.
Additionally, the DoT came out with guidelines for the verification of subscribers effective November 2012,
making wide ranging changes in subscriber activation processes, disconnection and other related matters. We
are currently litigating against the DoT for alleged violations of verification norms relating to subscriber
activation.
In August 2013, the DoT announced the grant of Unified License which may adversely affect our existing
licenses, including the extension thereof. For further details on these guidelines, see “Regulations and Policies”
on page 101.
Our licenses reserve broad discretion to the Government to influence the conduct of our businesses by giving the
Government the right to modify, at any time, the terms and conditions of our licenses, take-over our networks
and to terminate or suspend our licenses in the interests of national security or in the event of a national
emergency, war or similar situations. Under our licenses, the Government also may impose certain penalties
including suspension, revocation or termination of a license in the event of a default by us in complying with the
terms and conditions of the license.
Nine of our earliest licenses are expire between December 2015 and April 2016. We could be charged a
substantial entry fee and increased license fees and spectrum related charges for the purchase of additional
licenses which could have an adverse effect on our business and results of operations.
Technical failures, natural disasters, terrorism, fire or attacks by disaffected social elements could damage
48
our telecommunications networks.
Our mobile telecommunications networks are vulnerable to technological failures and natural disasters such as
earthquakes and floods. There have also been isolated incidents of damage to our installations and those of our
competitors as a result of attacks by disaffected sections of the community or groups seeking various forms of
recognition or redress. Although the nature of our network is such that these incidents are likely to remain
isolated and not impact our overall provision of services, there can be no guarantee that these attacks will not
increase or be more disruptive.
While we maintain insurance coverage for our networks against damage caused by fire and special perils
including landslides, earthquakes, burglary and terrorist attack, a loss to our telecommunications networks,
including loss of subscriber data for any reason, including those covered by insurance, could have an adverse
effect on our business, results of operations and financial condition. We cannot assure you that any claim under
our insurance policies will be honoured fully or in part or in a timely manner or payment of such claim would
fully compensate us if, for example, we are unable to recover subscriber data.
Our main IT data centre is in Pune but we have another IT data centre in Hyderabad, which functions as a
disaster recovery site. The Hyderabad IT data centre provides disaster recovery support and back-up facilities
for most of the critical IT enabled business applications but does not replicate in full the functions of the Pune
data centre. As such, any interruption to the use of the Pune data centre could have an adverse effect on our
business, results of operations and prospects. We cannot assure you that we will be able to control losses caused
by any natural, technological or human calamity.
Risks relating to doing business in India
Changing laws, rules and regulations, additional taxes and charges and legal uncertainties may adversely
affect our business and results of operations.
Our business and operations are governed by various laws and regulations, such as the Indian Telegraph Act,
1885, the Indian Wireless Telegraphy Act, 1933, the Telecom Regulatory Authority of India Act, 1997 and rules
and regulations made thereunder, the Information Technology Act, 2000 and other legislations enacted by the
central Government and the relevant state Governments. Our business and results of operations could be
adversely affected by any change in laws or interpretations of existing, or the promulgation of new laws, rules
and regulations applicable to our Company. For instance, the Supreme Court of India by its order dated
February 2, 2012 quashed all the licenses granted to the private companies on or after January 1, 2008 pursuant
to two press releases issued on January 10, 2008 and subsequent allocation of spectrum to such licensees.
Separately, the DoT levied one time spectrum charge which is currently under dispute. The Government has, in
the past, also raised demands against us, which we believe were not consistent with the terms and conditions of
our licenses. There can be no assurance that the Government will not raise such demands against us in the future
and that we will be successful in maintaining our position with regard to these demands with the appropriate
authorities.
There can be no assurance that the central or the relevant state Governments in India will not implement new
regulations and policies which will require us to obtain additional approvals and licenses from the Government
and other regulatory bodies or impose onerous requirements and conditions on our operations. Any such
changes and the related uncertainties with respect to the implementation of new regulations may have an
adverse effect on our business and results of operations.
Pursuant to the Issue, our Company may become a ‘foreign owned’ company per the Consolidated FDI
Policy and any investment by the Company in its Subsidiaries or Joint Venture will be subject to Indian
foreign investment laws.
Indian companies, which are owned or controlled by non-resident entities, are subject to investment restrictions
specified in the Consolidated FDI Policy. Under the Consolidated FDI Policy, an Indian company is considered
to be ‘owned’ by a non-resident entity if more than 50.0% of its equity interest is beneficially owned by nonresident entities. Pursuant to the Issue, the non-resident shareholding in our Company may exceed 50.0%,
thereby resulting in our Company being considered, as being ‘owned’ by non-resident entities under the
Consolidated FDI Policy. In such an event, any investment by our Company in the Subsidiaries or Joint Venture
will be considered as indirect foreign investment and shall be subject to various requirements specified under
the Consolidated FDI Policy, including sectoral investment restrictions, approval requirements and pricing
guidelines. For example, any investment in our subsidiary, Idea Cellular Infrastructure Services Limited, will be
49
subject to requirements specified under the Consolidated FDI Policy including applicable sectoral investment
restrictions and approval requirements.
The Companies Act, 2013 has effected significant changes to the existing Indian company law framework,
which may subject us to higher compliance requirements and increase our compliance costs.
A majority of the provisions and rules under the Companies Act, 2013 have recently been notified and have
come into effect from the date of their respective notification, resulting in the corresponding provisions of the
Companies Act, 1956 ceasing to have effect. The Companies Act, 2013 has brought into effect significant
changes to the Indian company law framework, such as in the provisions related to issue of capital (including
provisions in relation to issue of securities on a private placement basis), disclosures in offer document,
corporate governance norms, accounting policies and audit matters, related party transactions, introduction of a
provision allowing the initiation of class action suits in India against companies by shareholders or depositors, a
restriction on investment by an Indian company through more than two layers of subsidiary investment
companies (subject to certain permitted exceptions), prohibitions on loans to directors and insider trading and
restrictions on directors and key managerial personnel from engaging in forward dealing. We are also required
to spend, in each financial year, at least 2.0% of our average net profits during three immediately preceding
financial years towards corporate social responsibility activities. Further, the Companies Act, 2013 imposes
greater monetary and other liability on our Company and Directors for any non-compliance. To ensure
compliance with the requirements of the Companies Act, 2013, we may need to allocate additional resources,
which may increase our regulatory compliance costs and divert management attention.
The Companies Act, 2013 introduced certain additional requirements which do not have corresponding
equivalents under the Companies Act, 1956. Accordingly, we may face challenges in interpreting and
complying with such provisions due to limited jurisprudence on them. In the event, our interpretation of such
provisions of the Companies Act, 2013 differs from, or contradicts with, any judicial pronouncements or
clarifications issued by the Government in the future, we may face regulatory actions or we may be required to
undertake remedial steps. Additionally, some of the provisions of the Companies Act, 2013 overlap with other
existing laws and regulations (such as the corporate governance norms and insider trading regulations issued by
SEBI). Recently, SEBI issued revised corporate governance guidelines which are effective from October 1,
2014. Pursuant to the revised guidelines, we will be required to, amongst other things ensure that there is at least
one woman director on our Board at all times, establish a vigilance mechanism for directors and employees and
reconstitute certain committees in accordance with the revised guidelines. We may face difficulties in
complying with any such overlapping requirements. Further, we cannot currently determine the impact of
provisions of the Companies Act, 2013 and the revised SEBI corporate governance guidelines, which are yet to
come in force. Any increase in our compliance requirements or in our compliance costs may have an adverse
effect on our business and results of operations.
We may be affected by competition law in India and any adverse application or interpretation of the
Competition Act could adversely affect our business.
The Competition Act regulates practices having an appreciable AAEC in the relevant market in India. Under the
Competition Act, any formal or informal arrangement, understanding or action in concert, which causes or is
likely to cause an AAEC is considered void and results in imposition of substantial penalties. Further, any
agreement among competitors which directly or indirectly involves determination of purchase or sale prices,
limits or controls production, shares the market by way of geographical area or number of subscribers in the
relevant market or directly or indirectly results in bid-rigging or collusive bidding is presumed to have an AAEC
in the relevant market in India and is considered void. The Competition Act also prohibits abuse of a dominant
position by any enterprise.
On March 4, 2011, the Government issued and brought into force the combination regulation (merger control)
provisions under the Competition Act with effect from June 1, 2011. These provisions require acquisitions of
shares, voting rights, assets or control or mergers or amalgamations that cross the prescribed asset and turnover
based thresholds to be mandatorily notified to and pre-approved by the CCI. Additionally, on May 11, 2011, the
CCI issued Competition Commission of India (Procedure for Transaction of Business Relating to
Combinations) Regulations, 2011 (as amended) which sets out the mechanism for implementation of the merger
control regime in India.
The Competition Act aims to, among others, prohibit all agreements and transactions which may have an AAEC
in India. Consequently, all agreements entered into by us could be within the purview of the Competition Act.
Further, the CCI has extra-territorial powers and can investigate any agreements, abusive conduct or
50
combination occurring outside India if such agreement, conduct or combination has an AAEC in India.
However, the impact of the provisions of the Competition Act on the agreements entered into by us cannot be
predicted with certainty at this stage. We are not currently party to any outstanding proceedings, nor have we
received notice in relation to non-compliance with the Competition Act or the agreements entered into by us.
However, if we are affected, directly or indirectly, by the application or interpretation of any provision of the
Competition Act, or any enforcement proceedings initiated by the CCI, or any adverse publicity that may be
generated due to scrutiny or prosecution by the CCI or if any prohibition or substantial penalties are levied
under the Competition Act, it would adversely affect our business, results of operations and prospects.
We are subject to risks arising from exchange rate fluctuations.
A substantial portion of the equipment we use is imported and requires payments in foreign currencies. Imports
are subject to Government regulations and approvals, the availability of foreign exchange credit and the levy of
customs duties. Where there is no local alternative, delays in obtaining required approvals, changes in customs
duties or foreign exchange rates or adverse movements in the value of the Rupee could lead to a delay in the
acquisition of necessary equipment and adverse financial implications due to price movements thereof, which
could have an adverse effect on our business, and results of operations.
The exchange rate between the Rupee and the US Dollar has changed substantially in recent years and may
continue to fluctuate substantially in the future. From May 31, 2002 to June 1, 2007, the value of the Rupee
against the US Dollar rose by approximately 17.3 %. However, from June 1, 2007 to March 31, 2014, the value
of the Rupee against the US Dollar dropped by 48.2%. Accordingly, our operating and financial results would
be negatively affected if the Rupee depreciates against the US Dollar even further. We cannot assure you that
we will be able to effectively mitigate the adverse impact of currency fluctuations on our results of operations.
We have certain US Dollar denominated indebtedness and adverse movements in the value of Rupee against the
US Dollar, may increase our cost of borrowings and increase depreciation cost, which could have an adverse
effect on our business and results of operations.
The Indian economy has had sustained periods of high interest rates and/or inflation.
The majority of our direct costs are incurred in India. India has experienced high levels of inflation since 1980,
with inflation peaking at an annual rate of 14.1% in 1991. Notwithstanding recent reductions in the inflation
rate, based on the wholesale price index, which was 9.6% in the financial year 2011, 8.9% in the financial year
2012, 7.4% in the financial year 2013 and 6.0% in the financial year 2014 (Source: Reserve Bank of India), we
tend to experience inflation-driven increases in certain of our costs, such as salaries and related allowances, that
are linked to general price levels in India. However, we may not be able to increase the tariffs that we charge for
our services sufficiently to preserve operating margins. Accordingly, high rates of inflation in India could
increase our costs and decrease our operating margins, which could have an adverse effect on our business and
results of operations.
A portion of our borrowings are denominated in Rupees and are linked to floating Indian interest rates. Any
increase, especially over a prolonged period, in Indian interest rates would increase our costs of borrowing and
adversely affect our financial results and might make additional borrowing to fund investment uneconomic
and/or unaffordable. To the extent borrowings (including vendor financings) are linked to floating external rates
such as LIBOR, we are exposed to similar risks of high or variable interest rates used to determine the amounts
payable under such arrangements.
India’s infrastructure is less developed than that of many developed nations.
India’s infrastructure is less developed than that of many developed nations and problems with its port, rail and
road networks, electricity grid, communication systems or other public facilities could disrupt our normal
business activity. Any material deterioration of India’s physical infrastructure could harm the national economy,
disrupt the transportation of goods and supplies, and add costs to doing business in India. These problems could
interrupt our business operations and reduce demand for our services, which could have an adverse effect on our
business and results of operations.
There could be political, economic or other factors that are beyond our control, which may have an adverse
effect on our business and results of operations if they materialise.
The following external risks may have an adverse impact on our business and results of operations should any of
them materialize:
51

a change in the Government of India or a change in the economic and deregulation policies could
adversely affect economic conditions in India in general and our business in particular;

a slowdown in economic growth or financial instability in India could adversely affect our business and
results of operations;
Risks relating to the Placement
We cannot guarantee that the Equity Shares will be listed on the Stock Exchanges in a timely manner.
In accordance with Indian law and practice, after the Board passes the resolution to allot the Equity Shares but
prior to crediting such equity shares into the Depository Participant accounts of the QIBs, we are required to
apply to the Stock Exchanges for final listing approval. After receiving the final listing approval from the Stock
Exchanges, we will credit the equity shares into the Depository Participant accounts of the respective QIBs and
apply for the final trading approval from the Stock Exchanges. There could be a delay in obtaining these
approvals from the Stock Exchanges, which in turn could delay the listing of the Equity Shares on the Stock
Exchanges. Any delay in obtaining these approvals would restrict your ability to dispose of your equity shares.
An investor will not be able to sell any of the Equity Shares other than on a recognized Indian stock
exchange for a period of 12 months from the date of this Issue.
The Equity Shares are subject to restrictions on transfers. Pursuant to the SEBI Regulations, for a period of 12
months from the date of the issue of the Equity Shares, QIBs subscribing to the Equity Shares may only sell
their Equity Shares on the Stock Exchanges and may not enter into any off market trading in respect of these
Equity Shares. We cannot be certain that these restrictions will not have an impact on the price and liquidity of
the Equity Shares.
The price of the Equity Shares may be volatile.
The trading price of our equity shares may fluctuate after this Placement due to a variety of factors, including
our results of operations and the performance of our business, competitive conditions, general economic,
political and social factors, the performance of the Indian and global economy and significant developments in
India’s fiscal regime, volatility in the Indian and global securities market, performance of our competitors, the
Indian telecommunications industry and the perception in the market about investments in the
telecommunications industry, changes in the estimates of our performance or recommendations by financial
analysts and announcements by us or others regarding contracts, acquisitions, strategic partnerships, joint
ventures, or capital commitments. In addition, if the stock markets in general experience a loss of investor
confidence, the trading price of our equity shares could decline for reasons unrelated to our business, financial
condition or operating results. The trading price of our equity shares might also decline in reaction to events that
affect other companies in our industry even if these events do not directly affect us. Each of these factors,
among others, could adversely affect the price of our equity shares.
Any future issuance of equity shares by our Company or sales of our equity shares by any of our Company’s
significant shareholders may adversely affect the trading price of our equity shares.
Any future issuance of equity shares by us, including a preferential allotment to the Axiata Group Berhad or its
nominee entity as disclosed in the section “Summary of the Issue” on page 31, or pursuant to an employee
stock option scheme could dilute your shareholding. Any such future issuance of our equity shares or sales of
our equity shares by any of our significant shareholders may also adversely affect the trading price of our equity
shares, and could impact our ability to raise capital through an offering of our securities. We cannot assure you
that we will not issue further equity shares or that the shareholders will not dispose of, pledge, or otherwise
encumber their equity shares. In addition, any perception by investors that such issuances or sales might occur
could also affect the trading price of our equity shares.
Certain of our Company’s lenders have the right to convert their outstanding debt in to equity shares of our
Company on occurrence of certain events of default under the respective lenders agreements. This may lead to
dilution of your shareholding and could also affect the trading price of the Equity Shares.
Investors may be subject to Indian taxes arising out of capital gains on the sale of our equity shares.
Under current Indian tax laws, capital gains arising from the sale of equity shares within 12 months in an Indian
company are generally taxable in India. Any gain realized on the sale of listed equity shares on a stock exchange
52
held for more than 12 months will not be subject to capital gains tax in India if STT has been paid on the
transaction. STT will be levied on and collected by a domestic stock exchange on which our equity shares are
sold. Any gain realized on the sale of equity shares held for more than 12 months to an Indian resident, which
are sold other than on a recognized stock exchange and on which no STT has been paid, will be subject to long
term capital gains tax in India. Further, any gain realized on the sale of listed equity shares held for a period of
12 months or less will be subject to short-term capital gains tax in India. Capital gains arising from the sale of
our equity shares will be exempt from taxation in India in cases where the exemption from taxation in India is
provided under a treaty between India and the country of which the seller is resident. Generally, Indian tax
treaties do not limit India’s ability to impose tax on capital gains. As a result, residents of other countries may be
liable for tax in India as well as in their own jurisdiction on a gain upon the sale of our equity shares. The above
statements are based on the current tax laws. However, the Government has proposed the introduction of the
DTC, which will revamp the implementation of direct taxes. If the same is passed in present form by both
houses of Indian Parliament and approved by the President of India and then notified in the Gazette of India, the
tax impact mentioned above will be altered by the DTC.
Foreign investors are subject to foreign investment restrictions under Indian law that limits our ability to
attract foreign investors, which may adversely impact the market price of our equity shares.
Foreign investment in Indian securities is subject to regulation by Indian regulatory authorities. Under the FDI
Policy, issued by the Department of Industrial Policy and Promotion, Ministry of Commerce and Industry,
Government of India, foreign investment up to 100% is permitted in the telecommunications sector, of which,
foreign investment up to 49% is permitted through the automatic route and beyond 49% is permitted subsequent
to the approval of the Government, subject to satisfaction of certain conditions. Currently, foreign investment in
our Company cannot exceed 67.5%.
Also, under the foreign exchange regulations currently in force in India, transfers of shares between nonresidents and residents are permitted (subject to certain exceptions) if they comply with, among other things, the
pricing guidelines and reporting requirements specified by the RBI. If the transfer of shares does not comply
with such pricing guidelines or reporting requirements, or falls under any of the exceptions referred to above,
then prior approval of the RBI will be required.
Additionally, shareholders who seek to convert the Rupee proceeds from a sale of shares in India into foreign
currency and repatriate any such foreign currency from India will require a no objection or a tax clearance
certificate from the income tax authority. We cannot assure you that any required approval from the RBI or any
other Government agency can be obtained on any particular terms or at all.
The Equity Shares trade in the F&O segment of the stock exchanges and we are currently not subject to a
daily “price-based circuit breaker” imposed by stock exchanges in India, which could result in significant
volatility in the price of the Equity Shares. There can be no assurance that the Equity Shares will continue to
remain in the F&O segment and that the circuit breaker will not apply to the Equity Shares.
There are two types of circuit breakers applicable to the stocks listed on the Stock Exchanges, namely, (a) a
daily “price-based circuit breaker”, which specifies the band within which the price of a particular stock is
allowed to move freely; and (b) an index based market-wide circuit breaker, which applies to a stock at three
stages of the index movement either way – at 10%, 15% and 20%. While the daily price based circuit breaker is
applicable to a stock depending on whether or not it is traded on the F&O segment, an index based market-wide
circuit breaker is applicable to all the stocks listed on all the stock exchanges in India. Further, the daily “pricebased circuit breaker” operates independently of the index based market wide circuit breakers imposed by SEBI
on Indian stock exchanges.
Our equity shares are traded in the F&O segment, and our Company is, therefore, currently not subject to a daily
“price based circuit breaker” imposed by the Stock Exchanges in India, which does not allow transactions
beyond specified increases or decreases in the price of our equity shares. There can be no assurance that our
equity shares will continue to remain in the F&O segment and that the daily “price based circuit breaker” will
not apply to the Equity Shares. However, the index based market-wide circuit breaker system is still applicable
to the Equity Shares and these circuit breakers bring about a coordinated trading halt in trading on all equity and
equity derivatives markets across the country. The breakers are triggered by movements in either Nifty 50 or the
Sensex, whichever is breached earlier. We cannot assure you that the Stock Exchanges will not halt trading due
to the index based market-wide circuit breaker in the future and the closure of, or the stoppage of trading on, the
Stock Exchanges could adversely affect the trading price of the Equity Shares.
53
MARKET PRICE INFORMATION
The Equity Shares have been listed and traded on the BSE and the NSE since March 9, 2007. As on the date of
this Placement Document, 3,320,063,905 Equity Shares have been issued and are fully paid up.
On June 4, 2014 the closing price of the Equity Shares on the BSE and the NSE was ₹ 135.80 and ₹ 135.90 per
Equity Share, respectively. Because the Equity Shares are actively traded on the Stock Exchanges, the market
price and other information for each of the BSE and the NSE has been given separately.
(i)
The following tables set forth the reported high, low and average market prices and the trading volumes
of the Equity Shares on the Stock Exchanges on the dates on which such high and low prices were
recorded for Fiscal Years ended March 31, 2012, March 31, 2013 and March 31, 2014:
Fiscal
Year
High
(₹)
Date of high
2012
2013
2014
100.95 September 5, 2011
122.40 January 15, 2013
184.95 October 14, 2013
BSE
Number of
Total volume of
Low
Date of low
Equity Shares
Equity Shares
(₹)
traded on the
traded on date of
date of high
high ( ₹million)
829,132
83.26 64.25 May 6, 2011
1,408,791
169.50 72.40 August 9, 2012
173,554
32.12 103.25 April 5, 2013
Fiscal
Year
High
(₹)
Date of high
2012
2013
2014
100.85
122.55
185.00
September 5, 2011
January 15, 2013
October 14, 2013
Number of
Equity Shares
traded on
date of high
7,713,163
13,334,183
1,918,086
NSE
Total volume
Low
of Equity
(₹)
Shares
traded on
date of high
( ₹million)
774.05
64.25
1,583.78
72.30
354.77
103.45
Number of
Total volume of
Average
Equity Shares
Equity Shares
price for the
traded on the
traded on date of
year (₹)
date of low
low ( ₹million)
166,657
10.77
86.30
905,753
66.76
91.32
1,122,483
118.68
149.93
Date of low
May 6, 2011
August 9, 2012
April 5, 2013
Number of
Equity
Shares traded
on the date of
low
1,310,984
6,604,561
5,726,622
Total volume
of Equity
Shares
traded on
date of low
( ₹million)
84.38
485.82
601.98
Average
price for
the year
(₹)
86.36
91.35
149.99
(Source: www.bseindia.com and www.nseindia.com)
Notes:
1) High, low and average prices are based on the daily closing prices.
2) In case of two days with the same closing price, the date with the higher volume has been chosen.
3) In the case of a year, represents the average of the closing prices on the last day of each month of each
year presented.
(ii) The following tables set forth the reported high, low and average market prices and the trading volumes of
the Equity Shares on the Stock Exchanges on the dates on which such high and low prices were recorded
during each of the last six months:
Month year
December 2013
January 2014
February 2014
March 2014
April 2014
May 2014
Month year
December 2013
January 2014
February 2014
March 2014
April 2014
High ( ₹)
Date of high
177.50 December 10, 2013
168.25 January 15, 2014
151.15 February 4, 2014
141.75 March 12, 2014
146.85 April 7, 2014
147.50 May 20, 2014
High (₹)
Date of high
177.05 December 6, 2013
168.25 January 15, 2014
151.20 February 4, 2014
141.90 March 12, 2014
146.90 April 7, 2014
BSE
Number of Total volume Low (₹)
Date of low
Number of Total volume Average
Equity
of Equity
Equity Shares
of Equity price for the
Shares
Shares
traded on date
Shares
year (₹)
traded on
traded on
of low
traded on
date of high date of high
date of low (₹
( ₹million)
million)
338,323
60.43
165.75 December 26, 2013
187,417
31.32
171.47
358,585
60.43
139.30 January 28, 2014
965,383
134.52
155.49
565,449
83.37
126.15 February 26, 2014
345,314
44.06
133.54
244,266
34.51
130.70 March 3, 2014
267,528
35.04
136.31
307,792
44.71
134.35 April 30, 2014
515,447
70.58
141.03
813,944
119.42
130.30 May 7, 2014
150,528
19.68
137.25
NSE
Number of Total volume Low (₹)
Date of low
Number of
Total volume Average
Equity
of Equity
Equity Shares
of Equity price for the
Shares
Shares
traded on the
Shares on
month (₹)
traded on the traded on
date of low date of low ( ₹
date of high date of high
million)
(₹ million)
4,437,624
786.10
166.95 December 31, 2013
1,904,687
318.99
171.58
3,336,564
563.29
138.70 January 28, 2014
13,215,024
1,841.97
155.46
8,707,839
1,275.64
126.30 February 10, 2014
18,360,410
2,382.19
133.64
2,315,415
326.97
130.30 March 3, 2014
5,017,925
656.95
136.25
5,216,924
753.33
136.05 April 30, 2014
7,587,085
1,037.28
141.01
54
Month year
High (₹)
May 2014
Date of high
146.65 May 20, 2014
NSE
Number of Total volume Low (₹)
Date of low
Equity
of Equity
Shares
Shares
traded on the traded on
date of high date of high
(₹ million)
10,308,680
1,511.98
130.20 May 7, 2014
Number of
Total volume Average
Equity Shares
of Equity price for the
traded on the
Shares on
month (₹)
date of low date of low ( ₹
million)
4,226,354
551.79
137.28
(Source: www.bseindia.com and www.nseindia.com)
Notes:
(iii)
1)
High, low and average prices are based on the daily closing prices.
2)
In case of two days with the same closing price, the date with the higher volume has been
chosen.
3)
In the case of a month, represents the average of the closing prices of each day of each month
presented.
The following table set forth the details of the number of Equity Shares traded and the turnover during
the last six months and the Fiscal Years ended March 31, 2012, March 31, 2013 and March 31, 2014 on
the Stock Exchanges:
Period
Number of Equity Shares traded
BSE
NSE
164,336,490
1,465,080,017
67,985,324
723,371,117
Year ended March 31, 2012
Year ended March 31, 2013
144,819,829
Year ended March 31, 2014
12,371,509
December 2013
14,639,884
January 2014
15,952,189
February 2014
6,784,610
March 2014
6,340,485
April 2014
17,608,692
May 2014
(Source: www.bseindia.com and www.nseindia.com)
(iv)
Turnover (In ₹ million)
BSE
NSE
14,585.71
131,086.99
6,470.46
68,381.89
1,315,316,785
67,357,799
139,643,337
127,234,474
101,187,335
81,741,377
144,657,376
21,442.20
2,134.17
2,176.78
2,143.43
926.71
898.09
2,460.52
198,047.00
11,657.62
21,173.41
16,992.59
13,737.18
11,564.93
20,055.39
The following table sets forth the market price on the Stock Exchanges on August 2, 2013, the first
working day following the approval of the Board of Directors for the Issue:
Open
High
Low
BSE
Close
175.30
176.35
149.65
158.55
Number of
Equity
Shares
traded
2,170,770
Open
High
Low
NSE
Close
176.00
176.40
149.35
158.95
Volume
(₹ million)
346.11
(Source: www.bseindia.com and www.nseindia.com)
55
Number of
Equity Shares
traded
Volume
(₹ million)
20,951,013
3,359.08
USE OF PROCEEDS
The gross proceeds from the Issue will be approximately ₹ 30,000 million.
The net proceeds from the Issue, after deducting fees, commissions and expenses of the Issue, will be
approximately ₹ 29,682 million (the “Net Proceeds”).
Subject to compliance with applicable laws and regulations, our Company intends to use the Net Proceeds for
meeting business requirements including payment towards spectrum that may be auctioned by the DoT in future
and for general corporate purposes.
56
CAPITALISATION STATEMENT
The following table sets forth the consolidated capitalisation as of March 31, 2014 on an:

actual basis; and

as adjusted basis to give effect to the Issue.
You should read this table together with the section “Management’s Discussion and Analysis of Financial
Condition and Results of Operations” on page 61 and our Company’s financial statements and the related
notes thereto contained in “Financial Statements” on page 180.
As of March 31, 2014
Actual
Short term debt:
Secured
Unsecured
Long term debt:
Secured
Unsecured (including deferred liabilities towards acquisition of
spectrum)
Current Maturities of Long Term Debt
Total debt (including deferred liabilities towards acquisition of
spectrum)
Shareholders’ funds:
Share capital(2)
Securities premium
Reserves and surplus (excluding securities premium)
Total funds (excluding loan funds)
Total capitalisation
As adjusted(1)
( ₹millions)
5,982.05
489.58
5,982.05
489.58
82,776.39
98,507.66
82,776.39
98,507.66
18,593.59
206,349.27
18,593.59
206,349.27
33,196.32
89,914.99
42,139.18
165,250.49
35,435.13
117,357.83(3)
42,139.18
194,932.14
371,599.76
401,281.41
(1)
As adjusted to show the number of Equity Shares issued in the Issue.
(2)
As on the date of this Placement Document, our Company has instituted ESOP 2006 and ESOP 2013. After March 31,
2014 and up to the date of this Placement Document, our Company has issued and allotted an aggregate of 432,144
Equity Shares pursuant to exercise of options under the ESOP 2006. Further, as on May 31, 2014 there are aggregate of
6,911,942 options outstanding of which 6,347,376 options have been vested but yet not exercised under ESOP 2006.
Further, there are 18,382,430 options and 8,016,920 RSUs outstanding under ESOP 2013
(3)
The Securities Premium Account is net of the estimated Issue expenses of ₹ 318.35 million.
57
CAPITAL STRUCTURE
The Equity Share capital of our Company as at the date of this Placement Document is set forth below:
(In ₹, except share data)
Aggregate value at face
value
A
B
C
D
E
(1)
(2)
AUTHORIZED SHARE CAPITAL
6,775,000,000 Equity Shares
1,500 redeemable cumulative non-convertible preference shares of ₹
10,000,000 each
67,750,000,000
15,000,000,000
ISSUED, SUBSCRIBED AND PAID-UP CAPITAL BEFORE THE
ISSUE
3,320,063,905 Equity Shares
33,200,639,050
PRESENT ISSUE IN TERMS OF THIS PLACEMENT DOCUMENT
223,880,597 Equity Shares aggregating to ₹30,000 million(1)
2,238,805,970
PAID-UP CAPITAL AFTER THE ISSUE
3,543,944,502 Equity Shares
35,439,445,020
SECURITIES PREMIUM ACCOUNT
Before the Issue
After the Issue(2)
69,039,635,944
96,482,479,972
The Issue has been authorised by the Board of Directors on August 1, 2013 and the shareholders pursuant to their
resolution dated September 16, 2013.
The Securities Premium Account is net of the estimated Issue expenses of ₹ 318.35 million.
Pursuant to its resolution dated August 1, 2013, the Board of Directors has approved (subject to approval of the
shareholders of our Company) further issue of Equity Shares for an amount not exceeding ₹ 7,500 million by
way of a preferential allotment to Axiata Group Berhad or its nominee entity. Subject to market conditions and
other considerations, our Company may undertake this preferential issuance in accordance with Chapter VII of
the SEBI Regulations for an amount not exceeding ₹ 7,500 million or such other amount as may be approved by
the Board of Directors.
Equity Share Capital History of our Company
The history of the equity share capital of our Company is provided in the following table:
Date of Allotment
March 18, 1995
May 7, 1996
May 20, 1997
June 25, 1997
June 4, 1998
October 5, 1998
December 24, 1998
March 24, 1999
June 30, 1999
December 4, 2001
December 4, 2001
December 4, 2001
June 20, 2002
November 18, 2003
January 24, 2007
No. of Equity Shares
Allotted
70
500,000
498,800,000
35,000,000
83,280,000
85,000,000
27,000,000
150,000,000
14,872,000
336,000,000
578,778,695
38,456,441
291,840,000
120,000,000
50,000,000
58
Issue price per Equity
Share (₹)
10
10
75
Consideration
Cash
Shares*
Cash
Date of Allotment
March 2, 2007
April 5, 2007
August 12,2008
August 13, 2008
February 2010
March 17, 2010
March 2010
April 1, 2010 to June 30,
2010
July 1, 2010 to September
30, 2010
October
1,
2010
to
December 31, 2010
January 1, 2011 to March
31, 2011
April 1, 2011 to June 30,
2011
July 1, 2011 to September
30, 2011
October
1,
2011
to
December 31, 2011
January 1, 2012 to March
31, 2012
April 1, 2012 to June 30,
2012
July 1, 2012 to September
30, 2012
October
1,
2012
to
December 31, 2012
January 1, 2013 to March
31, 2013
April 1, 2013 to June 30,
2013
July 1, 2013 to September
30, 2013
October
1,
2013
December 31, 2013
No. of Equity Shares
Allotted
283,333,333
42,500,000
413,094,098
51,640,572
372,400
199,153,469
216,714
393,514
Issue price per Equity
Share (₹)
Consideration
156.96
Please see note 1
Please see note 1
Cash
Shares#
Cash
751,973
577,162
1,711,064
485,151
2,252,546
1,418,638
1,417,270
905,774
1,094,887
1,063,049
2,412,946
1,249,370
1,406,900
to
1,187,177
January 1, 2014 to March
31, 2014
April 1, 2014 to May 31,
2014
1,466,548
432,144
* Relates to the merger of Tata Cellular Limited, a mobile operator in Andhra Pradesh, with our Company.
#
Relates to the scheme of arrangement of Spice with our Company.
Notes:
(1) The Equity Shares have been allotted pursuant to exercise of vested stock options granted under ESOP 2006
at an exercise price of ₹39.30, ₹45.55, ₹57.55 and ₹68.86 per share.
(2) The face value of the Equity Shares of the Company has been ₹ 10 since incorporation of the Company.
59
DIVIDENDS
The declaration and payment of dividends, if any, will be recommended by the Board of Directors and approved
by the shareholders of our Company, in their discretion, subject to the provisions of the Articles of Association
and the Companies Act, 2013. The recommendation, declaration and payment of dividends, if any, will depend
on a number of factors, including but not limited to the earnings, capital requirements, contractual restrictions,
availability of profits for distribution and overall financial position of our Company. Our Company has no
formal dividend policy. However, subject to aforementioned factors our Company may consider declaring and
paying dividends in the future. Any amounts paid as dividends in the past are not necessarily indicative of our
Company’s future dividend policy or dividend amounts. The following table sets out, for the periods indicated,
the dividends paid by our Company:
Fiscal Year
Dividend per
Equity Share
(₹)
2012
2013
0.30
Total amount of
dividend paid(1)
(₹ millions)
1,164.12*
(1)
Inclusive of tax on dividend distribution.
*Includes amount paid for shares issued after balance sheet date and before record date of dividend
Our Company has, pursuant to the resolution passed at the meeting of the Board of Directors on April 28, 2014,
recommended a dividend of ₹ 0.40 per Equity Share for the financial year ended March 31, 2014. The payment
is subject to approval of the shareholders of our Company at the ensuing AGM.
For a summary of certain Indian consequences of dividend distributions to shareholders, see the section
“Statement of Tax Benefits” on page 145.
60
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
You should read the following discussion in conjunction with our audited consolidated financial statements as
of and for the years ended March 31, 2012, 2013 and 2014, and the related notes. Our unaudited and audited
consolidated financial statements are prepared in accordance with Indian GAAP, which differs in certain
material respects with IFRS and U.S. GAAP. Our financial year ends on March 31 of each year. Accordingly,
all references to a particular financial year are to the 12 month period ended March 31 of that year. This
discussion contains forward-looking statements that involve risks and uncertainties and reflects our current
view with respect to future events and financial performance. See “Risk Factors” and “Forward-Looking
Statements” on pages 39 and 12.
Overview
We are the third largest mobile telecommunications operator in India, based on TRAI Reported Revenue and
number of VLR subscribers. For the quarter ended December 31, 2013, we had a Revenue Market Share of
approximately 16.1% of the Indian mobile telecommunications services industry (as reported by TRAI) and as
of March 31, 2014, we had 135.8 million subscribers and 137.9 million VLR subscribers. For the quarter ended
March 31, 2014, we carried 157.1 billion voice minutes with an average realized rate per minute of 43.6 paise.
As of March 2013, we were also the seventh largest mobile telecommunications company (with operations in a
single country) in the world based on number of subscribers (as determined from data from WCIS).
We are a part of the Aditya Birla Group, which is one of the largest business groups in India. The Aditya Birla
Group is a conglomerate with operations in more than 30 countries. The Aditya Birla Group has a history of
over 50 years and has businesses in, among others, metals and mining, cement, carbon black, textiles, garments,
chemicals, fertilizers, life insurance, financial services and mobile telecommunications industries. Our
Company’s other large beneficial shareholders include Axiata Group Berhad, a leading Asian
telecommunications company, through its subsidiaries, Axiata Investments 1 (India) Limited and Axiata
Investments 2 (India) Limited, and Providence Equity Partners, a leading private equity fund, through its entity
P5 Asia Investments (Mauritius) Limited.
We are a pure play pan India mobile telecommunications operator offering voice, data and other VAS. All of
our mobile telecommunications services, other than voice, are classified as VAS. We provide GSM-based
mobile telecommunications services in all 22 Service Areas in India, and 3G services in 21 Service Areas. We
offer 3G services in 11 Service Areas pursuant to spectrum allocated to us. We provide 3G services in 10
additional Service Areas through intra-circle roaming arrangements with other mobile telecommunications
service providers. In the recent spectrum auctions held in February 2014, we won 5.0 MHz of spectrum in the
900 MHz band for the Delhi Service Area and intend to utilise this spectrum to launch 3G services. We also
won LTE compatible 1800 MHz spectrum in eight Service Areas (see “Our Business – Our Licenses and
Spectrum” for partial allocation in four Service Areas on page 93), which offer an opportunity to provide 4G
LTE services. We have also won spectrum in 1800 MHz band intended to be used for the provision of GSM
services in selected Service Areas. The spectrum won by us in February 2014 is yet to be allocated to us.
All of our services and products are offered under the
brand. The strength of our brand and our advertising
is reflected in several brand recognition awards we have won at various events, including the “Best Storyboard
Brand Campaign of the Year” award at the C BC TV18 India Business Leader Awards 2013.
We classify our service areas into Established Service Areas and New Service Areas, depending on the age of
our operations and profitability achieved in the respective Service Areas. Our 15 Established Service Areas
comprise Kerala, Madhya Pradesh, Uttar Pradesh (West), Maharashtra, Haryana, Punjab, Andhra Pradesh,
Gujarat, Uttar Pradesh (East), Rajasthan, Delhi, Bihar, Karnataka, Himachal Pradesh and Mumbai and our seven
New Service Areas comprise West Bengal, Kolkata, North East, Jammu & Kashmir, Assam, Orissa and Tamil
Nadu (including Chennai).
We also hold licenses for the provision of NLD, ILD, ISP and IP1 services in India. Our optical fibre cable
transmission network, either owned or through IRU arrangements mainly with other telecommunications
operators, extends to approximately 82,000 km and has 2,500 PoPs. Our mobile telecommunication operations
are spread over approximately 340,000 towns and villages. Approximately 98% of our captive NLD traffic and
approximately 97% of our ILD outgoing traffic was carried on our own infrastructure for the quarter ended
March 31, 2014. We also derive revenue from carrying India inbound ILD traffic through arrangements with
other mobile telecommunications companies and long distance carriers operating outside India. Our ISP services
61
launched during the financial year 2012, approximately 98% of our data traffic for the quarter ended March 31,
2014.
As of March 31, 2014, we had a network of 104,778 2G cell sites and 21,381 3G cell sites. We own 9,446
telecommunications towers as of March 31, 2014. In addition, our subsidiary, ABTL, holds 16% of the issued
and outstanding equity shares of Indus Towers, a joint venture with Bharti Infratel Limited and Vodafone India
Limited. Providence Equity Partners, through its entity P5 Asia Holding Investments (Mauritius) Limited,
beneficially holds 1,925,000 compulsorily convertible preference shares, convertible into equity shares
representing 30.3% of the total equity share capital post conversion of these preference shares of ABTL. Indus
Towers is one of the leading independent telecommunications tower companies and owns and operates
approximately 113,000 telecommunications towers as of March 31, 2014.
Significant Factors Affecting Our Results of Operations and Financial Condition
Based on number of subscribers, India is the second largest mobile telecommunications market in the world.
Besides the opportunity provided by the size of the market, our results of operations and financial condition
have been affected and will continue to be affected by a number of other significant factors, including the
following:
Our Business Model and Quality of Services Offered
Our business model focuses on providing affordable quality mobile telephony and data services across India.
We attract subscribers based on the strength of our network, brand salience, subscriber-centricity, and processes.
Our number of subscribers, particularly VLR subscribers, continues to grow faster than the industry. We operate
in a country that has one of the lowest tariffs in the world. As a result of recent changes in the competitive
landscape, the increase in data volume and the increase in data revenue, our ARPM has improved. The increase
in data volumes is a result of increasing smartphone penetration coupled with use of data services by
subscribers.
The quality of our services offered is reflected in the results of the mobile number portability program which
was implemented as pilot in November 2010 followed by nationwide implementation in January 2011. We lead
the mobile number portability and had a net subscriber gain of approximately 9.14 million subscribers between
November 2010 until March 31, 2014 through this program.
Regulations and Licenses
The telecommunication industry in India is dependent on the regulatory environment governing it and is prone
to imposition of new regulations and changes in existing regulations. Currently we have spectrum in the 900
MHz, 1800 MHz and the 2100 MHz bands. The licenses with initial spectrum in the 900 MHz band, which we
hold for nine of the Established Service Areas, are due for extension between December 2015 and April 2016.
See “Regulations and Policies” and “Legal Proceedings” for details.
Our Infrastructure
We continue to expand our telecommunication infrastructure through the increase in 2G and 3G sites, fibre
cable transmission network (our own and through arrangements with other companies), PoPs and ICR
arrangements. See “– Financial Condition, Liquidity and Capital Resources – Capital Expenditures”. Our
telecommunication infrastructure enables us to provide quality voice and data services as well as increase our
passive infrastructure revenues.
Economies of Scale
We have a pan India presence and are the third largest mobile telecommunication operator in India based on
number of VLR subscribers and revenue. This provides us with significant economies of scale as we grow our
business, both in terms of voice and VAS that we offer.
Competition
Competition in the Indian mobile telecommunications industry is intense. Competition in the Indian mobile
telecommunications industry increased primarily as a result of deregulation that led to the privatization and
foreign direct investment followed by issuance of many new licenses in 2008. However, the Supreme Court of
India by its order dated February 2, 2012 quashed licenses issued in 2008, as a result of which a number of
62
mobile services providers ceased their operations and the competitive scenario in India eased. Nevertheless, 6 to
10 mobile operators still operate in most Service Areas. Competition may affect our subscriber growth and
profitability by causing our subscriber base to decline and cause both a decrease in tariff rates and ARPU and an
increase in subscriber churn and selling and promotional expenses.
Dependence on 10 Established Service Areas
We classify our Service Areas into Established Service Areas and New Service Areas, depending on the age of
our operations and profitability achieved in the respective Service Areas. We currently have 15 Established
Service Areas, out of which we are substantially dependent on 10 Service Areas, Maharashtra, Madhya Pradesh,
Kerala, Andhra Pradesh, Uttar Pradesh West, Gujarat, Delhi, Punjab, Karnataka and Uttar Pradesh East. We
believe that these 10 Service Areas will continue to contribute significantly to our revenues in the foreseeable
future. Any inability to maintain or increase our revenues from these 10 Service Areas could have an adverse
effect on our business and results of operations. We have been able to increase our Revenue Market Share in
these 10 Service Areas from 18.5% for the quarter ended December 31, 2010 to 21.4% for quarter ended
December 31, 2013.
Other Significant Factors
Other significant factors affecting our results of operations and financial condition include:

new technologies which could affect our business model and usage behaviour;

expansion of 3G and 4G networks;

the churn rates in India;

changes in operating costs;

the sharing of passive infrastructure among mobile telecommunications providers in India;

consolidation in the mobile telecommunications industry in India;

the amount of our outstanding indebtedness and the changes in interest rates in the Indian and
international markets;

exchange rates, in particular between the Rupee (our reporting currency) and the U.S. dollar; and

political, economic and regulatory changes in India.
Our Critical Accounting Policies
The most significant principles of consolidation and the critical accounting policies followed by us in the
preparation of our consolidated financial statements are set out below. We have not changed any of our
accounting policies during the last three financial years.
Principles of Consolidation
Our consolidate financial statements are prepared in accordance with Indian GAAP, mandatory applicable
accounting standards and, more particularly, Accounting Standard 21 on “Consolidated Financial Statements”
and Accounting Standard 27 on “Financial Reporting of Interests in Joint Ventures” issued by the ICAI and
notified under the Companies Act.
We consolidated the financial results of our Company, our Subsidiaries, Idea Cellular Services Limited, Idea
Cellular Infrastructure Services Limited, Idea Telesystems Limited, Idea Mobile Commerce Services Limited
and ABTL and our joint venture, Indus Towers, in which ABTL holds 16% of the equity share capital, for the
preparation of our consolidated financial statements.
ICTIL, a subsidiary of ABTL, along with certain other companies merged with Indus Towers with an appointed
date of April 1, 2009 pursuant to a scheme of arrangement. The scheme was approved by the High Court of
Delhi on April 18, 2013 and became effective on June 11, 2013 and accordingly the effect of the merger is
reflected in our audited consolidated financial statements as of and for the financial year ended March 31, 2014.
63
Our consolidated financial statements are prepared under the historical cost convention method and follow the
accrual method of accounting. Our financial statements are consolidated on a line-by-line basis by adding
together the book values of like items of assets, liabilities, income and expenses, after eliminating intercompany transactions and balances with our Subsidiaries. The differential with respect to the cost of
investments in our Subsidiaries over our portion of equity is recognized as goodwill or capital reserve, as the
case may be.
Revenue Recognition and Receivables
Revenue on account of mobile telecommunications services and sales of handsets and related accessories is
recognized net of rebates, discounts, service taxes, on rendering of services and supply of goods, respectively.
Recharge fees on pre-paid recharge vouchers are recognized as revenue as and when the pre-paid recharge
voucher is initiated by the subscriber.
Revenue from provision of passive infrastructure services is recognized on accrual basis (net of
reimbursements) in accordance with the contractual terms with the counterparties.
Unbilled receivables, represent revenue recognized from the billing cycle date to the end of each month. These
are billed in subsequent bill cycles.
Debts (net of security deposits outstanding there against) due from subscribers, which remain unpaid for more
than 90 days from the date of billing and other debts, which are otherwise considered doubtful, are provided for.
Provision for doubtful debts on account of interconnect usage charges, roaming charges and passive
infrastructure sharing from other telecommunication operators, which are outstanding for more than 180 days
from the date of billing, other than cases when an amount is payable to that operator or in specific cases, where
we are of the view that the amount is recoverable.
Fixed Assets
Fixed assets are stated at cost of acquisition and installation less depreciation. Cost is inclusive of freight, duties,
levies and any cost directly or indirectly attributable to bringing the asset to its working condition for intended
use.
Asset retirement obligations are capitalized based on a constructive obligation as a result of past events, when it
is probable that an outflow of resources will be required to settle the obligation and a reliable estimate of the
amount can be made. Such costs are depreciated over the remaining useful life of the asset.
Depreciation and Amortization
Depreciation on tangible fixed assets is provided on a straight line method (except stated otherwise) on the basis
of estimated useful economic life. The estimated useful economic lives for fixed assets have been listed in detail
in “Financial Statements – Significant Accounting Policies.”
Intangible assets are amortized in the following manner:

cost of rights and licenses, including the fees paid on a fixed basis (in respect of the licenses issued
prior to the current revenue share regime) and spectrum fee is amortized on the commencement of
operations over the validity period;

software, which is not an integral part of hardware, is treated as intangible asset and is amortized over
its estimated useful economic lives, generally between three to five years; and

bandwidth and optical fibre over which we hold an indefeasible right of use is amortized over the
agreement period.
Segment Information
Our consolidated financial results are prepared and presented in three business segments:

Mobility Services. Providing mobile and related telephony services;

International Long Distance. Providing international long distance services; and
64

Passive Infrastructure. Providing passive infrastructure services.
We operate in the Indian markets only, which represents a singular economic environment with similar risks and
rewards and therefore, we do not report our results in geographical segments.
Our segment-wise total income and results, before interest and tax, are presented below for the periods indicated
and are also expressed as a percentage of total income (before inter segment eliminations) for such periods:
Financial Year
2012
Total Income
(₹ in
millions)
(%)*
2013
Result before
Interest and Tax
(₹ in
millions)
(%)*
(₹ in
millions)
Total Income
(%)*
2014
Result before
Interest and Tax
(₹ in
millions)
(%)*
(₹ in
millions)
Total Income
(%)*
Result before
Interest and Tax
(₹ in
millions)
(%)*
Business
Segments:
Mobility Services
International Long
Distance
Passive
Infrastructure
194,197.97
89.4
17,299.46
81.9
221,915.92
89.0
20,779.38
82.2
261,750.10
89.8
31,640.16
83.0
2,595.45
1.2
212.32
1.0
3,831.29
1.5
365.13
1.4
4,734.94
1.6
708.29
1.9
20,500.74
9.4
3,598.24
17.0
23,552.67
9.4
4,123.22
16.3
24,844.70
8.5
5,794.33
15.2
217,294.16
100.0
21,110.02
100.0
249,299.88
100.0
25,267.73
100.0
291,329.74
100.0
38,142.78
100.0
Elimination**
(21,882.53)
-
(24,723.34)
-
(26,140.69)
-
Total
195,411.63
Total
-
-
21,110.02
224,576.54
25,267.73
-
265,189.05
38,142.78
*Before considering intersegment elimination.
** Represents inter-segment revenue.
Income and Expenditure
Our income and expenditure is reported in the following manner:
Total Income. Total income consisted of service revenue, sale of trading goods and other income.
Service Revenue. Service revenue includes:
Mobility Services

post-paid revenue;

pre-paid revenue;

in-roaming revenue;

domestic incoming interconnect revenue;

enterprise solutions revenue; and

mobile banking revenue.
International Long Distance

international incoming interconnect revenue; and

ILD call carriage charge.
Passive Infrastructure

infrastructure sharing and leasing revenue.
Service revenue, as a percentage of our total income, was 99.0%, 98.6% and 98.8% of total income for the
financial years 2012, 2013 and 2014, respectively.
Post-paid revenue. Revenue from post-paid subscribers comprises airtime charges, monthly rentals, VAS (which
consists of all non-voice revenue) and out-roaming revenue.
65
-
Charges are calculated based on the tariff plan to which the subscriber subscribes. We currently offer a variety
of plans with varying monthly subscription charges and airtime charges for outgoing calls. Revenues from postpaid subscribers are recorded net of discounts and service taxes and are recognized as and when the services are
rendered. Depending on a subscriber’s tariff plans, rentals are billed on a monthly basis either in advance or in
arrears.
We offer a variety of VAS depending on demand, pricing and the technical capability of our network in each
Service Area. Depending on the tariff plan chosen, we either charge a fixed monthly fee for some of the services
or transaction charges based on usage.
Pre-paid revenue. Revenue from pre-paid subscribers primarily comprise airtime charges, recharge fees, VAS
and out-roaming revenue.
Starter packs and recharge vouchers are generally sold to subscribers through distributors, who pay us in
advance. We register a subscriber and recognize SIM processing fees if any, upon activation of the starter pack
by the subscriber. We recognize recharge fees as revenue upon activation of the pre-paid recharge vouchers by
the subscriber. We recognize airtime charges on actual usage by the subscriber. Pre-paid starter packs have a
pre-determined validity period for activation. Recharge vouchers have a pre-determined airtime value and a
validity period for usage. Upon usage of all of such airtime value or upon expiration of the validity period,
whichever occurs earlier, the subscriber must buy another recharge voucher to continue using our services. The
charges for VAS and roaming are deducted from the usable airtime value of the pre-paid recharge vouchers.
In-roaming revenue. In-roaming revenue is earned from usage of our networks by subscribers from other mobile
operators (in-roamers), including our own subscribers, outside their home Service Areas. To allow this usage,
we have entered into roaming agreements with other operators. These agreements are negotiated bilaterally both
domestically and internationally. In our consolidated financial statements, the interconnect pass-through charges
are treated as expenses while the total in-roaming revenue is treated as part of total revenue. In line with the
applicable Accounting Standards, while preparing our financial statements, the revenue earned from roaming
within our Service Areas is eliminated with a corresponding reduction in inter-circle out-roaming expenses.
Domestic incoming interconnect revenue. We earn revenue from incoming interconnect termination charges
paid by other operators for all domestic incoming calls terminating on our network. The termination charges are
determined by TRAI.
Enterprise solutions revenue. We also provide certain additional services such as conference call services,
interactive voice recording solutions and toll free services, among others, to our enterprise subscribers and such
revenue is recognized as enterprise solutions revenue.
Mobile banking revenue. We launched mobile banking services pursuant to an arrangement with Axis Bank
Limited. Our mobile banking services include services such as money transfer within Axis Bank Limited’s bank
accounts, recharges, DTH recharge, utility payments and remittance to other ‘Idea Money’ subscribers, for
which we are paid a certain commission or a fixed fee, which we recognize as mobile banking revenue.
International incoming interconnect revenue. We earn revenue from incoming interconnect termination charges
paid by other operators for all international incoming calls terminating on our network. The termination charges
are determined by TRAI.
ILD call carriage charge. We earn revenue from carrying international long distance calls.
Infrastructure sharing and leasing revenue. Infrastructure sharing and leasing revenue consists of amounts
charged to other operators pursuant to agreements entered into for their use of our passive infrastructure.
Sale of Trading Goods. Sales of trading goods consist of revenue from the sale of handsets, data cards and
related accessories. Sale of trading goods, as a percentage of our total income, was 0.8%, 1.2% and 0.8% for the
financial years 2012, 2013 and 2014, respectively.
Other Income. Other income includes reversal of provisions no longer required and miscellaneous receipts.
66
Total Operating Expenditure. Total Operating Expenditure consists of:

cost of trading goods;

personnel expenditure;

network expense and IT outsourcing cost;

licence fee and WPC charges;

roaming and access charges;

subscriber acquisition and servicing expenditure;

advertisement and business promotion expenditure; and

administration and other expenses.
Our total operating expenditure, as a percentage of our total income, was 73.9%, 73.3% and 68.6% for the
financial years 2012, 2013 and 2014, respectively.
Cost of Trading Goods. Cost of trading goods relate to the cost of handsets, data cards and related accessories
sold by us. Cost of trading goods, as a percentage of total income, was 0.7%, 1.0% and 0.7% for the financial
years 2012, 2013 and 2014, respectively.
Personnel Expenditure. Personnel expenditure consists of salaries, contributions to employee benefit funds,
allowances, variable performance pay, retirement benefits, leave encashment liability, staff welfare and other
employee recruitment and training costs. Personnel expenditure, as a percentage of total income, was 4.9%,
5.0% and 4.9% for the financial years 2012, 2013 and 2014, respectively.
Network Expense and IT Outsourcing Cost. Network expense and IT outsourcing cost consists of expenses
incurred in operating and maintaining our network, particularly security charges, power and fuel, including
electricity and diesel costs, rental payments and associated taxes for MSCs, BSCs and BTSs, annual
maintenance charges for networks (generally through contracts with Ericsson India Private Limited, Nokia
Solutions and Networks India Private Limited, HUAWEI International Pte. Limited and ZTE Corporation),
network related insurance, lease line charges from BSNL and private operators, junction related connectivity
charges to BSNL and MTNL and other operating expenses related to mobile network infrastructure. Leased line
charges consist of payments to the leased line owners for the use of their network for dedicated communication
services. Payments are made in advance, on an annual basis, and are dependent on the distance between the
POIs and the capacity of the leased line. Most of our network expenses are fixed and are directly related to the
number of MSCs, BSCs, BTSs, RNCs and NBs. Network expenses and IT outsourcing cost, as a percentage of
total income, was 24.9%, 24.7 and 24.5% for the financial years 2012, 2013 and 2014, respectively.
Licence and WPC Charges. Licence fee is calculated as a percentage of our Adjusted Gross Revenue, at a predetermined rate prescribed by the DoT. In connection with the interpretation of the definition of adjusted gross
revenue, there is currently a dispute between the mobile telecommunications operators and the DoT. WPC
charges or “spectrum usage charges”, relates to the payments made to the DoT for the use of allotted frequency
of spectrum for operating our mobile network. See “Legal Proceedings” and “Regulations and Policies” on
pages 162 and 101. Licence and WPC charges, as a percentage of total income, was 11.9%, 11.0% and 11.0%
for the financial years 2012, 2013 and 2014, respectively.
Roaming and Access Charges. Roaming and access charges include charges payable to other operators,
including long distance operators, for our subscribers accessing these operators’ networks and termination
charges. Roaming and access charges, as a percentage of total income, was 16.8%, 17.9% and 15.7% for the
financial years 2012, 2013 and 2014, respectively.
Subscriber Acquisition and Servicing Expenditure. Subscriber acquisition and servicing expenditure, primarily
consists of:

Cost of SIMs and recharge vouchers;
67

Commissions and incentives to dealers and distributors, including payments of commission to postpaid, and pre-paid distribution channel intermediaries for every new subscription and costs associated
with pre-paid packs purchased by existing subscribers;

Subscriber verification expenses incurred for verifying subscriber details on application for our
services;

Collection and telemarketing expenses incurred in respect of collection of bills, including costs
associated with sending reminders and the charges of external collection and recovery agencies.
Telemarketing expenses are incurred for establishing the first point of contact with consumers,
feedback on services and for query resolutions. Telemarketing is usually outsourced either on a per call
or a per seat basis; and

Subscriber retention and loyalty expenses incurred for the purposes of churn management and expenses
incurred in respect of subscriber loyalty programs.
Subscriber acquisition and servicing expenditure, as a percentage of total income, was 10.2%, 9.1% and 7.5%
for the financial years 2012, 2013 and 2014, respectively.
Advertisement and Business Promotion Expenditure. Advertising and business promotion expenses relate to
brand and product advertising, corporate campaigns and business promotions expenses. Advertisement and
business promotion expenditure, as a percentage of total income, was 2.2%, 2.1% and 1.8% for the financial
years 2012, 2013 and 2014, respectively.
Administration and Other Expenses. Administration and other expenses consist primarily of expenses incurred
on repairs and maintenance of non-network equipment and buildings, rates and taxes, non-network rentals,
insurance for non-network equipment, printing and stationery, electricity used in offices, communication, travel
and conveyance, legal and professional charges and other miscellaneous expenses. Administration and other
expenses, as a percentage of total income, was 2.4%, 2.5% and 2.4% for the financial years 2012, 2013 and
2014, respectively.
Depreciation. Depreciation costs relate to the depreciation of our tangible fixed assets. Depreciation costs, as a
percentage of total income, was 12.5%, 13.2% and 14.7% for the financial years 2012, 2013 and 2014,
respectively.
Amortization of Intangible Assets. Amortization of intangible assets, as a percentage of total income, was 2.8%,
2.3% and 2.4% for the financial years 2012, 2013 and 2014, respectively.
Finance and Treasury Charges. Finance and treasury charges consist of interest payments made in relation to
our borrowings and the related expenses as adjusted by income from treasury activities such as investments in
mutual funds and bank deposits and gain/loss on foreign exchange fluctuations.
Our Results of Operations
Financial Years 2012, 2013 and 2014
The following table sets forth select financial data from our audited consolidated statements of profit and loss
for the financial years 2012, 2013 and 2014, the components of which are also expressed as a percentage of total
income for such periods:
Income
Service Revenue
Sale of Trading Goods
Other Income
Total Income
Operating Expenditure
Cost of Trading Goods Sold
Personnel Expenditure
Network Expense and IT Outsourcing Cost
Licence Fees and WPC Charges
Roaming and Access Charges
Year Ended March 31,
2013
(%)
(₹ in millions)
2012
(₹ in millions)
(%)
193,381.85
1,505.00
524.78
195,411.63
99.0
0.8
0.3
100.0
221,409.87
2,664.58
502.09
224,576.54
98.6
1.2
0.2
100.0
262,071.27
2,248.41
869.37
265,189.05
98.8
0.8
0.3
100.0
1,413.72
9,499.16
48,608.39
23,231.83
32,798.75
0.7
4.9
24.9
11.9
16.8
2,318.36
11,225.28
55,360.60
24,752.50
40,145.27
1.0
5.0
24.7
11.0
17.9
1,927.00
13,121.17
64,990.27
29,237.98
41,615.64
0.7
4.9
24.5
11.0
15.7
68
2014
(₹ in millions)
(%)
2012
(₹ in millions)
Subscriber Acquisition and Servicing
Expenditure
Advertisement and Business Promotion
Expenditure
Administration and Other Expenses
Total Operating Expenditure
Profit before Finance Charges, Depreciation,
Amortization and Taxes
Finance and Treasury Charges (Net)
Depreciation
Amortization of Intangible Assets
Profit before Tax
Provision for Taxation
Current
Deferred
MAT Credit
Profit After Tax
(%)
Year Ended March 31,
2013
(%)
(₹ in millions)
2014
(₹ in millions)
(%)
19,869.00
10.2
20,467.29
9.1
19,806.63
7.5
4,281.21
2.2
4,720.29
2.1
4,867.01
1.8
4,786.20
144,488.26
2.4
73.9
5,541.57
164,531.16
2.5
73.3
6,286.57
181,852.27
2.4
68.6
50,923.37
26.1
60,045.38
26.7
83,336.78
31.4
10,557.29
24,356.93
5,456.42
10,552.73
5.4
12.5
2.8
5.4
9,494.50
29,589.50
5,188.15
15,773.23
4.2
13.2
2.3
7.0
7,700.13
38,855.15
6,338.85
30,442.65
2.9
14.7
2.4
11.5
2,227.52
3,173.60
(2,078.27)
7,229.88
1.1
1.6
(1.1)
3.7
3,506.98
4,907.46
(2,750.48)
10,109.27
1.6
2.2
(1.2)
4.5
6,687.95
5,454.11
(1,377.61)
19,678.20
2.5
2.1
(0.5)
7.4
Financial Year 2014 Compared to Financial Year 2013
Total Income. Total income increased by 18.1% to ₹ 265,189.05 million for the financial year 2014 from ₹
224,576.54 million for the financial year 2013, primarily due to an increase in our service revenues.
Service Revenue. Service Revenue increased by 18.4% to ₹ 262,071.27 million for the financial year 2014 from
₹ 221,409.87 million for the financial year 2013, primarily due to increases in total minutes of use by 10.5% to
588 billion minutes from 532 billion minutes, increase in total data volume to 79,382 million MB from 37,380
million MB and increase in our ARPM which was primarily due to better realizations from our voice services.
Sale of Trading Goods. Sale of Trading Goods decreased by 15.6% to ₹ 2,248.41 million for the financial year
2014 from ₹ 2,664.58 million for the financial year 2013, primarily due to reduction in number of data cards
sold during the financial year 2014.
Other Income. Other income increased by 73.2% to ₹ 869.37 million for the financial year 2014 from ₹ 502.09
million for the financial year 2013, primarily due to an increase in the provisions that were written back, as they
were no longer required.
Total Operating Expenditure. Total operating expenditure increased by 10.5% to ₹ 181,852.27 million for the
financial year 2014 from ₹ 164,531.16 million for the financial year 2013, primarily as a result of increases in
network expense and IT outsourcing cost, license fee and WPC charges, personnel expenditure and roaming and
access charges which were partially offset by a decrease in subscriber acquisition and servicing expenditure and
cost of trading goods.
Cost of Trading Goods. Cost of trading goods decreased by 16.9% to ₹ 1,927.00 million for the financial year
2014 from ₹ 2,318.36 million for the financial year 2013. This decrease was primarily as a result of reduction in
the number of data cards sold during the financial year 2014.
Personnel Expenditure. Personnel expenditure increased by 16.9% to ₹ 13,121.17 million for the financial year
2014 from ₹ 11,225.28 million for the financial year 2013, primarily as a result of an increase in the average
number of employees and an increase in salaries. Our total number of employees (not including employee of
Indus Towers) increased to 14,988 as of March 31, 2014 from 13,645 as of March 31, 2013.
Network Expense and IT Outsourcing Cost. Network expense and IT outsourcing cost increased by 17.4% to ₹
64,990.27 million for the financial year 2014 from ₹ 55,360.60 million for the financial year 2013, primarily as
a result of an increase in the expansion of our network coverage and increase in energy prices. Our total 2G and
3G cell sites increased to 104,778 and 21,381 cell sites as of March 31, 2014 from 90,094 and 17,140 cell sites
as of March 31, 2013, respectively.
Licence Fee and WPC Charges. Licence Fee and WPC charges increased by 18.1% to ₹ 29,237.98 million for
the financial year 2014 from ₹ 24,752.50 million for the financial year 2013, primarily as a result of an increase
in adjusted gross revenue.
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Roaming and Access Charges. Roaming and access charges increased by 3.7% to ₹ 41,615.64 million for the
financial year 2014 from ₹ 40,145.27 million for the financial year 2013, primarily as a result of an increase in
total minutes of usage which was offset by a reduction in SMS interconnect charges which was effective from
June 2013.
Subscriber Acquisition and Servicing Expenditure. Subscriber acquisition and servicing expenditure, decreased
by 3.2% to ₹ 19,806.63 million for the financial year 2014 from ₹ 20,467.29 million for the financial year 2013,
primarily as a result of a decrease in gross additions of subscribers.
Advertisement and Business Promotion Expenditure. Advertisement and business promotion expenditure
increased by 3.1% to ₹ 4,867.01 million for the financial year 2014 from ₹ 4,720.29 million for the financial
year 2013, primarily due to higher expenditure on our advertisement campaigns.
Administration and Other Expenses. Administration and other expenses increased by 13.4% to ₹ 6,286.57
million for the financial year 2014 from ₹ 5,541.57 million for the financial year 2013, primarily due to an
increase in provision for bad debts and advances and legal and professional expenses.
Depreciation. Depreciation increased by 31.3% to ₹ 38,855.15 million for the financial year 2014 from ₹
29,589.50 million for the financial year 2013, primarily as a result of gross block additions and revision in the
estimated useful life of certain of our fixed assets.
Amortization of Intangible Assets. Amortization of intangible assets increased by 22.2% to ₹ 6,338.85 million
for the financial year 2014 from ₹ 5,188.15 million for the financial year 2013, primarily due to amortization of
1800 MHz spectrum cost for the seven Service Areas acquired in the November 2012 auction.
Finance and Treasury Charges. Finance and treasury charges decreased by 18.9% to ₹ 7,700.13 million for the
financial year 2014 from ₹ 9,494.50 million for the financial year 2013, primarily as a result of lower average
net debt which was partially offset by an increase in loss from foreign exchange.
Tax Expense. Tax expense increased to ₹ 10,764.45 million for the financial year 2014 from ₹ 5,663.96 million
for the financial year 2013, primarily due to increase in our taxable income for the reasons set out above.
Net Profit. Net profit increased by 94.7% to ₹ 19,678.20 million for the financial year 2014 from ₹ 10,109.27
million for the financial year 2013, primarily as a result of an increase in our income for the reasons set out
above.
Financial Year 2013 Compared to Financial Year 2012
Total Income. Total income increased by 14.9% to ₹ 224,576.54 million for the financial year 2013 from ₹
195,411.63 million for the financial year 2012, primarily due to an increase in our service revenue.
Service Revenue. Service revenue increased by 14.5% to ₹ 221,409.87 million for the financial year 2013 from
₹ 193,381.85 million for the financial year 2012, primarily due to an increase in total minutes of use by 17.4%
to 532 billion minutes for the financial year 2013 from 453 billion minutes for the financial year 2012 and an
increase in VAS service revenue from subscribers by 25.6% between the financial year 2013 and the financial
year 2012.
Sale of Trading Goods. Sale of trading goods increased by 77.0% to ₹ 2,664.58 million for the financial year
2013 from ₹ 1,505.00 million for the financial year 2012, primarily due to an increase in the quantity of
handsets sold by us, as we launched five new
branded 3G enabled handsets during the financial year 2013.
Other Income. Other income decreased by 4.3% to ₹ 502.09 million for the financial year 2013 from ₹ 524.78
million for the financial year 2012, primarily due to a decrease in the provisions written back.
Total Operating Expenditure. Total operating expenditure increased by 13.9% to ₹ 164,531.16 million for the
financial year 2013 from ₹ 144,488.26 million for the financial year 2012, primarily as a result of increases in
network expense and IT outsourcing costs and roaming and access charges.
Cost of Trading Goods Sold. Cost of trading goods sold increased by 64.0% to ₹ 2,318.36 million for the
financial year 2013 from ₹ 1,413.72 million for the financial year 2012. This increase was primarily as a result
of an increase in quantity of handsets sold during the financial year 2013.
70
Personnel Expenditure. Personnel expenditure increased by 18.2% to ₹ 11,225.28 million for the financial year
2013 from ₹ 9,499.16 million for the financial year 2012, primarily as a result of an increase in the average
number of employees and an increase in salaries. Our number of employees (not including employees of Indus
Towers) increased to 13,645 as of March 31, 2013 from 10,916 as of March 31, 2012.
Network Expense and IT Outsourcing Cost. Network expenses and IT outsourcing cost increased by 13.9% to ₹
55,360.60 million for the financial year 2013 from ₹ 48,608.39 million for the financial year 2012, primarily as
a result of the expansion of our network coverage. Our total 2G and 3G cell sites increased from 83,190 and
12,825 as of March 31, 2012 to 90,094 and 17,140 as of March 31, 2013, respectively. As a result, our passive
infrastructure charges increased by 19.4% to ₹ 13,440.68 million for the financial year 2013 from ₹ 11,259.58
million for the financial year 2012. Power and fuel cost increased by 21.6% to ₹ 19,099.53 million for the
financial year 2013 from ₹ 15,705.81 million for the financial year 2012 as a result of an increase in the average
number of cell sites along with increase in electricity and diesel rates. Our repairs and maintenance charges also
increased by 19.0% from ₹ 7,187.27 million to ₹ 8,549.28 million primarily as a result of an increase in annual
maintenance charges on our expanding network assets.
Licence Fees and WPC Charges. Licence fees and WPC charges increased by 6.5% to ₹ 24,752.50 million for
the financial year 2013 from ₹ 23,231.83 million for the financial year 2012, primarily as a result of an increase
in the adjusted gross revenue.
Roaming and Access Charges. Roaming and access charges increased by 22.4% to ₹ 40,145.27 million for the
financial year 2013 from ₹ 32,798.75 million for the financial year 2012, primarily as a result of an increase in
access charges by 17.0% to ₹ 33,485.04 million for the financial year 2013 from ₹ 28,609.79 million for the
financial year 2012, which was attributable to the increase in total minutes of use.
Subscriber Acquisition and Servicing Expenditure. Subscriber acquisition and servicing expenditure increased
by 3.0% to ₹ 20,467.29 million for the financial year 2013 from ₹ 19,869.0 million for the financial year 2012
primarily as a result of an increase in subscriber servicing expenditure on account of an increase in subscriber
base. Our subscriber base as of March 31, 2013 was 121.61 million subscribers compared to 112.72 million
subscribers as of March 31, 2012, an increase of 7.9%.
Advertisement and Business Promotion Expenditure. Advertisement and business promotion expenditure
increased by 10.3% to ₹ 4,720.29 million for the financial year 2013 from ₹ 4,281.21 million for the financial
year 2012, primarily as a result of the launch of two large advertising campaigns and a series of shorter festive
campaigns.
Administration and Other Expenses. Administration and other expenses increased by 15.8% to ₹ 5,541.57
million for the financial year 2013 from ₹ 4,786.20 million for the financial year 2012, primarily as a result of
an increase in provision of bad debts and doubtful debts by 38.9% to ₹ 829.85 million for the financial year
2013 from ₹ 597.31 million for the financial year 2012 and an overall increase in our business operations.
Finance and Treasury Charges. Finance and treasury charges decreased by 10.1% to ₹ 9,494.50 million for the
financial year 2013 from ₹ 10,557.29 million for the financial year 2012, primarily as a result of an increase in
profits from the sale of mutual funds to ₹ 667.37 million for the financial year 2013 from ₹ 291.71 million for
the financial year 2012 and a decrease in loss from foreign exchange fluctuation to ₹ 198.80 million for the
financial year 2013 from ₹ 501.78 million for the financial year 2012.
Depreciation. Depreciation costs increased by 21.5% to ₹ 29,589.50 million for the financial year 2013 from ₹
24,356.93 million for the financial year 2012, primarily as a result of increase in the gross block of tangible
fixed assets to ₹ 350,418.46 million, as of March 31, 2013, from ₹ 314,492.12 million, as of March 31, 2012,
primarily attributable to the overall growth in our business.
Amortization of Intangible Assets. Amortization of intangible assets decreased by 4.9% to ₹ 5,188.15 million for
the financial year 2013 from ₹ 5,456.42 million for the financial year 2012, primarily as a result of reversal of
accumulated amortization on the seven operational quashed licenses amounting to ₹ 482.30 million.
Tax Expense. Tax expense increased by 70.5% to ₹ 5,663.96 million for the financial year 2013 from ₹ 3,322.85
million for the financial year 2012, primarily as a result of an increase in profit before tax by 49.5% and an
increase in surcharge on income tax from 5.0% to 10.0% resulting in effective current tax rate increasing from
32.5% to 34.0%. Our effective tax rates increased to 35.9% in the financial year 2013 from 31.5% in the
71
financial year 2012, primarily as a result of the cumulative impact of increase in surcharge on opening deferred
tax liability.
Profit After Tax. Our profit after tax increased by 39.8% to ₹ 10,109.27 million for the financial year 2013 from
₹ 7,229.88 million for the financial year 2012 primarily as a result of an increase in our service revenue. Our
profit after tax for the year as a percentage of total income increased to 4.5% for the financial year 2013 from
3.7% for the financial year 2012.
Financial Condition, Liquidity and Capital Resources
We define liquidity as our ability to generate sufficient funds from internal and external sources to meet our
obligations and commitments. In addition, liquidity includes the ability to obtain appropriate equity and debt
financing. Liquidity cannot be considered separately from capital resources that consist of current or potentially
available funds for use in achieving long-range business objectives and meeting debt service and other
commitments.
We have historically financed our capital requirements primarily through cash generated from our operations,
financing from banks and other financial institutions and from the issuance of equity shares of our Company.
Our primary capital requirements have been capital expenditures to develop, expand and upgrade our network
and equipment, acquisition of spectrum, license and other regulatory costs, and other capital expenditure and
working capital requirements. We believe that we will have sufficient capital resources from our operations, net
proceeds of the Issue and other financing from banks, financial institutions and other lenders to meet our capital
requirements for at least the next 12 months.
Cash Flows
The table below summarizes our cash flows for the financial years 2012, 2013 and 2014:
For the year ended March 31,
2013
(₹ in millions)
38,180.82
62,970.92
(46,850.92)
(34,109.00)
(3,613.98)
(19,653.42)
(12,284.08)
9,208.50
2012
Net cash generated from operating activities
Net cash (used in) investing activities
Net cash generated from / (used in) financing activities
Net increase / (decrease) in cash and cash equivalents
2014
82,192.05
(65,642.42)
(24,660.80)
(8,111.17)
Operating Activities
Net cash generated from operating activities increased to ₹ 82,192.05 million for the financial year 2014 from ₹
62,970.92 million for the financial year 2013, primarily due to an increase in revenues for the financial year
2014 as compared to the financial year 2013.
Net cash generated from operating activities increased to ₹ 62,970.92 million for the financial year 2013 from ₹
38,180.82 million for the financial year 2012, primarily due to an increase in revenues for the financial year
2013 as compared to the financial year 2012 and the making of certain business related deposits in the financial
year 2012.
Investing Activities
Net cash used in investing activities was ₹ 65,642.42 million for the financial year 2014, consisting of amount
paid for purchase of fixed assets and intangible assets (including CWIP) of ₹ 36,984.63 million, primarily for
expansion of our network, payment towards spectrum and licences of ₹ 31,436.07 million in respect of new 900
MHz and 1800 MHz spectrum acquired in February 2014, which was partially offset by profits from the sale of
current investments and interest received of ₹ 2,242.06 million.
Net cash used in investing activities was ₹ 34,109.00 million for the financial year 2013, consisting of amount
paid for purchase of fixed assets and intangible assets (including CWIP) of ₹ 35,199.98 million, primarily for
expansion of our network which was partially offset by profits from the sale of current investments and interest
received of ₹ 870.28 million.
Net cash used in investing activities was ₹ 46,850.92 million for the financial year 2012, consisting of amount
paid for purchase of fixed assets and intangible assets (including CWIP) of ₹ 47,326.59 million, primarily for
72
expansion of our network which was partially offset by profits from the sale of current investments and interest
received of ₹ 416.63 million.
Financing Activities
Net cash used in financing activities was ₹ 24,660.80 million for the financial year 2014, consisting primarily of
net repayment of long-term borrowings of ₹ 17,554.62 million and payment of interest and financing charges of
₹ 7,681.99 million, partially offset by net proceeds from short-term borrowings of ₹ 1,618.94 million.
Net cash used in financing activities was ₹ 19,653.42 million for the financial year 2013, consisting primarily of
net repayment of short-term borrowings of ₹ 12,690.11 million and payment of interest and financing charges of
₹ 9,283.00 million, partially offset by net proceeds from long-term borrowings of ₹ 2,321.73 million.
Net cash used in financing activities was ₹ 3,613.98 million for the financial year 2012, consisting primarily of
payment of interest and financing charges of ₹ 11,199.84 million and net repayment of short term borrowings of
₹ 628.63 million. Net proceeds from long-term borrowings during the year were ₹ 7,977.39 million which was
mainly used for purchase of fixed assets.
Indebtedness
As of March 31, 2014, our consolidated total indebtedness (including deferred liabilities towards acquisition of
spectrum) was ₹ 206,349.27 million, consisting of short-term borrowings and long-term borrowings. The
following table summarizes our consolidated long-term and short-term indebtedness, as of March 31, 2014:
As of March 31, 2014
(₹ in millions)
Our Indebtedness
Short-term Borrowings
Secured
Unsecured
Total Short-term Borrowings
5,982.05
489.58
6,471.63
Long-term Borrowings
Secured
Unsecured
Total Long-term Borrowings
Current Maturities of Long-Term Borrowings
Total
82,776.39
98,507.66
181,284.05
18,593.59
206,349.27
There are a number of covenants in the financing agreements we have entered into with our lenders, such as:

creation of security over existing and future assets;

incurrence of additional indebtedness or servicing subordinated indebtedness under certain
circumstances;

making certain restricted payments;

investing in equity interests or purchasing assets, other than in ordinary course of our business, unless
certain conditions are satisfied;

sale or other disposition or revaluation of assets;

change or expansion in scope of business;

entering into certain corporate transactions such as reorganizations, amalgamations and mergers;

dilution of our promoter’s shareholding in our Company beyond specified levels; and

change in the capital structure of our Company.
See “Risk Factors – Risks relating to our business – Our lenders have substantial rights to determine how
we conduct our business.” on page 41 for further details.
73
Our interest coverage ratio for the last three financial years is set out below:
As of March 31,
2013
2012
Interest Coverage Ratio
(the sum of profit after tax, depreciation and amortisation and
gross finance cost divided by gross finance cost)
4.53
2014
5.42
7.79
Capital and Other Commitments
As of March 31, 2014, our estimated capital expenditure contracts, which we expect to incur costs on within one
year, remaining to be executed (net of advances) and not provided for was ₹ 17,402.34 million and other
estimated long-term contracts remaining to be executed, including early termination commitments (if any) was ₹
18,376.07 million.
Operating Leases
We have entered into non-cancellable operating leases for offices, switches and cell sites for periods ranging
from 36 months to 240 months. For the financial year 2014, total minimum lease payments amounting to ₹
22,857.76 million were charged to our statement of profit and loss.
The future minimum lease payments in respect of our operating leases are as follows:
Within 1 Year
Minimum Lease Payments
20,141.03
Between
1 and 5 Years
(₹ in millions)
68,527.36
More than 5 Years
35,596.72
Capital Expenditures
Our capital expenditure for the financial years 2014, 2013 and 2012 were ₹ 150,250.77 million, ₹ 61,986.52
million and ₹ 45,669.04 million, respectively.
Our capital expenditure for the financial year 2014 primarily included ₹ 104,242.15 million in respect of new
900 MHz and 1800 MHz spectrum acquired in February 2014, capitalization of exchange loss amounting to ₹
7,475.54 million on the long term loans taken for acquisition of fixed assets and the remaining amount incurred
was primarily towards the expansion of our network.
Our capital expenditure for the financial year 2013 included ₹ 20,313.10 million that we incurred for the
acquisition of 2G spectrum in the auction held in November 2012, capitalization of exchange loss amounting to
₹ 4,120.31 million on the long term loans taken for acquisition of fixed assets and the remaining amount
incurred was primarily towards the expansion of our network.
Our capital expenditure for the financial year 2012 was primarily towards expansion of our 3G and 2G network
and the capitalization of exchange loss amounting to ₹ 5,635.25 million on long term loans availed for the
acquisition of fixed assets.
Contingent Liabilities
Our contingent liabilities as of March 31, 2014 are set out below:
Particulars
Income Tax Matters not acknowledged as debts
Sales Tax and Entertainment Tax Matters not acknowledged as debts
Service Tax Matters not acknowledged as debts
Entry Tax and Custom Matters not acknowledged as debts
Licensing Disputes not acknowledged as debts
Other claims not acknowledged as debts
As of March 31, 2014
(₹ in millions)
62,340.68
1,003.74
2,123.73
344.84
19,943.82
2,578.56
In addition, DoT has issued us demand notices towards one time spectrum charges for the following:

spectrum beyond 6.2 MHz in respective Service Areas, for a retrospective period commencing from
July 1, 2008 to December 31, 2012, amounting to ₹ 3,691.30 million; and
74

spectrum beyond 4.4 MHz in respective Service Areas, with effect from January 1, 2013 till the expiry
of the period under the respective licenses, amounting to ₹ 17,443.70 million.
We have challenged these notices before the High Court of Bombay on the grounds that it amounts to alteration
of financial terms of the licenses issued by the DoT. The High Court of Bombay has directed DoT to not take
any coercive action until matter is heard further. For more details, see “Legal Proceedings” on page 162.
Our Company also has a contingent obligation to buy compulsorily convertible preference shares from the
holder of such shares at fair market value plus agreed consideration in the event ABTL is not able to redeem
such shares (which were issued by ABTL for ₹ 20,982.50 million including premium thereon).
Our share in certain disputed tax demand notices and show cause notices relating to indirect tax matters
amounting to ₹ 5,892.00 million have neither been acknowledged as claims nor considered as contingent
liabilities by Indus Towers. Based on internal assessment and independent advice taken from tax experts, Indus
Towers has determined that the possibility of any of these tax demands materialising is remote.
We have also provided bank guarantees, aggregating to ₹ 42,006.13 million, including ₹ 40,955.25 million
provided to DoT, as of March 31, 2014.
Related Party Transactions
We have in the past engaged, and in the future may engage, in transactions with related parties, including with
our affiliates. Such transactions could be for, among other things, purchase and sale of services, rent or lease of
certain properties, dividends and interest, remuneration. We believe each of these arrangements has been entered
into in the ordinary course of business and are on arm’s lengths terms, or on terms that we believe are at least as
favourable to us as similar transactions with unrelated parties.
For additional details of our related party transactions, see our audited consolidated financial statements as of
and for the years ended March 31, 2012, 2013 and 2014, and the related notes.
Off-Balance Sheet Commitments and Arrangements
We do not have any off-balance sheet arrangements, derivative instruments, swap transactions or relationships
with affiliates or other unconsolidated entities or financial partnerships that would have been established for the
purpose of facilitating off-balance sheet arrangements.
Quantitative and Qualitative Disclosures about Market Risk
Market risk is the risk of loss related to adverse changes in market prices, including interest rate risk and
commodities risk. We are exposed to interest rate risk, exchange rate risk, credit risk and inflation risk in the
normal course of our business.
Exchange Rate Risk
We face exchange rate risk because certain of our obligations and certain receivables pertaining to international
in-roaming and ILD charges are denominated in foreign currencies. To manage exchange rate risk, we enter into
forward and swap contracts with various counterparties to protect against the volatility of the Rupee against the
U.S. Dollar, Euro, Pound Sterling and Japanese Yen. Details of our foreign currency exposures are set out
below:
Hedged by a Derivative Instrument:
As of March 31, 2014
(Amount in millions)
Hedged
Foreign Currency Loan:
Foreign Currency Loan in US$
Foreign Currency Loan in JPY
Equivalent ₹ of Foreign Currency Loan
Trade Payable and Other Current Liabilities
Trade Payable in US$
Interest accrued but not due on Foreign Currency Loans in US$
Interest accrued but not due on Foreign Currency Loans in JPY
Equivalent ₹ of Trade Payables and other Current Liabilities
667.73
5,313.22
43,744.48
46.38
7.39
8.20
3,368.86
75
Not Hedged by a Derivative Instrument or otherwise:
As of March 31, 2014
(Amount in millions)
Not Hedged
Foreign Currency Loan:
Foreign Currency Loan in US$
Equivalent ₹ of Foreign Currency Loan
Trade Payable:
Trade Payable in US$
Trade Payable in EURO
Equivalent ₹ of Trade Payables in Foreign Currency
Trade Receivable:
Trade Receivable in US$
Trade Receivable in EURO
The Equivalent ₹ of Trade Receivables in Foreign Currency
473.75
28,472.38
46.01
0.25
2,786.04
12.65
0.11
768.78
While we believe that our forward contracts protect us against certain short-term swings in the Indian RupeeU.S. Dollar and Indian Rupee-Japanese Yen exchange rates, we cannot assure you that they will fully mitigate
any adverse movements in exchange rates. Also, see “Risk Factors – Risks relating to doing business in
India – We are subject to risks arising from exchange rate fluctuations.” on page 51.
Interest Rate Risk
We are subject to interest rate risk, primarily because some of our borrowings and our deposits of cash and cash
equivalents with banks and other financial institutions are at floating interest rates. As of March 31, 2014, 25%
of our indebtedness consisted of floating rate indebtedness.
Interest rates are highly sensitive to many factors beyond our control, including the monetary policies of the
RBI, deregulation of the financial sector in India, domestic and international economic and political conditions,
inflation and other factors. Upward fluctuations in interest rates increase the cost of servicing existing and new
debts, which adversely affects our results of operations.
Credit Risk
We are exposed to credit risk on trade receivables from subscribers and other counterparties. We try to control
our credit risk by assessing the credit quality of our subscribers, taking into account their financial position, past
experience and other factors.
Inflation Risk
India has experienced high inflation for the last 12 to 18 months, which has contributed to an increase in interest
rates. See “Risk Factors –Risks relating to doing business in India –The Indian economy has had sustained
periods of high interest rates and/or inflation.” on page 51.
Seasonality of Business
We do not experience significant seasonality in our business, however, in the second quarter of each financial
year, we generally see a slowdown in the growth of minutes on our network on a quarter on quarter basis.
76
INDUSTRY OVERVIEW
The information in this section has been extracted from various government publications and industry sources.
None of us, the Lead Managers, or any other person connected with the Issue has verified this information.
Industry sources and publications generally state that the information contained therein has been obtained from
sources generally believed to be reliable, but that the accuracy, completeness and underlying assumptions of
these sources are not guaranteed and their reliability cannot be assured and, accordingly, your investment
decision should not be based on such information.
Unless otherwise stated, the revenue data sourced from TRAI is presented on a quarterly basis and the
subscriber data sourced from TRAI is presented on a monthly basis.
The Indian Economy
The Indian economy is the fourth largest by purchasing power parity. In 2013, India’s gross domestic product
(“GDP”) on a purchasing power parity basis was approximately US$4.96 trillion. (Source:
https://www.cia.gov/library/publications/the-world-factbook/geos/in.html)
India is also becoming increasingly urbanized and its per capita income has risen in recent years. In 2012,
India’s urban population increased to approximately 391.5 million people. The urban population in India
represents 32.0% of the total population. (Source: International Monetary Fund, available at:
http://data.worldbank.org/indicator/SP.URB.TOTL.IN.ZS) For 2013, India’s per capita GDP at current prices
was estimated to be ₹ 90,242.52. (Source: International Monetary Fund, available at: http://www.imf.org
/external/pubs/ft/weo/2013/02/weodata/weorept.aspx?pr.x=92&pr.y=8&sy=2011&ey=2018&scsm=1&ssd=1&
sort=country&ds=.&br=1&c=534&s=NGDPRPC%2CNGDPPC%2CNGDPDPC&grp=0&a=)
Overview of the Mobile Telecommunications Industry in India
The mobile telecommunications industry is an integral part of the Indian economy and has contributed to the
economic growth and the GDP of the country. It also generates revenue for the Government and creates new
jobs. The growth of the mobile telecommunications industry has had a positive influence over the overall
economy in the past two decades. The share of the telecommunications industry, as a percentage of the total
GDP, increased from 1.0% in 2000–01 to 4.4% in 2011-12. (Source: Central Statistical Organization)
The mobile telecommunications industry in India is divided into 22 Service Areas – three metro Service Areas,
and 19 other Service Areas. These other Service Areas are categorized as Service Area ‘A’, Service Area ‘B’
and Service Area ‘C’ in descending order on the basis of degree of affluence, infrastructure development and
revenue potential across each Service Area. As of March 31, 2014, India had a total reported subscriber base of
904.5 million and a VLR subscriber base of 790.9 million. In the financial year 2013, mobile
telecommunications operators earned gross revenues of ₹ 1,507,177 million. (Source: TRAI)
A map of India showing the Service Areas, gross revenues per Service Area and total mobile subscribers in each
Service Area is set out below:
77
Total Mobile
Subscribers (mm)
Gross Revenues
(Rs. mm)
Andhra Pradesh
67.2
117,395
Gujarat
54.5
85,826
Karnataka
54.3
108,066
Maharashtra
72.6
122,474
Tamil Nadu (inc
Chennai)
75.2
132,230
Total Mobile
Subscribers (mm)
Gross Revenues
(Rs. mm)
Haryana
21.3
31,703
Kerala
31.1
64,920
Madhya Pradesh
55.5
69,184
Punjab
31.2
57,569
Rajasthan
52.6
74,239
Uttar Pradesh (E)
77.0
93,619
Category B Circles
Uttar Pradesh (W)
48.8
65,025
Category C Circles
West Bengal
42.3
49,266
Category C
Total Mobile
Subscribers (mm)
Gross Revenues
(Rs. mm)
Assam
15.3
26,164
Bihar
61.6
74,142
Himachal Pradesh
7.1
10,823
J&K
7.9
16,207
N.E.
9.4
16,479
Orissa
25.1
30,310
Category A
Category B
Metro Circles
Category A Circles
Metros
Delhi
Kolkata
Mumbai
Total Mobile
Subscribers (mm)
Gross Revenues
(Rs. mm)
42.6
124,987
21.1
30.9
38,233
98,317
(Source: TRAI; Revenues for the financial year ending March 2013; Subscribers as of March 31, 2014)
Subscriber Growth
The Indian mobile telecommunications industry had approximately seven million monthly subscriber additions
during 2007. In 2008 the Government awarded several new licenses as well as allowed CDMA operators to
offer GSM services. Both these events prompted aggressive subscriber acquisition initiatives. These events also
led to a prolonged phase of hyper competition and, as a result, steep tariff decline. After the launch of services
by new licensees, subscriber additions increased significantly and reached a peak of 22.9 million subscriber
additions during the month of November 2010. (Source: TRAI) This period also led to multi-SIM usage as
subscribers attempted to take advantage of the tariff arbitrage between different plans thereby increasing the
reported subscriber penetration without the commensurate increase in human penetration.
The competitive intensity has decreased since the quashing of the licenses and the associated spectrum granted
in January 2008 by the Supreme Court of India in February 2012. As a result of a reduction in promotional
packages following reduced competitive intensity, new subscriber additions and multi-SIM usage declined.
Some operators have also deactivated inactive connections as a result of which, the reported subscriber base
which was highest at the end of June 2012 at 934.09 million, decreased to 861.66 million as of the end of
February 2013. Thereafter, the subscriber base has been increasing and was 904.51 million as of March 31,
2014. However, the VLR subscriber base has been increasing during this period and was 790.87 million as of
March 31, 2014 as compared to 695.82 million as of June 30, 2012. The total number of VLR subscribers
increased by 40.0 million during the financial year 2014 as compared to 67.9 million during financial year 2013.
(Source: TRAI)
78
The chart below illustrates the reported and VLR subscriber base from March 31, 2008 to March 31, 2014:
Reported Subscriber (mm)
VLR Subscribers (mm)
1,000.00
919.2
867.8
900.00
811.6
800.00
790.9
683.0
700.00
584.3
574.0
Mar-10
Mar-11
600.00
500.00
904.5
723.0
391.8
400.00
300.00
261.1
200.00
100.00
Mar-08
Mar-09
Mar-12
Mar-13
Mar-14
(Source: TRAI)
Evolution of the Mobile Telecommunications Industry in India
The telecommunications industry in India was a Government-managed monopoly until the NTP 1994, in which
the Government set targets for expanding service provision and privatizing the sector. The Government
subsequently opened the sector to private companies and auctioned licenses for providing mobile
telecommunications services with fixed fees, first, from 1994 to 1995 for the metro Service Areas, and later,
from 1995 to 1998 for the ‘A’, ‘B’ and ‘C’ Service Areas. The industry was divided into Service Areas, which
broadly correspond with boundaries of Indian states and metro areas. Today there are 22 Service Areas - three
metro Service Areas, which are Mumbai, Delhi and Kolkata, and 19 other Service Areas, which are categorized
as Service Area ‘A’, Service Area ‘B’ and Service Area ‘C’. Initially, licenses were awarded to two private
operators with GSM spectrum in the 900 MHz band in each Service Area.
In 1997, the TRAI was established by an act of parliament called the Telecom Regulatory Authority of India
Act, 1997. The aim of TRAI is to regulate telecommunications services, including fixation and revision of tariffs
for telecommunications services which were earlier vested with the Government and to create and nurture an
environment that enables the quick growth of the telecommunications sector in India.
By 1999, the Government, recognizing that the objectives set by NTP 1994 were unattainable without further
privatization, announced the NTP 1999. NTP 1999 allowed service providers to migrate their license fee
structure from fixed to revenue sharing, extended initial license term from 10 years to 20 years and bifurcated
the DoT into BSNL, the Government-managed telecommunications service provider, and DoT, the policy maker
and licensor. BSNL, which initially provided fixed-line and domestic long distance service, was allowed to coexist alongside two other Government-owned telecommunication service providers: MTNL, which initially
provided fixed-line local service in the metropolitan cities of Mumbai and Delhi, and VSNL, which provided
international long distance service. VSNL was privatized in 2002 and was subsequently renamed Tata
Communications. DoT issued the third mobile telecommunications service provider licenses to MTNL in
Mumbai and Delhi, and to BSNL for all other Service Areas.
In an effort to encourage competition and development, NTP 1999 also permitted DoT to issue more mobile
telecommunications licenses in each Service Area. Subsequently, in January 2001, the Government published
guidelines concerning the fourth license to be awarded for each Service Area. The guidelines called for a nonexclusive license for a period of 20 years (thereafter extendable by 10 years).
79
Also, in January 2001, based on the recommendations of TRAI, the Government issued guidelines to permit
fixed-line telecommunications service providers to provide limited mobility services using WLL technology
within specified short distance calling areas in which the relevant subscriber is registered.
Initially service providers were required to obtain different licenses depending on the service and technology
used. In 2003, the Government created guidelines for a unified licensing regime which produced three key
measures:

the country was divided into Service Areas for providing UAS;

service providers could provide both fixed-line and mobile telecommunications services in a given
Service Area by obtaining just one UASL; and

with UASL, service providers were free to use any technology to provide the licensed service.
Following the introduction of the unified licensing regime, basic operators that were providing limited mobility
services using WLL technology migrated to UASL license and started providing full mobility services after
payment of the difference between the entry fee paid by the fourth cellular operator and the entry fee paid by the
basic licensee. The year 2003 also witnessed a change in pricing policy which was called the CPP regime which
assisted in the growth of the mobile telecommunications industry in India. By introduction of the CPP regime,
all incoming calls could be received free of charge.
In 2008, DoT allotted four to seven licenses in each Service Area along with start-up spectrum and also
permitted CDMA operators to offer GSM services, taking the number of operators (based on subscriber
reported) in the industry to between 9 to 13 per Service Area by December 2011. Licenses and spectrum were
allotted on a first-come-first-serve basis and were granted at 2001 prices. A number of foreign companies
entered the Indian mobile telecommunications market in partnership with Indian entrepreneurs during 2008 as a
result of new licenses being offered and as a result of the 2005 relaxation in the FDI limit in the industry from
49.0% to 74.0%. The launch of mobile telecommunications services by new licensees in partnership with
foreign partners led to a phase of hyper competition and, as a result, subscriber additions increased significantly
and reached a peak of 22.9 million subscriber additions during the month of November 2010. (Source: TRAI)
Meanwhile auctions for 3G (2100 MHz) and BWA (2300 MHz) spectrum were held in 2010 with a pan India
winning price of 3G spectrum of ₹ 167,505.80 million for 5 MHz block of paired spectrum and pan India price
of BWA spectrum of ₹ 128,477.10 million for 20 MHz block of unpaired spectrum. (Source: DoT)
On February 2, 2012, the Supreme Court of India directed that all licenses and spectrum allocated pursuant to
the press releases of January 2008 were to be quashed as the method of allocation of these licenses followed by
the Government was flawed. DoT issued a press release on February 15, 2012, where it directed that going
forward licenses and spectrum be delinked. Following TRAI recommendations, the Government conducted a
spectrum auction for 1800 MHz band in November 2012 with a pan India reserve price of ₹ 140.0 billion for 5
MHz block of paired 1800 MHz spectrum. Though, the quantum of the spectrum put to auction was less than the
spectrum vacated due to quashing of licenses, the auction concluded in two days and only 102 blocks (one block
is equal to 1.25 MHz spectrum) were sold against 236 blocks put up for auction. There were no bids received for
the Service Areas of Delhi, Mumbai, Karnataka and Rajasthan. There were no applicants for 800 MHz band as
well. Subsequently, the Government reduced the price of 1800 MHz band by 30% in these four Service Areas,
where no bids were received in the November 2012 auction and by 50% for the 800 MHz band, for all Service
Areas. The Government issued a notice inviting applications on January 30, 2013 for the auction of 900 MHz,
1800 MHz and 800 MHz bands. The auction for 1800 MHz band was limited to the four Service Areas where no
bids were received in the November 2012 auction while the auction for 900 MHz band was for the Service
Areas of Delhi, Mumbai and Kolkata, where some of the old licenses are due for extension in 2014. However, as
no applications were received by the Government for the 900 MHz and 1800 MHz bands, the Government was
forced to cancel the auction for the 900 MHz and 1800 MHz bands. For the 800 MHz band, there was only one
participant who bid and won spectrum in eight Service Areas.
Meanwhile, the Supreme Court directed the Government to put the entire spectrum vacated due to quashing of
licenses for auction. Subsequently, in February 2014, auction for spectrum in 900 MHz for three Metro Service
Areas and 1800 MHz bands for all Service Areas was held over 10 days of bidding, in which, eight companies
participated. In the 1800 MHz band segment, bids were made for 307.2 MHz out of 385.2 MHz of spectrum
available for auction across all Service Areas, which were sold for an aggregate price of ₹ 375,726 million. The
entire 46 MHz spectrum in three Metro Service Areas available for auction in the 900 MHz band was sold for an
80
aggregate price of ₹ 235,896 million. (Source: DoT)
In August 2013, the Government increased the maximum FDI limit in the telecommunications sector to 100%
from 74%. The Government of India has allowed up to 49% FDI through the automatic route, with further
investments subject to approval by the FIPB and other applicable conditions.
In August 2013, DoT announced the UL guidelines which aim to unify all licenses (except broadcasting and
Direct to Home) under the ambit of TRAI under one license. According to these guidelines, national level
unified licensees are permitted to provide services under a single license. Operators can convert their existing
licenses into a Unified License by paying a fee to the Government. According to the new guidelines, spectrum
has been de-linked from license.
On February 20, 2014, DoT announced the guidelines for transfer and merger of various categories of
telecommunication service licenses. The underlying principle for the guidelines was the National Telecom
Policy, 2012, which had proposed simplified merger and acquisition regime in the sector while ensuring
adequate competition. The key features of these guidelines have been set out below:

Transfer and merger of licenses will be allowed where market share for of the resultant entity in the
respective Service Area will not be more than 50%. Market share will be determined on subscriber base
(including wireline subscribers according to the EDR and wireless subscribers according to the VLR)
and AGR. If the market share of resultant entity exceeds 50% in a Service Area, it would need to be
reduced to 50% within a period of one year from the date of approval of the transfer or the merger;

The period of validity of licenses will be equal to the longer of the license period of any of the merging
entities subject to pro-rata payments, if any, for the extended period of license. However, the validity
period of the spectrum shall remain unchanged;

Total spectrum (including all bands) held by resultant entity will not exceed 25% of the total spectrum
assigned for access services in the Service Area and 50% of the spectrum assigned in each band as set
out below:

o
in case of 800 MHz band, the ceiling shall be 10 MHz;
o
resultant entity shall be allowed to hold two blocks of 3G spectrum (2100 MHz) subject to the
50% limit; and
o
excess spectrum will have to be returned within one year of the approval of the transfer or the
merger;
If a transferor (the acquired) company holds part of a spectrum, which has been assigned against the
entry fee paid, the transferee (the acquiring) company, will be required to pay the differential between
the entry fee and the determined market price of the spectrum on a pro-rata basis for the remaining
period of validity of such license to the Government at the time of the transfer or the merger and
subject to the following conditions:
o
no separate charge will be required to be paid for spectrum acquired through auctions
conducted from 2010 onwards;
o
in the event of judicial intervention in respect of demands raised before the transfer or the
merger for one time spectrum charges (for spectrum held beyond 4.4 MHz (GSM) or 2.5 MHz
(CDMA)), a bank guarantee shall be submitted.
Key Characteristics of the Mobile Telecommunications Industry in India
Mobile Penetration
As of March 31, 2014, mobile teledensity was at 72.9% based on reported subscribers and 63.8% based on VLR
subscribers. In India mobile teledensity varies significantly across urban and rural areas. As of March 31, 2014,
mobile teledensity in urban areas, based on reported subscribers, was 139.9% and in rural areas was 43.3%.
Teledensity in rural areas has increased from 18.8% to 43.3% since March 2009, while teledensity in urban
areas has increased from 88.7% to 139.9% over the same period. (Source: TRAI)
81
GSM Technology and CDMA Technology
GSM technology is the second generation (2G) digital cellular network used by mobile phones. The GSM
standard was developed as a replacement for first generation (1G) analog cellular networks. CDMA technology
is a channel access method used by various radio communication technologies. CDMA technology permits
several transmitters to send information simultaneously over a single communication channel thereby allowing
several users to share bandwidth.
The GSM reported subscriber base has increased from 192.7 million in March 2008 to 824.1 million in
December 2013. GSM subscribers accounted for approximately 93.0% of the total mobile subscriber base in
India at the end of December 2013. (Source: TRAI)
With more subscribers opting for GSM, the share of CDMA subscribers has decreased steadily. The share of
CDMA subscribers decreased from 26.2% in March 2008 to 7.0% in December 2013. (Source: TRAI)
The table below illustrates the technology wise subscriber base for the periods indicated:
Technology
Million reported
subscribers
GSM
CDMA
Total
GSM %
CDMA %
(Source: TRAI)
March
2008
March
2009
March
2010
March
2011
March
2012
March
2013
December
2013
192.7
297.3
478.7
698.4
814.1
794.0
824.1
68.4
261.1
73.8%
26.2%
94.5
391.8
75.9%
24.1%
105.6
584.3
81.9%
18.1%
113.2
811.6
86.1%
14.0%
105.1
919.2
88.6%
11.4%
73.8
867.8
91.5%
8.5%
62.2
886.3
93.0%
7.0%
Key Operational Metrics
ARPU
Between 2008 and 2013, ARPU for GSM subscribers decreased from ₹ 264.00 per month in the quarter ended
March 2008 to ₹ 112.00 per month in the quarter ended December 2013. ARPU for CDMA subscribers
decreased from ₹ 159.00 per month to ₹ 104.00 per month during the same period. The decrease in tariffs was
the outcome of a combination of factors including implementation of the CPP regime, an increase in the
proportion of pre-paid subscribers and rural subscribers and rising competitive intensity.
The table below illustrates the technology wise ARPU for the periods indicated:
Quarter Ending
GSM (₹ per month)
CDMA (₹ per month)
(Source: TRAI)
March
2008
264
159
March
2009
205
99
March
2010
131
76
March
2011
100
66
March
2012
97
75
March
2013
105
95
December
2013
112
104
Minutes of Use
Between 2008 and 2013, MoU for GSM subscribers decreased from 493 minutes per month in the quarter ended
March 2008 to 379 minutes per month in the quarter ended December 2013. MoU for CDMA subscribers
decreased from 364 minutes per month to 272 minutes per month during the same period. As cellular operators
broaden their reach in rural and semi-urban areas, the proportion of low-end users increases, resulting in lower
average usage. At the same time, the increase in competitive intensity since 2009 led to rise of multi-SIM usage
which also led to minutes of a single user splitting among multiple SIMs or operators. The multi-SIM issue has
started to reduce in recent times as competitive intensity declined leading to minutes stabilizing and the
proportion of active subscribers increasing.
The table below illustrates the technology wise MoU for the periods indicated:
Quarter Ending
GSM (minutes per month)
March
2008
493
March
2009
484
March
2010
410
82
March
2011
349
March
2012
346
March
2013
383
December
2013
379
Quarter Ending
CDMA (minutes per month)
(Source: TRAI)
March
2008
364
March
2009
357
March
2010
307
March
2011
263
March
2012
229
March
2013
275
December
2013
272
Pre-paid and Post-paid Subscriptions
Mobile telecommunications operators offer two basic subscription methods, pre-paid and post-paid.
The pre-paid subscription model is currently the most widely used subscription method in the mobile
telecommunications industry in India. The pre-paid subscription model accounted for 96.0% of GSM
subscribers and 89.9% of CDMA subscribers as of December 31, 2013. (Source: TRAI)
Spectrum
Mobile operators in India have currently been allotted spectrum in different bands. These bands are: 800 MHz,
900 MHz, 1800 MHz, 2100 MHz, 2300 MHz and 2600 MHz. (Source: DoT)
While 800 MHz is used for provision of CDMA services, 900 MHz and 1800 MHz have been used for the
provision of GSM services. Spectrum in 2100 MHz and 2300 MHz bands were auctioned in 2010 for 3G and
BWA services, respectively. BSNL and MTNL were awarded spectrum in the 2600 MHz band in select Service
Areas and 2300 MHz in other Service Areas for provision of BWA services.
The recently concluded auction in February 2014 entailed the auction of spectrum in 900 MHz and 1800 MHz
bands, with the winning entities having the flexibility to use the spectrum to provide 2G, 3G, 4G or other
services.
Competitive Landscape
The three largest mobile telecommunications operators accounted for approximately 69.6% of TRAI Revenue
market share for the quarter ended December 31, 2013 and 62.5% of VLR subscriber market share as of March
31, 2014. The TRAI reported Revenue market share of the three largest operators increased from 65.6% for the
quarter ended September 2010 to approximately 69.6% for the quarter ended December 31, 2013.
TRAI Revenue Share (quarter ended)
VLR Share of Top 3 Operators*
65%
75%
62.5%
61.5%
68.6%
70%
60%
58.8%
66.9%
59.3%
58.0%
55%
69.6%
65.6%
65.1%
65%
60%
Sep'10 Mar'11 Mar'12 Mar'13 Mar'14
Sep'10
Mar'11
Mar'12
Mar'13
Dec'13
* Bharti, Vodafone and Idea
(Source: TRAI)
While the three largest operators successfully defended their market share, the phase of hyper-competition led to
steep fall in tariffs and realizations for all operators. Since the quashing of licenses by the Supreme Court,
competitive intensity has declined with operators being forced to exit or reduce their presence in India. The
number of licensees has therefore decreased to six to ten mobile operators per Service Area. In addition
increasing losses have forced operators to start rationalizing tariffs to protect their investments. As a result,
realizations have started to improve.
83
The chart below illustrates the number of operators in all Service Areas:
Number of Operators
December 2008
December 2011
6
11
6
11
7
13
6
9
6
12
7
11
6
12
5
9
6
12
6
11
6
11
6
12
6
12
7
12
6
11
6
12
7
12
7
12
6
11
6
11
6
12
6
10
Service Area
Andhra Pradesh
Assam
Bihar
Delhi
Gujarat
Himachal Pradesh
Haryana
Jammu and Kashmir
Karnataka
Kerala
Kolkata
Madhya Pradesh
Maharashtra
Mumbai
North East
Orissa
Punjab
Rajasthan
Tamil Nadu (including Chennai)
Uttar Pradesh (East)
Uttar Pradesh (West)
West Bengal
March 2014
8
6
8
8
10
7
8
6
8
8
8
8
8
8
6
7
8
8
8
8
9
8
(Source: TRAI; Number of operators in a Service Area has been calculated on the basis of whether a licensee
reported subscribers in that particular Service Area as of end of respective month)
Key Drivers of Industry Growth
Several factors have influenced the growth of the mobile telecommunications industry in India and are expected,
along with innovations, to drive future growth as well. Sustained economic growth has been a factor as has
subscriber ability to use the technology as a result of network expansion. The chart below illustrates the industry
subscriber trends (Source: TRAI):
Industry VLR (mn)
800
750
700
650
600
550
500
450
400
350
300
VLR Teledensity
791
70%
723
683
65%
63.8%
574
59.0%
55%
56.5%
483
60%
50%
42.8%
48.1%
Sep'10
Mar'11
45%
40%
Mar'12
84
Mar'13
Mar'14
Favourable Demography
India’s young population, rapid urbanization and growing middle class ensure a steady subscriber base in the
target demography. As of April 30, 2014, 94.3% of India’s population is estimated to be aged under 65 years,
with 28.9% aged under 15 years (Source: CIA World Factbook Website). India’s young and rapidly urbanizing
population is expected to drive economic growth and increase consumption. A table showing estimated
population distributions for selected countries in 2013 is shown below:
Aged 0-14
(in percentage)
24.2
17.2
28.9
13.4
16.0
20.0
17.3
Countries
Brazil
China
India
Japan
Russia
United States
United Kingdom
Aged 15-64
(in percentage)
68.5
73.4
65.5
61.8
70.9
66.2
65.4
Aged 65+
(in percentage)
7.3
9.4
5.7
24.8
13.1
13.9
17.3
(Source: CIA World Factbook Website)
The Indian middle class is also expected to grow substantially over the next two decades and will continue to
fuel consumption as more products and services become affordable. (Source: U.S. State Department website)
Low mobile penetration in India
As of March 31, 2014, the mobile teledensity was at 72.9% based on reported subscribers and 63.8% based on
VLR subscribers. Actual population penetration could be even lower accounting for the presence of multi-SIM
users. As of March 31, 2014, mobile teledensity in urban areas based on reported subscribers was 139.9% and in
rural areas was 43.3% suggesting significant potential for growth in the rural and semi-urban markets. (Source:
TRAI)
Affordable Tariffs
Tariffs have decreased for each segment primarily due to efficiencies realized through economies of scale and
intense pricing competition. The reduction in tariffs has helped expand the market making mobile
telecommunications a mass market product. Tariffs in India are one of the lowest in the world resulting in low
ARPU levels as indicated in the chart below:
India’s Position in Mobile Pre-paid Tariffs, 2008
35.0
32.2
35.5
35.7
France
Countries with the Highest Mobile
Cellular Prepaid Tariff
Switzerland
Countries with the Lowest Mobile
Cellular Prepaid Tariff
40.0
37.0
33.3
25.1
Greece
26.4
26.5
Australia
24.7
Portugal
24.3
Vennezuela, R.B.
de
World Average: 10.1
25.0
Austria
ARPU
(US$ per Month)
30.0
20.0
15.0
10.0
1.3
1.6
Bangladesh
India
5.0
1.9
2.4
2.6
2.8
2.9
3.0
3.0
3.1
0.0
(Source: TRAI, Telecom Sector in India: A Decadal Profile published May 3, 2012)
85
Brazil
Spain
Japan
Ethiopia
Lao P.D.R.
Bhutan
Nepal
Macao SAR, China
Hong Kong SAR,
China
Sri Lanka
Pakistan
0.0
Market Consolidation
Many new mobile telecommunications operators have exited the market or have significantly scaled down their
operations after the cancellation of licenses by Supreme Court in February 2012. As a result, the remaining
mobile telecommunications operators are focusing on adding new subscribers, reducing churn and increasing
realizations. This could therefore lead to growth in revenue and profitability for the industry as a whole.
Data Services to provide exponential growth
Total wired internet penetration in India, excluding subscribers who accessed the Internet through mobile
phones, was relatively low with 18.33 million connections as of December 31, 2013 (Source: TRAI
Performance Indicator Report for –October - December 2013). The growth of wired internet in India has been
restricted due to lack of adequate infrastructure therefore limiting last mile connectivity. As a result, wireless is
expected to be the preferred means to access the Internet. Currently, 220.4 million users access the internet
through wireless devices including mobile phones as of December 31, 2013 (Source: TRAI Performance
Indicator Report October - December 2013). The wireless technology Internet penetration continues to be low
compared to the total reported subscriber base. This number is expected to grow further driven by continuous
expansion of data network (EDGE, 3G and 4G) by operators, India’s growing young urban population,
increasing affordability of smart phones, growth in social media usage and the proliferation of relevant content.
Growth of Passive Infrastructure Sharing
Passive infrastructure sharing has become increasingly prevalent in India due to various factors. Sharing or
leasing of passive infrastructure will continue to enable the mobile telecommunications operators to
significantly reduce network capital expenditure and operating expenditure. Growth in sharing or leasing of
passive infrastructure will continue to help mobile telecommunications operators in achieving cost efficiencies
and improve profitability. Additionally, leasing passive infrastructure from other mobile telecommunications
operators or independent passive infrastructure service providers will continue to assist operators to roll-out
their services at a faster pace.
Mobile Number Portability
MNP allows a subscriber to retain his mobile telephone number when he moves from one mobile
telecommunications operator to another irrespective of the mobile technology or from one cellular mobile
technology to another of the same mobile operator. The Government implemented MNP in the Haryana Service
Area on November 25, 2010, followed by a nation-wide launch on January 20, 2011. Subscriber porting has
increased subsequent to the quashing of licenses by the Supreme Court of India. Since the nation-wide launch of
MNP approximately 117.0 million mobile subscribers have requested for MNP as of March 31, 2014. (Source:
TRAI) The NTP 2012 expects to implement MNP on a nationwide basis so that subscribers can port their mobile
number to any operator in any Service Area. TRAI has given its recommendations on the subject and the final
decision will be made by the DoT.
86
OUR BUSINESS
Overview
We are the third largest mobile telecommunications operator in India, based on TRAI Reported Revenue and
number of VLR subscribers. For the quarter ended December 31, 2013, we had a Revenue Market Share of
approximately 16.1% of the Indian mobile telecommunications services industry (as reported by TRAI) and as
of March 31, 2014, we had 135.8 million subscribers and 137.9 million VLR subscribers. For the quarter ended
March 31, 2014, we carried 157.1 billion voice minutes with an average realized rate per minute of 43.6 paise.
As of March 2013, we were also the seventh largest mobile telecommunications company (with operations in a
single country) in the world based on number of subscribers (as determined from data from WCIS).
We are a part of the Aditya Birla Group, which is one of the largest business groups in India. The Aditya Birla
Group is a conglomerate with operations in more than 30 countries. The Aditya Birla Group has a history of
over 50 years and has businesses in, among others, metals and mining, cement, carbon black, textiles, garments,
chemicals, fertilizers, life insurance, financial services and mobile telecommunications industries. Our
Company’s other large beneficial shareholders include Axiata Group Berhad, a leading Asian
telecommunications company, through its subsidiaries, Axiata Investments 1 (India) Limited and Axiata
Investments 2 (India) Limited, and Providence Equity Partners, a leading private equity fund, through its entity
P5 Asia Investments (Mauritius) Limited.
We are a pure play pan India mobile telecommunications operator offering voice, data and other VAS. All of
our mobile telecommunications services, other than voice, are classified as VAS. We provide GSM-based
mobile telecommunications services in all 22 Service Areas in India, and 3G services in 21 Service Areas. We
offer 3G services in 11 Service Areas pursuant to spectrum allocated to us. We provide 3G services in 10
additional Service Areas through intra-circle roaming arrangements with other mobile telecommunications
service providers. In the recent spectrum auctions held in February 2014, we won 5.0 MHz of spectrum in the
900 MHz band for the Delhi Service Area and intend to utilise this spectrum to launch 3G services. We also
won LTE compatible 1800 MHz spectrum in eight Service Areas (see “– Our Licenses and Spectrum” for
partial allocation in four Service Areas), which offer an opportunity to provide 4G LTE services. We have also
won spectrum in 1800 MHz band intended to be used for the provision of GSM services in selected Service
Areas. The spectrum won by us in February 2014 is yet to be allocated to us.
All of our services and products are offered under the
brand. The strength of our brand and our advertising
is reflected in several brand recognition awards we have won at various events, including the “Best Storyboard
Brand Campaign of the Year” award at the C BC TV18 India Business Leader Awards 2013.
We classify our service areas into Established Service Areas and New Service Areas, depending on the age of
our operations and profitability achieved in the respective Service Areas. Our 15 Established Service Areas
comprise Kerala, Madhya Pradesh, Uttar Pradesh (West), Maharashtra, Haryana, Punjab, Andhra Pradesh,
Gujarat, Uttar Pradesh (East), Rajasthan, Delhi, Bihar, Karnataka, Himachal Pradesh and Mumbai and our seven
New Service Areas comprise West Bengal, Kolkata, North East, Jammu & Kashmir, Assam, Orissa and Tamil
Nadu (including Chennai).
We also hold licenses for the provision of NLD, ILD, ISP and IP1 services in India. Our optical fibre cable
transmission network, either owned or through IRU arrangements mainly with other telecommunications
operators, extends to approximately 82,000 km and has 2,500 PoPs. Our mobile telecommunication operations
are spread over approximately 340,000 towns and villages. Approximately 98% of our captive NLD traffic and
approximately 97% of our ILD outgoing traffic was carried on our own infrastructure for the quarter ended
March 31, 2014. We also derive revenue from carrying India inbound ILD traffic through arrangements with
other mobile telecommunications companies and long distance carriers operating outside India. Our ISP services
launched during the financial year 2012, carried approximately 98% of our data traffic for the quarter ended
March 31, 2014.
As of March 31, 2014, we had a network of 104,778 2G cell sites and 21,381 3G cell sites. We own 9,446
telecommunications towers as of March 31, 2014. In addition, our subsidiary, ABTL, holds 16% of the issued
and outstanding equity shares of Indus Towers, a joint venture with Bharti Infratel Limited and Vodafone India
Limited. Providence Equity Partners, through its entity P5 Asia Holding Investments (Mauritius) Limited,
beneficially holds 1,925,000 compulsorily convertible preference shares, convertible into equity shares
representing 30.3% of the total equity share capital post conversion of these preference shares of ABTL, which
in turn reflects Providence Equity Partners’ beneficial equity interest in Indus Towers of 4.85% (assuming no
87
other change in the equity share capital of Indus Towers). Indus Towers is one of the leading independent
telecommunications tower companies and owns and operates approximately 113,000 telecommunications
towers as of March 31, 2014.
Our consolidated total income and profit after tax for the financial year 2014, was ₹ 265,189.05 million and ₹
19,678.20 million, respectively, and for the financial year 2013, was ₹ 224,576.54 million and ₹ 10,109.27
million, respectively.
We have won several industry awards, including awards for the Most Innovative Service Provider award under
Enterprise category and My Favourite Service Provider award at the ET Telecom Awards 2013, the “Best Rural
Service Provider of the Year” – 2012 and 2013 by Amity Telecom Excellence Award.
Our Competitive Strengths
We believe that we are well positioned to exploit the growth opportunities in India’s rapidly expanding mobile
telecommunications industry. Our key competitive strengths are set out below:
Established Leadership Position and Large Subscriber Base
We are the third largest mobile telecommunications operator in India, based on TRAI Reported Revenue and
number of VLR subscribers. For the quarter ended December 31, 2013, we had a Revenue Market Share of
approximately 16.1% of the Indian mobile telecommunications services industry. As of March 31, 2014,
101.5% of our subscribers were VLR subscribers (as disclosed by TRAI). For the quarter ended December 31,
2013, by TRAI Reported Revenues, we are the largest operator in the four Service Areas of Kerala, Madhya
Pradesh, Uttar Pradesh (West) and Maharashtra and the second largest operator in the four Service Areas of
Haryana, Punjab, Andhra Pradesh and Gujarat. We have a combined Revenue Market Share of 26.8% in these
eight Service Areas which collectively represent approximately 40.9% of the TRAI Reported Revenue of the
Indian mobile telecommunications services industry for the quarter ended December 31, 2013. With the
competitive scenario easing in the Indian mobile telecommunications industry, we believe that we have been
able to attract new subscribers and subscribers from other operators because of our strong market position and
large and spread-out distribution network. We believe this position also allows us to market our data and other
VAS more extensively.
Extensive Mobile Telecommunications and Distribution Network
Our mobile telecommunications operations are spread over approximately 340,000 towns and villages. Our
optical fibre cable transmission network, either owned or through IRU arrangements mainly with other
telecommunications operators, extends to approximately 82,000 km and has 2,500 PoPs. As of March 31, 2014,
we had a network of 104,778 2G cell sites and 21,381 3G cell sites. Our joint venture, Indus Towers owns and
operates approximately 113,000 telecommunications towers which are spread across 15 Service Areas as of
March 31, 2014. Additionally, we own 9,446 telecommunications towers as of March 31, 2014. Our suppliers
for our mobile telecommunications network include leading equipment manufacturers such as Ericsson India
Private Limited, Nokia Solutions and Networks India Private Limited, HUAWEI International Pte. Limited and
ZTE Corporation.
We maintain an extensive sales and distribution network in our Service Areas. Our sales network entails
approximately 29,000 third party distributors servicing approximately 1.4 million third party retailers for our
voice services, of which approximately 1.1 million retailers sell data products and recharges. We currently have
approximately 150 outlets per 100,000 persons in the population we cover. In addition, we have over 5,500 Idea
service stores catering to the demands of our subscribers in both urban and rural areas.
Strong Brand
We believe that the strength of our brand and our advertising campaigns have contributed significantly to our
strong market position and subscriber growth and loyalty. Our brand,
, is widely recognized countrywide.
Our brand excellence is confirmed by several awards such as the Aegis Graham Bell Award 2013 for Best
Brand Campaign, Pitch ‘Top 50 Brands’ Award, Silver and Bronze at the APAC EFFIES for the ‘Honey
Bunny’ campaign, Silver at Emvies, 2013 for Integrated Media Campaign for the Honey Bunny campaign, two
Golds, one Silver and one Bronze for ‘Honey Bunny’, ‘Telephone Exchange’, and ‘What an Idea’ series of
brand campaigns at EFFIES 2013.
88
One of the Fastest Growing Mobile Telecommunications Operators in India
We are one of the fastest growing mobile telecommunications operators in India. We increased our Revenue
Market Share by approximately 1.3% to approximately 16.1% for quarter ended December 31, 2013 from
14.8% for quarter ended December 31, 2012, which we believe is the highest increase among all mobile
telecommunications operators in India in such period. Over the last 12 quarters ended December 31, 2013, we
had an incremental Revenue Market Share of 23.7%. Similarly, our total subscribers increased by 11.7% to
135.8 million as of March 31, 2014 from 121.6 million as of March 31, 2013, and total voice minutes carried
increased by 10.5% to 588 billion for the financial year 2014 from 532 billion for the financial year 2013. We
have enjoyed a leading position in terms of net subscribers added pursuant to the MNP program, which was
launched in the Haryana Service Area in November 2010 and became effective nationwide in January 2011.
From November 2010 until March 31, 2014, we had a net gain of approximately 9.14 million subscribers
through this program, which we believe is the highest among all mobile telecommunications operators in India.
We believe that owing to our extensive network, better quality of services and brand value, we are ideally
positioned to take advantage of the changing competitive landscape in the Indian mobile telecommunications
industry.
Cost Management
India continues to have one of the lowest voice and data tariff in the world. A low tariff requires us to
continuously focus on cost reduction. Our cost management initiatives are focused on optimizing network
operating costs, increasing the utilization of our infrastructure, subscriber acquisition and servicing costs,
business promotion costs and general administrative costs. In addition, our extensive telecommunications and
distribution network infrastructure and subscriber base enables us to realize significant benefits from economies
of scale in many aspects of our operations, such as subscriber acquisition, sales and marketing, billing and
subscriber service and support, telecommunications network usage, and equipment procurement.
Consistent Financial Performance and Strong Balance Sheet
Despite the tough economic scenario and the difficult industry conditions, we have increased our total income
and profit after tax by a compound annual growth rate of 16.5% and 65.0%, respectively, between the financial
year 2012 and the financial year 2014. The increase in our total income also resulted in an increase in our
revenue market share. Our data and other VAS revenues have also consistently increased during this period. As
a result of our financial performance, our net debt (after considering deferred payment liabilities towards
spectrum of ₹ 87,418.17 million) to equity ratio was 1.22 as of March 31, 2014. We believe that because of our
consistent performance and robust financial condition, we are well placed to compete effectively and further
grow our market share and profitability.
Aditya Birla Group Parentage
We are a part of the Aditya Birla Group, which is one of the largest business groups in India. The Aditya Birla
group has businesses in, among others, metals and mining, cement, carbon black, textiles, garments, chemicals,
fertilizers, life insurance, financial services industries and mobile telecommunications. The Aditya Birla Group
is one of the most respected business houses in India and we benefit from the confidence that consumers,
lenders, vendors and others place in the Aditya Birla Group. Our parentage also enhances our ability to attract
talented employees from premier educational institutions. We believe that the Aditya Birla Group is known for
its best corporate governance practices. Our governance framework is aimed at demonstrating high levels of
accountability, transparency and integrity in all our transactions. We believe that the combination of our
management structure and our being a part of the Aditya Birla Group enables us to effectively manage a
dynamic business and to respond quickly to rapidly changing market situations.
Our Growth Strategies
We believe that we are well positioned to grow in the rapidly evolving Indian mobile telecommunications
industry. Our growth strategies are set out below:
Strengthen our Leadership Position in the Established Service Areas
For the quarter ended December 31, 2013, our 15 Established Service Areas covered approximately 79.5% of
the TRAI Reported Revenue of India’s mobile telecommunications services industry. We enjoy a strong market
position based on our extensive network coverage, distribution strengths and brand recognition in these Service
Areas. We also own 3G spectrum in 11 of these Established Service Areas, which accounted for more than 79%
89
of our total TRAI Reported Revenue for the quarter ended December 31, 2013. We won LTE compatible 1800
MHz spectrum in seven of these Established Service Areas in the recent spectrum auction in February 2014 (see
“– Our Licenses and Spectrum”), which covers approximately 58% of our total TRAI Reported Revenue for
the quarter ended December 31, 2013. We intend to leverage our investment in our mobile telecommunications
and distribution networks and the brand equity that we have built, to strengthen our market position in these
Service Areas. We will continue to focus on network coverage and enhancing subscriber experience to
differentiate us from other operators. We also believe that our ability to leverage the economies of scale of our
operations and our spectrum profile will provide us an opportunity to compete effectively.
Focus on Sustainable Growth in the New Service Areas
Our New Service Areas, where we launched our operations during the financial year 2010 are strategically
important to us. In addition to strengthening our pan India presence, these Service Areas offer us an opportunity
to achieve higher growth rates. For the quarter ended December 31, 2013, these seven New Service Areas
contributed approximately 5.1% of our total TRAI Reported Revenue. The Supreme Court direction of February
2012 quashing licenses issued in 2008 impacted the licenses for these Services Areas. However, we won back
the spectrum in the 1800 MHz band for these Service Areas in November 2012 auction and we now intend to
further expand our operations to take advantage of the reduction in competition. We have also been awarded
Unified Licenses in October 2013 for these Service Areas. We won an additional 5.0 MHz of spectrum in the
1800 MHz band for the North East Service Area during the recently concluded spectrum auction in February
2014 (see “– Our Licenses and Spectrum”), which offer an opportunity to provide 4G LTE services. We also
intend to leverage the synergies arising from our existing presence in our Established Service Areas and the
scale of our operations to improve margins in the New Service Areas. We intend to achieve sustainable growth
in these Service Areas, which we believe will provide impetus to our overall revenue market share and results of
operations.
Focus on Data and other Revenue Streams
We believe that data and other VAS offers a substantial opportunity for additional growth in the Indian mobile
telecommunications industry. We intend to focus on expanding our non-voice service offerings across our
network. We own 3G spectrum in all eight Service Areas where we are either the largest or the second largest
operator based on Revenue Market Share, which gives us the ability to focus on differentiating our service
offerings and focus on VAS, particularly data. We believe our 3G network is currently under-utilized and we
have the ability to grow our 3G revenue stream without significant additional investment. Since the launch of
3G services, we took multiple initiatives such as introducing innovative pricing and a range of
branded
smart phones to increase data usage. We provide 3G services in 10 additional Service Areas through intra-circle
roaming arrangements with other mobile telecommunications service providers. We recently won spectrum in
the 900 MHz band for the Delhi Service Area and intend to launch 3G services on such spectrum. We also won
LTE compatible 1800 MHz spectrum in eight Service Areas (see “– Our Licenses and Spectrum” for partial
allocation in four Service Areas), which offers an opportunity to provide 4G LTE services in these Service
Areas. We will continue to focus on data consumption on smartphones to leverage our large subscriber base. We
believe that mobile commerce will become increasingly popular in the Indian market and we intend to grow in
the areas of mobile banking and commerce. We have launched mobile banking services in select districts of
some of our Service Areas. Further, we will continue to expand our optical fibre cable network to take
advantage of the growth potential of mobile broadband services. Additionally, we intend to focus on our ILD
and ISP capabilities to diversify our revenue streams. For example, we recently launched wi-fi services in select
cities.
Focus on Subscriber Service
We place significant emphasis upon delivering an efficient and friendly experience at all contact points in the
subscriber life cycle. Our service plans and tariffs are designed to be transparent and easy to understand. We
have established call centers to focus on our subscribers’ needs for service and to cross-sell our various
products. While the rate of churn is generally determined by competitive market forces, we believe that our
focus on subscriber service has also led to the reduction in our churn. Each of these factors applied at all our
Service Areas also led to the enhancement of our brand.
Our Products and Services
We offer mobile telecommunications services in all 22 Service Areas. In addition to our core mobile voice
services, we offer data services and a diverse range of other VAS. Further, we offer mobile broadband in 21
90
Service Areas. Our pre-paid mobile telecommunications services cater to our retail subscribers while post-paid
mobile telecommunications services cater to both retail and enterprise subscribers. We also offer
branded
mobile handsets and data cards in certain markets.
We and our joint venture, Indus Towers, also offer passive infrastructure services. See “– Our Network
Infrastructure”.
Voice Services: Mobile voice telecommunications services are offered throughout India, and through roaming
arrangements in numerous countries other than India, to our subscribers. Voice services are complimented by an
array of voice VAS offerings.
Data Services: Mobile data telecommunications services are also offered throughout India, and through roaming
arrangements in numerous countries other than India, to our subscribers. Our data services are aimed at offering
a superior subscriber experience in downloading songs and movies, streaming video and audio, photo and
textual updates on social media, mail, watching mobile TV, blog postings and HD gaming.
Other VAS: Our other VAS offerings include:

Idea MusicHUB offering streaming and downloading of songs;

GPRS enabled entertainment services such as MMS, video tones, WAP, wallpapers, Java games and
mobile magazines;

voice and SMS based entertainment services such as ring back tones, background music, voice and
SMS chat, ringtones, horoscopes, expert advice and subscription services;

call-forwarding (allowing a subscriber to divert incoming calls to another telephone number);

call conferencing (allowing a subscriber to speak to two or more persons simultaneously);

utility services such as missed call alerts and job alerts; and

voice mail (allowing callers to leave voice messages for the subscriber).
Enterprise Solutions: We also provide additional services to our enterprise subscribers through our enterprise
business unit:

‘Idea ConCall’, an audio conferencing service;

Internet leased line service;

toll-free calling services;

fixed cellular terminals for corporate needs, GSM gateways and machine to machine communication
such as vehicle tracking and automatic meter reading;

a hosted interactive voice recording customized solution that helps businesses manage their various
business processes internally and with their subscribers;

work-force tracking solution, which is a location based service based on advanced cellular
identification technology, helps businesses with large remote workers to optimally manage their work
force for better productivity and performance;

an I-SAFE solution that helps businesses provide secured mobile connectivity between remote
employees and enterprise intranet or internet server through our data connectivity; and

Idea Smart Gas solution used by India Oil Corporation Limited.
Mobile Banking: We believe that in light of the high mobile penetration and comparatively sparse organized
banking penetration in India, mobile banking has the potential of increasing access to banking services. We
launched mobile banking services in August 2012 pursuant to an agreement with Axis Bank Limited under the
brand name of ‘Idea Money’. Currently, we offer mobile banking in selected districts of Uttar Pradesh (East),
91
Bihar, Delhi and Mumbai Service Areas. Our mobile banking services, delivered through designated retail
outlets, include services such as account opening, cash deposits and cash withdrawals. Subscribers using their
mobile phones can avail of services such as person-to-person transfer, pre-paid connection and direct-to-home
recharges, utility bill payments (such as electricity and gas) and balance inquiry. In November 2013, we
launched the provision of over the counter money transfer services which allow our subscribers to transfer
money to bank accounts within India. This service is currently provided in Mumbai and Delhi by designated
retail outlets.
In addition, also in November 2013, IMCSL, our subsidiary, received a certificate of authorization from the
Reserve Bank of India to provide a pre-paid payment instrument service, where subscribers are offered a service
similar to Idea Money (except for cash withdrawals).
Mobile Devices: To compliment our service offerings, we also offer Idea branded mobile handsets and data
cards in all Service Areas. We purchase these devices from manufacturers based outside India. The
manufacturers of the devices usually provide a warranty not exceeding one year.
The following table sets out certain operational metrics about our service offerings:
Unit
December
31, 2012
As of and for the Quarter Ended
March 31,
June 30,
September
2013
2013
30, 2013
Total Number of
Millions
113.9
121.6
Subscribers
Pre-paid Subscribers (%
%
96.1
96.1
of total subscribers)
Average Revenue per
158
167
₹
User (ARPU)
Average Minutes of Use
Minutes
384
406
per User
Average Realization per
Paise
41.1
41.2
Minute (ARPM)
Total Minutes of Use
Millions
132,181
143,366
Average Monthly Churn
%
6.9%
4.3%
VAS as a % of our Service
%
14.6
15.2
Revenue
Data as a % of our Service
%
5.7
6.6
Revenue
Total Data Subscribers
Millions
21.75
26.22
(2G + 3G)
3G Subscribers (Voice +
Millions
4.1
5.1
Data)
Total Data Volume
Millions MB
10,040
11,421
(2G + 3G)
3G Data Volume
Millions MB
4,512
5,231
Blended Data (2G+3G)
Paise
31.0
33.9
ARMB
Data ARPU for Data
52
55
₹
Subscribers (2G + 3G)
*
Definition of data subscribers revised to data usage of >100 kb.
**
December
31, 2013
March 31,
2014
125.0
127.2
128.7
135.8
96.0
95.8
95.7
95.7
174
164
169
173
398
368
376
397
43.7
44.7
44.9
43.6
147,315
5.1%
138,827
5.3%
144,571
5.6%
157,055
4.2%
16.0
16.1
16.1
16.5
7.2
8.7
9.5
10.1
30.91
33.62
25.52*
25.26**
5.5
6.2
8.7
10.2
13,791
17,452
20,840
27,299
6,334
7,578
9,469
13,084
33.5
31.0
29.6
25.3
54
55
91
104
Definition of data subscribers revised to data usage of >1 MB.
Passive Infrastructure Services: Passive infrastructure services comprise setting up, operating and maintaining
mobile telecommunications towers and an optical fibre cable network. Towers comprise the non-active
components of a mobile telecommunications infrastructure network, including the tower structure, shelters,
industrial air conditioners and diesel generators.
We lease space on our towers, i.e., provide passive infrastructure services, to other mobile telecommunications
services companies. Our joint venture, Indus Towers also leases space on the towers it owns to our Company
and other mobile telecommunications services companies. We also lease capacity on our optical fibre cable
network to mobile telecommunication service providers.
Our Service Areas and Subscribers
We provide 2G GSM-based mobile telecommunications services in all 22 Service Areas in India. We offer 3G
services in 11 Service Areas pursuant to the spectrum allocated to us. We have also entered into intra-circle
roaming agreements with other mobile telecommunications operators to provide 3G services in 10 additional
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Service Areas where we do not hold 3G spectrum. As a result, we offer 3G services in 21 out of 22 Service
Areas. We recently won spectrum in the 900 MHz band for the Delhi Service Area and intend to utilize this
spectrum to launch 3G services. Our mobile telecommunications operations are spread over approximately
340,000 towns and villages.
The following table sets out select information about our Service Areas, including our Revenue Market Share
and our ranking based on TRAI Reported Revenue for the quarter ended December 31, 2013 and number of
subscribers as of March 31, 2014 (all information provided in the table below is taken from information
disclosed by TRAI):
Service Areas
No. of VLR
Subscribers (Millions)
Established Service Areas
Kerala
Madhya Pradesh
Uttar Pradesh (West)
Maharashtra
Haryana
Punjab
Andhra Pradesh
Gujarat
Uttar Pradesh (East)
Rajasthan
Delhi
Bihar
Karnataka
Himachal Pradesh
Mumbai
New Service Areas
West Bengal
Kolkata
North East
Jammu & Kashmir
Assam
Orissa
Tamil Nadu (including Chennai)
Revenue Market Share
(%)
Our Revenue Market
Share Ranking
8.7
18.2
12.1
19.3
4.2
5.8
12.4
9.4
8.5
6.5
5.5
7.3
6.9
0.6
3.1
36.2
35.0
30.1
29.7
24.7
21.3
20.4
19.1
12.5
12.5
12.0
11.0
10.4
10.0
9.4
1
1
1
1
2
2
2
2
3
3
3
4
4
4
5
3.2
1.3
0.3
0.3
0.6
1.1
2.4
5.8
4.8
3.7
4.0
3.1
4.1
3.3
6
6
6
6
6
7
7
Our Churn
Churn for a given period is the rate of subscriber deactivation. We calculate our churn by dividing the total
deactivations in a period by the average number of subscribers for that period. For post-paid customers,
according to our credit policy, we generally deactivate subscribers if their bill remains unpaid for a specific
period of time after the billing date. We deactivate pre-paid subscribers if they do not use the network for a
specific period of time. However, we exercise certain discretion in applying our credit policy to corporate
subscribers and certain key retail subscribers. Our average monthly churn rate for the quarters ended March 31,
2012, March 31, 2013 and March 31, 2014 were 9.9%, 4.3% and 4.2%, respectively. We follow a three-pronged
churn management approach through the implementation of certain strategic initiatives, including new products
and services, better quality of network and superior subscriber care.
Our Licenses and Spectrum
The operations of our telecommunications network and the provision of mobile telecommunications services are
regulated by central governmental and regulatory authorities. In order to provide GSM based mobile
telecommunications services and 3G services in a particular Service Area, we are required to hold a valid
license for such Service Area. Under such license, we have the right to use the spectrum that we own in such
Service Area. Currently, under the UL Guidelines, the allocation of spectrum is delinked from the licenses and
has to be obtained separately in accordance with the prescribed procedure. As per current policy, spectrum in the
800; 900; 1800; 2100; 2300 and 2500 MHz band is allocated through a bidding process. In case the UASL,
CMTS license or Unified License is cancelled or terminated for any reason, the spectrum usage rights in respect
of that Service Area will stand withdrawn. Further, if the period of any of the aforementioned license expires
prior to the expiry of the right to use the spectrum, then the licensee company will be required to obtain a UL.
Our licenses specify the services we can offer and are subject to amendments, modification, interpretation,
imposition of limitations and termination by the relevant authorities. The following discussion includes the
spectrum that we won in the February 2014 auction which is in the process of being allocated to us.
93
The CMTS licenses or UASL that we hold in nine Established Service Areas are due for extension between
December 2015 and April 2016. These licenses currently have a total of 59.00 MHz of spectrum in the 900 MHz
band and 9.2 MHz of spectrum in the 1800 MHz band. The licenses we hold in six other Established Service
Areas are due for extension in the financial year 2022 and the financial year 2027 and we hold a total of 33.6
MHz of spectrum in the 1800 MHz band. Additionally, we won 5.0 MHz of spectrum in the 900 MHz band in
the Delhi Service Area and 55.2 MHz of spectrum in the 1800 MHz band in 10 Service Areas in the auctions
held in February 2014 and 1.25 MHz in Bihar Service Area in the auctions held in November 2012. Such
spectrum is valid for a period of 20 years from the date of allocation.
In our seven New Service Areas, we hold 36.25 MHz which we won in the November 2012 auctions.
Additionally, we won 5.0 MHz of spectrum in the North East Service Area in the1800 MHz band in February
2014. These are valid for a period of 20 years from the date of allocation. The Unified License agreement for
spectrum won by us in the November 2012 auctions was entered into in October 2013.
We hold the 3G spectrum in 2100 MHz band in 11 Service Areas enabling us to offer 3G services for a period
of 20 years, commencing September 2010. We hold a total of 55 MHz of 3G spectrum in 2100 MHz band.
As such, we hold spectrum of a total of 259.50 MHz in the 900 MHz, 1800 MHz and 2100 MHz bands. The
following table sets out our current spectrum profile:
Service Areas
Maharashtra*
Kerala
Madhya Pradesh
Andhra Pradesh
Punjab*
Haryana*
Uttar Pradesh (West)
900
7.8
6.2
6.2
6.2
7.8
6.2
6.2
Current Spectrum Profile
(Holding in MHz)
1800*
2100
11.0
5.0
11.8
5.0
8.8
5.0
7.8
5.0
8.0
5.0
6.0
5.0
1.8
5.0
Capability to Offer
Total
23.8
23.0
20.0
19.0
20.8
17.2
13.0
GSM







3G







5.0
12.8


8.6
-
13.6


6.2
5.0
11.2


-
4.4
5.0
9.4


-
5.0
5.0
10.0


6.2
5.0
-
11.2

-
10.0
-
10.0

-
44.5
-
44.5




Gujarat
6.2
1.6
Delhi
5.0
Uttar Pradesh (East)
-
Himachal Pradesh
Jammu and Kashmir
Karnataka
North East*
Remaining 8 Service
Areas**
Total Spectrum
64.0
140.5
55.0
259.5
LTE















***
*
Contiguous blocks of 5 MHz (1800 MHz) spectrum is not available in Pune and Nasik for Maharashtra, Amritsar and Ludhiana for
Punjab, Sirsa for Haryana and Khasi Hill and Tawang for North East Service Area.
**
Includes Service Areas of Rajasthan, Mumbai, Bihar, Tamil Nadu, West Bengal, Kolkata, Orissa and Assam.
***
In the recently concluded spectrum auction, we won 5.0 MHz for the Delhi Service Area which can be used for 3G services and
55.2 MHz in the 1800 MHz band. Out of this 55.2 MHz, 45 MHz is contiguous spectrum (in 5.0 MHz block which can be used for
4G LTE services). Out of the total spectrum holding of 259.5 MHz, we have acquired 157.7 MHz through auctions and remaining
101.8 MHz through administrative allocation.
We also hold licenses for the provision of NLD, ILD, ISP and registration for IP1 services in India.
For a description of the regulations governing our licenses, see “Regulations and Policies” on page 101. For a
description of the litigation relating to our licenses, see “Legal Proceedings” on page 162.
Tariffs
The telecommunications industry in India is highly competitive and tariffs are determined by competitive forces.
The TRAI currently have a tariff forbearance policy, except for roaming tariffs where a ceiling is provided by
the authority. Moreover, termination charges for voice and SMS are reviewed and fixed by TRAI periodically.
Otherwise, we have flexibility in setting our tariff plans and they differ across Service Areas. We structure our
tariffs so that subscribers can choose their preferred package based on their requirements. We constantly revise
94
our tariff plans to take advantage of new opportunities and our competitors’ existing tariffs and product
offerings. We believe that our tariff plans are simple, transparent and easy to understand. The aim of our tariff
strategy is to ensure that we acquire and retain subscribers, achieve superior realizations and optimize network
utilization by promoting usage of VAS that are not network intrusive.
Roaming Services
Roaming enables subscribers to make and receive voice calls, send and receive data or messages or access other
services when travelling outside their Service Areas or home network. We offer roaming services to both our
pre-paid and post-paid subscribers as well as to subscribers of other mobile telecommunication services
companies.
The amounts we charge our out-roamers vary according to whether an out-roamer is a pre-paid or post-paid
subscriber and whether out-roaming or in-roaming is on a national or international basis. The charges involve
both fixed fees and/or airtime charges.
We have entered into preferred roaming relationships with select foreign operators through which our network is
selected automatically when an out-roamer of the relevant operator enters any of our Service Areas and vice
versa. We also seek to promote loyalty from in-roamers and have a dedicated roaming subscriber care help desk.
We have a number of existing bilateral agreements with national and international roaming partners for voice
and data transmissions.
Our Network Infrastructure
Our telecommunications network consists of:

mobile switch centres (“MSCs”) for switching calls and interconnecting with the public switched
telephone networks and other mobile and fixed-line networks;

BTS for the 2G services network and Node B for the 3G services network and other equipment used to
communicate through radio channels with subscribers’ mobile devices within the range of a cell;

base station controllers (“BSC”) for the 2G services network, which connect to and control a number of
base stations deployed within a certain area; radio network controller for the 3G services network,
which connects to and controls the Node Bs deployed within a certain area and does the same function
as that of a BSC in the 2G services network;

packet core elements to handle the 2G and 3G data traffic;

intelligent network for offering pre-paid services; and

transmission links, consisting of microwave and optical fibre media to link various elements of the
network.
As of March 31, 2014, we had a total of 104,778 2G cell sites and 21,381 3G cell sites. Each cell site comprises
of BTS and/or NodeB and the transmission link. It also includes the non-active components of the mobile
telecommunications passive infrastructure network, including the telecommunications tower structure, shelters,
industrial air conditioners, diesel generators, batteries, switch mode power supplies and voltage stabilizers.
We either own the towers, or enter into lease arrangements with passive infrastructure providers, including
Indus Towers for use of the towers and certain other passive infrastructure equipment. The following table sets
out certain details about our cell-sites and telecommunications towers:
2012
3G Cell Sites
2G Cell Sites
Towers – Rented (From Indus Towers)
Towers – Rented (From Others)
Our Own Towers
Tenancy Ratio for our Own Towers
12,825
83,190
44,214
29,737
9,239
1.55
95
As of March 31,
2013
17,140
90,094
47,570
33,211
9,401
1.57
2014
21,381
104,778
55,213
40,167
9,446
1.57
Our Company has entered into infrastructure sharing agreements with Indus Towers and several other tower
companies for the non-exclusive use by our Company of towers and certain other passive infrastructure
equipment held by such tower companies. These agreements are generally for a minimum period and entail, in
certain circumstances, the payment of early termination changes if terminated prior to such minimum period.
The agreements specify the rent payable to the lessor, determined annually, and generally contain provisions for
escalation or reduction of rent, payment of expenses for deployment of equipment beyond the standard
configuration and payment for consumption of power.
We are currently in compliance with the mandatory network roll-out requirements provided in our licenses,
which mainly relate to the number of district, town and block headquarters in a Service Area where we need to
provide network coverage. We generally cover towns and population centres in excess of the roll-out
requirements specified in our licenses. For the seven new Service Areas, for which licenses have been signed on
October 11, 2013, we have additional roll out obligations of covering the block headquarters which we are
required to complete in the stipulated time frame of five years. For the spectrum that we won in February 2014,
there are similar roll out obligations which are required to be completed within three to five years of the date of
the allocation of such spectrum.
We continuously evaluate measures to reduce the operating cost of our networks through optimization of leased
line expenses, negotiating appropriate operational and maintenance contracts, tower sharing and control of tower
and cell site running expenses. We have been focusing on reduction of power consumption and use of renewable
energy, e.g., by having solar power for BTS sites and outdoor BTS to reduce energy consumption.
All the key components of our mobile telecommunications networks have been supplied by leading mobile
telecommunications equipment manufacturers such as Ericsson India Private Limited, Nokia Solutions and
Networks India Private Limited, HUAWEI International Pte. Limited and ZTE Corporation. We have entered
into contracts with these vendors for the supply of equipment and for maintenance support of our core and radio
access networks. These contracts generally have a term of two to three years and purchases under such contracts
are made pursuant to individual purchase orders governing price and quantity of equipment purchased.
Our optical fibre cable transmission network, either owned or through IRU arrangements mainly with other
telecommunications operators, extends to approximately 82,000 km and has 2,500 PoPs. Our mobile
telecommunications operations are spread over approximately 340,000 towns and villages. Approximately 98%
of our captive NLD traffic and approximately 97% of our ILD outgoing traffic is carried on our own
infrastructure for the quarter ended March 31, 2014. We also derive revenue from carrying India inbound ILD
traffic through arrangements with other mobile telecommunications companies operating outside India. Our
internet network, launched during the financial year 2012, carries approximately 98% of our data traffic for the
quarter ended March 31, 2014.
Sales and Distribution
We believe that our growth will continue to be dependent on our sales and distribution network. Our sales and
distribution network comprises distributors dealers, retail outlets and direct sale agents.
Pre-paid services: As of March 31, 2014, 95.7% of our total subscribers were pre-paid. These subscribers pay
for mobile telecommunications by purchasing pre-paid starter packs and vouchers (including electronic top-up
vouchers) which are sold through a wide variety of franchisees and retail outlets. We have built strong
distribution channels to support pre-paid mobile telecommunications services business in the each of the Service
Area that we operate in. The presence of these strong distribution channels enables and improves the services
we provide to our subscribers. Pre-paid starter packs and vouchers are sold to distributors upfront for cash, who
in turn supply them to retail outlets. The Indian retail sector is not organized on a national scale and comprises a
large number of small retail shops throughout the country. Our pre-paid distribution network comprises of wide
categories of retail outlets, ranging from neighborhood department stores and pharmacies to exclusive
telecommunications outlets and branded stores. We offer incentives to distributors and retailers who are
successful in meeting specified targets. We believe this promotes distributor and retailer loyalty and, as a result,
continuity and availability of our products to our subscribers.
Post-paid services: Our post-paid services are marketed by our enterprise business unit as well as through a
combination of franchises branded as “My Idea”, dealers and direct sales agents. Our enterprise business unit
provides products and services as a complete package to meet the telecommunications needs of the businesses,
including after sales-services and support with respect to billing queries and complaints. Our “My Idea”
franchisees and direct sales agents offer new connections and services to our retail post-paid subscribers.
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Subscriber Service
We have created a pool of dedicated service professionals who have been put through on-the-job training to staff
the service delivery function that oversees our subscriber service. We believe that subscriber service will
continue to be a factor through which we can differentiate ourselves from our competitors and we have invested
considerable resources in our subscriber service delivery platform. We believe that the three critical elements for
delivering superior subscriber service are process, people and technology, and we have invested in each of these
areas to improve our subscriber service with the philosophy of standardizing these services and delivering “One
Idea-One Service” for each of our pre-paid and post-paid service categories.
Our service delivery department is split into teams focusing on our post-paid, pre-paid and enterprise
subscribers. Apart from offering programs for new subscribers and servicing the existing subscribers, managing
subscriber retention is also within the scope of this function. We use prediction models to identify disengaged
subscribers and offer them attractive solutions to retain them. Our service delivery department consists of
Service Provisioning and Activation, Service and Contact Centres, and oversees our relationships with our
subscribers.
Service Provisioning and Activation
The service provisioning and activation function ensures that all necessary documents are procured from prepaid subscribers at the time of subscription and that our regulatory requirements in accordance with Government
guidelines in relation to verification of such documents are fulfilled. For post-paid subscribers, we undertake
subscriber profiling as part of the activation process of a new subscription. This function is also responsible for
management of mobile number inventory and the activation and deactivation of services requested by
subscribers.
Service Centres
To better service the increasing number of subscribers, we initially launched the My Idea Service Centres in
2007. These centres focus on making our franchisee a business partner with a “proprietary” interest in our
subscribers rather than a mere subscriber servicing point. With further increase in rural penetration, new service
centre models, ‘Idea Points’ and ‘Idea Service Points’ were created in 2008 and 2009, respectively to further
service subscribers from rural locations. With the launch of 3G services, new 3G experience zones were
launched at My Idea Service Centres to create awareness and visibility about 3G services that we offer. We have
over 5,500 service centres, including Company Owned Company Operated Stores, My Idea Service Centres,
Idea Points and Idea Service Points as of March 31, 2014.
For better management of our service centres, we are investing in automated queue management systems,
monitoring of subscriber facing agents through CCTV and centralized management of online content displayed
through LCDs placed in these service centres.
Contact Centres
With the intent to improve subscriber experience and to ensure a uniform service experience, we outsourced our
call centre operations. We also launched a 24x7 hub and spoke model for our call centres by expanding
operations to tier II and tier III towns, thus serving benefits such as local language support and cost efficiency
by employing agents from these locations.
Subscriber Relations and our Loyalty Program
We seek to increase subscriber loyalty with our loyalty program, “Idea Select” for post-paid subscribers. The
“Idea Select” program offers rewards in the form of events, gifts and priority service. It has three levels,
platinum, gold and silver, and the subscribers are categorized based on factors such as subscriber’s length of
time with our network, usage and payment performance. The majority of our loyalty program members are high
usage retail subscribers. We believe our loyalty scheme is effective in increasing retention, with the churn rate
for “Idea Select” subscribers being low.
We have also initiated a program for providing differential servicing to identified high usage pre-paid and postpaid subscribers. The program is named “Service+” which involves providing a superior service experience
through well trained and dedicated call handling agents. These agents handle the entire process, from the time a
subscriber calls the call centre until the query or complaint is resolved.
97
Marketing
Our communications strategy aims to strengthen our brand by reinforcing the ways in which mobile telephony
can transform the subscriber’s life.
Brand Initiatives
We believe our brand initiatives are innovative, energetic, imaginative and contemporaneous. While we focus
on communicating simple ideas, our advertising initiatives are often for a cause such as promoting “education
for all”, “use mobile save paper” and “break the language barrier”. We believe that phrases used in our
advertisements, such as “what an idea, sirjee” and “no idea - get idea” have pervaded the Indian common man
lingo. We believe our recent ‘no ullu banawing” musical, “honey bunny” musical and our “telephone exchange”
emotive campaign were very successful in connecting with our existing and potential subscribers and elicited
favourable public response. The two campaigns of “honey bunny” and “telephone exchange” were supported by
shorter festive campaigns with the concept of celebrating festivals of all religions, irrespective of one’s faith.
The festive campaign was promoted during festivals such as Diwali, Eid, Christmas and Holi.
Market Research
We use market research extensively to determine our subscriber service objectives through the identification of
subscriber segments and assessment of the status of our brand in target markets.
Credit Risk Management Systems
Our risk management systems enable us to detect and prevent fraudulent usage of our services and to minimize
bad debts in the post-paid category. When activating new post-paid subscribers we carry out credit checks. We
also conduct exposure control for all our post-paid subscribers with reference to pre-determined credit limits,
which are reviewed monthly. If a subscriber exceeds the pre-determined credit limit, we initiate a number of
steps such as sending reminders, requesting interim payments and barring certain kinds of calls. We use a fraud
management system to provide us network based management information system reports and a common
subscriber data format across our Service Areas. This gives us the benefit of easy maintenance, savings on
hardware costs, customized credit management modules, service violation alarms and online monitoring of our
out-roamers.
We generally allow our post-paid subscribers 15 days from the date of the bill to make payment. Subscribers
who fail to make payment within the stipulated time are sent reminders for payment followed by recovery
attempts, which include partial or total disconnection of services. If the subscriber does not pay within a period
of 90 days of the bill date, we generally disconnect services permanently (we exercise certain discretion in
applying our credit policy to corporate subscribers and certain key retail subscribers). As part of our recovery
attempts, we call our subscribers, send SMS as reminders and use the services of recovery agencies. As a last
recourse, depending on the merits of the case and the amount due, we initiate legal proceedings.
We are not exposed to credit-risk in relation to our pre-paid subscribers. We also do not bear any credit risk
from our distributors and retailers for the pre-paid segment, as our distributors purchase items such as pre-paid
starter packs and pre-paid cards for cash and then sell these to retailers.
Billing
We use Business Support and Control Systems, a billing software package for our post-paid billing, recording
minutes used, calculating the appropriate charge and rendering a bill to the subscriber. Charging for our pre-paid
subscribers is done through Intelligent Network. We also use an interconnect billing system for the interoperator settlement of interconnect for voice (including long distance) and SMSs.
Post-paid collections
Our post-paid collection department manages our billing and collection process. Post-paid subscribers can pay
their bill in cash, by cheque or by credit card (including online payment) and we also have deployed drop-boxes
across our stores to allow our subscribers to make a cheque payment at any time.
A feature of the Indian market is that some subscribers prefer to pay in cash. As we have an extensive
distribution network, we have been able to accommodate this preference by enabling our retailers to accept postpaid bill payments at minimal cost to us.
98
Competition
Competition in the Indian telecommunications industry is intense. Competition in the Indian
telecommunications industry increased primarily as a result of deregulation which led to the privatization of the
industry and permitted foreign direct investment. However, the Supreme Court of India by its order dated
February 2, 2012 quashed the telecommunications licenses, as a result of which a number of mobile
telecommunications services providers ceased operations and the competitive scenario in India eased recently.
Nevertheless, six to 10 mobile operators still operate in most Service Areas. We face significant competition
from a number of companies, including from those with pan-India footprints such as Bharti Airtel Limited,
Vodafone Group and Reliance Communications Limited.
Information Technology
Information technology plays an important role in enhancing subscriber experience, improving operational
efficiency and ensuring compliance in a stringent regulatory environment. We have outsourced most of our
information technology operations, including information technology services, processes, applications and
software to IBM India Private Limited for a term of 12 years (including a two year extension), since March
2007. This outsourcing agreement covers functions such as subscriber relationship management, business
intelligence, advanced analytics, subscriber billing and dealer sales management. The agreement expires on
March 31, 2019, unless terminated earlier for cause or convenience or extended under the terms of the
agreement.
Intellectual Property
We have obtained 48 trademark registrations of brands, including our pre-paid service marks, i.e., Idea Chitchat,
and other marks including ‘Idea’, ‘THE POWER OF A IDEA’, ‘IDEA FRESH’, ‘IDEA ROCKS I DIA’,
‘IDEA MAIL’, ‘A IDEA CA CHA GE YOUR LIFE’, ‘IDEA TALK FOR I DIA’, ‘Idea Khoj 50805’ and
‘Idea Kaho What’s Your Idea’ in a number of classes under the Trade Marks Act, 1999. We have also made 36
applications with respect to trademarks including ‘POCKET PCO’, ‘Idea My Cash’, ‘Experience Smart
Internet’, ‘WiFi Idea Experience Smart Internet’, ‘WiFi Idea’, and ‘Eka Idea Jaha Badalai Diye Apananka
Dunia’ in certain service mark classes.
Insurance
We insure our properties forming part of the tangible fixed assets on replacement value basis. Insurance for
fixed assets put to use covers all operational risks and losses arising out of any material damage and include
risks arising out of acts of terrorism. We are also insured against business interruption losses and third party
liabilities for amounts as felt appropriate by us. We also take coverage for equipment in transit.
Human Resources
As of March 31, 2014, our 14,988 employees (excluding employees of Indus Towers) were classified by
functions and corporate entities as follows:
Function
No. of Employees
Our Company
Sales & Marketing
Service Delivery
Network Services
Finance (including Revenue Assurance)
Human Resources and Administrative
Commercial
Information Technology
Others
Our Subsidiaries, ICSL and IMCSL
Total
3,413
3,334
2,463
542
223
177
95
258
4,483
14,988
Property
Our Company’s registered office is located at Suman Tower, Plot No. 18, Sector-11, Gandhinagar 382 011,
Gujarat, India, which is owned by our Company.
Our Company’s corporate office is located at Windsor, 5 th Floor, Off CST Road, Near Vidya Nagari, Kalina,
Santacruz (East), Mumbai 400 098, Maharashtra, India, which has been licensed to our Company and for which
99
license expires in December 2015.
Most of the properties on which our cell-sites, MSCs and BSCs are located are leased for a period ranging from
nine to 20 years.
In addition, we have branch offices and zonal sales offices across all Service Areas are in various locations, the
majority of which are occupied by us on leasehold basis. These lease agreements are generally for terms ranging
from five to 20 years.
100
REGULATIONS AND POLICIES
The following is an overview of the important laws, regulations and policies which are relevant to our business
in India. The information provided below has been obtained from sources available in the public domain. The
description of laws, regulations and policies set out below are not exhaustive, and are only intended to provide
general information to the investors and is neither designed nor intended to be a substitute for professional
legal advice. The statements below are based on the current provisions of Indian law, and the judicial and
administrative interpretations thereof, which are subject to change or modification by subsequent legislative,
regulatory, administrative or judicial decisions.
In addition to the regulations and policies already specified in this Placement Document, taxation statutes such
as the IT Act, various labour laws, environmental laws such as the Environment Protection Act, 1986, Water
(Prevention and Control of Pollution) Act, 1974 and Air (Prevention and Control of Pollution) Act, 1981 and
other miscellaneous laws apply to us as they do to any other Indian company.
Overview
The telecommunications industry in India is subject to extensive government regulation. The Government holds
the exclusive power to provide telecommunication services and issue licenses for the same. In the initial stages,
the Government had monopoly in the industry, and the services were provided by the Department of Telegraphs
and Posts. In 1991, the Government began privatizing the sector with de-licensing telecommunication
equipment manufacture, followed by privatization of VAS.
The DoT established under the Ministry of Communication and Information Technology, Government of India
(“MCIT”) is the primary regulator for the telecommunications sector. The DoT, together with the Telecom
Commission, is responsible for formulating development policies for the accelerated growth of
telecommunication services, licensing, wireless spectrum management, promotion of private investment in
telecommunications, research and development as well as standardizing and validating equipment. In 1997, the
Government set up the TRAI, an independent statutory regulator, with extensive powers to regulate the
telecommunications sector in India. Subsequently, a separate dispute resolution body namely the TDSAT was
set up in 2000, to settle disputes between a licensor and a licensee, between two or more service providers,
between a service provider and a group of consumers pertaining to the telecommunications sector. The WPC
wing of the MCIT, created in 1952, is responsible for frequency spectrum management. The WPC issues
licenses to establish, maintain and operate wireless stations. The wireless license is an independent license and
any UASL holder intending to offer mobile services is required to obtain a separate wireless license from the
WPC wing. The WPC is divided into (i) licensing and regulations, (ii) new technology group, and (iii) SACFA.
The SACFA, a high level committee, issues approvals for the use of radio frequency (spectrum) by telecom
service providers, which involves a detailed technical evaluation of certain factors, including possible aviation
hazards and interference (electro-magnetic interference/electro magnetic compatibility) to existing and proposed
networks.
Key regulations in the telecommunications sector
Indian Telegraph Act, 1885 (the “Indian Telegraph Act”)
The Indian Telegraph Act is the principal legislation regulating telegraphs, which include any appliance,
instrument, material or apparatus used or capable of use for transmission or reception of signs, signals, writing,
images and sounds or intelligence of any nature by wire, visual or other electro-magnetic emissions, radio waves
or hertzian waves, galvanic, electric or magnetic means. Under the Indian Telegraph Act, the Government has
the power to grant licenses on such conditions and in consideration of such payments as it thinks fit, to any
person to establish, maintain or work a telegraph within any part of India. The Government also has the power
to make rules applicable to persons licensed under the Indian Telegraph Act, including rules specifying the rates
and other conditions subject to which messages will be transmitted within India, conditions subject to which any
telegraph line or appliance of apparatus for telegraphic communication will be established, maintained, worked,
repaired, transferred, shifted, withdrawn or disconnected, charges in respect of any application for providing any
telegraph line, appliance or apparatus, charges in respect of (i) the establishment, maintenance, working, repair,
transfer or shifting of any telegraph line, appliance or apparatus; and (ii) the services of operators operating such
line, appliance or apparatus, and the time, manner and conditions under which and the persons by whom such
rates, charges and fees will be paid and the furnishing of security for the payment of such rates, charges and
fees. The UASL and the CMTS licenses are granted by the Government under the Indian Telegraph Act.
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The Indian Wireless Telegraphy Act, 1933 (the “Indian Wireless Act”)
Under the Indian Wireless Act, no person is permitted to possess a wireless telegraphy apparatus without
obtaining a license. Any contravention of this will attract a penalty of ₹ 100. Any subsequent offences will
attract a penalty of ₹ 250. Any person held in possession of a wireless telegraphy apparatus, other than a
wireless transmitter, without a license is liable to be punished under the Indian Wireless Act with imprisonment
which may extend to three years or a fine which may extend to ₹ 1,000, or both. The term ‘wireless telegraphy
apparatus’ has been defined to mean any apparatus, appliance, instrument or material used or capable of use in
wireless communication, and includes any article determined by rules made thereunder to be wireless telegraphy
apparatus, but does not include any such apparatus, appliance, instrument or material commonly used for other
electrical purposes, unless it has been specifically so designed or adapted for wireless communication or forms
part of some apparatus, appliance, instrument or material specially so designed or adapted, nor any article
determined by rules made under the provisions of the Indian Telegraph Act not to be wireless telegraphy
apparatus.
The WPC has through certain notifications exempted certain frequency bands from licensing requirements in
relation to the establishment, maintenance, working, possession or dealing in any wireless equipment, on noninterference, non-protection and shared (non-exclusive) basis. Further, these notifications also require the
wireless equipment to be type approved and designed and constructed in a manner such that the bandwidth of
emission and other parameters conform to the limits as specified in rules framed by the Government in this
regard from time to time.
Telecom Regulatory Authority of India Act, 1997 (the “TRAI Act”)
TRAI Act provides for the establishment of TRAI for the purpose of regulating the telecommunication services
industry. The TRAI Act also provides for the constitution of the TDSAT, the adjudicatory body in this sector.
The functions and responsibilities of TRAI include, amongst others, (i) making recommendations to the
Government in connection with matters such as the need and timing for introduction of new service providers,
(ii) specifying the terms and conditions of licenses issued to service providers and revocation of licenses for
non-compliance with stipulated conditions, (iii) ensuring compliance with conditions of licenses, (iv) regulating
revenue sharing arrangements among service providers, (v) specifying standards of quality of service to be
provided by service providers, (vi) ensuring effective compliance of universal service obligations (“USO”), and
(vii) rendering advice to the Government in matters relating to development of telecommunication technology
and the telecommunication industry in general. Additionally, TRAI is empowered to specify the rates at which
the telecommunication services within and outside India will be provided. For effective discharge of its
functions, the TRAI is empowered to call upon any service provider at any time to furnish in writing such
information or explanation as is required or to conduct an investigation into the affairs of any service provider or
issue directions in respect thereof. The provisions of the TRAI Act are in addition to the provisions of the Indian
Telegraph Act and the Indian Wireless Telegraphy Act and do not affect any jurisdiction, powers and functions
required to be exercised or performed by the authorities established under the aforesaid legislation in relation to
any area falling within the jurisdiction of such authority.
Telecommunication Tariff Order, 1999 (“Tariff Order”)
Telecommunications tariffs, ceilings and floor prices for various services are regulated by TRAI through the
Tariff Order. Under the Tariff Order, TRAI has the authority to review and modify the tariff for any
telecommunication service, or a part thereof, from time to time. In accordance with the Tariff Order, the tariffs
to be charged by the service providers from the subscribers along with conditions, if any, are to be published.
Further, the provisions of the Tariff Order prohibit the service providers from discriminating between
subscribers of the same class and such classification of subscribers. The Tariff Order also requires service
providers to clearly indicate the terms and conditions of the provision of telecommunication services to
subscribers, including in relation to utilization and termination of services, billing, repair and fault rectification
as well as choice of tariff packages made available.
The Reporting System on Accounting Separation Regulations, 2012 (“Accounting Regulations”)
TRAI has issued Accounting Regulations requiring all service providers having an aggregate turnover of not
less than ₹ 1,000 million to furnish financial and non-financial reports, geographical area wise as well as
consolidated report for all geographical areas. Further, every service provider is required to submit a yearly
audited report based on the historical cost accounting and audited reports based on replacement cost accounting
every second accounting year, to TRAI within six months of the end of the accounting year.
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National Telecom Policy, 2012 (“NTP 2012”)
The NTP 2012 was approved by the Government on May 31, 2012. The policy envisions providing secure,
reliable, affordable and high quality converged telecommunication services. One of the objectives of NTP 2012
is to attract investment, both domestic and foreign, in the telecom sector. Additionally, NTP 2012 aims to,
among other things, (i) simplify the licensing framework; (ii) liberalise spectrum to enable use of spectrum in
any band to provide any service in any technology; (iii) deliver high quality seamless voice, data, multimedia
and broadcasting services on converged networks for enhanced delivery; (iv) de-license additional frequency
bands for public use; and (iv) put in place a merger and acquisition regime in telecommunication service sector
while ensuring adequate competition. The NTP 2012 seeks to provide a predictable and stable policy regime for
an approximate period of 10 years. Further, the NTP 2012 lists various strategies in relation to
telecommunication infrastructure which include, among others, (i) reviewing and simplifying sectoral policy for
right of way; (ii) undertaking periodic review of electro magnetic field (“EMF”) radiation standards for mobile
towers and mobile devices; and (iii) mandating standards regarding of functional requirements, safety and
security and in other building blocks of the communication network. The NTP 2012 will be made operational by
bringing out detailed guidelines, as may be considered appropriate, from time to time.
National Frequency Allocation Plan, 2011 (“NFAP 2011”)
The NFAP 2011 was developed by the WPC in line with the policies of the World Radiocommunication
Conference, 2007 of the International Telecommunication Union (“ITU”). The NFAP was developed with a
view to (i) cater to emerging technologies, (ii) ensure equitable and optimum utilization of scarce natural
resources of radio frequency spectrum; and (iii) encourage or promote indigenous technologies / manufacturing
by provisioning of small chunk of spectrum in certain frequency band / sub-bands in limited geographical area.
The ITU formulates the international frequency table based on which the member countries can formulate their
own frequency allocation plan. Accordingly, the WPC formulates the national frequency allocation plan for the
allocation of spectrum frequencies in India.
Unified Access Regime
Prior to the introduction of the Unified Access Regime, telecommunication service providers were granted
separate licenses for wireline (basic) and wireless (cellular) services in different telecom circles. The terms of
such licenses were distinct with respect to entry fee, spectrum allocation and interconnection charges. The
Government, through the Guidelines for Unified Access (Basic and Cellular) Services License dated November
11, 2003, introduced the UASL, under which a telecommunications service provider could offer both basic and
cellular services under one license. In accordance with these guidelines, CMTS license holders were permitted
to migrate from their CMTS license to UASL.
Subsequently, the Guidelines for Unified Access Services License (the “UASL Guidelines”) were issued by the
Government on December 14, 2005. The UASL Guidelines set out the qualifications for grant of a UASL in a
service area, including, inter alia, requirements in relation to the shareholding pattern and net worth of the
applicant entity. The UASL Guidelines further prescribe the scope of the UASL and the rights and obligations
of the licensee under the same, and provide for the payment of entry fees, license fees and spectrum charges, as
applicable, by the licensees.
The UASL Guidelines permit direct interconnectivity among all telecom service providers in the licensed
service area. The licensee may enter into suitable interconnection arrangements with other service providers for
such purpose. The terms and conditions of the interconnection, such as standard interfaces, points of
interconnection and technical aspects are to be mutually agreed between the service providers, subject to
compliance with TRAI norms and regulations.
Revenue sharing / license fee and spectrum charge
On June 25, 2012, DoT announced a uniform license fee rate of 8% of AGR to be adopted across all categories
of service areas in a 2 step process starting from July 1, 2012. In addition to the license fee, an additional
spectrum charge is to be levied on the cellular service provides for the use of spectrum, depending upon the
spectrum allotted.
Unified License
On August 19, 2013, DoT issued the UL Guidelines providing for, among other things, the migration of existing
licenses to a unified licensing regime. Under the unified licensing regime, a company can have only one Unified
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License along with authorisation for more than one service and service area for a specified term of 20 years,
subject to fulfilment of all conditions of entry simultaneously or separately at different time. The tenure of such
authorisation will run concurrently with the Unified License. In the event of holding or obtaining access
spectrum, no licensee or its promoter(s) directly or indirectly have any beneficial interest in any other licensee
company holding access spectrum in the same service area. Further, the minimum capital requirements have
been prescribed under the UL Guidelines. The license fee has been prescribed as 8% of the Adjusted Gross
Revenue under the UL Guidelines. However, from the second year of the effective date of respective
authorisation, the license fee shall be subject to a minimum of 10% of entry fee of the respective authorised
service and service area. Further, pursuant to the UL Guidelines, no other license for any of the services covered
under the Unified License shall be issued / extended / renewed. In addition, the UL Guidelines impose certain
restrictive conditions in relation to equity holding in other companies and security conditions.
The UL Guidelines were further amended on December 3, 2013, December 6, 2013, January 8, 2014 and April
2, 2014. Pursuant to the amendment dated December 6, 2013, the requirement imposed on the telecom service
providers to migrate all its’ existing licenses at the time of (i) renewal / extension of any of their current
licenses; or (ii) expansion of scope of license / service, has been deleted. The telecom service provider is now
required to migrate only its relevant license to Unified License at the time of renewal / extension of license.
Pursuant to the amendment dated January 8, 2014, the definition of networth has been amended to bring it in
conformity with the Companies Act, 2013. Annexure III of the UL Guidelines was amended pursuant to the
amendment dated April 2, 2014. On January 8, 2014, the DoT issued consolidated guidelines for grant of
Unified License.
Guidelines for transfer or merger of various categories of telecommunication service license or authorisation
under Unified License on compromises, arrangements and amalgamation of the companies, notified by DoT
on February 20, 2014 (“Merger Guidelines”).
The transfer or merger of various categories of telecommunication service licenses and authorisations under UL
in the event of compromises, arrangements and amalgamation of companies is permitted as per the Merger
Guidelines. The Merger Guidelines have been brought into effect in supersession of the earlier guidelines issued
by the DoT for intra service area merger of CMTS and/or UASL dated April 22, 2008. The Merger Guidelines,
inter alia, require that the licensees notify the licensor of any proposal of compromise, arrangement or
amalgamation. Any representation or objection made by the licensor has to be communicated to all concerned
parties. A time period of one year is permitted for the transfer or merger of various licenses in different service
areas.
In light of the spectrum cap of 50% in a band for access services, in case the merger or acquisition proposal
results in a market share in any service area exceeding 50%, the resultant entity is to reduce its market share to
the limit of 50% within a period of one year from the date of approval of the merger or acquisition. Further,
upon the merger of the licenses in a service area, the total spectrum held by the resultant entity cannot exceed
25% of the total spectrum assigned for access services and 50% of the spectrum assigned in a given band in the
concerned service area. If as a result of the merger, the total spectrum held by the entity is beyond the prescribed
limits, such excess spectrum must be surrendered within one year of the permission being granted. The extant
rules and regulations applicable to significant market power (“SMP”) would also apply if the resultant entity
becomes a SMP consequent to the merger of licenses in a service area.
DoT instructions on verification of subscribers
The DoT came out with fresh instructions for verification of subscribers which were made effective from
November 2012. The guidelines, among other things, dealt with (i) subscriber activation process, (ii) activation
of bulk, outstation and foreign subscribers, and (iii) provided norms for change in name and address of
subscribers.
Interconnection Usage Charges
TRAI has issued Interconnection Usage Charges Regulations, 2003 (which has been amended from time to
time) for covering arrangements amongst service providers for payment of interconnection usage charges such
as termination charges, origination charges, carriage charges and access deficit charges, for telecommunication
services.
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Internet Service
The Government issued Internet Services Provider Guidelines (“ISP Guidelines”) in August 2007 for the
purpose of granting licenses to internet service providers. Under the ISP Guidelines telecommunication service
providers holding internet service license are permitted to provide internet services, including, internet access
through any method and internet telephony, which is a service to process and carry voice signals offered through
the public internet by use of personal computers or IP based customer services equipment.
Mobile Number Portability
MNP allows mobile subscribers to retain their existing telephone numbers when they switch from one telephone
operator to another, irrespective of mobile technology or from one technology to another of the same or any
other access service provider. In September 2009, TRAI introduced the Telecommunications Mobile Number
Portability Regulations, 2009 (“MNP Regulations”). Under the MNP Regulations subscribers are allowed to
retain their mobile number while moving from within the same service circle.
Registration as Infrastructure Provider Category – I
Telecommunications infrastructure service providers are required to be registered with the DoT as an
Infrastructure Provider Category I (“IP-I Provider”) and obtain a certificate in this regard from the DoT (“IP-I
Registration Certificate”). An IP-I Provider can provide infrastructure such as dark fibres, right of way, duct
space and towers on lease, rent out or sale basis to the licensees of telecommunication services on mutually
agreed terms, but in accordance with the terms and conditions set out in the IP – I Registration Certificate and
the Revised Guidelines for Registration of Infrastructure Providers Category- I dated December 9, 2013 by the
DoT (“IP-I Guidelines”).
On March 9, 2009, DoT issued an order regarding scope of IP-I providers. Under this order, DoT clarified that
the scope of IP-I providers has been enhanced to cover the active infrastructure, if such infrastructure is
provided on behalf of the licensees, i.e. they can create active infrastructure limited to antenna, feeder cable,
Node B, Radio Access Network and transmission system only for and / or on behalf of UASL and / or CMSP
licensees.
SACFA Clearance
The DoT issued Guidelines for Infrastructure Sharing on April 1, 2008 (“Infrastructure Sharing Guidelines”)
applicable to service providers and infrastructure providers. Under the Infrastructure Sharing Guidelines, IP-I
Providers are permitted to seek sitting clearance from SACFA for erecting towers irrespective of whether the IPI Providers have entered into agreements with licensed service providers. For setting up any wireless
installations in India, clearance from the SACFA is required in respect of a fixed station and its antenna mast
(cell sites). The DoT has issued guidelines for issue of clearance for installation of mobile towers which became
effective as on June 1, 2013.
Quality of Service
TRAI has issued various regulations prescribing quality of service standards for (i) mobile banking; (ii) wireless
data services; and (c) basic telephone service (wireline) and cellular mobile telephone service.
EMF Radiation from base transmitting station towers
The DoT has issued the norms in relation to EMF Radiation on Mobile Towers and Mobile Handsets stating,
inter alia, that: (i) the EMF exposure limit (base station emissions) be lowered to 1/10 th of the existing
International Commission on Non-Ionizing Radiation Protection (“ICNIRP”) exposure limit effective from
September 1, 2012, (ii) DoT to carry out test audit of 10% of the BTS sites on random basis and on all cases
where there is a public complaint; (iii) for non-compliance of EMF standards, a penalty of ₹ 0.5 million is liable
to be levied per BTS per service provider. These norms became effective from September 1, 2012.
Installation of Mobile Towers
The DoT issued a letter dated December 11, 2012, to all telecom service providers requiring all telecom towers
erected or used by telecom service providers to conform to the generic requirements of towers issued by
Telecommunications Engineering Centre (“TEC”), with effect from April 1, 2014.
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Further, DoT has issued Advisory Guidelines for State Government for Issue of Clearance for Installation of
Mobile Towers. These guidelines became effective as on August 1, 2013. These guidelines provide for, among
other things, procedure for obtaining clearance from local bodies and / or state governments for installation of
mobile towers and the power accorded to the state government and / or local body in this regard.
In addition to the above, permission from various authorities such as the municipal authorities, zilla parishad,
gram panchayat or any other local authority would be required for setting up towers and other infrastructure.
Further, permission from state pollution control boards would be also required for the operating the DG sets.
Information Technology Act, 2000 (the “Information Technology Act”)
The Information Technology Act provides legal recognition to electronic documents and digital signatures as a
mean to authenticate electronic documents. The Information Technology Act further provides for penalties to
various offences, including cyber crimes and e-commerce fraud. Pursuant to an amendment to the Information
Technology Act in 2008, intermediaries including telecommunication service providers were made liable for
offences committed under the Information Technology Act. However, the intermediary is exempt from such
liability in relation to third party information, if the intermediary’s role is limited to that of providing access to a
communication system over which the third party information is transmitted or temporarily stored, or if the
intermediary does not select the recipient or select/modify the information in the transmission to the recipient
and if the intermediary has observed due diligence while discharging its duties.
The Department of Information Technology under the Ministry of Communications and Information
Technology, Government of India, introduced the Information Technology (Intermediaries guidelines) Rules,
2011 (“IT intermediaries rules”) in exercise of powers conferred under the Information Technology Act. As
per the IT intermediaries rules, the intermediary has to observe necessary due diligence while discharging his
duties which includes publishing rules and regulations, privacy policy and user agreement.
Foreign Investment Regulations
Under the FDI Policy, foreign investment up to 100% is permitted in the telecommunications sector, of which
foreign investment up to 49% is permitted through the automatic route and beyond 49% through the government
route, subject to certain licensing and security conditions.
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BOARD OF DIRECTORS AND SENIOR MANAGEMENT
Board of Directors
The Board of Directors presently consists of 14 Directors, and in accordance with the Articles of Association,
our Company shall not have less than three Directors and not more than 16 Directors.
In accordance with Article 127(b) of the Articles of Association, the majority of Directors on the Board shall be
resident Indian citizens appointed in consultation with Aditya Birla Nuvo Limited as long as Aditya Birla Nuvo
Limited remains a Serious Resident Indian Investor.
At every AGM, one-third of such of the Directors as are liable to retire by rotation for the time being or, if their
number is not three or multiple of three, then the number nearest to one-third shall retire from office. The
Directors are not required to hold any Equity Shares to qualify to be a Director.
The quorum for meetings of the Board of Directors is one third of the total number of Directors or three
Directors, whichever is higher.
The following table sets forth details regarding the Board of Directors as of the date of this Placement
Document:
Sr. No.
1.
Name
Kumar Mangalam Birla
Age (years)
46
Designation
Non-Executive Chairman and
Non-Independent Director
68
Non-Executive and NonIndependent Director
53
Managing Director
Address:
Mangal Adityayan
20, Carmichael Road
Mumbai 400 026
DIN: 00012813
Term: Liable to retire by rotation
Occupation: Industrialist
2.
Nationality: Indian
Rajashree Birla
Address:
Mangal Adityayan
20, Carmichael Road
Mumbai 400 026
DIN: 00022995
Term: Liable to retire by rotation
Occupation: Industrialist
3.
Nationality: Indian
Himanshu Kapania
Address:
Flat No. 404, 4th Floor
Silver Cascade, Mount Mary Road
Bandra (West)
Mumbai 400 050
DIN: 03387441
Term: Five years from April 1, 2011
107
Sr. No.
Name
Age (years)
Designation
53
Non-Executive and NonIndependent Director
48
Non-Executive and NonIndependent Director (Nominee
Director)
46
Non-Executive and NonIndependent Director (Nominee
Director)
62
Non-Executive and NonIndependent Director
Occupation: Service
4.
Nationality: Indian
Rakesh Jain
Address:
801, The Residency
Union Park Road, Khar (West)
Mumbai 400 052
DIN: 00020425
Term: Liable to retire by rotation
Occupation: Service
5.
Nationality: Indian
Biswajit A. Subramanian
Address:
2, Shivji Marg
West End Greens
Rangpuri
New Delhi 110 037
DIN: 00905348
Occupation: Service
Term: Liable to retire by rotation
6.
Nationality: U.K.
Shridhir Sariputta Hansa Wijayasuriya
Address:
No.19, Bagatelle Road
Colombo 03
Sri Lanka
DIN: 00363174
Term: Liable to retire by rotation
Occupation: Service
7.
Nationality: Sri Lanka
Sanjeev Aga
Address:
901, Nav Sonarbala Annexe
Turner Road, Bandra (West)
Mumbai 400 050
DIN: 00022065
Term: Liable to retire by rotation
Occupation: Professional
108
Sr. No.
8.
Name
Nationality: Indian
Arun Thiagarajan
Age (years)
Designation
69
Non-Executive and Independent
Director
73
Non-Executive and Independent
Director
62
Non-Executive and Independent
Director
77
Non-Executive and Independent
Director
Address:
Grace Home
37 Kanakapura Road
Basavangudi
Bangalore 560 004
DIN: 00292757
Term: Liable to retire by rotation
Occupation: Professional
9.
Nationality: Indian
Gian Prakash Gupta
Address:
101, Kaveri, B Wing
Neelkanth Valley, 7th Road
Rajawadi, Ghatkopar (East)
Mumbai 400 077
DIN: 00017639
Term: Liable to retire by rotation
Occupation: Professional
10.
Nationality: Indian
Mohan Gyani
Address:
2137 Cascara Ct.
Pleasanton
California
USA 94588
DIN: 00943522
Term: Liable to retire by rotation
Occupation: Professional
11.
Nationality: United States
Tarjani Vakil
Address:
A-1, Ishwardas Mansion
Nana Chowk
Mumbai 400 007
DIN: 00009603
Term: Liable to retire by rotation
Occupation: Professional
109
Sr. No.
12.
Name
Nationality: Indian
R.C. Bhargava
Age (years)
Designation
79
Independent and Non-Executive
Director
79
Non-Executive and Independent
Director
48
Non-Executive and Independent
Director
Address:
220, Sector 15A
Noida 201 301
DIN: 00007620
Term: Liable to retire by rotation
Occupation: Professional
13.
Nationality: Indian
P. Murari
Address:
3 (Old 2), Gilchrist Avenue
Off-Harrington Road
Chennai 600 031
DIN: 00020437
Term: Liable to retire by rotation
Occupation: Professional
Nationality: Indian
14.
Madhabi Puri Buch
Address:
#09-05, Sky@Eleven
7 Thomson Lane
Singapore 297 725
DIN: 00016299
Term: Liable to retire by rotation
Occupation: Professional
Nationality: Indian
Biographies of the Directors
Kumar Mangalam Birla, chairman of the Aditya Birla Group, was appointed as Chairman of our Company in
June 2006. He holds a bachelor’s degree in Commerce from Mumbai University and a master’s degree in
Business Administration from London Business School. He is a qualified Chartered Accountant. He also serves
as a chairman of the board of directors of various companies of the Aditya Birla group in India and overseas. He
also held and continues to hold several key positions on various regulatory and professional boards. An
erstwhile director on the Central Board of Directors of the RBI, he was also chairman of the advisory committee
constituted by the Ministry of Company Affairs and served on the Prime Minister of India’s Advisory Council
on Trade and Industry.
Rajashree Birla, was appointed to the Board of Directors in June 2006. She holds a bachelor’s degree in Arts
from Loretto College, Kolkata. She also serves as a director on the board of directors of various companies of
the Aditya Birla group in Indian and overseas. As chairperson of Aditya Birla Centre for Community Initiatives
110
and Rural Development, the body responsible for development projects, she oversees social and welfare related
work across 30 companies of Aditya Birla group. She is also the chairperson of FICCI CSR Committee and the
FICCI Aditya Birla CSR Centre for Excellence. She was conferred the Padma Bhushan by the Government for
her contribution in the area of social work in 2011.
Himanshu Kapania, was appointed as the Managing Director of our Company in April 2011. He holds a
bachelor’s degree in Engineering (Electronics and Electricals) from Birla Institute of Technology, Mesra and a
post graduate diploma in Management from Indian Institute of Management, Bangalore. He is currently the
chairman of the Cellular Operators Association of India, a body representing GSM operators.
Rakesh Jain, was appointed to the Board of Directors in October 2009. He holds a bachelor’s degree in
Engineering (Chemical) from Indian Institute of Technology, Delhi and a master’s degree in Technology from
Indian Institute of Technology, Kharagpur. He also holds a Doctor of Philosophy degree in Polymer Science
from University of Akron and Ohio State University. He also serves as the managing director of Aditya Birla
Nuvo Limited and as the director of Group IT Pty Limited. He has previously served as the president and CEO
of GE Plastic India Limited for India and South Asia. He was appointed as a Director in 2009 pursuant to
intimation by one of the Promoters of its intention to nominate him to the office of the Director.
Biswajit A. Subramanian, was appointed to the Board of Directors in December 2006. He holds a bachelor’s
degree in Engineering (Electrical) from Indian Institute of Technology, Madras and a master’s degree in
Engineering (Electrical) from University of California, Santa Barbara. He also holds a master’s degree in
Business Administration from Wharton School of the University of Pennsylvania. He serves as the managing
director of Providence Equity Advisors India Private Limited, which forms a part of Providence Equity Partners
group and leads the advisory activities relating to Providence Equity’s private equity investment activities in
Asia (ex-China).
Shridhir Sariputta Hansa Wijayasuriya, was appointed to the Board of Directors in January 2013. He holds a
bachelor’s degree in Engineering (Electrical and Electronics) from University of Cambridge, U.K. and a
master’s degree in Business Administration from University of Warwick, U.K. He also holds a Doctor of
Philosophy degree in Digital Mobile Communications from University of Bristol, U.K. He also serves as the
group chief executive of Dialog Axiata Plc., Sri Lanka, a subsidiary of Axiata Group Berhad, and as the director
on the board of a number of international subsidiaries of the Axiata Group Berhad.
Sanjeev Aga, was appointed to the Board of Directors in September 2004. He holds a bachelor’s Honours
degree in Physics from St. Stephen’s College, Delhi University and a post graduate diploma in Management
from Indian Institute of Management, Kolkata. He has previously served as the managing director of our
Company from November 2006 to March 2011. He has previously held various senior positions in Asian Paints
Limited, Chellarams Nigeria Limited and Jenson & Nicholson Limited, and served as the CEO of Mattel Toys
India Limited before serving as the managing director of Blow Plast Limited and Aditya Birla Nuvo Limited.
Arun Thiagarajan, was appointed to the Board of Directors in September 2006. He holds a master’s degree in
Engineering (Electrical) from Royal Institute of Technology, Stockholm. He also holds a master’s degree in
Business Administration and Information Systems from Uppsala University, Sweden. He has also attended the
advanced management program of the Harvard Business School. He also serves as a part-time chairman of ING
Vysya Bank Limited. He has previously served as the managing director of Asea Brown Boveri Limited, as the
vice chairman of Wipro Limited and as president of Hewlett-Packard India Private Limited.
Gian Prakash Gupta, was appointed to the Board of Directors in December 2006. He holds a master’s degree
in Commerce from Shri Ram College of Commerce, Delhi. He has previously served as the chairman and
managing director of Industrial Development Bank of India Limited and as the chairman of Unit Trust of India
Limited.
Mohan Gyani, was appointed to the Board of Directors in September 2006. He holds a bachelor’s degree in
Business Administration as well as a master’s degree in Business Administration (Finance) from San Francisco
State University. He also serves as vice chairman of Roamware Inc. He has previously served as president and
CEO of AT&T Wireless Services Inc. and executive vice president and chief financial officer of AirTouch
Communications, Inc.
Tarjani Vakil, was appointed to the Board of Directors in September 2006. She holds a master’s degree in Arts
from University of Bombay. She has previously served as the chairperson and managing director of Export
Import Bank of India and has worked with Industrial Development Bank of India Limited.
111
R.C. Bhargava, retired Indian Administrative Services officer, was appointed to the Board of Directors in
October 2008. He holds a master’s degree in Science (Mathematics) from Allahabad University and a master’s
degree in Arts (Development Economics) from Williams College, United States. He currently serves as the nonexecutive chairman of Maruti Suzuki India Limited. He has previously served in Indian Administrative Services
and has served as the Joint Secretary in the Ministry of Energy and in the Cabinet Secretariat. He has also
previously served as managing director of Maruti Suzuki India Limited.
P. Murari, retired Indian Administrative Services officer, was appointed to the Board of Directors in October
2008. He holds a master’s degree in Arts (Economics) from Madras University. He currently serves as an
advisor to the president of Federation of Indian Chambers of Commerce and Industry. He has previously served
in Indian Administrative Services and has held several senior positions with the Government, the last being
Secretary to the President of India.
Madhabi Puri Buch, was appointed to the Board of Directors in December 2011. She holds a bachelor’s degree
in Science (Mathematics) and Arts (Economics) from St. Stephen’s College, Delhi and a post graduate diploma
in Management from Indian Institute of Management, Ahmedabad. She currently serves as a director at Agora
Advisory Private Limited. She has previously served as the director of Greater Pacific Capital Singapore Pte.
Limited. She has also previously served as the CEO of ICICI Securities Limited and as a director on the board
of directors of ICICI Bank Limited.
Relationship with other Directors
Two of the Directors, Kumar Mangalam Birla and Rajashree Birla are related to each other. Kumar Mangalam
Birla is the son of Rajashree Birla. None of the other Directors are related to each other.
Borrowing powers of the Board of Directors
The Board of Directors is authorised to borrow money upon such terms and conditions as the Board of Directors
may think fit provided that the aggregate amount of the borrowings shall not exceed ₹ 250,000 million over and
above the aggregate of the paid up capital and free reserves of our Company.
Interest of the Directors
All of the Directors, other than the Managing Director, may be deemed to be interested to the extent of fees
payable to them for attending Board or Board committee meetings as well as to the extent of reimbursement of
expenses payable to them. The Managing Director may be deemed interested to the extent of remuneration paid
to him for services rendered as the officer of our Company.
All of the Directors may also be regarded as interested in any Equity Shares held by them and also to the extent
of any dividend payable to them and other distributions in respect of such Equity Shares held by them. All
Directors may also be regarded as interested in the Equity Shares held by, or subscribed by and allotted to, the
companies, firms and trust, in which they are interested as directors, members, partners, trustees. The Managing
Director may also be interested in the options that have been granted to him under the ESOP 2006 and ESOP
2013.
Except as otherwise stated in this Placement Document, our Company has not entered into any contract,
agreement or arrangement during the preceding two years from the date of this Placement Document in which
any of the Directors are interested, directly or indirectly, and no payments have been made to them in respect of
any such contracts, agreements, arrangements which are proposed to be made with them. The Directors have not
taken any loans from our Company.
Shareholding of Directors
The following table sets forth the shareholding of the Directors as of June 4, 2014:
Name
Kumar Mangalam Birla
Number Percent of Aggregate
of
total
number
Equity number of of ESOPs
Shares outstanding granted
Equity
Shares
233,333
-(1)
-
112
Aggregate
number of
RSUs
granted
Aggregate Aggregate
number of number
ESOPs
of RSUs
remaining remaining
ununexercised exercised
-
Name
Rakesh Jain
Arun Thiagarajan
Gian Prakash Gupta
Tarjani Vakil
Sanjeev Aga
Himanshu Kapania
(1)
Number Percent of
of
total
Equity number of
Shares outstanding
Equity
Shares
5,000
-(1)
7,700
-(1)
4,192
-(1)
147
-(1)
200,000
-(1)
314,375
-(1)
Aggregate
number
of ESOPs
granted
2,140,000
2,228,115
Aggregate
number of
RSUs
granted
533,333
Aggregate Aggregate
number of number
ESOPs
of RSUs
remaining remaining
ununexercised exercised
1,893,740
533,333
The percentage of the total number of outstanding Equity Shares is below 0.01%.
Terms of appointment of the Executive-Director
Himanshu Kapania has been appointed as the Managing Director of our Company for a term of five years from
April 1, 2011 pursuant to the resolution dated December 27, 2010 passed by the Board of Directors and
resolution dated September 28, 2011 passed by the shareholders of our Company.
Except Himanshu Kapania, all the other Directors are the Non-Executive Directors.
Compensation of the Directors
Non-Executive Directors
The Non-Executive Directors are paid remuneration consisting of sitting fees, which is determined by the Board
of Directors. Our Company pays sitting fees of ₹ 20,000 per meeting to Non-Executive Directors for attending
the meetings of the Board and all committees thereof.
The following table sets forth all compensation paid by our Company to the Non-Executive Directors for the
period between April 1, 2014 and May 31, 2014:
Non-Executive Director
-
Sitting fees(1)
(₹)
40,000
20,000
40,000
20,000
20,000
Total compensation
(₹)
40,000
20,000
40,000
20,000
20,000
-
40,000
80,000
20,000
80,000
40,000
20,000
40,000
40,000
80,000
20,000
80,000
40,000
20,000
40,000
Commission
(₹)
Kumar Mangalam Birla
Rajashree Birla
Rakesh Jain
Biswajit A. Subramanian
Shridhir Sariputta Hansa
Wijayasuriya
Sanjeev Aga
Arun Thiagarajan
Gian Prakash Gupta
Mohan Gyani
Tarjani Vakil
R.C. Bhargava
P. Murari
Madhabi Puri Buch
The following table sets forth all compensation paid by our Company to the Non-Executive Directors for the
Fiscal Years ended March 31, 2014, 2013, and 2012:
Non-Executive Director
Kumar Mangalam Birla
Commission
(₹)
2014
2013
2012
-
-
-
Sitting fees(1)
Total compensation
(₹)
(₹)
For the Fiscal Year ended March 31,
2014
2013
2012
2014
2013
2012
40,000
113
100,000
110,000
40,000
100,000
110,000
Non-Executive Director
Rajashree Birla
Rakesh Jain
Biswajit A. Subramanian
Shridhir
Sariputta
Wijayasuriya(2)
Sanjeev Aga
Arun Thiagarajan
Gian Prakash Gupta
Mohan Gyani
Tarjani Vakil
R.C. Bhargava
P. Murari
Madhabi Puri Buch
Juan Villalonga Navarro(3)
Hansa
Commission
(₹)
Sitting fees(1)
Total compensation
(₹)
(₹)
For the Fiscal Year ended March 31,
2014
2013
2012
2014
2013
2012
2014
2013
2012
-
-
-
40,000
100,000
60,000
120,000
40,000
140,000
60,000
130,000
60,000
150,000
60,000
110,000
40,000
100,000
60,000
120,000
40,000
140,000
60,000
130,000
60,000
150,000
60,000
110,000
-
-
-
140,000
100,000
150,000
140,000
100,000
150,000
NA
-
-
280,000
220,000
20,000
220,000
40,000
40,000
80,000
NA
170,000
150,000
20,000
160,000
80,000
20,000
80,000
-
180,000
150,000
40,000
150,000
40,000
20,000
20,000
0
280,000
220,000
20,000
220,000
40,000
40,000
80,000
NA
170,000
150,000
20,000
160,000
80,000
20,000
80,000
-
180,000
150,000
40,000
150,000
40,000
20,000
20,000
0
(1)
The sitting fees for attending each committee meeting was increased from ₹ 10,000 to ₹ 20,000 with effect from January
29, 2013.
(2)
Shridhir Sariputta Hansa Wijayasuriya was paid sitting fees for the meetings attended by him as an Alternate Director to
Juan Villalonga Navarro for the Fiscal Year ended March 31, 2013 and 2012. Shridhir Sariputta Hansa Wijayasuriya
was appointed as a Director with effect from January 29, 2013.
(3)
Juan Villalonga Navarro ceased to be a Director with effect from January 29, 2013.
Commission
The Board has, in its meeting held on April 28, 2014, approved the proposal to pay commission not exceeding ₹
100 million in total to Non-Executive Directors of our Company for FY 2013-14, subject to the approval of
shareholders in a general meeting.
Executive-Director
Himanshu Kapania has been paid a remuneration of ₹ 6.65 million (including salary and other benefits) for the
period between April 1, 2014 and May 31, 2014.
The following table sets forth the total compensation paid by our Company to Himanshu Kapania for the Fiscal
Years ended March 31, 2014, 2013, 2012 and 2011:
Executive Director
Himanshu Kapania
Total remuneration (including salary and other benefits)
(₹ in million)
For the Fiscal Year ended March 31,
2014
2013
2012
93.30
87.54
33.13
For details in relation to the Equity Shares and ESOPs held by Himanshu Kapania as of March 31, 2014, please
see “- Shareholding of Directors” on page 112.
114
Organisational structure of our Company
Key managerial personnel of our Company
The following table sets forth details regarding the key managerial personnel of our Company as of the date of
this Placement Document:
Sr. No.
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
Name
Akshaya Moondra
Anil Tandan
Prakash Paranjape
Rajat Mukarji
Rajesh Srivastava
Ambrish Jain
P. Lakshminarayana
Sashi Shankar
Navanit Narayan
Vinay Razdan
Pankaj Kapdeo
Age (years)
51
65
55
61
58
57
53
54
49
47
48
Title
Chief Financial Officer
Chief Technology Officer
Chief Information Officer
Chief Corporate Affair Officer
Chief Commercial Officer
Deputy Managing Director
Chief Operating Officer - Corporate
Chief Marketing Officer
Chief Service Delivery Officer
Chief Human Resource Officer
General Counsel and Company Secretary
Biographies of the key managerial personnel
Akshaya Moondra is the Chief Financial Officer of our Company. He holds a bachelor’s degree in Commerce
from University of Delhi and is a qualified Chartered Accountant and Licentiate Company Secretary. He has
over 27 years of work experience including five years of experience in telecom sector. Prior to joining our
Company, he worked with Thai Acrylic Fibre Company Limited, Thailand. He joined our Company in July
2008.
Anil Tandan is the Chief Technology Officer at our Company. He holds a master’s degree in Technology from
Indian Institute of Technology, Kharagpur. He has served in the Indian Army in the Corps of Signal for 30
years. He has 14 years of experience in telecom sector. Prior to joining our Company, he worked with Fascel
Limited. He joined our Company in January 2001.
Prakash Paranjape is the Chief Information Officer at our Company. He holds a bachelor’s degree in
Engineering from Pune University. He has over 33 years of work experience including 17 years of experience in
telecom sector. Prior to joining our Company, he worked with BPL Mobile Limited. He joined our Company in
September 2005.
115
Rajat Mukarji is the Chief Corporate Affairs Officer at our Company. He holds a bachelor’s degree in Arts
(History) from St. Stephen’s College, ew Delhi and a diploma in International Marketing Management from
Department of Management Studies, Delhi University. He has over 29 years of work experience including 17
years of experience in telecom sector. Prior to joining our Company, he worked with Jumbo Electronics
Company Limited. He joined our Company in January 1996.
Rajesh Srivastava is the Chief Commercial Officer at our Company. He holds a bachelor’s degree in Science
(Physics) from Delhi University and a bachelor’s degree in Engineering from Indian Institute of Science,
Bangalore. He has over 38 years of work experience including 11 years of experience in telecom sector. Prior to
joining our Company, he worked with Ipca Laboratories Limited. He joined our Company in November 2006.
Ambrish Jain is the Deputy Managing Director at our Company. He holds a bachelor’s degree in Technology
from Indian Institute of Technology, Delhi and a post graduate diploma in Management from Indian Institute of
Management, Ahmedabad. He has over 34 years of work experience including 18 years of experience in
telecom sector. Prior to joining our Company, he worked with Aircel Digilink India Limited. He joined our
Company in October 2001.
P. Lakshminarayana is the Chief Operating Officer - Corporate at our Company. He holds a bachelor’s degree
in Engineering from Osmania University and a post graduate diploma in Management from Indian Institute of
Management, Kolkata. He has over 30 years of work experience including ten years of experience in telecom
sector. Prior to joining our Company, he worked with PepsiCo India Holdings Private Limited. He joined our
Company in February 2004.
Sashi Shankar is the Chief Marketing Officer at our Company. He holds a bachelor’s degree in Engineering
(Chemicals) from Madras University and a masters degree in Management Studies (Marketing) from S.P. Jain
Institute of Management Research, Mumbai University. He has over 30 years of work experience including 12.5
years of experience in telecom sector. Prior to joining our Company, he worked with Mattel Toys (I) Limited.
He joined our Company in September 2001.
Navanit Narayan is the Chief Service Delivery Officer at our Company. He holds a bachelor’s degree in
Science from Birla Institute of Technology, Mesra and a master’s degree in Science from orthwestern
University, IL, United States. He also holds a post graduate diploma in Business Management from Xavier
Labour Relations Institute, Jamshedpur. He has over 25 years of work experience including seven years of
experience in telecom sector. Prior to joining our Company, he worked with Nokia Siemens Networks Limited.
He joined our Company in January 2008.
Vinay Razdan is the Chief Human Resource Officer at our Company. He holds a bachelor’s degree in
Commerce from Delhi University and a post graduate diploma in Personnel Management and Industrial
Relations from Xavier Labour Relations Institute, Jamshedpur. He has over 26 years of work experience
including eight years of experience in telecom sector. Prior to joining our Company, he worked with HCL
Technologies Limited. He joined our Company in January 2006.
Pankaj Kapdeo is the General Counsel and Company Secretary at our Company. He holds a bachelor’s degree
in Commerce from Vikram University, Ujjain and a bachelor’s degree in law from Vikram University, Ujjain.
He is also a qualified Company Secretary. He has over 25 years of work experience including seven years of
experience in telecom sector. Prior to joining our Company, he worked with Radico Khaitan Limited. He joined
our Company in November 2006.
All the key management personnel are permanent employees of our Company.
116
Shareholding of key managerial personnel
The following table sets forth the details regarding the shareholding of the key managerial personnel of our
Company as of June 4, 2014:
Name
Number of Percent of
Equity
total
Shares
number of
outstandin
g
Equity
Shares
Akshaya
Moondra
Anil Tandan
Prakash
Paranjape
Rajat Mukarji
Rajesh
Srivastava
Ambrish Jain
P.
Lakshminaray
ana
Sashi Shankar
Navanit
Narayan
Vinay Razdan
Pankaj
Kapdeo
(1)
Aggregate
number
of
ESOPs
granted
under ESOP
2006
80,000
-(1)
Aggregate
number of
ESOPs
remaining
unexercised
under
ESOP
2006
160,500
60,500
Aggregate
number of
Options
granted
under
ESOP
2013
Aggregate
number of
Options
remaining
unexercised
under
ESOP
2013
297,885
297,885
Aggregate
number of
RSUs
granted
under
ESOP
2013
Aggregate
number of
RSUs
remaining
unexercised
under
ESOP
2013
146,944
146,944
25,500
-
-(1)
-
267,500
267,500
205,000
-
182,998
297,885
182,998
297,885
88,667
146,944
88,667
146,944
20,000
400
-(1)
-(1)
267,500
267,500
183,875
-
297,885
297,885
146,944
146,944
200,782
-
-(1)
-
334,375
267,500
83,593
45,500
946,870
297,885
946,870
297,885
266,667
146,944
266,667
146,944
26,000
-
-(1)
-
267,500
160,500
107,125
70,250
297,885
297,885
297,885
297,885
146,944
146,944
146,944
146,944
5,500
28,452
-(1)
-(1)
267,500
103,750
160,500
41,500
297,885
91,088
297,885
91,088
146,944
41,422
146,944
41,422
The percentage of the total number of outstanding Equity Shares is below 0.01%.
Interest of key managerial personnel
The key managerial personnel of our Company do not have any interest in our Company other than to the extent
of the remuneration or benefits to which they are entitled to as per their terms of appointment and to the extent
of the Equity Shares held by them or their dependants in our Company, if any, and number of options granted to
them under the ESOP 2006 and ESOP 2013.
Corporate governance
Our Company has been complying with the requirements of the applicable regulations, including the Listing
Agreement with the Stock Exchanges and the SEBI guidelines, in respect of corporate governance including
constitution of the Board of Directors and committees thereof.
The Board of Directors presently consists of 14 Directors. In compliance with the requirements of the Listing
Agreement, the Board of Directors consists of seven Independent Directors.
The corporate governance framework is based on an effective independent Board of Directors, separation of the
supervisory role of the Board of Directors from the executive management team and proper constitution of
committees of the Board of Directors. The Board of Directors functions either as a full Board or through various
committees constituted to oversee specific operational areas.
Committees of the Board of Directors
The Board of Directors has seven committees, which have been constituted and function in accordance with the
relevant provisions of the Companies Act, Securities and Exchange Board of India (Employee Stock Option
Scheme and Employee Stock Purchase Scheme) Guidelines, 1999 and the Listing Agreement: (i) Audit
Committee, (ii) Remuneration Committee, (iii) Shareholders’/Investors’ Grievance Committee, (iv) ESOS
Compensation Committee, (v) Finance Committee, (vi) Securities Allotment Committee, and (vii) Corporate
Social Responsibility Committee.
117
The following table sets forth the details of the members of the aforesaid committees as of the date of this
Placement Document:
Committee
Audit Committee
Remuneration Committee
Shareholders’/Investors’ Grievance Committee
ESOS Compensation Committee
Finance Committee
Securities Allotment Committee
Corporate Social Responsibility Committee
Members
Gian Prakash Gupta (Chairman), Arun Thiagarajan,
Tarjani Vakil, Shridhir Sariputta Hansa Wijayaurisya
Arun Thiagarajan, Tarjani Vakil and Gian Prakash
Gupta
Rakesh Jain, Sanjeev Aga and Himanshu Kapania
Arun Thiagarajan, Tarjani Vakil and Kumar
Mangalam Birla
Rakesh Jain, Sanjeev Aga and Himanshu Kapania
Gian Prakash Gupta, Rakesh Jain, Sanjeev Aga and
Himanshu Kapania
Rajashree Birla (Chairman), P. Murari and Himanshu
Kapania
Policy on disclosures and internal procedure for prevention of insider trading
Regulation 12(1) of the SEBI Prohibition of Insider Trading Regulations applies to our Company and its
employees and requires our Company to implement a code of internal procedures and conduct for the prevention
of insider trading. Our Company has implemented a code of conduct for prevention of insider trading in
accordance with the SEBI Prohibition of Insider Trading Regulations.
Other Confirmations
None of the Directors, Promoters or key managerial personnel of our Company has any financial or other
material interest in the Issue and there is no effect of such interest in so far as it is different from the interests of
other persons.
118
PRINCIPAL SHAREHOLDERS
The following table sets forth the details regarding the shareholding pattern of our Company, as on March 31,
2014:
Sr.
no.
(A)
(1)
(2)
(B)
(1)
(2)
(C)
Category of Shareholder
No. of
Shareholders
Total no. of
Equity Shares
Shareholding of Promoter and promoter group
Indian
Individuals
/
Hindu
1
233,333
Undivided Family
Bodies Corporate
4 1,520,445,714
Sub Total
5 1,520,679,047
Foreign
Total shareholding of
5 1,520,679,047
Promoter and promoter
group (A)
Public Shareholding
Institutions
Mutual Funds / UTI
103
23,024,704
Financial Institutions /
41
39,463,893
Banks
Insurance Companies
3
17,600,443
Foreign
Institutional
400
647,506,093
Investors
Sub Total
547
727,595,133
Non-Institutions
Bodies Corporate
1,472
23,188,350
Individuals
Individual
shareholders
242,967
43,868,989
holding nominal share
capital up to ₹ 0.1 million
Individual
shareholders
223
5,516,796
holding nominal share
capital in excess of ₹ 0.1
million
Any Others (Specify)
Individual Director
6
531,414
Non Resident Indians
2,623
1,576,206
Trusts
20
722,121
Overseas Corporate Bodies
3
990,162,003
Clearing Members
374
5,791,702
Sub Total
247,688 1,071,357,581
Total Public Shareholding
248,235 1,798,952,714
(B)
Total (A) + (B)
248,240 3,319,631,761
Shares held by Custodians
0
0
and
against
which
Depository Receipts have
been issued
Promoter and Promoter
0
0
Group
Public
0
0
Sub Total
0
0
Grand Total (A)+(B)+(C)
248,240 3,319,631,761
119
Total no. of
Equity Shares
held in
Dematerialised
Form
Total Shareholding
as a % of total no. of
Equity Shares
Equity Shares
pledged or
otherwise
encumbered
As a % As a % of
of (A+B) (A+B+C)
Number
As a
of Equity
% of
Shares Total no.
of
Equity
Shares
233,333
0.01
0.01
0
0.00
1,520,445,714
1,520,679,047
45.80
45.81
45.80
45.81
0
0
0.00
0.00
1,520,679,047
45.81
45.81
0
0.00
23,024,704
39,463,893
0.69
1.19
0.69
1.19
0
0
0.00
0.00
17,600,443
647,506,093
0.53
19.51
0.53
19.51
0
0
0.00
0.00
727,595,133
21.92
21.92
0.00
0.00
23,188,350
0.70
0.70
0
0.00
43,857,381
1.32
1.32
0
0.00
5,516,796
0.17
0.17
0
0.00
531,414
1,571,206
722,121
990,162,003
5,791,702
1,071,340,973
1,798,936,106
0.02
0.05
0.02
29.83
0.17
32.27
54.19
0.02
0.05
0.02
29.83
0.17
32.27
54.19
0
0
0
0
0
0
0
0.00
0.00
0.00
0.00
0.00
0.00
0.00
3,319,615,153
0
100.00
0.00
100.00
0.00
0
0
0.00
0.00
0
0.00
0.00
0
0.00
0
0
3,319,615,153
0.00
0.00
100.00
00.00
0.00
100.00
0
0
0
0.00
0.00
0.00
The following table sets forth the details regarding the shareholding of the Promoter and Promoter Group as at
March 31, 2014:
Sr. No.
1.
2.
3.
4.
5.
Name of the shareholder
Total Equity Shares held
Number of
Total shareholding as
Equity Shares A % of grand total (A) +
(B) + (C)
837,526,221
25.23
283,565,373
8.54
228,340,226
6.88
171,013,894
5.15
233,333
0.01
1,520,679,047
45.81
Aditya Birla Nuvo Limited
Birla TMT Holdings Private Limited
Hindalco Industries Limited
Grasim Industries Limited
Kumar Mangalam Birla
Total
The following table sets forth the details regarding the shareholding of persons belonging to the category
“Public” and holding more than 1% of the total number of Equity Shares as at March 31, 2014:
Sr. No.
1.
2.
3.
4.
5.
6.
Name of the shareholder
Number of
Equity Shares
Axiata Investments 1 (India) Limited
P5 Asia Investments Mauritius Limited
Axiata Investments 2 (India) Limited
National Westminster Bank PLC as deposit
Vanguard International Growth Fund
National Westminster Bank PLC as deposit
Total
120
464,734,670
330,000,000
195,427,333
86,734,095
52,497,932
33,380,745
1,162,774,775
Total shareholding as a
% of total no. of Equity
Shares
14.00
9.94
5.89
2.61
1.58
1.01
35.03
ISSUE PROCEDURE
The following is a summary intended to present a general outline of the procedure relating to the application,
payment, Allocation and Allotment of the Equity Shares to be issued pursuant to the Issue. The procedure
followed in the Issue may differ from the one mentioned below, and investors are presumed to have apprised
themselves of the same from our Company or the Lead Managers. Investors are advised to inform themselves of
any restrictions or limitations that may be applicable to them. See the sections “Distribution and Solicitation
Restrictions” and “Transfer Restrictions” on pages 133 and 137, respectively.
Qualified Institutions Placement
The Issue is being made to QIBs in reliance upon Chapter VIII of the SEBI Regulations and Section 42 of the
Companies Act, 2013, through the mechanism of a QIP. Under Chapter VIII of the SEBI Regulations and
Section 42 of the Companies Act, 2013, a company may issue equity shares to QIBs provided that certain
conditions are met by the company. Certain of these conditions are set out below:

the shareholders of the issuer have passed a special resolution approving such QIP. Such special
resolution must specify (a) that the allotment of securities is proposed to be made pursuant to the QIP;
and (b) the Relevant Date;

equity shares of the same class of such issuer, which are proposed to be allotted through the QIP, are
listed on a recognised stock exchange in India having nation-wide trading terminals for a period of at
least one year prior to the date of issuance of notice to its shareholders for convening the meeting to
pass the above-mentioned special resolution;

the aggregate of the proposed issue and all previous QIPs made by the issuer in the same financial year
does not exceed five times the net worth (as defined in the SEBI Regulations) of the issuer as per the
audited balance sheet of the previous financial year;

the issuer shall be in compliance with the minimum public shareholding requirements set out in the
SCRR;

the issuer shall have completed allotments with respect to any offer or invitation made by the issuer and
has not withdrawn or abandoned any invitation or offer made by the issuer;

the issuer shall offer to each Allottee such number of the securities in the issue which would aggregate
to at least ₹ 20,000 calculated at the face value of the securities.
At least 10% of the equity shares issued to QIBs must be allotted to Mutual Funds, provided that, if this portion
or any part thereof to be allotted to Mutual Funds remains unsubscribed, it may be allotted to other QIBs.
Bidders are not allowed to withdraw their Bids after the Bid/Issue Closing Date.
Additionally, there is a minimum pricing requirement under the SEBI Regulations. The Floor Price shall not be
less than the average of the weekly high and low of the closing prices of the Equity Shares quoted on the stock
exchange during the two weeks preceding the Relevant Date. However, a discount of up to 5% on the Floor
Price is permitted in accordance with the provisions of the SEBI Regulations.
The “Relevant Date” referred to above, for Allotment, will be the date of the meeting in which the committee of
Directors duly authorised by the Board decides to open the Issue and “stock exchange” means any of the
recognised stock exchanges in India on which the equity shares of the issuer of the same class are listed and on
which the highest trading volume in such shares has been recorded during the two weeks immediately preceding
the Relevant Date.
Our Company has applied for and received the in-principle approval of the Stock Exchanges under Clause 24 (a)
of its Equity Listing Agreements for the listing of the Equity Shares on the Stock Exchanges. Our Company has
also delivered a copy of the Preliminary Placement Document and has filed a copy of this Placement Document
to the Stock Exchanges.
Our Company shall also make the requisite filings with the RoC and SEBI within the stipulated period as
required under the Companies Act, 2013 and the Companies (Prospectus and Allotment of Securities) Rules,
2014.
121
The Issue has been authorized by (i) the Board pursuant to a resolution passed on August 1, 2013, and (ii) the
shareholders, pursuant to a resolution passed under Section 81(1A) of the Companies Act, 1956 on September
16, 2013.
The Equity Shares will be Allotted within 12 months from the date of the shareholders’ resolution approving the
QIP and within 60 days from the date of receipt of subscription money from the successful Bidders. For details
of refund of application money, see the section “Issue Procedure – Pricing and Allocation – Designated Date
and Allotment of Equity Shares”.
The Equity Shares issued pursuant to the QIP must be issued on the basis of the Preliminary Placement
Document and this Placement Document that contains all material information including the information
specified in Schedule XVIII of the SEBI Regulations and the requirements prescribed under Form PAS-4. The
Preliminary Placement Document and this Placement Document are private documents provided to only select
investors through serially numbered copies and are required to be placed on the website of the concerned Stock
Exchanges and of our Company with a disclaimer to the effect that it is in connection with an issue to QIBs and
no offer is being made to the public or to any other category of investors.
The minimum number of allottees for each QIP shall not be less than:

two, where the issue size is less than or equal to ₹ 2.5 billion; and

five, where the issue size is greater than ₹ 2.5 billion.
No single allottee shall be allotted more than 50 % of the issue size.
QIBs that belong to the same group or that are under common control shall be deemed to be a single allottee.
For details of what constitutes “same group” or “common control”, see the section “Issue Procedure—
Application Process—Application Form”.
Securities allotted to a QIB pursuant to a QIP shall not be sold for a period of one year from the date of
allotment except on the floor of a recognised stock exchange in India. Allotments made to FVCIs, VCFs and
AIFs in the Issue are subject to the rules and regulations that are applicable to them, including in relation to
lock-in requirements.
The Equity Shares offered hereby have not been and will not be registered under the Securities Act and may not
be offered or sold within the United States except pursuant to an exemption from, or in a transaction not subject
to, the registration requirements of the Securities Act and applicable state securities laws. Accordingly, the
Equity Shares are being offered and sold (a) in the United States only to persons reasonably believed to be
Qualified Institutional Buyers (as defined in Rule 144A under the Securities Act) pursuant to Section 4(a)(2)
under the Securities Act, and (b) outside the United States in offshore transactions in reliance on Regulation S
under the Securities Act. For a description of certain restrictions on transfer of the Equity Shares, see “Transfer
Restrictions”.
The Equity Shares have not been and will not be registered, listed or otherwise qualified in any other
jurisdiction outside India and may not be offered or sold, and Bids may not be made by persons in any
such jurisdiction, except in compliance with the applicable laws of such jurisdiction.
Issue Procedure
1.
Our Company and the Lead Managers shall circulate serially numbered copies of the Preliminary
Placement Document and the serially numbered Application Form, either in electronic or physical
form, to the QIBs and the Application Form will be specifically addressed to such QIBs. In terms of
Section 42(7) of the Companies Act, 2013, our Company shall maintain complete records of the QIBs
to whom the Preliminary Placement Document and the serially numbered Application Form have been
dispatched. Our Company will make the requisite filings with the RoC and SEBI within the stipulated
time period as required under the Companies Act, 2013.
2.
Unless a serially numbered Preliminary Placement Document along with the serially numbered
Application Form is addressed to a particular QIB, no invitation to subscribe shall be deemed to
have been made to such QIB. Even if such documentation were to come into the possession of any
person other than the intended recipient, no offer or invitation to offer shall be deemed to have been
made to such person and any application that does not comply with this requirement shall be treated as
122
invalid.
3.
QIBs may submit an Application Form, including any revisions thereof, during the Bidding Period to
the Lead Managers.
4.
Bidders will be required to indicate the following in the Application Form:

name of the QIB to whom Equity Shares are to be Allotted;

number of Equity Shares Bid for;

price at which they are agreeable to subscribe for the Equity Shares, provided that QIBs may
also indicate that they are agreeable to submit a Bid at “Cut-off Price”; which shall be any
price as may be determined by our Company in consultation with the Lead Managers at or
above the Floor Price or the Floor Price net of such discount as approved in accordance with
SEBI Regulations;

details of the depository account to which the Equity Shares should be credited; and

a representation that it is either (i) outside the United States, or (ii) an institutional investor
meeting the requirements of a “qualified institutional buyer” as defined in Rule 144A, and (iii)
it has agreed to certain other representations set forth in the Application Form.
Note: Each sub-account of an FII other than a sub-account which is a foreign corporate or a foreign
individual will be considered as an individual QIB and separate Application Forms would be required
from each such sub-account for submitting Bids.
5.
Once a duly completed Application Form is submitted by a QIB, such Application Form constitutes an
irrevocable offer and cannot be withdrawn after the Bid/Issue Closing Date. The Bid/Issue Closing
Date shall be notified to the Stock Exchanges and the QIBs shall be deemed to have been given notice
of such date after receipt of the Application Form.
6.
The Bids made by asset management companies or custodians of Mutual Funds shall specifically state
the names of the concerned schemes for which the Bids are made. In case of a Mutual Fund, a separate
Bid can be made in respect of each scheme of the Mutual Fund registered with SEBI. Upon receipt of
the Application Form, after the Bid/Issue Closing Date, our Company shall determine the final terms,
including the Issue Price of the Equity Shares to be issued pursuant to the Issue in consultation with the
Lead Managers. Upon determination of the final terms of the Equity Shares, the Lead Managers will
send the serially numbered CAN along with the Placement Document to the QIBs who have been
Allocated the Equity Shares. The dispatch of a CAN shall be deemed a valid, binding and irrevocable
contract for the QIB to pay the entire Issue Price for all the Equity Shares Allocated to such QIB. The
CAN shall contain details such as the number of Equity Shares Allocated to the QIB and payment
instructions including the details of the amounts payable by the QIB for Allotment of the Equity Shares
in its name and the Pay-In Date as applicable to the respective QIB. Please note that the Allocation
will be at the absolute discretion of our Company and will be based on the recommendation of
the Lead Managers.
7.
Pursuant to receiving a CAN, each QIB shall be required to make the payment of the entire application
monies for the Equity Shares indicated in the CAN at the Issue Price, only through electronic transfer
to our Company’s designated bank account by the Pay-In Date as specified in the CAN sent to the
respective QIBs. No payment shall be made by QIBs in cash. Please note that any payment of
application money for the Equity Shares shall be made from the bank accounts of the relevant QIBs
applying for the Equity Shares. Monies payable on Equity Shares to be held by joint holders shall be
paid from the bank account of the person whose name appears first in the application. Pending
Allotment, all monies received for subscription of the Equity Shares shall be kept by our Company in a
separate bank account with a scheduled bank and shall be utilised only for the purposes permitted
under the Companies Act, 2013.
8.
Upon receipt of the application monies from the QIBs, our Company shall Allot Equity Shares as per
the details in the CANs sent to the QIBs.
9.
After passing the resolution for Allotment and prior to crediting the Equity Shares into the depository
123
participant accounts of the successful Bidders, our Company shall apply to the Stock Exchanges for
listing approvals. Our Company will intimate to the Stock Exchanges the details of the Allotment and
apply for approvals for listing of the Equity Shares on the Stock Exchanges prior to crediting the
Equity Shares into the beneficiary account maintained with the Depository Participant by the QIBs.
10.
After receipt of the listing approvals of the Stock Exchanges, our Company shall credit the Equity
Shares Allotted pursuant to this Issue into the Depository Participant accounts of the respective
Allottees.
11.
Our Company will then apply for the final trading approvals from the Stock Exchanges.
12.
The Equity Shares that would have been credited to the beneficiary account with the Depository
Participant of the QIBs shall be eligible for trading on the Stock Exchanges only upon the receipt of
final trading and listing approvals from the Stock Exchanges.
13.
Upon receipt of intimation of final trading and listing approval from the Stock Exchanges, our
Company shall inform the Allottees of the receipt of such approval. Our Company and the Lead
Managers shall not be responsible for any delay or non-receipt of the communication of the final
trading and listing permissions from the Stock Exchanges or any loss arising from such delay or nonreceipt. Final listing and trading approvals granted by the Stock Exchanges are also placed on their
respective websites. QIBs are advised to apprise themselves of the status of the receipt of the
permissions from the Stock Exchanges or our Company.
Qualified Institutional Buyers
Only QIBs as defined in Regulation 2(1)(zd) of the SEBI Regulations and not otherwise excluded pursuant to
Regulation 86(1)(b) of the SEBI Regulations are eligible to invest. Currently, under Regulation 2(1)(zd) of the
SEBI Regulations, a QIB means:

alternate investment funds registered with SEBI

Eligible FPIs;

foreign venture capital investors registered with SEBI;

insurance companies registered with Insurance Regulatory and Development Authority;

insurance funds set up and managed by army, navy or air force of the Union of India;

insurance funds set up and managed by the Department of Posts, India;

multilateral and bilateral development financial institutions;

Mutual Fund;

pension funds with minimum corpus of ₹ 250 million;

provident funds with minimum corpus of ₹ 250 million;

public financial institutions as defined in Section 4A of the Companies Act, 1956 (Section 2(72) of the
Companies Act, 2013);

scheduled commercial banks;

state industrial development corporations;

the National Investment Fund set up by resolution no. F. No. 2/3/2005-DDII dated November 23, 2005
of the Government published in the Gazette of India; and

venture capital funds registered with SEBI;
124
Eligible non-resident QIBs can participate in the Issue under Schedule 1 of the FEMA 20.
FIIs (other than a sub-account which is a foreign corporate or a foreign individual) and Eligible FPIs are
permitted to participate through the portfolio investment scheme under Schedule 2 and Schedule 2A of
FEMA 20 respectively, in this Issue. FIIs and Eligible FPIs are permitted to participate in the Issue
subject to compliance with all applicable laws and such that the shareholding of the FPIs do not exceed
specified limits as prescribed under applicable laws in this regard.
In terms of the SEBI FPI Regulations, the issue of Equity Shares to a single FPI or an investor group (which
means the same set of ultimate beneficial owner(s) investing through multiple entities) is not permitted to
exceed 10% of our post-Issue Equity Share capital. Further, in terms of the FEMA 20, the total holding by each
FPI shall be below 10% of the total paid-up Equity Share capital of our Company and the total holdings of all
FPIs put together shall not exceed 24% of the paid-up Equity Share capital of our Company. The aggregate limit
of 24% may be increased up to the sectoral cap by way of a resolution passed by the Board of Directors
followed by a special resolution passed by the shareholders of our Company. The existing investment limit for
FIIs in our Company is 49% of the paid up capital of our Company.
Eligible FPIs are permitted to participate in the Issue subject to compliance with conditions and restrictions
which may be specified by the Government from time to time.
An FII who holds a valid certificate of registration from SEBI shall be deemed to be an FPI until the expiry of
the block of three years for which fees have been paid as per the SEBI FII Regulations. An FII or sub-account
(other than a sub-account which is a foreign corporate or a foreign individual) may participate in the Issue, until
the expiry of its registration as a FII or sub-account, or until it obtains a certificate of registration as FPI,
whichever is earlier. If the registration of an FII or sub-account has expired or is about to expire, such FII or
sub-account may, subject to payment of conversion fees under the SEBI FPI Regulations, participate in the
Issue. An FII or sub-account shall not be eligible to invest as an FII after registering as an FPI under the SEBI
FPI Regulations.
In terms of the FEMA 20, for calculating the aggregate holding of FPIs in a company, holding of all registered
FPIs as well as holding of FIIs (being deemed FPIs) shall be included.
Under Regulation 86(1)(b) of the SEBI Regulations, no Allotment shall be made pursuant to the Issue, either
directly or indirectly, to any QIB being, or any person related to, the Promoters. QIBs which have all or any of
the following rights shall be deemed to be persons related to the Promoters:

rights under a shareholders’ agreement or voting agreement entered into with the Promoters or persons
related to the Promoters;

veto rights; or

a right to appoint any nominee director on the Board.
Provided, however, that a QIB which does not hold any shares in our Company and which has acquired the
aforesaid rights in the capacity of a lender shall not be deemed to be related to the Promoters.
Our Company and the Lead Managers are not liable for any amendment or modification or change to
applicable laws or regulations, which may occur after the date of this Placement Document. QIBs are
advised to make their independent investigations and satisfy themselves that they are eligible to apply.
QIBs are advised to ensure that any single application from them does not exceed the investment limits or
maximum number of Equity Shares that can be held by them under applicable law or regulation or as
specified in this Placement Document. Further, QIBs are required to satisfy themselves that their Bids
would not eventually result in triggering a tender offer under the Takeover Code.
Note: Affiliates or associates of the Lead Managers who are QIBs may participate in the Issue in compliance
with applicable laws.
125
Application Process
Application Form
QIBs shall only use the serially numbered Application Forms (which are addressed to them) supplied by our
Company and the Lead Managers in either electronic form or by physical delivery for the purpose of making a
Bid (including revision of a Bid) in terms of the Preliminary Placement Document.
By making a Bid (including the revision thereof) for Equity Shares through Application Forms and pursuant to
the terms of the Preliminary Placement Document, the QIB will be deemed to have made the following
representations and warranties and the representations, warranties and agreements made under the sections
“Notice to Investors”, “Representations by Investors”, “Distribution and Solicitation Restrictions” and
“Transfer Restrictions” on pages 1, 3, 133, and 137, respectively:
1.
The QIB confirms that it is a QIB in terms of Regulation 2(1)(zd) of the SEBI Regulations and is not
excluded under Regulation 86 of the SEBI Regulations, has a valid and existing registration under the
applicable laws in India (as applicable) and is eligible to participate in this Issue;
2.
The QIB confirms that it is not a Promoter and is not a person related to the Promoters, either directly
or indirectly and its Application Form does not directly or indirectly represent the Promoters or
Promoter Group or persons related to the Promoters;
3.
The QIB confirms that it has no rights under a shareholders’ agreement or voting agreement with the
Promoters or persons related to the Promoters, no veto rights or right to appoint any nominee director
on the Board other than those acquired in the capacity of a lender which shall not be deemed to be a
person related to the Promoters;
4.
The QIB acknowledges that it has no right to withdraw its Bid after the Bid/Issue Closing Date;
5.
The QIB confirms that if Equity Shares are Allotted through this Issue, it shall not, for a period of one
year from Allotment, sell such Equity Shares otherwise than on the Stock Exchanges;
6.
The QIB confirms that the QIB is eligible to Bid and hold Equity Shares so Allotted. The QIB further
confirms that the holding of the QIB, does not and shall not, exceed the level permissible as per any
applicable regulations applicable to the QIB;
7.
The QIB confirms that its Bids would not eventually result in triggering a tender offer under the
Takeover Code;
8.
The QIP confirms that to the best of its knowledge and belief, the number of Equity Shares Allotted to
it pursuant to the Issue, together with other Allottees that belong to the same group or are under
common control, shall not exceed 50% of the Issue. For the purposes of this representation::
9.
c.
The expression ‘belong to the same group’ shall derive meaning from the concept of
‘companies under the same group’ as provided in sub-section (11) of Section 372 of the
Companies Act; and
d.
‘Control’ shall have the same meaning as is assigned to it by Regulation 2(1)(e) of the
Takeover Code;
The QIBs shall not undertake any trade in the Equity Shares credited to its beneficiary account
maintained with the Depository Participant until such time that the final listing and trading approvals
for the Equity Shares are issued by the Stock Exchanges.
126
QIBS MUST PROVIDE THEIR DEPOSITORY ACCOUNT DETAILS, PAN, THEIR DEPOSITORY
PARTICIPANT’S NAME, DEPOSITORY PARTICIPANT IDENTIFICATION NUMBER AND
BENEFICIARY ACCOUNT NUMBER IN THE APPLICATION FORM. QIBS MUST ENSURE THAT
THE NAME GIVEN IN THE APPLICATION FORM IS EXACTLY THE SAME AS THE NAME IN
WHICH THE DEPOSITORY ACCOUNT IS HELD. FOR THIS PURPOSE, ELIGIBLE SUB
ACCOUNTS OF AN FII WOULD BE CONSIDERED AS AN INDEPENDENT QIB.
Demographic details such as address and bank account will be obtained from the Depositories as per the
Depository Participant account details given above.
The submission of an Application Form by a QIB shall be deemed a valid, binding and irrevocable offer for the
QIB to pay the entire Issue Price for the Equity Shares (as indicated by the CAN) and becomes a binding
contract on the QIB upon issuance of the CAN by our Company in favour of the QIB.
Submission of Application Form
All Application Forms must be duly completed with information including the number of Equity Shares applied
for. All Application Forms duly completed along with payment and a copy of the PAN card or PAN allotment
letter shall be submitted to the Lead Managers either through electronic form or through physical delivery at the
following address:
Name of Lead
Manager
Address
Contact
person
Email
DSP
Merrill
Lynch Limited
8th Floor, Mafatlal
Center, Nariman
Point,
Mumbai
400 021
Ritesh
Agarwal
ritesh3.agarwal@baml.com
Citigroup Global
Markets
India
Private Limited
1202, 12th Floor
First International
Financial Centre G
Block,
C54&55
Bandra
Kurla
Complex Bandra
(E)
Mumbai
400051
18F/19F, Tower 2,
One
Indiabulls
Centre
841
Senapati
Bapat
Marg Mumbai 400
013
5th Floor , A Wing,
Parinee Crescenzo,
C-38/39 G-Block,
Bandra
Kurla
Complex, Bandra
(East), Mumbai –
400 051
1st floor, Axis
House, C-2 Wadia
International
Centre P.B. Marg
Worli,
Mumbai
400 025
Jeetendra
Parmani
jeetendra.parmani@citi.com
Tel: +9122
6175 9894
Fax: +91 22
6646 6800
Kamal
Yadav
kamal.yadav@morganstanley.com
Tel: +91 22
6118 3370
Fax: +91 22
6118 1040
Roselyn
Pereira
Roselyn.pereira@sc.com
Tel: 022 4205
6114
Fax: +91 22
4205 5999
G.
Venkatesh
venkatesh.iyer@axiscap.in
Tel: +9122
4325 4587
Fax: +9122
4325 5599
Morgan Stanley
India Company
Private Limited
Standard
Chartered
Securities (India)
Limited
Axis
Limited
Capital
The Lead Managers shall not be required to provide any written acknowledgement of the same.
127
Phone
(telephone and
fax)
Tel: +9122
66328120
Fax: +9122
2282 5103
Permanent Account Number or PAN
Each QIB should mention its PAN allotted under the IT Act in the Application Form. Applications without this
information will be considered incomplete and are liable to be rejected. QIBs should not submit the GIR number
instead of the PAN as the Application Form is liable to be rejected on this ground.
Pricing and Allocation
Build up of the Book
The QIBs shall submit their Bids (including the revision of bids) within the Bidding Period to the Lead
Managers. Such Bids cannot be withdrawn after the Bid/Issue Closing Date. The book shall be maintained by
the Lead Managers.
Price Discovery and Allocation
Our Company, in consultation with the Lead Managers, shall determine the Issue Price, which shall be at or
above the Floor Price. However, our Company may offer a discount of not more than 5% on the Floor Price in
terms of Regulation 85 of the SEBI Regulations.
After finalisation of the Issue Price, our Company shall update the Preliminary Placement Document with the
Issue details and file the same with the Stock Exchanges as the Placement Document.
Method of Allocation
Our Company shall determine the Allocation in consultation with the Lead Managers on a discretionary basis
and in compliance with Chapter VIII of the SEBI Regulations.
Bids received from the QIBs at or above the Issue Price shall be grouped together to determine the total demand.
The Allocation to all such QIBs will be made at the Issue Price. Allocation to Mutual Funds for up to a
minimum of 10% of the Issue Size shall be undertaken subject to valid Bids being received at or above the Issue
Price.
THE DECISION OF OUR COMPANY IN CONSULTATION WITH THE LEAD MANAGER IN
RESPECT OF ALLOCATION SHALL BE FINAL AND BINDING ON ALL QIBS. QIBS MAY NOTE
THAT ALLOCATION OF EQUITY SHARES IS AT THE SOLE AND ABSOLUTE DISCRETION OF
OUR COMPANY AND QIBS MAY NOT RECEIVE ANY ALLOCATION EVEN IF THEY HAVE
SUBMITTED VALID APPLICATION FORMS AT OR ABOVE THE ISSUE PRICE. NEITHER OUR
COMPANY NOR THE LEAD MANAGER IS OBLIGED TO ASSIGN ANY REASON FOR ANY NONALLOCATION.
CAN
Based on the Application Forms received, our Company, in consultation with the Lead Managers, in their sole
and absolute discretion, shall decide the QIBs to whom the serially numbered CAN shall be sent, pursuant to
which the details of the Equity Shares Allocated to them and the details of the amounts payable for Allotment of
such Equity Shares in their respective names shall be notified to such QIBs. Additionally, a CAN will include
details of the relevant Escrow Bank Account into which such payments would need to be made, address where
the application money needs to be sent, Pay-In Date as well as the probable designated date, being the date of
credit of the Equity Shares to the respective QIB’s account.
The eligible QIBs would also be sent a serially numbered Placement Document either in electronic form or by
physical delivery along with the serially numbered CAN.
The dispatch of the serially numbered Placement Document and the serially numbered CAN to the QIBs shall be
deemed a valid, binding and irrevocable contract for the QIB to furnish all details that may be required by the
Lead Managers and to pay the entire Issue Price for all the Equity Shares Allocated to such QIB.
QIBs are advised to instruct their Depository Participant to accept the Equity Shares that may be
Allotted to them pursuant to the Issue.
Bank Account for Payment of Application Money
128
Our Company has opened the “Idea – QIP Escrow Account” with Standard Chartered Bank in terms of the
arrangement among our Company, the Lead Managers and Standard Chartered Bank as escrow bank. The QIB
will be required to deposit the entire amount payable for the Equity Shares Allocated to it by the Pay-In Date as
mentioned in, and in accordance with, the respective CAN.
Payments are to be made only through electronic fund transfer.
Note: Payments through cheques are liable to be rejected.
If the payment is not made favouring the “Idea – QIP Escrow Account” within the time stipulated in the CAN,
the Application Form and the CAN of the QIB are liable to be cancelled.
Our Company undertakes to utilise the amount deposited in Idea – QIP Escrow Account only for the purposes
of (i) adjustment against Allotment of Equity Shares in the Issue; or (ii) repayment of application money if our
Company is not able to Allot Equity Shares in the Issue.
In case of cancellations or default by the QIBs, our Company and the Lead Managers have the right to reallocate
the Equity Shares at the Issue Price among existing or new QIBs at their sole and absolute discretion.
Designated Date and Allotment of Equity Shares
The Equity Shares will not be Allotted unless the QIBs pay the Issue Price to the “Idea – QIP Escrow Account”
as stated above.
The Equity Shares in the Issue will be issued and Allotment shall be made only in dematerialised form to the
Allottees. Allottees will have the option to re-materialise the Equity Shares, if they so desire, as per the
provisions of the Companies Act and the Depositories Act.
Our Company, at its sole discretion, reserve the right to cancel the Issue at any time up to Allotment without
assigning any reason whatsoever.
Following the Allotment and credit of Equity Shares into the QIBs’ Depository Participant accounts, our
Company will apply for final trading and listing approvals from the Stock Exchanges.
In the case of QIBs who have been Allotted more than 5% of the Equity Shares in the Issue, our Company shall
disclose the name and the number of the Equity Shares Allotted to such QIB to the Stock Exchanges and the
Stock Exchanges will make the same available on their website.
The Escrow Bank shall release the monies lying to the credit of the Escrow Bank Account to our Company after
Allotment of Equity Shares to QIBs.
In the event that our Company is unable to issue and Allot the Equity Shares offered in the Issue or on
cancellation of the Issue, within 60 days from the date of receipt of application money, our Company shall repay
the application money within 15 days from expiry of 60 days, failing which our Company shall repay that
money with interest at the rate of 12% per annum from expiry of the sixtieth day. The application money to be
refunded by our Company shall be refunded to the same bank account from which application money was
remitted by the QIBs.
Other Instructions
Right to Reject Applications
Our Company, in consultation with the Lead Managers, may reject Bids, in part or in full, without assigning any
reason whatsoever. The decision of our Company and the Lead Managers in relation to the rejection of Bids
shall be final and binding.
Equity Shares in Dematerialised form with NSDL or CDSL
The Allotment of the Equity Shares in this Issue shall be only in dematerialised form (i.e., not in physical
certificates but be fungible and be represented by the statement issued through the electronic mode).
A QIB applying for Equity Shares to be issued pursuant to the Issue must have at least one beneficiary account
with a Depository Participant of either NSDL or CDSL prior to making the Bid. Allotment to a successful QIB
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will be credited in electronic form directly to the beneficiary account (with the Depository Participant) of the
QIB.
Equity Shares in electronic form can be traded only on the stock exchanges having electronic connectivity with
NSDL and CDSL. The Stock Exchanges have electronic connectivity with NSDL and CDSL.
The trading of the Equity Shares to be issued pursuant to the Issue would be in dematerialised form only for all
QIBs in the demat segment of the respective Stock Exchanges.
Our Company will not be responsible or liable for the delay in the credit of Equity Shares to be issued pursuant
to the Issue due to errors in the Application Form or otherwise on part of the QIBs.
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PLACEMENT
Placement Agreement
The Lead Managers have entered into a Placement Agreement with our Company, pursuant to which the Lead
Managers have agreed to manage the Issue and to act as placement agents in connection with the proposed Issue
and procure subscription for Equity Shares to be placed with the QIBs, pursuant to Chapter VIII of the SEBI
Regulations.
The Placement Agreement contains customary representations, warranties and indemnities from our Company
and the Lead Managers, and it is subject to termination in accordance with the terms contained therein.
Applications shall be made to list the Equity Shares issued pursuant to the Issue and admit them to trading on
the Stock Exchanges. No assurance can be given as to the liquidity or sustainability of the trading market for
such Equity Shares, the ability of holders of the Equity Shares to sell their Equity Shares or the price at which
holders of the Equity Shares will be able to sell their Equity Shares.
This Placement Document has not been, and will not be, registered as a prospectus with the RoC and, no Equity
Shares will be offered in India or overseas to the public or any members of the public in India or any other class
of investors, other than QIBs.
In connection with the Issue, the Lead Managers (or their respective affiliates) may, for their own account,
subscribe to the Equity Shares or enter into asset swaps, credit derivatives or other derivative transactions
relating to the Equity Shares to be issued pursuant to the Issue at the same time as the offer and sale of the
Equity Shares, or in secondary market transactions. As a result of such transactions, the Lead Managers may
hold long or short positions in such Equity Shares. These transactions may comprise a substantial portion of the
Issue and no specific disclosure will be made of such positions. Affiliates of the Lead Managers may purchase
Equity Shares and be Allotted Equity Shares for proprietary purposes and not with a view to distribute or in
connection with the issuance of P-Notes. See the section “Offshore Derivative Instruments” on page 7.
From time to time, the Lead Managers and certain of their affiliates have provided and continue to provide
commercial and investment banking services, particularly acting as an underwriter or lead manager, to us or our
affiliates for which they have received and may in the future receive compensation. For instance, DSP Merrill
Lynch Limited, Citigroup Global Markets India Private Limited and Morgan Stanley (through its former joint
venture entity, JM Morgan Stanley Private Limited), acted as underwriters in the initial public offering of our
Equity Shares in February 2007. DSP Merrill Lynch Limited has in the past also acted as financial advisors to us
on certain investments, acquisitions as well as joint ventures. An affiliate of DSP Merrill Lynch Limited
provides short-term credit facilities to us. An affiliate of Citigroup Global Markets India Private Limited
provides short-term credit facilities and commercial banking services to us. Axis Bank Limited currently
provides, and has provided in past, credit facilities and commercial banking services to us. Further, An affiliate
of Standard Chartered Securities (India) Limited currently provides, and has provided in past, working capital
facilities and commercial banking services to us.
Lock-up
Our Company agrees that it will not, for a period of 60 days from the Pricing Date, without the prior written
consent of each of the Lead Managers, directly or indirectly, (i) offer, sell or announce the intention to sell,
pledge, issue, contract to issue, grant any option, right or warrant for the issuance and allotment, or otherwise
dispose of or transfer, or establish or increase a put equivalent position or liquidate or decrease a call equivalent
position with respect to, any Equity Shares or securities convertible into or exchangeable or exercisable for
Equity Shares (including any warrants or other rights to subscribe for any Equity Shares), (ii) enter into a
transaction which would have the same effect, or enter into any swap, hedge or other arrangement that transfers,
in whole or in part, any of the economic consequences of ownership of any Equity Shares, whether any such
aforementioned transaction is to be settled by allotment of any Equity Shares, in cash or otherwise, or (iii)
publicly disclose the intention to make any such offer, issuance and allotment or disposition, or to enter into any
such transaction, swap, hedge or other arrangement. Provided, however, that the Company may issue and allot
(a) Equity Shares or grant any options pursuant to any employee stock option plan of the Company, which is in
effect on the date hereof, and the Company may issue Equity Shares issuable upon the exercise of existing
options outstanding on the date hereof, in each case, as described in each of the Preliminary Placement
Document and this Placement Document, as the case may be; and (b) such number of Equity Shares to Axiata
Investments 2 (India) Ltd, as may be approved by the shareholders of the Company, in accordance with the
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provisions of the SEBI Regulations.
The Promoters of our Company have agreed that they will not, from the date of the Placement Agreement and
for a period of 60 days from the date of the Placement Document, directly or indirectly: (i) directly or indirectly,
issue, offer, lend, sell, contract to sell or issue, sell any option or contract to sell, grant any option, or otherwise
transfer or dispose of any Equity Shares or any securities convertible into or exercisable or exchangeable for
Equity Shares or publicly announce an intention with respect to any of the foregoing, (ii) enter into any swap or
any other agreement or any transaction that transfers, in whole or in part, directly or indirectly, any of the
economic consequences of ownership of the Equity Shares or any securities convertible into or exercisable or
exchangeable for Equity Shares or publicly announce an intention to enter into any such transaction, whether
any such swap or transaction described in clause (i) or (ii) hereof is to be settled by delivery of Equity Shares or
such other securities, in cash or otherwise, or (iii) deposit Equity Shares or any securities convertible into or
exercisable or exchangeable for Equity Shares or which carry the right to subscribe for or purchase Equity
Shares in depositary receipt facilities or enter into any transaction (including a transaction involving derivatives)
having an economic effect similar to that of a sale or a deposit of Equity Shares in any depositary receipt
facility, or publicly announce any intention to enter into any such transaction.
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DISTRIBUTION AND SOLICITATION RESTRICTIONS
General
No action has been or will be taken in any jurisdiction by our Company or the Lead Managers that would permit
a public offering of the Equity Shares or the possession, circulation or distribution of the Placement Document
or any other material relating to our Company or the Equity Shares in the Issue in any jurisdiction where action
for such purpose is required. Accordingly, the Equity Shares in the Issue may not be offered or sold, directly or
indirectly and neither the Placement Document nor any other offering material or advertisements in connection
with the Equity Shares issued pursuant to the Issue may be distributed or published, in or from any country or
jurisdiction except under circumstances that will result in compliance with any applicable rules and regulations
of any such country or jurisdiction and will not impose any obligations on our Company or the Lead Managers.
The Issue will be made in compliance with the SEBI Regulations. Each subscriber of the Equity Shares in the
Issue will be required to make, or will be deemed to have made, as applicable, the acknowledgments and
agreements as described under the section “Transfer Restrictions” on page 137.
Australia. The Placement Document is not a disclosure document under Chapter 6D of the Corporations Act
2001 (the “Australian Corporations Act”), has not been lodged with the Australian Securities & Investments
Commission and does not purport to include the information required of a disclosure document under the
Australian Corporations Act. (i) The offer of Equity Shares under the Placement Document is only made to
persons to whom it is lawful to offer Equity Shares without disclosure to investors under Chapter 6D of the
Australian Corporations Act under one or more exemptions set out in Section 708 of the Australian
Corporations Act; (ii) the Placement Document is made available in Australia to persons as set forth in clause (i)
above; and (iii) by accepting this offer, the offeree represents that the offeree is such a person as set forth in
clause (ii) above and agrees not to sell or offer for sale within Australia any Equity Share sold to the offeree
within 12 months after their transfer to the offeree under the Placement Document.
Cayman Islands. No offer or invitation to purchase Equity Shares may be made to the public in the Cayman
Islands.
European Economic Area (including Liechtenstein, Iceland and Norway). In relation to each Member State of
the European Economic Area which has implemented the Prospectus Directive (each a “Relevant Member
State”), an offer may not be made to the public in that Relevant Member State prior to the publication of a
prospectus in relation to the Equity Shares which has been approved by the competent authority in that Relevant
Member State or, where appropriate, approved in another Relevant Member State and notified to the competent
authority in that Relevant Member State, all in accordance with the Prospectus Directive, except that it may,
with effect from and including the date on which the Prospectus Directive is implemented in that Relevant
Member State (the “Relevant Implementation Date”), make an offer of Equity Shares to the public in that
Relevant Member State at any time:

to legal entities which are authorized or regulated to operate in the financial markets or, if not so
authorized or regulated, whose corporate purpose is solely to invest in securities;

to any legal entity which has two or more of (i) an average of at least 250 employees during the last
financial year, (ii) a total balance sheet of more than €50,000,000, as show in its last annual
consolidated accounts;

to fewer than 100 natural or legal persons (other than qualified investors as defined in the Prospectus
Directive) subject to obtaining the prior consent of the Lead Managers for any such offer; or

in any other circumstances which do not require the publication of a prospectus pursuant to Article 3(2)
of the Prospectus Directive.
provided that no such offer of Equity Shares shall result in a requirement for the publication by our Company or
the Lead Managers of a prospectus pursuant to Article 3 of the Prospectus Directive. For the purposes of this
provision, the expression an “offer of Equity Shares to the public” in relation to any of the Equity Shares in any
Relevant Member States means the communication in any form and by any means, of sufficient information on
the terms of the offer and the Equity Shares to be offered so as to enable an investor to decide to purchase or
subscribe for the Equity Shares, as the same may be varied in that Member State by any measure implementing
the Prospectus Directive in that Member State.
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Hong Kong. No Equity Shares have been offered or sold, and no Equity Shares may be offered or sold, in Hong
Kong by means of any document, other than to persons whose ordinary business is to buy or sell shares or
debentures, whether as principal agent; or to “professional investors” as defined in the Securities and Futures
Ordinance (Cap. 571) of Hong Kong and any rules made under that Ordinance; or in other circumstances which
do not result in the document being a “prospectus” as defined in the Companies Ordinance (Cap. 32) of Hong
Kong or which do not constitute an offer to the public within the meaning of the Companies Ordinance (Cap.32)
of Hong Kong. No document, invitation or advertisement relating to the Equity Shares has been issued or may
be issued, which is directed at, or the contents of which are likely to be accessed or read by, the public of Hong
Kong (except if permitted under the securities laws of Hong Kong) other than with respect to the Equity Shares
which are intended to be disposed of only to persons outside Hong Kong or only to “professional investors” as
defined in the Securities and Futures Ordinance (Cap. 571) of Hong Kong and any rules made under that
Ordinance.
India. The Placement Document has not been and will not be registered as a prospectus with the Registrar of
Companies in India and the Equity Shares will not be offered or sold directly or indirectly, to the public or any
members of the public in India or any other class of investors other than QIBs.
Japan. The offering of the Equity Shares has not been and will not be registered under the Financial Instruments
and Exchange Law of Japan, as amended (the “Financial Instruments and Exchange Law”). No Equity
Shares have been offered or sold, and will not be offered or sold, directly or indirectly, in Japan or to, or for the
benefit of, any resident of Japan (which term as used herein means any person resident in Japan, including any
corporation or other entity organized under the laws of Japan) or to others for reoffering or re-sale, directly or
indirectly in Japan or to, or for the benefit of, any resident of Japan except pursuant to an exemption from the
registration requirements of the Financial Instruments and Exchange Law and otherwise in compliance with the
Financial Instruments and Exchange Law and any other applicable laws, regulations and ministerial ordinances
of Japan.
Korea. The Equity Shares have not been registered under the Korean Securities and Exchange Law, and the
Equity Shares acquired in connection with the distribution contemplated hereby may not be offered or sold,
directly or indirectly, in Korea or to or for the account of any resident thereof, except as otherwise permitted by
applicable Korean laws and regulations, including, without limitation, the Korean Securities and Exchange Law
and the Foreign Exchange Transaction Laws.
Kuwait. The Equity Shares have not been authorized or licensed for offering, marketing or sale in the State of
Kuwait. The distribution of the Placement Document and the offering and sale of the Equity Shares in the State
of Kuwait is restricted by law unless a license is obtained from the Kuwaiti Ministry of Commerce and Industry
in accordance with Law 31 of 1990.
Malaysia. No approval of the Securities Commission of Malaysia has been or will be obtained in connection
with the offer and sale of the Equity Shares in Malaysia nor will any prospectus or other offering material or
document in connection with the offer and sale of the Equity Shares be registered with the Securities
Commission of Malaysia. Accordingly, the Equity Shares may not be offered or sold, directly or indirectly, nor
may any document or other material in connection therewith be distributed in Malaysia.
New Zealand. The Placement Document is not a prospectus. It has not been prepared or registered in
accordance with the Securities Act 1978 of New Zealand (the “New Zealand Securities Act”). The Placement
Document is being distributed in New Zealand only to persons whose principal business is the investment of
money or who, in the course of and for the purposes of their business, habitually invest money, within the
meaning of section 3(2)(a)(ii) of the New Zealand Securities Act (“Habitual Investors”). By accepting the
Placement Document, each investor represents and warrants that if they receive the Placement Document in
New Zealand they are a Habitual Investor and they will not disclose the Placement Document to any person who
is not also a Habitual Investor.
Qatar. The Equity Shares have not been offered, sold or delivered, and will not be offered, sold or delivered at
any time, directly or indirectly, in the state of Qatar in a manner that would constitute a public offering. The
Placement Document has not been reviewed or registered with Qatari Government Authorities, whether under
Law No. 25 (2002) concerning investment funds, Central Bank resolution No. 15 (1997), as amended, or any
associated regulations. Therefore, the Placement Document is strictly private and confidential, and is being
issued to a limited number of sophisticated investors, and may not be reproduced or used for any other purposes,
nor provided to any person other than recipient thereof.
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Singapore. Each of the Lead Managers has acknowledged that the Placement Document has not been registered
as a prospectus with the Monetary Authority of Singapore. Accordingly, each of the Lead Managers has
represented and agreed that it has not offered or sold any Equity Shares issued pursuant to the Issue or caused
such Equity Shares to be made the subject of an invitation for subscription or purchase and will not offer or sell
such Equity Shares issued pursuant to the Issue or cause such Equity Shares to be made the subject of an
invitation for subscription or purchase, and have not circulated or distributed, nor will they circulate or
distribute, the Placement Document or any other document or material in connection with the offer or sale, or
invitation for subscription or purchase, of such Equity Shares issued pursuant to the Issue, whether directly or
indirectly, to persons in Singapore other than (i) to an institutional investor under Section 274 of the Securities
and Futures Act, Chapter 289 of Singapore (“SFA”), (ii) to a relevant person pursuant to Section 275(1), or any
person pursuant to Section 275(1A), and in accordance with the conditions specified in Section 275 of the SFA,
or (iii) otherwise pursuant to, and in accordance with the conditions of, any other applicable provision of the
SFA.
Where the Equity Shares are subscribed or purchased under Section 275 by a relevant person which is:

a corporation (which is not an accredited investor) (as defined in Section 4A of the SFA) the sole
business of which is to hold investments and the entire share capital of which is owned by one or more
individuals, each of whom is an accredited investor; or

a trust (where the trustee is not an accredited investor) whose sole purpose is to hold investments and
each beneficiary of the trust is an individual who is an accredited investor,
securities (as defined in Section 239(1) of the SFA) of that corporation to the beneficiaries’ rights and interest
(howsoever described) in that trust shall not be transferred within 6 months after that corporation or that trust
has acquired the Equity Shares pursuant to an offer made under Section 275 except:

to an institutional investor under Section 274 of the SFA or to a relevant person defined in Section
275(2) of the SFA, or to any person arising from an offer referred to in Section 275(1A) or Section
276(4)(i)(B) of the SFA;

where no consideration is or will be given for the transfer;

where the transfer is by operation of law; or

as specified in Section 276(7) of the SFA.
Switzerland. The Placement Document does not constitute an issue prospectus pursuant to Art. 652a of the
Swiss Code of Obligations. The Equity Shares will not be listed on the SWX Swiss Exchange, and therefore, the
Placement Document does not comply with the disclosure standards of the Listing Rules of the SWX Swiss
Exchange. Accordingly, the Equity Shares may not be offered to the public in or from Switzerland, but only to a
selected and limited group of investors, which do not subscribe the Shares with a view to distribution to the
public. The investors will be individually approached by one of the BRLMs. The Placement Document is
personal to each offeree and does not constitute an offer to any other person. The Placement Document may
only be used by those persons to whom it has been handed out in connection with the offer described herein and
may neither directly nor indirectly be distributed or made available to other persons without the express consent
of our Company. It may not be used in connection with any other offer and shall in particular not be copied
and/or distributed to the public in or from Switzerland.
United Arab Emirates. The Placement Document is not intended to constitute an offer, sale or delivery of shares
or other securities under the laws of the United Arab Emirates (the “UAE”). The Equity Shares have not been
and will not be registered under Federal Law No. 4 of 2000 Concerning the Emirates Securities and
Commodities Authority and the Emirates Security and Commodity Exchange, or with the UAE Central Bank,
the Dubai Financial Market, the Abu Dhabi Securities market or with any other UAE exchange. the Issue, the
Equity Shares and interests therein do not constitute a public offer of securities in the UAE in accordance with
the Commercial Companies Law, Federal Law No. 8 of 1984 (as amended) or otherwise. The Placement
Document is strictly private and confidential and is being distributed to a limited number of investors and must
not be provided to any person other than the original recipient, and may not be reproduced or used for any other
purpose. The interests in the Equity Shares may not be offered or sold directly or indirectly to the public in the
UAE.
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By receiving this Placement Document, the person or entity to whom the Placement Document has been issued
understands, acknowledges and agrees that the Equity Shares have not been and will not be offered, sold or
publicly promoted or advertised in the Dubai International Financial Centre other than in compliance with laws
applicable in the Dubai International Financial Centre, governing the issue, offering or sale of securities. The
Dubai Financial Services Authority has not approved this Placement Document nor taken steps to verify the
information set out in it, and has no responsibility for it.
United Kingdom. Each of the Lead Managers has represented and agreed that it:

is a person who is a qualified investor within the meaning of Section 86(7) of the Financial Services and
Markets Act 2000 (the “FSMA”), being an investor whose ordinary activities involve it in acquiring,
holding, managing or disposing of investments (as principal or agent) for the purposes of its business;

has not offered or sold and will not offer or sell the Equity Shares other than to persons who are qualified
investors within the meaning of Section 86(7) of the FSMA or who it reasonably expects will acquire,
hold, manage or dispose of investments (as principal or agent) for the purposes of their businesses where
the issue of the Equity Shares would otherwise constitute a contravention of Section 19 of the FSMA by
us;
United States of America. The Equity Shares have not been and will not be registered under the U.S. Securities
Act, and may not be offered or sold within the United States except pursuant to an exemption from, or in a
transaction not subject to, the registration requirements of the U.S. Securities Act. The Equity Shares are being
offered and sold (a) in the United States only to persons reasonably believed to be qualified institutional buyers
(as defined in Rule 144A under the U.S. Securities Act) pursuant to Section 4(a)(2) under the U.S. Securities
Act; and (b) outside the United States in offshore transactions in reliance on Regulation S of the U.S. Securities
Act.
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TRANSFER RESTRICTIONS
The Equity Shares being Allotted shall not be sold for a period of one year from the date of Allotment, except on
the Stock Exchanges. Due to the following restrictions, investors are advised to consult legal counsel prior to
making any resale, pledge or transfer of the Equity Shares.
United States Transfer Restrictions
The Equity Shares have not been and will not be registered under the Securities Act and may not be offered or
sold within the United States except pursuant to an exemption from, or in a transaction not subject to, the
registration requirements of the Securities Act and applicable state securities laws.
Each purchaser of the Equity Shares outside the United States pursuant to Regulation S will be deemed to have
represented and agreed that it has received a copy of this Placement Document and such other information as it
deems necessary to make an informed investment decision and that:
1.
the purchaser acknowledges that the Equity Shares have not been and will not be registered under the
Securities Act, or with any securities regulatory authority of any state of the United States, and are
subject to restrictions on transfer;
2.
the purchaser and the person, if any, for whose account or benefit the purchaser is acquiring the Equity
Shares, was located outside the United States at the time the buy order for the Equity Shares was
originated and continues to be located outside the United States and has not purchased the Equity
Shares for the account or benefit of any person in the United States or entered into any arrangement for
the transfer of the Equity Shares or any economic interest therein to any person in the United States;
3.
the purchaser is not an affiliate (as defined in Rule 405 of the Securities Act) of our Company or a
person acting on behalf of such affiliate; and it is not in the business of buying and selling securities or,
if it is in such business, it did not acquire the Equity Shares from our Company or an affiliate (as
defined in Rule 405 of the Securities Act) thereof in the initial distribution of the Equity Shares;
4.
the purchaser is aware of the restrictions on the offer and sale of the Equity Shares pursuant to
Regulation S described in this Prospectus;
5.
the Equity Shares have not been offered to it by means of any “directed selling efforts” as defined in
Regulation S under the Securities Act; and
6.
the purchaser acknowledges that our Company, the Lead Managers and their respective affiliates (as
defined in Rule 405 of the Securities Act), and others will rely upon the truth and accuracy of the
foregoing acknowledgements, representations and agreements and agrees that, if any of such
acknowledgements, representations and agreements deemed to have been made by virtue of its
purchase of the Equity Shares are no longer accurate, it will promptly notify our Company, and if it is
acquiring any of the Equity Shares as a fiduciary or agent for one or more accounts, it represents that it
has sole investment discretion with respect to each such account and that it has full power to make the
foregoing acknowledgements, representations and agreements on behalf of such account.
Each purchaser of the Equity Shares within the United States purchasing pursuant to an exemption from, or in a
transaction not subject to, the registration requirements of the Securities Act will be deemed to have represented
and agreed that it has received a copy of this Placement Document and such other information as it deems
necessary to make an informed investment decision and that:
1.
the purchaser is authorized to consummate the purchase of the Equity Shares in compliance with all
applicable laws and regulations;
2.
the purchaser acknowledges that the Equity Shares have not been and will not be registered under the
Securities Act or with any securities regulatory authority of any state of the United States and are
subject to significant restrictions on transfer;
3.
the purchaser is a qualified institutional buyer (as defined in Rule 144A under the Securities Act), is
aware that the sale to it is being made in a transaction not subject to the registration requirements of the
Securities Act and is acquiring such Equity Shares for its own account or for the account of a qualified
institutional buyer;
137
4.
the purchaser is aware that the Equity Shares are being offered in the United States in a transaction not
involving any public offering in the United States within the meaning of the Securities Act;
5.
if in the future, the purchaser decides to offer, resell, pledge or otherwise transfer such Equity Shares,
or any economic interest therein, such Equity Shares or any economic interest therein may be offered,
sold, pledged or otherwise transferred only to a qualified institutional buyer in a transaction meeting
the requirements of Rule 144A, in accordance with Regulation S under the Securities Act or in
accordance with Rule 144 under the Securities Act (if available), in each case in accordance with any
applicable securities laws of any state of the United States or any other jurisdiction;
6.
the Equity Shares are “restricted securities” within the meaning of Rule 144(a)(3) under the Securities
Act and no representation is made as to the availability of the exemption provided by Rule 144 for resales of any Equity Shares;
7.
the purchaser will not deposit or cause to be deposited such Equity Shares into any depositary receipt
facility established or maintained by a depositary bank other than a Rule 144A restricted depositary
receipt facility, so long as such Equity Shares are “restricted securities” within the meaning of Rule
144(a)(3) under the Securities Act;
8.
our Company shall not recognize any offer, sale, pledge or other transfer of the Equity Shares made
other than in compliance with the above-stated restrictions; and
9.
the purchaser acknowledges that our Company, the Lead Managers and their respective affiliates (as
defined in Rule 405 of the Securities Act), and others will rely upon the truth and accuracy of the
foregoing acknowledgements, representations and agreements and agrees that, if any of such
acknowledgements, representations and agreements deemed to have been made by virtue of its
purchase of the Equity Shares are no longer accurate, it will promptly notify our Company, and if it is
acquiring any of the Equity Shares as a fiduciary or agent for one or more accounts, it represents that it
has sole investment discretion with respect to each such account and that it has full power to make the
foregoing acknowledgements, representations and agreements on behalf of such account.
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THE SECURITIES MARKET OF INDIA
The information in this section has been extracted from documents available on the website of SEBI and the
Stock Exchanges and has not been prepared or independently verified by our Company or the Lead Managers
or any of their respective affiliates or advisors.
India has a long history of organized securities trading. In 1875, the first stock exchange was established in
Mumbai.
Indian Stock Exchanges
Indian stock exchanges are regulated primarily by SEBI, as well as by the Government acting through the
Ministry of Finance, Capital Markets Division, under the Securities Contracts (Regulation) Act, 1956 (the
“SCRA”) and the Securities Contracts (Regulation) Rules, 1957 (the “SCRR”). On June 20, 2012, SEBI, in
exercise of its powers under the SCRA and the Securities and Exchange Board of India Act, 1992, as amended
from time to time (the “SEBI Act”), notified the Securities Contracts (Regulation) (Stock Exchanges and
Clearing Corporations) Regulations, 2012 (the “SCR (SECC) Rules”), which regulate inter alia the
recognition, ownership and internal governance of stock exchanges and clearing corporations in India together
with providing for minimum capitalisation requirements for stock exchanges. The SCRA, the SCRR and the
SCR (SECC) Rules along with various rules, bye-laws and regulations of the respective stock exchanges,
regulate the recognition of stock exchanges, the qualifications for membership thereof and the manner, in which
contracts are entered into, settled and enforced between members of the stock exchanges.
The SEBI Act empowers SEBI to regulate the Indian securities markets, including stock exchanges and
intermediaries in the capital markets, promote and monitor self-regulatory organisations and prohibit fraudulent
and unfair trade practices. Regulations concerning minimum disclosure requirements by public companies, rules
and regulations concerning investor protection, insider trading, substantial acquisitions of shares and takeover of
companies, buy-backs of securities, employee stock option schemes, stockbrokers, merchant bankers,
underwriters, mutual funds, foreign institutional investors, credit rating agencies and other capital market
participants have been notified by the relevant regulatory authority.
There are 17 recognized stock exchanges in India. Most of the stock exchanges have their own governing board
for self regulation. The BSE and the NSE together hold a dominant position among the stock exchanges in terms
of the number of listed companies, market capitalization and trading activity.
Listing of Securities
The listing of securities on a recognised Indian stock exchange is regulated by the applicable Indian laws
including the Companies Act, the SCRA, the SCRR, the SEBI Act and various guidelines and regulations issued
by the SEBI and the listing agreements of the respective stock exchanges. The SCRA empowers the governing
body of each recognised stock exchange to suspend trading of or withdraw admission to dealings in a listed
security for breach of or non compliance with any conditions or breach of company’s obligations under such
listing agreement or for any reason, subject to the issuer receiving prior written notice of the intent of the
exchange and upon granting of a hearing in the matter. SEBI also has the power to amend such equity listing
agreements and bye-laws of the stock exchanges in India, to overrule a stock exchange’s governing body and
withdraw recognition of a recognized stock exchange.
SEBI has notified the Securities and Exchange Board of India (Delisting of Equity Shares) Regulations, 2009 in
relation to the voluntary and compulsory delisting of equity shares from the stock exchanges. In addition, certain
amendments to the SCRR have also been notified in relation to delisting.
Pursuant to an amendment of the SCRR in June 2010, all listed companies (except public sector undertakings)
are required to maintain a minimum public shareholding of 25% and were given a period of three years to
comply with such requirement. In this regard, SEBI has amended the listing agreement and has provided several
mechanisms to comply with this requirement.
Index-Based Market-Wide Circuit Breaker System
In order to restrict abnormal price volatility in any particular stock, the SEBI has instructed stock exchanges to
apply daily circuit breakers which do not allow transactions beyond a certain level of price volatility. The indexbased market-wide circuit breaker system (equity and equity derivatives) applies at three stages of the index
movement, at 10%, 15% and 20%. These circuit breakers, when triggered, bring about a co-ordinated trading
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halt in all equity and equity derivative markets nationwide. The market-wide circuit breakers are triggered by
movement of either the SENSEX of the BSE or the CNX NIFTY of the NSE, whichever is breached earlier.
In addition to the market-wide index-based circuit breakers, there are currently in place individual scrip-wise
price bands of 20% movements either up or down. However, no price bands are applicable on scrips on which
derivative products are available or scrips included in indices on which derivative products are available.
The stock exchanges in India can also exercise the power to suspend trading during periods of market volatility.
Margin requirements are imposed by stock exchanges that are required to be paid by the stockbrokers.
BSE
Established in 1875, it is the oldest stock exchange in India. In 1956, it became the first stock exchange in India
to obtain permanent recognition from the Government under the SCRA. As at May 31, 2014, the one month
average daily equity turnover was ₹ 43,868 million. As at June 4, 2014 there were 3,145 scrips traded on the
BSE and the estimated market capitalization of stocks trading on the BSE as at June 4, 2014 was ₹ 85,345,544
million. (Source: www.bseindia.com)
NSE
The NSE was established by financial institutions and banks to provide nationwide online, satellite-linked,
screen-based trading facilities with market-makers and electronic clearing and settlement for securities including
government securities, debentures, public sector bonds and units. The NSE was recognised as a stock exchange
under the SCRA in April 1993 and commenced operations in the wholesale debt market segment in June 1994.
The capital market (equities) segment commenced operations in November 1994 and operations in the
derivatives segment commenced in June 2000. NSE launched the NSE 50 Index, now known as S&P CNX
NIFTY, on April 22, 1996 and the Mid-cap Index on January 1, 1996. The securities in the NSE 50 Index are
highly liquid.
On May 31, 2014, the one month average daily traded value of the capital market segment was ₹ 207,630
million. As at April 30, 2014, there were 1,690 listed companies trading on the NSE. As at June 4, 2014, the
estimated market capitalisation of stock trading on the NSE was ₹ 85,131,840 million. (Source:
www.nseindia.com)
Internet-based Securities Trading and Services
Internet trading takes place through order routing systems, which route client orders to exchange trading
systems for execution. Stockbrokers interested in providing this service are required to apply for permission to
the relevant stock exchange and also have to comply with certain minimum conditions stipulated by SEBI. The
NSE became the first exchange to grant approval to its members for providing internet-based trading services.
Internet trading is possible on both the “equities” as well as the “derivatives” segments of the NSE.
Trading Hours
Trading on both the NSE and the BSE occurs from Monday to Friday, between 9:15 a.m. and 3:30 p.m. IST
(excluding the 15 minutes pre-open session from 9:00 a.m. to 9:15 a.m. that has been introduced recently). The
BSE and the NSE are closed on public holidays. The recognised stock exchanges have been permitted to set
their own trading hours (in the cash and derivatives segments) subject to the condition that (i) the trading hours
are between 9.00 a.m. and 5.00 p.m.; and (ii) the stock exchange has in place a risk management system and
infrastructure commensurate to the trading hours.
Trading Procedure
In order to facilitate smooth transactions, the BSE replaced its open outcry system with BSE On-line Trading (or
“BOLT”) facility in 1995. This totally automated screen based trading in securities was put into practice nationwide. This has enhanced transparency in dealings and has assisted considerably in smoothening settlement
cycles and improving efficiency in back-office work.
NSE has introduced a fully automated trading system called National Exchange for Automated Trading (or
“NEAT”), which operates on strict time/price priority besides enabling efficient trade. NEAT has provided
depth in the market by enabling large number of members all over India to trade simultaneously, narrowing the
spreads.
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Takeover Code
Disclosure and mandatory bid obligations for listed Indian companies under Indian law are governed by the
Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 2011,
as amended (the “Takeover Code”), which provides specific regulations in relation to substantial acquisition of
shares and takeover. Once the equity shares of a company are listed on a stock exchange in India, the provisions
of the Takeover Code will apply to any acquisition of the company’s shares/voting rights/control. The Takeover
Code prescribes certain thresholds or trigger points in the shareholding a person or entity has in the listed Indian
company, which give rise to certain obligations on part of the acquirer. Acquisitions up to a certain threshold
prescribed under the Takeover Code mandate specific disclosure requirements, while acquisitions crossing
particular thresholds may result in the acquirer having to make an open offer of the shares of the target
company. The Takeover Code also provides for the possibility of indirect acquisitions, imposing specific
obligations on the acquirer in case of such indirect acquisition.
Prohibition of Insider Trading Regulations
The Securities and Exchange Board of India (Prohibition of Insider Trading) Regulations, 1992, as amended
(the “SEBI Prohibition of Insider Trading Regulations”) have been notified by SEBI to prohibit and penalize
insider trading in India. An insider is, among other things, prohibited from dealing in the securities of a listed
company when in possession of unpublished price sensitive information.
The SEBI Prohibition of Insider Trading Regulations also provide disclosure obligations for shareholders
holding more than a pre-defined percentage, and directors and officers, with respect to their shareholding in the
company, and the changes therein. The definition of “insider” includes any person who has received or has had
access to unpublished price sensitive information in relation to securities of a company or any person reasonably
expected to have access to unpublished price sensitive information in relation to securities of a company and
who is or was connected with the company or is deemed to have been connected with the company.
Depositories
The Depositories Act provides a legal framework for the establishment of depositories to record ownership
details and effect transfer in book-entry form. Further, SEBI framed regulations in relation to the registration of
such depositories, the registration of participants as well as the rights and obligations of the depositories,
participants, companies and beneficial owners. The depository system has significantly improved the operation
of the Indian securities markets.
Derivatives (Futures and Options)
Trading in derivatives is governed by the SCRA, the SCRR and the SEBI Act. The SCRA was amended in
February 2000 and derivatives contracts were included within the term “securities”, as defined by the SCRA.
Trading in derivatives in India takes place either on separate and independent derivatives exchanges or on a
separate segment of an existing stock exchange. The derivatives exchange or derivatives segment of a stock
exchange functions as a self-regulatory organisation under the supervision of the SEBI.
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DESCRIPTION OF THE EQUITY SHARES
The following is information relating to the Equity Shares including a brief summary of the Memorandum and
Articles of Association, the Companies Act. Prospective investors are urged to read the Memorandum and
Articles of Association carefully, and consult with their advisers, as the Memorandum and Articles of
Association and applicable Indian law, and not this summary, govern the rights attached to the Equity Shares.
General
The authorised share capital of our Company is ₹ 82,750,000,000 consisting of 6,775,000,000 Equity Shares of
₹ 10 each and 1,500 redeemable cumulative non-convertible preference shares of ₹ 10,000,000 each.
Dividends
Under Indian law, a company pays dividends upon a recommendation by its board of directors and approval by
a majority of the shareholders at the AGM held each fiscal year. Under the Companies Act, unless the board of
directors of a company recommends the payment of a dividend, the shareholders at a general meeting have no
power to declare any dividend. Subject to certain conditions laid down by Section 123 of the Companies Act,
2013 no dividend can be declared or paid by a company for any fiscal year except out of the profits of the
company for that year, calculated in accordance with the provisions of the Companies Act or out of the profits
of the company for any previous fiscal year(s) arrived at as laid down by the Companies Act. According to the
Articles of Association, the amount of dividends shall not exceed the amount recommended by the Board of
Directors. However, our Company may declare a smaller dividend in the general meeting. In addition, as is
permitted by the Articles of Association, the Board of the Directors may pay interim dividend as appear to it be
justified by the profits of our Company, subject to the requirements of the Companies Act.
The Equity Shares issued pursuant to the Preliminary Placement Document and this Placement Document shall
rank pari passu with the existing Equity Shares in all respects including entitlements to any dividends that may
be declared by our Company.
Capitalisation of Reserves and Issue of Bonus Shares
In addition to permitting dividends to be paid out of current or retained earnings as described above, the
Companies Act permits the board of directors, if so approved by the shareholders in a general meeting, to
distribute an amount transferred in the free reserves, the securities premium account or the capital redemption
reserve account to its shareholders, in the form of fully paid up bonus ordinary shares, which are similar to stock
dividend. These bonus ordinary shares must be distributed to shareholders in proportion to the number of
ordinary shares owned by them as recommended by the board of directors. No issue of bonus shares may be
made by capitalizing reserves created by revaluation of assets. Further, any issue of bonus shares would be
subject to SEBI Regulations.
As per the Articles of Association, upon resolution in the general meeting, on recommendation of the Board of
Directors, our Company may capitalise and distribute amongst the shareholders any amount standing to the
credit of Company’s reserve accounts and to the credit of the profit and loss account or otherwise. However,
aforesaid distribution shall not be made in cash.
Pre-emptive Rights and Alteration of Share Capital
Subject to the provisions of the Companies Act, our Company may increase its share capital by issuing new
shares on such terms and with such rights as it, by action of its shareholders in a general meeting may
determine. According to Section 62 of the Companies Act, 2013 such new shares shall be offered to existing
shareholders in proportion to the amount paid up on those shares at that date. The offer shall be made by notice
specifying the number of shares offered and the date (being not less than 15 days and not exceeding 30 days
from the date of the offer) within which the offer, if not accepted, will be deemed to have been declined. After
such date the Board may dispose of the shares offered in respect of which no acceptance has been received
which shall not be disadvantageous to the shareholders of our Company. The offer is deemed to include a right
exercisable by the person concerned to renounce the shares offered to him in favour of any other person.
Under the provisions of Section 62(1)(c) of the Companies Act, 2013, new shares may be offered to any persons
whether or not those persons include existing shareholders, either for cash of for a consideration other than cash,
if the price of such shares is determined by the valuation report of a registered valuer subject to such conditions
as may be prescribed, if a special resolution to that effect is passed by our Company’s shareholders in a general
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meeting.
The Articles of Association authorise it to increase its authorised capital by issuing new shares consisting of
equity and/or preference shares, as our Company may determine in a general meeting. Our Company may, by
special resolution, also alter its share capital by converting any fully paid up shares into stock and reconverting
that stock into fully paid up shares of any denomination.
The Articles of Association provide that our Company, by a special resolution passed at the general meeting,
from time to time, may consolidate or sub-divide its share capital and the resolution may provide that holders of
shares resulting from such sub-division shall have some special advantage as regards dividend, capital or
otherwise as compared with any other shares. The Articles of Association also provide that our Company may
issue shares with differential rights as to dividend, voting or otherwise, subject to the compliance with
requirements under the Companies Act and the rules thereto, or any other applicable law in force.
General meetings of shareholders
There are two types of general meetings of the shareholders:
(i)
AGM; and
(ii)
EGM.
Our Company must hold its AGM within six months after the expiry of each fiscal year provided that not more
than 15 months shall elapse between the AGM and next one, unless extended by the RoC at its request for any
special reason for a period not exceeding three months. The Board of Directors may convene an EGM when
necessary or at the request of a shareholder or shareholders holding in the aggregate not less than one tenth of
our Company’s issued paid up capital (carrying a right to vote in respect of the relevant matter on the date of
receipt of the requisition).
Notices, either in writing or through electronic mode, convening a meeting setting out the date, day, hour, place
and agenda of the meeting must be given to members at least 21 clear days prior to the date of the proposed
meeting. A general meeting may be called after giving shorter notice if consent is received, in writing or
electronic mode, from not less than 95% of the shareholders entitled to vote. Unless, the Articles of Association
provide for a larger number, (i) five shareholders present in person, if the number of shareholders as on the date
of meeting is not more than 1,000; (ii) 15 shareholders present in person, if the number of shareholders as on the
date of the meeting is more than 1,000 but up to 5,000; and (iii) 30 shareholders present in person, if the number
of shareholders as on the date of meeting exceeds 5,000, shall constitute a quorum for a general meeting of out
Company, whether AGM or EGM. The quorum requirements applicable to shareholder meetings under the
Companies Act have to be physically complied with.
A company intending to pass a resolution relating to matters such as, but not limited to, amendment in the
objects clause of the Memorandum, the issuing of shares with different voting or dividend rights, a variation of
the rights attached to a class of shares or debentures or other securities, buy-back of shares, giving loans or
extending guarantees in excess of limits prescribed, is required to obtain the resolution passed by means of a
postal ballot instead of transacting the business in our Company’s general meeting. A notice to all the
shareholders shall be sent along with a draft resolution explaining the reasons therefore and requesting them to
send their assent or dissent in writing on a postal ballot within a period of 30 days from the date of posting the
letter. Postal ballot includes voting by electronic mode.
Voting rights
At a general meeting, upon a show of hands, every member holding shares and entitled to vote and present in
person has one vote. Upon a poll, the voting rights of each shareholder entitled to vote and present in person or
by proxy is in the same proportion as the capital paid up on each share held by such holder bears to our
Company’s total paid up capital. Voting is by a show of hands, unless a poll is ordered by the Chairman of the
meeting The Chairman of the meeting has a casting vote.
Ordinary resolutions may be passed by simple majority of those present and voting. Special resolutions require
that the votes cast in favour of the resolution must be at least three times the votes cast against the resolution.
A shareholder may exercise his voting rights by proxy to be given in the form required by the Articles of
Association. The instrument appointing a proxy is required to be lodged with our Company at least 48 hours
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before the time of the meeting. A proxy may not vote except on a poll and does not have a right to speak at
meetings.
Convertible securities/warrants
Our Company may issue debt instruments from time to time that are partly or fully convertible into Equity
Shares and/or warrants to purchase Equity Shares.
Transfer of shares
Shares held through depositories are transferred in the form of book entries or in electronic form in accordance
with the regulations laid down by SEBI. These regulations provide the regime for the functioning of the
depositories and the participants and set out the manner in which the records are to be kept and maintained and
the safeguards to be followed in this system. Transfers of beneficial ownership of shares held through a
depository are subject to STT (levied on and collected by the stock exchanges on which such equity shares are
sold), however are exempt from stamp duty. Our Company has entered into an agreement for such depository
services with the NSDL and the CDSL. SEBI requires that our Company’s shares for trading and settlement
purposes be in book-entry form for all investors, except for transactions that are not made on a stock exchange
and transactions that are not required to be reported to the stock exchange. Our Company shall keep a book in
which every transfer or transmission of shares will be entered.
Pursuant to the Listing Agreements, in the event our Company has not effected the transfer of shares within one
month or where our Company has failed to communicate to the transferee any valid objection to the transfer
within the stipulated time period of one month, it is required to compensate the aggrieved party for the
opportunity loss caused during the period of the delay. The shares of our Company shall be freely transferable.
Under the Listing Agreements, notice of such refusal must be sent to the transferee within one month of the date
on which the transfer was lodged with our Company.
Liquidation rights
Subject to the rights of creditors, of employees and of the holders of any other shares entitled by their terms of
issue to preferential repayment over the shares, in the event of a winding-up of our Company, the holders of the
Equity Shares are entitled to be repaid the amounts of capital paid up or credited as paid up on such shares or in
case of a shortfall, proportionately. All surplus assets after payments due to employees, the holders of any
preference shares and other creditors belong to the holders of the ordinary shares in proportion to the amount
paid up or credited as paid up on such shares, respectively, at the commencement of the winding-up.
Subscription agreement dated June 25, 2008 among our Company, Axiata Group Berhad and TMI
Mauritius Limited (now known as Axiata Investments 1 (India) Limited) (the “Subscription Agreement”)
Pursuant to the Subscription Agreement, Axiata Group Berhad (or its nominee) have certain rights under
Articles of Association. Such rights include anti-dilution rights, nominee rights and certain notification
requirements. For further details of such rights, please read the Memorandum and Articles of Association which
are available for review as set out in the section “General Information” on page 179.
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STATEMENT OF TAX BENEFITS
TAXATION
Statement of possible tax benefits available to the Company and its shareholders under the applicable laws in
India
Statement of Tax Benefits
To,
Board of Directors,
Idea Cellular Limited
5th Floor,
Windsor Building, Kalina,
CST Road, Santacruz (East),
Mumbai - 400098.
Dear Sirs,
Sub: Statement of possible tax benefits available to Idea Cellular Limited (“the Company”) and its
shareholders
We refer to the proposed Qualified Institutional Placement (QIP) of the shares of Idea Cellular Limited (“the
Company”) and enclose the statement showing the current position of tax benefits available to the Company and
to its shareholders as per the provisions of the Income Tax Act, 1961 and the Wealth Tax Act, 1957 for
inclusion in the Placement Document.
This statement is provided for general information purposes only and each investor is advised to consult its own
tax consultant with respect to specific income/wealth tax implications arising out of participation in the issue.
Unless otherwise specified, sections referred below are sections of the Income tax Act, 1961 (“IT Act”) and the
Wealth Tax Act, 1957 (“WT Act”). The benefits set out below are subject to conditions specified therein read
with the Income Tax Rules, 1962 and the Wealth Tax Rules, 1957 presently in force.
The benefits outlined in the enclosed statement based on the information and particulars provided by the
Company are neither exhaustive nor conclusive.
We do not express any opinion or provide any assurance as to whether:

the Company or its shareholders will continue to obtain these benefits in future;

the conditions prescribed for availing the benefits have been/would be met with; and

the revenue authorities/courts will concur with the views expressed herein.
We hereby give our consent to include the enclosed statement regarding tax benefits available to the Company
and to its shareholders in the Placement Document for the proposed QIP which the Company intends to submit
to the Securities and Exchange Board of India, the Registrar of Companies and the Stock Exchange(s).
Limitations
Our views expressed in the statement enclosed are based on the facts and assumptions indicated above. No
assurance is given that the revenue authorities/courts will concur with the views expressed herein. Our views are
based on the existing provisions of law and its interpretation, which are subject to change from time to time. We
do not assume responsibility to update the views consequent to such changes. The views are exclusively for the
use of Idea Cellular Limited and shall not, without our prior written consent, be disclosed to any other person.
Yours faithfully,
For
DELOITTE HASKINS & SELLS LLP
145
Chartered Accountants
(Firm Registration No. 117366W/W-100018)
Khurshed Pastakia
Partner
(Membership No. 31544)
Place: Mumbai
Date: June 5, 2014
146
STATEMENT OF TAX BENEFITS AVAILABLE TO IDEA CELLULAR LIMITED (“THE
COMPANY”) AND ITS SHAREHOLDERS
The tax benefits listed below are the possible benefits available under the current tax laws in India. Several of
these benefits are dependent on the Company or its shareholders fulfilling the conditions prescribed under the
relevant tax laws. Hence, the ability of the Company or its shareholders to derive the tax benefits is dependent
upon fulfilling such conditions, which based on business imperatives it faces in the future, it may not choose to
fulfill.
1.
SPECIAL TAX BENEFITS AVAILABLE TO THE COMPANY
The following specific tax benefits are available to the Company after fulfilling conditions as per the
respective provisions of the relevant tax laws.
Income arising from providing telecommunication services
As per section 80-IA of the Income tax Act, 1961 (“IT Act”), a deduction of 100% is allowable in
respect of profits and gains derived from undertaking providing telecommunication services for a
period of first five consecutive assessment years and deduction of 30% for a period of next 5 years, out
of fifteen years beginning with the assessment year relevant to the previous year in which the
undertaking/s start providing telecommunication services on or after 1st day of April 1995 but before
the 31st day of March 2005. The Company is operating Delhi Service Area, the profits of which are
eligible for the said deduction until 31st day of March 2017.
However, the aforesaid deduction is not available while computing tax liability of the Company under
Minimum Alternative Tax (‘MAT’). onetheless, such MAT paid/payable on the book profits of the
Company computed in terms of the provisions of IT Act, read with the Companies Act, 1956 would be
eligible for credit against tax liability arising under normal provisions of IT Act.
Further, such credit would not be allowed to be carried forward and set off beyond 10 th assessment year
immediately succeeding the assessment year in which such credit becomes allowable.
2.
GENERAL TAX BENEFITS AVAILABLE TO THE COMPANY
The following benefits are available to the Company after fulfilling conditions as per the respective
provisions of the relevant tax laws.
i.
Dividends
Exemption u/s 10(34) of the IT Act
As per section 10(34) of the IT Act, any income by way of dividends referred to in section
115-O from a domestic company is exempt from tax in the hands of the company. Such
income is also exempt from tax while computing book profit for the purpose of determination
of MAT liability.
However, in view of the provisions of Section 14A of the IT Act, no deduction is allowed in
respect of any expenditure incurred in relation to earning such dividend income. The quantum
of such expenditure liable for disallowance is to be computed in accordance with the
provisions contained therein.
Also, Section 94(7) of the IT Act provides that losses arising from the sale/transfer of shares
or units purchased within a period of three months prior to the record date and sold/transferred
within three months or nine months respectively after such date, will be disallowed to the
extent dividend income on such shares or units is claimed as tax exempt.
Exemption u/s 10(35) of the IT Act
As per section 10(35) of the IT Act, the following incomes will be exempt in the hands of the
company –
147
a)
Income received in respect of the units of a mutual fund specified under clause
(23D) of Section 10 of the IT Act; or
b)
Income received in respect of units from the administrator of the specified
undertaking; or
c)
Income received in respect of units from the specified company.
However, this exemption does not apply to any income arising from transfer of units of the
administrator of the specified undertaking or of the specified company or of a mutual fund, as
the case may be.
Such income is also exempt from tax while computing book profit for the purpose of
determination of MAT liability.
However, in view of the provisions of Section 14A of the IT Act, no deduction is allowed in
respect of any expenditure incurred in relation to earning such dividend income. The quantum
of such expenditure liable for disallowance is to be computed in accordance with the
provisions contained therein.
Also, Section 94(7) of the IT Act provides that losses arising from the sale/transfer of shares
or units purchased within a period of three months prior to the record date and sold/transferred
within three months or nine months respectively after such date, will be disallowed to the
extent dividend income on such shares or units is claimed as tax exempt.
As per section 94(8) of the IT Act, if an investor purchases units within three months prior to
the record date for entitlement of bonus, is allotted bonus units without any payment on the
basis of holding original units on the record date and such person sells / redeems the original
units within nine months of the record date, then the loss arising from sale/ redemption of the
original units will be ignored for the purpose of computing income chargeable to tax and the
amount of loss ignored shall be regarded as the cost of acquisition of the bonus units.
ii.
Income from buy back of shares
Exemption u/s 10(34A) of the IT Act
As per section 10(34A) of the IT Act, any income arising to the Company being a shareholder,
on account of buy back of shares (not being listed on a recognized stock exchange) by a
company as referred to in section 115QA of the IT Act will be exempt from tax. Such income
is also exempt from tax while computing book profit for the purpose of determination of MAT
liability.
iii.
Profits and Gains of Business or Profession
Under Section 35(1)(i) and Section 35(1)(iv) of the IT Act, in respect of any revenue or capital
expenditure incurred respectively, other than expenditure on the acquisition of any land, on
scientific research related to the business of the company are allowed as deduction against the
income of Company.
Under Section 35(1)(ii) of the IT Act, any sum paid to a research association which has as its
object, the undertaking of scientific research or to a university, college or other institution to
be used for scientific research is eligible for weighted deduction to the extent of one and threefourth times (175%) of the sum so paid. This weighted deduction is available to amounts paid
to approved research association, university, college or institution.
Under Section 35(1)(iia) of the IT Act any sum paid to a company registered in India which
has as its main object the conduct of scientific research and development and is approved by
the prescribed authority and fulfills such conditions as may be prescribed shall be liable to
deduction at one and one fourth times (125%) of the amount so paid.
Where the Company pays any sum to a National Laboratory or a University or an Indian
Institute of Technology or specified person referred to in section 35(2AA) of the IT Act with a
148
specific direction that the said sum shall be used for scientific research undertaken under a
programme approved in this behalf by prescribed authority, the deduction shall be allowed of
a sum equal to two times (200%) of the sum so paid.
As per section 35ABB of the IT Act, any capital expenditure incurred, for acquiring any right
to operate telecommunication services either before the commencement of the business to
operate telecommunication services or thereafter at any time during any previous year and for
which payment has actually been made to obtain a licence, shall be allowed in appropriate
fraction for each of the relevant previous years while computing income from profits and
gains of business or profession.
As per section 35AC of the IT Act, a deduction of the amount of expenditure incurred by way
of payment of any sum to a public sector company or a local authority or to an association or
institution approved by the National committee for carrying out any eligible project or
scheme, is allowable while computing income from profits and gains of business or
profession.
In case the Company or any of its subsidiary companies is engaged in any of the specified
businesses as prescribed in Section 35AD of the IT Act, there shall be allowed a deduction of
100% or 150% of the capital expenditure incurred except cost of land, goodwill or any
financial instruments depending on the type and nature of the business and the date on which
such business commenced as prescribed in Section 35AD.
As per section 35CCD of the IT Act, a weighted deduction to the extent of one and one-half
times (150%) of the amount of expenditure incurred (other than cost of land and building) on
any skill development project notified by the Board, is allowable while computing income
from profits and gains of business or profession.
Subject to certain conditions, Section 35D of the IT Act provides for deduction of specified
preliminary expenditure incurred before the commencement of the business or after the
commencement of business in connection with the extension of the undertaking or in
connection with the setting up a new unit. The deduction allowable is equal to one-fifth of
such expenditure incurred for each of the five successive previous years beginning with the
previous year in which the business commences.
Under Section 35DD of the IT Act, the Company will be entitled to a deduction equal to 1/5th
of the expenditure incurred in connection with Amalgamation or Demerger of an undertaking
by way of amortization over a period of 5 successive years, beginning with the previous year
in which the amalgamation or demerger takes place.
iv.
Depreciation
The Company is entitled to claim depreciation on specified tangible and intangible assets
owned and used by it for the purpose of its business as per provisions of section 32 of the IT
Act.
v.
Carry forward and Set Off of Business loss and unabsorbed depreciation
Business loss (other than speculative loss), if any, arising during a year can be set off against
the income under any other head of income, other than income under the head ‘salaries’, in
terms of the provisions of section 71 of the IT Act. Balance business loss, if any, can be
carried forward and set off against business profits for eight subsequent years in terms of the
provisions of section 72 of the IT Act.
Unabsorbed depreciation under section 32(2) of the IT Act can be carried forward and set off
against any source of income in subsequent years subject to provisions of section 72(2) of the
IT Act.
v.
Capital gains
As per section 2(42A) of the IT Act, shares held in a company or any other security listed in a
recognized stock exchange in India or units of the Unit Trust of India or units of a mutual fund
149
specified under section 10(23D) of the IT Act or zero coupon bonds will be considered as
short term capital asset if the period of holding of such shares, units or security is twelve
months or less. If the period of holding is more than twelve months, it will be considered as
long term capital asset as per section 2(29A) of the IT Act. In respect of other assets, the
determinative period of holding is thirty six months as against twelve months mentioned
above. Further, gain/loss arising from the transfer of short term capital asset and long term
capital asset is regarded as short term capital gains/loss and long term capital gains/loss
respectively.
Section 48 of the IT Act, which prescribes the mode of computation of Capital Gains,
provides for deduction of cost of acquisition/improvement and expenses incurred in
connection with the transfer of a capital asset, from the sale consideration to arrive at the
amount of Capital Gains. However, in respect of long term capital gains, it offers a benefit by
permitting substitution of cost of acquisition/improvement with the indexed cost of
acquisition/improvement, which adjusts the cost of acquisition/ improvement by a cost
inflation index as prescribed from time to time. However, such indexation benefit would not
be available on bonds and debentures.
As per section 10(38) of the IT Act, long term capital gains arising to the Company from
transfer of long term capital asset being an equity share in a Company or a unit of an equity
oriented fund listed in recognized stock exchange in India where such transaction is
chargeable to Securities Transaction Tax (STT) will be exempt in the hands of the Company.
However, such income shall be taken into account in computing book profit under section
115JB of the IT Act.
As per section 54EC of the IT Act, capital gains upto Rs. 50 Lakhs per annum, arising from
the transfer of a long term capital asset (in cases not covered under section 10(38) of the IT
Act) are exempt from capital gains tax provided such capital gains are invested within a period
of six months after the date of such transfer in specified bonds issued by National Highways
Authority of India (NHAI) or Rural Electrification Corporation Ltd (RECL).
Gains arising on transfer of short term capital assets are currently chargeable to tax at the rate
of 30 percent (plus applicable surcharge, education cess and secondary higher education cess).
However, as per section 111A of the IT Act, short term capital gains arising to the Company
from the sale of equity share or a unit of an equity oriented fund transacted through a
recognized stock exchange in India, where such transaction is chargeable to STT, will be
taxable at the rate of 15% (plus applicable surcharge, education cess and higher education
cess).
However, as per the proviso to section 112(1), if the tax on long term capital gains resulting
on transfer of listed securities or units or zero coupon bond (other than through a recognized
stock exchange), calculated at the rate of 20 percent with indexation benefit exceeds the tax on
long term capital gains computed at the rate of 10 percent without indexation benefit, then
such gains are chargeable to tax at concessional rate of 10 percent (plus applicable surcharge,
education cess and secondary higher education cess).
As per section 70 read with section 74 of the IT Act, short term capital loss arising during a
year is allowed to be set-off against short term capital gains as well as long term capital gains.
Balance loss, if any, shall be carried forward and set-off against any capital gains arising
during subsequent eight assessment years in terms of the provisions of section 74 of the IT
Act.
Long term capital loss arising during a year is allowed to be set-off only against long term
capital gains in terms of section 70 of the IT Act. Balance loss, if any, shall be carried forward
and set-off against long term capital gains arising during subsequent eight assessment years in
terms of the provisions of section 74 of the IT Act. Long term capital loss arising on sale of
shares or units of equity oriented fund subject to STT may not be carried forward for set off.
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vi.
Credit of MAT
As per section 115JAA(1A) of the IT Act, credit is allowed in respect of tax paid under
section 115JB of the IT Act for any assessment year commencing on or after April 1, 2006.
MAT credit eligible to be carried forward will be the difference between MAT paid and the
tax computed as per the normal provisions of the IT Act for that assessment year. Such MAT
credit is allowed to be carried forward for set off purposes for upto ten assessment years
immediately succeeding the assessment year in which the MAT credit becomes allowable
under section 115JAA(1A) of the IT Act.
MAT credit can be set off in a year when tax is payable under the normal provisions of the IT
Act. MAT credit to be allowed shall be the difference between MAT payable and the tax
computed as per the normal provisions of the IT Act for that assessment year.
vii.
Tax on distributed profits of domestic companies
As per section 115-O of the IT Act, tax on distributed profits of domestic companies is
chargeable at 15% (plus applicable surcharge, education cess and higher education cess). As
per sub-section (1A) to section 115-O, the domestic Company will be allowed to set-off the
dividend received from its subsidiary company during the financial year against the dividend
distributed by it, while computing the Dividend Distribution Tax (DDT) if:
a)
the dividend is received from its domestic subsidiary and the subsidiary has paid the DDT
payable on such dividend; or
b) the dividend is received from a foreign subsidiary, the Company has paid tax payable
under section 115BBD.
However, the same amount of dividend shall not be taken into account for reduction more
than once.
viii.
Other Deductions
A deduction amounting to 100% or 50%, as the case may be, of the sums paid as donations to
various entities is allowable as per section 80G of the IT Act.
A deduction amounting to 100% of any sum contributed to any political party or an electoral
trust is allowable under section 80GGB of the IT Act while computing total income.
3.
SPECIAL TAX BENEFITS AVAILABLE TO THE SHAREHOLDERS
There are no special tax benefits available to resident as well as Foreign Institutional Investors (“FIIs”)
shareholders of the Company.
4.
GENERAL TAX BENEFITS AVAILABLE TO THE SHAREHOLDERS
4.1
RESIDENT SHAREHOLDERS
Under Section 10(34) of the IT Act, income earned by way of dividend from domestic company
referred to in Section 115-O of the IT Act is exempt from income-tax in the hands of the shareholders.
Accordingly, dividend declared by the Company is exempt in the hands of shareholders.
Such income is also exempt from tax while computing book profit for the purpose of determination of
MAT liability.
However, in view of the provisions of Section 14A of the IT Act, no deduction is allowed in respect of
any expenditure incurred in relation to earning such dividend income. The quantum of such
expenditure liable for disallowance is to be computed in accordance with the provisions contained
therein.
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Also, Section 94(7) of the IT Act provides that losses arising from the sale/transfer of shares within a
period of three months prior to the record date and sold/transferred within three months after such date,
will be disallowed to the extent dividend income on such shares is claimed as tax exempt.
Under Section 10(38) of the IT Act, long term capital gain arising to the shareholder from transfer of a
long term capital asset being an equity share in the Company (i.e. capital asset held for the period of
more than twelve months) entered into in a recognized stock exchange in India and being such a
transaction, which is chargeable to Securities Transaction Tax, shall be exempt from tax. However,
such long term capital gains of a shareholder being company shall be taken into account in computing
tax payable under section 115JB.
In terms of section 36(1)(xv) of the IT Act, STT paid in respect of the taxable securities transactions
entered into in the course of the business by a shareholder is allowed as a deduction if the income
arising from such taxable securities transactions is included in the income computed under the head
‘Profit and gains of business or profession’.
As per section 2(42A) of the IT Act, shares held in a company will be considered as short term capital
asset if the period of holding of such shares is twelve months or less. If the period of holding is more
than twelve months, it will be considered as long term capital asset as per section 2(29A) of the IT Act.
Further, gain/loss arising from the transfer of short term capital asset and long term capital asset is
regarded as short term capital gains/loss and long term capital gains/loss respectively.
Section 48 of the IT Act, which prescribes the mode of computation of Capital Gains, provides for
deduction of cost of acquisition/improvement and expenses incurred in connection with the transfer of
a capital asset, from the sale consideration to arrive at the amount of Capital Gains. However, in
respect of long term capital gains, it offers a benefit by permitting substitution of cost of
acquisition/improvement with the indexed cost of acquisition/improvement, which adjusts the cost of
acquisition/ improvement by a cost inflation index as prescribed from time to time.
Under Section 54EC of the IT Act, capital gain arising from transfer of shares of a company (other than
those exempt u/s 10(38) of the IT Act) shall be exempt from tax, subject to the conditions and to the
extent specified therein, if the capital gain are invested within a period of six months from the date of
transfer in the bonds redeemable after three years and issued by National Highways Authority of India
(‘ HAI’) and/or Rural Electrification Corporation Limited (‘RECL’);
If only part of the capital gain is so reinvested, the exemption shall be proportionately reduced.
However, the amount so exempted shall be chargeable to tax subsequently, if the new bonds are
transferred or converted into money within three years from the date of their acquisition.
Under Section 54F of the IT Act, where in the case of an individual or HUF long term capital gain arise
from transfer of shares of the a company (other than exempt u/s 10(38) of the IT Act) then such capital
gain, subject to the conditions and to the extent specified therein, will be exempt if the net sales
consideration from such transfer is utilized for purchase of residential house property within a period of
one year before or two year after the date on which the transfer took place or for construction of
residential house property within a period of three years after the date of transfer. If only a part of the
net consideration is so reinvested, the exemption shall be proportionately reduced.
Under section 80CCG of the IT Act, a resident individual being a new retail investor will be allowed
deduction of 50% of amount invested in listed equity shares or listed units of equity oriented mutual
fund in accordance with Rajiv Gandhi Equity Savings Scheme 2013 subject to maximum deduction of
INR 25,000 and fulfillment of other conditions as prescribed.
Under Section 111A of the IT Act, capital gains arising from transfer of short term capital assets, being
an equity share in a company which is subject to Securities Transaction Tax will be taxable under the
IT Act at 15% (plus applicable surcharge, education cess and higher education cess). As per Section 70
read with Section 74 of the IT Act, short-term capital loss, if any arising during the year can be set-off
against short-term capital gain as well as against the long-term capital gains and shall be allowed to be
carried forward upto eight assessment years immediately succeeding the assessment year for which the
loss was first computed.
152
Under Section 112 of the IT Act and other relevant provisions of the IT Act, long term capital gains
(not covered under Section 10(38) of the IT Act) arising on transfer of shares of a listed company, if
shares are held for a period exceeding 12 months, shall be taxed at a rate of 20% (plus applicable
surcharge, education cess and secondary higher education cess) after indexation as provided in the
second proviso to Section 48 or at 10% (plus applicable surcharge, education cess and secondary
higher education cess) (without indexation), at the option of the Shareholders. As per section 70 read
with section 74 of the IT Act, long-term capital loss, if any arising during the year can be set-off only
against long-term capital gain and shall be allowed to be carried forward upto eight assessment years
immediately succeeding the assessment year for which the loss was first computed for set off against
future long term capital gain. However brought forward long term capital loss can be set off only
against future long term capital gains.
4.2
BENEFITS AVAILABLE TO FIIs

Dividends exempt under section 10 (34)
Under section 10(34) of the IT Act, income earned by way of dividend (Interim or final) from
domestic company referred to in section 115-O of the IT Act is exempt from income tax in the
hands of the shareholders.
However, in view of the provisions of Section 14A of IT Act, no deduction is allowed in
respect of any expenditure incurred in relation to earning such dividend income. The quantum
of such expenditure liable for disallowance is to be computed in accordance with the
provisions contained therein.
Also, Section 94(7) of the IT Act provides that losses arising from the sale/transfer of shares
purchased within a period of three months prior to the record date and sold/transferred within
three months after such date, will be disallowed to the extent dividend income on such shares
is claimed as tax exempt.

Taxability of capital gains
As per section 2(42A) of the IT Act, shares held in a company will be considered as short term
capital asset if the period of holding of such shares is twelve months or less. If the period of
holding is more than twelve months, it will be considered as long term capital asset as per
section 2(29A) of the IT Act. Further, gain/loss arising from the transfer of short term capital
asset and long term capital asset is regarded as short term capital gains/loss and long term
capital gains/loss respectively.
Under section 10(38) of the IT Act, long term capital gains arising out of sale of equity shares
will be exempt from tax provided that the transaction of sale of such equity shares is
chargeable to STT.
The income by way of short term capital gains or long term capital gains (long term capital
gains not covered under section 10(38) of the IT Act) realized by FII’s on sale of the shares of
the Company would be taxed at the following rates as per section 115AD of the IT Act.
o
Short term capital gains, other than those referred to under section 111A of the IT
Act shall be taxed @ 30% (plus applicable surcharge, education cess and secondary
higher education cess).
o
Short term capital gains, referred to under section 111A of the IT Act shall be taxed
@ 15% (plus applicable surcharge, education cess and secondary higher education
cess).
o
Long term capital gains @10% (plus applicable surcharge, education cess and
secondary higher education cess) (without cost indexation).
It may be noted that the benefits of indexation and foreign currency fluctuation protection as
provided by section 48 of the IT Act are not applicable.
153
As per section 196D(2) of the IT Act, no deduction of tax at source will be made in respect of
income by way of capital gain arising from the transfer of securities referred to in section
115AD.
Under Section 54EC of the IT Act, capital gain arising from transfer of shares of a company
(other than those exempt u/s 10(38) of the IT Act) shall be exempt from tax, subject to the
conditions and to the extent specified therein, if the capital gain are invested within a period of
six months from the date of transfer in the bonds redeemable after three years and issued by
ational Highways Authority of India (‘ HAI’) and/or Rural Electrification Corporation
Limited (‘RECL’);
However, if the assessee transfers or converts the notified bonds into money within a period of
three years from the date of their acquisition, the amount of capital gains exempt earlier would
become chargeable to tax as long term capital gains in the year in which the bonds are
transferred or converted into money.
As per Section 70 read with Section 74 of IT Act, short-term capital loss, if any arising during
the year can be set-off against short-term capital gain as well as against the long-term capital
gains and shall be allowed to be carried forward upto eight assessment years immediately
succeeding the assessment year for which the loss was first computed. Further, long-term
capital loss, if any arising during the year can be set-off only against long-term capital gain
and shall be allowed to be carried forward upto eight assessment years immediately
succeeding the assessment year for which the loss was first computed for set off against future
long term capital gain. However brought forward long term capital loss can be set off only
against future long term capital gains.

Provisions of the IT Act vis-à-vis provisions of the tax treaty
As per Section 90(2) of the IT Act, the provisions of the IT Act would prevail over the
provisions of the relevant tax treaty to the extent they are more beneficial to the non-resident,
subject to compliance with sub-sections (4) and (5) of section 90 and section 206AA of the IT
Act.
4.3
BENEFITS AVAILABLE TO MUTUAL FUNDS
As per the provisions of section 10(23D) of the IT Act, any income of Mutual Funds registered under
the Securities and Exchange Board of India Act, 1992 or regulations made there under, Mutual Funds
set up by public sector banks or public financial institutions or authorized by the Reserve Bank of
India, would be exempt from income tax subject to the conditions as the Central Government may
notify. However, the mutual funds shall be liable to pay tax on distributed income to unit holders under
section 115R of the IT Act.
4.4
BENEFITS AVAILABLE TO VENTURE CAPITAL COMPANIES/ FUNDS
As per the provisions of section 10(23FB) of the IT Act, any income of Venture Capital Companies/
Funds from investment in venture capital undertaking registered with the Securities and Exchange
Board of India, would be exempt from income tax, subject to the conditions specified therein.
However, the income distributed by the Venture Capital Companies/ Funds to its investors would be
taxable in the hands of the recipients.
4.5
BENEFITS AVAILABLE UNDER THE WEALTH-TAX ACT, 1957
Shares of the Company held by the shareholder will not be treated as an asset within the meaning of
section 2(ea) of Wealth Tax Act, 1957. Hence, no wealth tax will be payable on the market value of
shares of the Company held by the shareholder of the Company.
Notes:
1.
All the above benefits are as per the current tax law and will be available only to the sole/first named
holder in case the shares are held by the joint holders.
154
2.
In view of the individual nature of tax consequences, each investor is advised to consult his/her own
tax advisor with respect to specific tax consequences of his/her participation in the scheme.
3.
We have not commented on the taxation aspect under any law for the time being in force, as applicable,
of any country other than India. Each investor is advised to consult its own tax consultant for taxation
in any country other than India.
155
Certain U.S. Federal Income Tax Considerations
To ensure compliance with United States Treasury Department Circular 230, investors are hereby notified that:
(i) any discussion of United States federal tax issues in this placement document is not intended or written to be
relied upon, and cannot be relied upon by investors, for the purpose of avoiding penalties that may be imposed
on investors under the United States Internal Revenue Code of 1986, as amended (the “Code”); (ii) such
discussion is written in connection with the promotion or marketing of the transactions or matters addressed
herein by the Company and dealers, managers and underwriters; and (iii) investors should seek advice based on
their particular circumstances from their own independent tax advisors.
The following is a discussion of certain material U.S. federal income tax consequences of purchasing, owning
and disposing of Equity Shares acquired pursuant to this offering. This summary does not address any aspect of
U.S. federal non-income tax laws, such as U.S. federal estate and gift tax laws, or state, local or non-U.S. tax
laws, and does not purport to be a comprehensive description of all of the U.S. tax considerations that may be
relevant to a particular person’s decision to acquire Equity Shares.
YOU SHOULD CONSULT YOUR OWN TAX ADVISORS CONCERNING THE U.S. FEDERAL,
STATE, LOCAL AND NON-U.S. TAX CONSEQUENCES OF PURCHASING, OWNING AND
DISPOSING OF EQUITY SHARES IN YOUR PARTICULAR SITUATION.
The discussion applies to you only if you acquire the Equity Shares in this Issue and you hold the Equity Shares
as capital assets for U.S. federal income tax purposes (generally, for investment). This section does not apply to
you if you are a member of a special class of holders subject to special tax rules, including:

a broker;

a dealer in securities, commodities or foreign currencies;

a trader in securities that elects to use a mark-to-market method of accounting for your securities
holdings;

a bank or other financial institution;

a tax-exempt organization;

an insurance company;

a regulated investment company;

an investor who is a U.S. expatriate, former U.S. citizen or former long term resident of the United
States;

a mutual fund;

an individual retirement or other tax-deferred account;

a holder liable for alternative minimum tax;

a holder that actually or constructively owns 10% or more, by voting power, of the Company’s voting
stock;

a partnership or other pass-through entity for U.S. federal income tax purposes;

a holder that holds Equity Shares as part of a straddle, hedging, constructive sale, conversion or other
integrated transaction for U.S. federal income tax purposes; or

a U.S. holder (as defined below) whose functional currency is not the U.S. Dollar.
This section is based on the Code, existing and proposed income tax regulations issued under the Code,
legislative history, and judicial and administrative interpretations thereof, all as of the date hereof. All of the
foregoing are subject to change at any time, and any change could be retroactive and could affect the accuracy
of this discussion. In addition, the application and interpretation of certain aspects of the passive foreign
156
investment company (“PFIC”) rules, referred to below, require the issuance of regulations which in many
instances have not been promulgated and which may have retroactive effect. There can be no assurance that any
of these regulations will be enacted or promulgated, and if so, the form they will take or the effect that they may
have on this discussion. This discussion is not binding on the U.S. Internal Revenue Service (“IRS”) or the
courts. No ruling has been or will be sought from the IRS with respect to the positions and issues discussed
herein, and there can be no assurance that the IRS or a court will not take a different position concerning the
U.S. federal income tax consequences of an investment in the Equity Shares or that any such position would not
be sustained.
You are a “U.S. holder” if you are a beneficial owner of Equity Shares that acquired the shares pursuant to this
offering and you are:

a citizen or resident of the United States;

a U.S. domestic corporation, or other entity treated as a domestic corporation for U.S. federal income
tax purposes;

an estate whose income is subject to U.S. federal income tax regardless of its source; or

a trust if (1) a U.S. court can exercise primary supervision over the trust’s administration and one or
more U.S. persons are authorised to control all substantial decisions of the trust or (2) has a valid
election in effect under applicable U.S. Treasury regulations to be treated as a U.S. person.
In addition, this discussion is limited to U.S. holders who are not resident in India for purposes of the Income
Tax Treaty between the United States and India.
If a partnership (including for this purpose any entity treated as a partnership for U.S. federal income tax
purposes) is a beneficial owner of the Equity Shares, the U.S. tax treatment of a partner in the partnership
generally will depend on the status of the partner and the activities of the partnership. A holder of the Equity
Shares that is a partnership and partners in such a partnership should consult their own tax advisors concerning
the U.S. federal income tax consequences of purchasing, owning and disposing of Equity Shares.
A “non-U.S. holder” is a beneficial owner of Equity Shares that acquired the shares pursuant to this offering and
that is neither a U.S. holder nor a partnership for U.S. federal income tax purposes.
Although not free from doubt, the Company does not believe that it should be treated as, and does not expect to
become, a PFIC for U.S. federal income tax purposes. However, no assurance can be given that the Company
will not be considered a PFIC in the current or future years. The determination whether or not the Company is a
PFIC is a factual determination that is made annually based on the types of income it earns and the value of its
assets. If the Company was currently or were to become a PFIC, U.S. holders of Equity Shares would be subject
to special rules and a variety of potentially adverse tax consequences under the Code.
Taxation of Dividends
U.S. Holders. Subject to the PFIC rules below, if you are a U.S. holder you must include in your gross income
the gross amount of any distributions of cash or property (other than certain pro rata distributions of Equity
Shares) with respect to Equity Shares, to the extent the distribution is paid by the Company out of its current or
accumulated earnings and profits, as determined for U.S. federal income tax purposes. A U.S. holder will
include the dividend income at the time of actual or constructive receipt. Distributions in excess of current and
accumulated earnings and profits, as determined for U.S. federal income tax purposes, will be treated as a nontaxable return of capital to the extent of your basis in the Equity Shares and thereafter as capital gain from the
sale or exchange of such Equity Shares. Notwithstanding the foregoing, the Company does not intend to
maintain calculations of its earnings and profits as determined for U.S. federal income tax purposes.
Consequently, distributions generally will be reported as dividend income for U.S. information reporting
purposes.
You should not include the amount of any Indian tax paid by the Company with respect to the dividend
payment, as that tax is, under Indian law, a liability of the Company and not the shareholders, unless you are a
U.S. corporation that owns 10% or more of the voting stock of the Company and also claims a foreign tax credit
against your U.S. tax liability for your share of income taxes paid by the Company. The dividend is ordinary
income that you must include in income when you receive the dividend, actually or constructively. The dividend
will not be eligible for the dividends-received deduction generally allowed to U.S. corporations in respect of
157
dividends received from other U.S. corporations.
Subject to the PFIC rules described below, dividends paid by a non-U.S. corporation generally will be taxed at
the preferential tax rates applicable to long-term capital gain of non-corporate taxpayers if (a) such non-U.S.
corporation is eligible for the benefits of certain U.S. treaties or the dividend is paid by such non-U.S.
corporation with respect to stock that is readily tradable on an established securities market in the United States,
(b) the U.S. holder receiving such dividend is an individual, estate, or trust, and (c) such dividend is paid on
shares that have been held by such U.S. holder for at least 61 days during the 121-day period beginning 60 days
before the “ex-dividend date.” If the requirements of the immediately preceding paragraph are not satisfied, a
dividend paid by a non-U.S. corporation to a U.S. holder, including a U.S. holder that is an individual, estate, or
trust, generally will be taxed at ordinary income tax rates (and not at the preferential tax rates applicable to longterm capital gains). The dividend rules are complex, and each U.S. holder should consult its own tax advisor
regarding the dividend rules.
Dividends received generally will be income from non-U.S. sources, which may be relevant in calculating your
U.S. foreign tax credit limitation. Such non-U.S. source income generally will be “passive category income”, or
in certain cases “general category income”, which is treated separately from other types of income for purposes
of computing the foreign tax credit allowable to you. You should consult your own tax advisor to determine the
foreign tax credit implications of owning the Equity Shares.
The amount of the dividend distribution that you must include in your income as a U.S. holder will be the U.S.
Dollar value of the Indian Rupee payments made, determined at the spot Indian Rupee/U.S. Dollar exchange
rate on the date the dividend distribution is includible in your income, regardless of whether the payment is in
fact converted into U.S. Dollars. Generally, any gain or loss resulting from currency exchange fluctuations
during the period from the date you include the dividend payment in income to the date you convert the payment
into U.S. Dollars will be treated as ordinary income or loss. The gain or loss generally will be income or loss
from sources within the United States for foreign tax credit limitation purposes.
Non-U.S. Holders. Dividends paid to non-U.S. holders generally will not be subject to U.S. income tax unless
the dividends are “effectively connected” with your conduct of a trade or business within the United States, and
the dividends are attributable to a permanent establishment (or in the case of an individual, a fixed place of
business) that you maintain in the United States if that is required by an applicable income tax treaty as a
condition for subjecting you to U.S. taxation on a net income basis. In such cases you generally will be taxed in
the same manner as a U.S. holder (other than with respect to the Medicare Tax described below). If you are a
corporate non-U.S. holder, “effectively connected” dividends may, under certain circumstances, be subject to an
additional “branch profits tax” at a 30% rate or a lower rate if you are eligible for the benefits of an income tax
treaty that provides for a lower rate.
Taxation of Capital Gains
U.S. Holders. Subject to the PFIC rules discussed below, if you are a U.S. holder and you sell, exchange or
otherwise dispose of your Equity Shares, you will generally recognize capital gain or loss for U.S. federal
income tax purposes equal to the difference between the U.S. Dollar value of the amount realized and your tax
basis, determined in U.S. Dollars, in your Equity Shares. Gain or loss recognized on such a sale, exchange or
other disposition of Equity Shares generally will be long-term capital gain if the U.S. holder has held the Equity
Shares for more than one year. Long-term capital gains of U.S. holders who are individuals (as well as certain
trusts and estates) are generally taxed at a maximum rate of 20%. The gain or loss will generally be income or
loss from sources within the United States for foreign tax credit limitation purposes, unless it is attributable to
an office or other fixed place of business outside the United States and certain other conditions are met. Your
ability to deduct capital losses is subject to limitations.
Non-U.S. Holders. If you are a non-U.S. holder, you will not be subject to U.S. federal income tax on gain
recognized on the sale, exchange or other disposition of your Equity Shares unless:

the gain is “effectively connected” with your conduct of a trade or business in the United States, and
the gain is attributable to a permanent establishment (or in the case of an individual, a fixed place of
business) that you maintain in the United States if that is required by an applicable income tax treaty as
a condition for subjecting you to U.S. taxation on a net income basis; or

you are an individual, you are present in the United States for 183 or more days in the taxable year of
such sale, exchange or other disposition and certain other conditions are met.
158
In the first case, the non-U.S. holder will be taxed in the same manner as a U.S. holder (other than with respect
to the Medicare Tax described below). In the second case, the non-U.S. holder will be subject to U.S. federal
income tax at a rate of 30% on the amount by which such non-U.S. holder’s U.S.-source capital gains exceed
such non-U.S.-source capital losses.
If you are a corporate non-U.S. holder, “effectively connected” gains that you recognize may also, under certain
circumstances, be subject to an additional “branch profits tax” at a 30% rate or at a lower rate if you are eligible
for the benefits of an income tax treaty that provides for a lower rate.
Medicare Tax
Certain U.S. holders who are individuals, estates or trusts are required to pay a 3.8% Medicare surtax on all or
part of that holder’s “net investment income”, which includes, among other items, dividends on, and capital
gains from the sale or other taxable disposition of, the Equity Shares, subject to certain limitations and
exceptions. This surtax applies to taxable years beginning after December 31, 2012. Prospective investors
should consult their own tax advisors regarding the effect, if any, of this surtax on their ownership and
disposition of the Equity Shares.
PFIC Considerations
The Code provides special rules regarding certain distributions received by U.S. persons with respect to, and
sales, exchanges and other dispositions, including pledges, of, shares of stock in a PFIC. A foreign corporation
will be treated as a PFIC for any taxable year in which either: (i) at least 75 percent of its gross income is
“passive income” or (ii) at least 50 percent of its gross assets during the taxable year (based on the average of
the fair market values of the assets determined at the end of each quarterly period) are “passive assets,” which
generally means that they produce passive income or are held for the production of passive income. Passive
income for this purpose generally includes, among other things, dividends, interest, rents, royalties, gains from
commodities and securities transactions, and gains from assets that produce passive income. In determining
whether a foreign corporation is a PFIC, a pro rata portion of the income and assets of each corporation in which
it owns, directly or indirectly, at least a 25% interest (by value) is taken into account.
Although not free from doubt, the Company does not believe that it should be treated as, and does not expect to
become, a PFIC for U.S. federal income tax purposes, but the Company’s possible status as a PFIC must be
determined for each year and cannot be determined until the end of each taxable year. Because this
determination is made annually at the end of each taxable year and is dependent upon a number of factors, some
of which are beyond the Company’s control, including the amount and nature of the Company’s income, as well
as on the market valuation of the Company’s assets and the Company’s spending schedule for its cash balances
and the proceeds of the Placement, and because certain aspects of the PFIC rules are not entirely certain, there
can be no assurance that the Company is not a PFIC and will not become a PFIC or that the IRS will agree with
our conclusion regarding our PFIC status.
A U.S. stockholder that holds stock in a foreign corporation during any taxable year in which the corporation
qualifies as a PFIC is subject to special tax rules with respect to (a) any gain realized on the sale, exchange or
other disposition of the stock and (b) any “excess distribution” by the corporation to the stockholder, unless the
stockholder elects to treat the PFIC as a “qualified electing fund” (“QEF”) or makes a “mark-to-market”
election, each as discussed below. An “excess distribution” is that portion of a distribution with respect to PFIC
stock that exceeds 125% of the average of such distributions over the preceding three-year period or, if shorter,
the stockholder’s holding period for its shares. Excess distributions and gains on the sale, exchange or other
disposition of stock of a corporation which was a PFIC at any time during the U.S. stockholder’s holding period
are allocated ratably to each day of the U.S. stockholder’s holding period. Amounts allocated to the current
taxable year and any taxable year in which the Company was not a PFIC will be taxed as ordinary income
(rather than capital gain) earned in the current taxable year. Amounts allocated to other years are taxed at the
highest ordinary income tax rates in effect for those years, and the tax for each such prior year is subject to an
interest charge at the rate applicable to income tax deficiencies. The preferential U.S. federal income tax rates
for dividends and long-term capital gain of individual U.S. holders (as well as certain trusts and estates) would
not apply, and special rates would apply for calculating the amount of the foreign tax credit with respect to
excess distributions. In addition, a U.S. stockholder who acquires shares in a PFIC from a decedent generally
will not receive a “stepped-up” fair market value tax basis in such shares but, instead, will receive a tax basis
equal to the decedent’s basis, if lower.
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If a corporation is a PFIC for any taxable year during which a U.S. stockholder holds shares in the corporation,
then the corporation generally will continue to be treated as a PFIC with respect to the stockholder’s shares,
even if the corporation no longer satisfies either the passive income or passive asset tests described above,
unless the U.S. stockholder terminates this deemed PFIC status by electing to recognize gain, which will be
taxed under the excess distribution rules as if such shares had been sold on the last day of the last taxable year
for which the corporation was a PFIC.
The excess distribution rules may be avoided if a U.S. stockholder makes a QEF election effective beginning
with the first taxable year in the stockholder’s holding period in which the corporation is a PFIC. A U.S.
stockholder that makes a QEF election is required to include in income its pro rata share of the PFIC’s ordinary
earnings and net capital gain as ordinary income and long-term capital gain, respectively, subject to a separate
election to defer payment of taxes, which deferral is subject to an interest charge. A U.S. stockholder whose
QEF election is effective after the first taxable year during the stockholder’s holding period in which the
corporation is a PFIC will continue to be subject to the excess distribution rules for years beginning with such
first taxable year for which the QEF election is effective.
In general, a U.S. stockholder makes a QEF election by attaching a completed IRS Form 8621 to a timely filed
(taking into account any extensions) U.S. federal income tax return for the year beginning with which the QEF
election is to be effective. In certain circumstances, a U.S. stockholder may be able to make a retroactive QEF
election. A QEF election can be revoked only with the consent of the IRS. In order for a U.S. stockholder to
make a valid QEF election, the corporation must annually provide or make available to the stockholder certain
information. The Company does not intend to provide to U.S. stockholders the information required to make a
valid QEF election and the Company currently makes no undertaking to provide such information.
As an alternative to making a QEF election, a U.S. stockholder may make a “mark-to-market” election with
respect to its PFIC shares if the shares meet certain minimum trading requirements. If a U.S. stockholder makes
a valid mark-to-market election for the first tax year in which such stockholder holds (or is deemed to hold)
stock in a corporation and for which such corporation is determined to be a PFIC, such holder generally will not
be subject to the PFIC rules described above in respect of its stock. Instead, a U.S. stockholder that makes a
mark-to-market election will be required to include in income each year an amount equal to the excess of the
fair market value of the shares that the stockholder owns as of the close of the taxable year over the
stockholder’s adjusted tax basis in the shares. The U.S. stockholder will be entitled to a deduction for the excess,
if any, of the stockholder’s adjusted tax basis in the shares over the fair market value of the shares as of the close
of the taxable year; provided, however, that the deduction will be limited to the extent of any net mark-tomarket gains with respect to the shares included by the U.S. stockholder under the election for prior taxable
years. The U.S. stockholder’s basis in the shares will be adjusted to reflect the amounts included or deducted
pursuant to the election. Amounts included in income pursuant to a mark-to-market election, as well as gain on
the sale, exchange or other disposition of the shares, will be treated as ordinary income. The deductible portion
of any mark-to-market loss, as well as loss on a sale, exchange or other disposition of shares to the extent that
the amount of such loss does not exceed net mark-to-market gains previously included in income, will be treated
as ordinary loss.
The mark-to-market election applies to the taxable year for which the election is made and all subsequent
taxable years, unless the shares cease to meet applicable trading requirements (described below) or the IRS
consents to its revocation. The excess distribution rules generally do not apply to a U.S. stockholder for tax
years for which a mark-to-market election is in effect. However, if a U.S. stockholder makes a mark-to-market
election for PFIC stock after the beginning of the stockholder’s holding period for the stock, a coordination rule
applies to ensure that the stockholder does not avoid the tax and interest charge with respect to amounts
attributable to periods before the election.
A mark-to-mark election is available only if the shares are considered “marketable” for these purposes. Shares
will be marketable if they are regularly traded on a national securities exchange that is registered with the
Securities and Exchange Commission or on a non-U.S. exchange or market that the IRS determines has rules
sufficient to ensure that the market price represents a legitimate and sound fair market value. For these purposes,
shares will be considered regularly traded during any calendar year during which they are traded, other than in
negligible quantities, on at least 15 days during each calendar quarter. Any trades that have as their principal
purpose meeting this requirement will be disregarded. Each U.S. stockholder should ask its own tax advisor
whether a mark-to-market election is available or desirable.
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If the Company were to be treated as a PFIC in a taxable year and owned shares in another PFIC (a “lower–tier
PFIC”), a U.S. holder would also be subject to the PFIC rules with respect to its indirect ownership of the
lower-tier PFIC.
A U.S. stockholder of a PFIC must generally file an IRS Form 8621 annually and provide such other
information as may be required by the U.S. Treasury Department if the U.S. stockholder (i) receives certain
direct or indirect distributions from a PFIC, (ii) recognizes gain on a direct or indirect disposition of PFIC stock,
or (iii) makes certain elections (including a QEF election or a mark-to-market election) reportable on IRS Form
8621.
U.S. holders are urged to consult their tax advisors as to the Company’s status as a PFIC, and, if the
Company is treated as a PFIC, as to the effect on them of the PFIC rules and the desirability of making, and
the availability of, either a QEF election or a mark-to-market election with respect to our ordinary shares.
The Company provides no advice on taxation matters.
Information with Respect to Foreign Financial Assets
In addition, a U.S. holder that is an individual (and, to the extent provided in future regulations, an entity), may
be subject to recently-enacted reporting obligations with respect to Equity Shares if the aggregate value of these
and certain other “specified foreign financial assets” exceeds $50,000. If required, this disclosure is made by
filing Form 8938 with the U.S. Internal Revenue Service. Significant penalties can apply if U.S. holders are
required to make this disclosure and fail to do so. In addition, a U.S. holder should consider the possible
obligation to file a Form TD F 90-22.1—Foreign Bank and Financial Accounts Report as a result of holding
Equity Shares. U.S. holders are thus encouraged to consult their U.S. tax advisors with respect to these and other
reporting requirements that may apply to their acquisition of Equity Shares.
Backup Withholding and Information Reporting
In general, information reporting requirements will apply to distributions made on our Equity Shares within the
U.S. to a non-corporate U.S. holder and to the proceeds from the sale, exchange, redemption or other disposition
of Equity Shares by a non-corporate U.S. holder to or through a U.S. office of a broker. Payments made (and
sales or other dispositions effected at an office) outside the U.S. will be subject to information reporting in
limited circumstances.
In addition, backup withholding of U.S. federal income tax may apply to such amounts if the U.S. holder fails to
provide an accurate taxpayer identification number (or otherwise establishes, in the manner provided by law, an
exemption from backup withholding) or to report dividends required to be shown on the U.S. holder’s U.S.
federal income tax returns.
Backup withholding is not an additional income tax, and the amount of any backup withholding from a payment
to a U.S. holder will be allowed as credit against the U.S. holder’s U.S. federal income tax liability provided that
the appropriate returns are filed.
A non-U.S. holder generally may eliminate the requirement for information reporting and backup withholding
by providing certification of its foreign status to the payor, under penalties of perjury, on IRS Form W-8BEN.
You should consult your own tax advisor as to the qualifications for exemption from backup withholding and
the procedures for obtaining the exemption.
The foregoing does not purport to be a complete analysis of the potential tax considerations relating to
the Placement, and is not tax advice. Prospective investors should consult their own tax advisors as to the
particular tax considerations applicable to them relating to the purchase, ownership and disposition of
the Equity Shares, including the applicability of the U.S. federal, state and local tax laws or non-tax laws,
foreign tax laws, and any changes in applicable tax laws and any pending or proposed legislation or
regulations.
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LEGAL PROCEEDINGS
Our Company and the Subsidiaries are, from time to time, involved in various legal proceedings in the ordinary
course of business, which involve matters pertaining to, amongst others, tax (including entertainment tax),
regulatory and other disputes. The section below describes the legal proceedings, which singly or in aggregate,
could have a material adverse effect on our Company or the relevant Subsidiary.
Litigation Involving our Company
Regulatory Proceedings
1.
The High Court of Delhi had approved the scheme of amalgamation between our Company and
erstwhile Spice Communications Limited (“Spice”) through its order dated February 5, 2010 (the
“Merger Order”). Pursuant thereto, DoT filed an application before the High Court of Delhi, seeking
(i) recall of the order dated February 5, 2010, and (ii) setting aside the merger of Spice with our
Company (the “Spice Merger”), since it was undertaken without the prior approval of the DoT, and
was, therefore, in contravention of the Guidelines issued by the DoT on April 22, 2008 for proper
conduct of telegraphs and telecommunication services (the “Erstwhile Merger Guidelines”). Through
its order dated July 4, 2011 (the “Modifying Order”), a single judge bench of the High Court of Delhi
ordered, amongst others, vesting of the telecom licenses held by, and spectrum allocated to, Spice in
DoT and held that it was not feasible to recall the Merger Order despite the Scheme’s alleged
contravention of the Erstwhile Merger Guidelines. It further permitted the DoT to pass any order for
the aforesaid breaches. Upon separate appeals filed by both our Company and the DoT, a division
bench of the High Court of Delhi by its order dated July 13, 2012 reaffirmed the Merger Order and the
Modifying Order, but omitted the direction regarding the transfer of licenses to the DoT as stated in the
Modifying Order. It further observed that the dispute regarding transfer of the licenses shall be
determined by TDSAT and the parties.
Subsequently, DoT issued a letter dated February 8, 2013 informing our Company that it would
consider the merger of Spice with our Company, subject to, amongst other things, the conditions that:
(i)
only Punjab and Karnataka licenses would be transferred to our Company,
(ii)
the transfer would be subject to the final order which may be passed on the show cause notices
issued earlier on this matter,
(iii)
our Company being liable for all financial dues and penalties pertaining to the licenses held by
it along with the six licenses of Spice, and
(iv)
our Company not claiming set-off against the entry fees paid by Spice for the quashed
licenses, for the auction of spectrum held on September 28, 2012 if the DoT approves the
transfer of licenses of Spice to our Company.
Our Company replied to the above letter on February 11, 2013. The DoT also issued a show cause
notice dated June 27, 2013 to our Company regarding breach of terms and conditions of the said
licenses, which was followed by a letter dated ovember 29, 2013 (the “November Letter”). The
DoT, through the November Letter imposed a penalty of ₹ 6,000 million (the “Penalty”) on our
Company for breach of license conditions. The November Letter further specified that DoT would take
the Spice Merger on record and transfer the Spice licenses in respect of the Punjab and Karnataka
service areas, subject to our Company (i) paying the Penalty; (ii) complying with the conditions laid
down by the DoT in its letter dated February 8, 2013; and (iii) paying the dues in relation to the
specified licenses and one-time spectrum charges, as applicable. On December 6, 2013, our Company
filed a petition (no. 440 of 2013) before the TDSAT (“Petition 440”), against the Penalty imposed by
DoT through the November Letter. TDSAT, through its interim order dated December 10, 2013,
granted a stay on the realisation of Penalty by DoT, subject to the condition that in the event Petition
440 were to fail, our Company would be liable to pay the Penalty, along with interest, as may be
determined by TDSAT. The matter is currently pending before TDSAT. Separately, in accordance with
the order dated January 30, 2014 issued by the Supreme Court, the DoT has endorsed the licenses of
erstwhile Spice pertaining to the Punjab and Karnataka Service Areas in favour of our Company on
February 1, 2014. However, such endorsement is subject to the outcome of Petition 440. Pursuant to
such endorsement, our Company has commenced providing 3G services in the Punjab Service Area.
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2.
Pursuant to the approval of the cabinet of ministers, Government of India, at its meeting held on
November 8, 2012, for levying one-time charge for excess spectrum held by telecom service providers
and the DoT order dated December 28, 2012, the DoT issued a demand notice dated January 8, 2013 to
our Company imposing a one-time spectrum fee. These charges were payable for the spectrum held by
our Company in the 900 MHz and 1800 MHz frequency bands, which was in excess of (i) 6.2 MHz for
the period from July 1, 2008 to December 31, 2012 (the “First Period”), and (ii) 4.4 MHz, from
January 1, 2013 (the “Second Period”) until expiry of the relevant licenses. The charges amounted to ₹
3,691.30 million and ₹ 17,443.70 million for the First Period and the Second Period, respectively.
Aggrieved by the said demand notice, our Company filed a writ petition before the High Court of
Bombay (the “Bombay HC”) challenging the imposition of one-time spectrum charges. The Bombay
HC has passed an interim order dated January 24, 2013 granting a stay and directing the DoT to refrain
from undertaking any coercive actions for non-payment of the amounts under demand. The matter is
currently pending.
3.
Association of Unified Telecom Service Providers of India and others (“AUSPI Group”) had filed
petitions before TDSAT against the Union of India and another (“UoI”) regarding calculation of
adjusted gross revenue (the “AGR”), which forms the basis for the quantum of license fees. The
AUSPI Group had contended that the license fees should be payable on the AGR earned from
operation of the licenses alone and that the revenue derived from non-licensed activities such as interest
income, rent income, dividend income should not be included within the AGR for computing license
fee. TDSAT, through its orders dated July 7, 2006 and August 30, 2007 (the “Common Orders”),
accepted the contentions of the AUSPI Group. UoI filed an appeal before the Supreme Court
challenging the Common Orders and the Supreme Court, through its order dated October 11, 2011, set
aside the Common Orders and held that TDSAT had no jurisdiction to determine the validity of the
terms and conditions contained in the telecom license agreement, including the definition of the term
‘adjusted gross revenue’ without a specific demand being disputed before it. Additionally, the Supreme
Court of India permitted the licensees companies to challenge the demands raised by DoT before
TDSAT within the following two months.
Our Company has filed eight petitions before TDSAT against Union of India challenging various
demand notices issued by the DoT. Our Company has pleaded before TDSAT on various grounds,
including the definition of the AGR being inconsistent with the terms and conditions of the CMTS
license agreement. TDSAT has passed an interim order dated December 15, 2011 restraining the DoT
from enforcing any demands raised by it against the licensees without the leave of TDSAT. The
aggregate amount involved in the matter is ₹ 241.99 million and the matter is currently pending.
4.
Our Company has filed a writ petition before the High Court of Kerala against the Union of India and
another seeking directions restraining the DoT from computing the license fee after including revenue
generated by our Company from activities other than licensed activities within the definition of
‘adjusted gross revenue’. Our Company further sought a declaration from the High Court that the
power granted to DoT under proviso to section 4 of the Indian Telegraph Act, 1885 to claim revenue
share in respect of activities, other than licensed activities undertaken by our Company, is in violation
of Article 14 and 19(1)(g) of the Constitution of India. The High Court of Kerala passed an interim
order dated July 13, 2012 permitting our Company to calculate the license fee in a manner consistent
with past practice until disposal of the petition. The amount involved in the matter is ₹ 1376.7 million
and the matter is currently pending.
5.
The DoT had issued a demand notice to our Company in November 2012 for an aggregate amount of ₹
1,342 million. The demand pertained to alleged shortfall in the license fee paid by our Company and
interest thereon and was based on the special audit conducted in July 2009 for the fiscal years 2007 and
2008 by auditors appointed by the DoT (the “DoT Auditors”). The shortfall had resulted from a
difference between the DoT’s and our Company’s interpretation of the AGR. Aggrieved by the said
demand notice, our Company filed an intervention application in an existing writ petition before the
Kerala High Court, which has granted an interim stay through an order dated November 26, 2012. The
matter is currently pending.
6.
A penalty of ₹ 215 million (i.e. 150% of the alleged shortfall) was levied by DoT on our Company for
delay in the payment of the license fee. DoT had not adjusted the refund payable by it to our Company
while it calculated the aforementioned shortfall. Therefore, our Company challenged this levy of
penalty before the TDSAT. The TDSAT allowed our Company’s petition through an order dated
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February 11, 2010 and directed DoT to not levy the aforementioned penalty and refund the amount
adjusted by DoT as penalty. The DoT has challenged this order of the TDSAT before the Supreme
Court, however, no interim order has been passed by the Supreme Court in favour of the DoT. The
matter is currently pending.
7.
The DoT had, through its order dated February 25, 2010 (the “Charges Enhancement Order”),
increased the 2G spectrum charges by 1% of AGR across all the spectrum slabs for GSM and CDMA
service providers. Our Company had filed a petition before TDSAT challenging the Charges
Enhancement Order, which was dismissed by TDSAT through its order dated September 1, 2010 (the
“TDSAT Order”). Thereafter, our Company filed an appeal before the Supreme Court challenging the
TDSAT Order. The Supreme Court has passed an interim order dated October 22, 2010 staying the
operation of the TDSAT Order, subject to certain conditions, which include:
(i)
deposit of 50% of the outstanding principal amount (net of interest) in the registry of the
Supreme Court;
(ii)
and balance amount shall be secured by way of bank guarantee issued in favour of the
Secretary General, Supreme Court; and
(iii)
the managing director of our Company to provide an affidavit that our Company will pay the
balance amount (along with interest as determined by the Supreme Court) if the appeal is
dismissed.
The Supreme Court also stated that in case of a breach of the aforementioned conditions, the impugned
DoT order will come into force with immediate effect. The matter is currently pending and the
aggregate amount involved in it is ₹ 639 million.
8.
The DoT had, through its order dated December 23, 2011, directed all telecom service providers having
intra-circle roaming agreements for 3G services (the “ICR Arrangements”) to immediately stop
providing such services (the “Impugned Order”). The ICR Arrangements are utilised by the telecom
service providers to provide their respective subscribers with 3G services in those circles, where such
telecom service providers do not have 3G spectrum. All the directed parties, including our Company,
collectively challenged the DoT directive before TDSAT, which stayed the DoT order, through its
interim order dated December 24, 2011. On July 3, 2012, the two member bench of the TDSAT
pronounced a split verdict in the matter. The member ordered that the petition be dismissed. However,
the chairperson, TDSAT (the “Chairman”), in his judgment, allowed the petition, set aside the
Impugned Order and granted DoT the liberty to pass appropriate orders upon giving due opportunity of
hearing to the operators, including our Company (collectively, the “Aggrieved Petitioners”).
Pursuant to the order of the Chairman, the DoT issued fresh show cause notices to each of the
Aggrieved Petitioners. Our Company submitted its response to the fresh show cause notice on February
18, 2013. However, on April 5, 2013, the DoT committee, as with other Aggrieved Operators, imposed
a penalty on our Company (the “Penalty Order”). Each of the Aggrieved Petitioners filed writ
petitions before the Delhi High Court. Simultaneously, our Company had filed an application for
intervention before the Supreme Court of India in the special leave petition (no. 8417 of 2013)
preferred by one of the Aggrieved Petitioners against the Union of India challenging a order dated
April 4, 2013 passed by the High Court of Delhi against such Aggrieved Petitioner in relation to the
violation of licenses due to execution of ICR Arrangements.
Subsequently, the Aggrieved Petitioners sought leave of the Delhi High Court and the Supreme Court,
as applicable, to approach TDSAT for determination of the underlying dispute. Accordingly, the Delhi
High Court and the Supreme Court dismissed the petitions filed by the Aggrieved Petitioners as
withdrawn. All the Aggrieved Petitioners then filed their respective petitions before TDSAT for
determining the legality of the ICR Arrangements, which were aggregated by TDSAT and heard as a
single matter. TDSAT, through its order dated April 29, 2014 (the “ICR Order”), decided the matter
in favour of the Petitioners and held that that ICR Arrangements were not in violation of the applicable
law and the terms of the licenses. It further quashed the penalty orders passed by DoT against each of
the Petitioners. The prescribed limitation period for filing an appeal before the Supreme Court is 90
days from the date of the ICR Order. As on date, no appeal against the said order of TDSAT has been
preferred by DoT.
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9.
Our Company had filed a writ petition before the High Court of Delhi challenging the letter dated April
5, 2013 issued by the DoT (the “DoT Letter”). Through the DoT Letter, our Company was directed to
immediately stop providing 3G services pursuant to ICR Arrangements to both existing and new
subscribers in the Service Areas of Assam, Kolkata, Mumbai, North East, Tamil Nadu and West
Bengal and reiterated a penalty of ₹ 500 million per Service Area (aggregating to ₹ 3,000 million) was
also imposed on our Company. The High Court of Delhi passed an interim order dated April 12, 2013
(the “Interim Order”) directing that the letter dated April 5, 2013 would stand modified to the extent
that our Company shall be restricted from extending 3G services through ICR Arrangements only to
new subscribers and that no coercive steps will be taken by DoT pursuant to the DoT Letter.
Subsequently, the High Court of Delhi, through order dated August 5, 2013, permitted withdrawal of
the writ petition by our Company and granted leave to approach TDSAT in relation to the said dispute.
It further held that the stay granted pursuant to the interim order shall continue for a further period of
six weeks i.e. upto September 20, 2013. Subsequently, TDSAT, through an order dated April 29, 2014
(the “ICR Order”), held that ICR Arrangements were not violative of applicable law and set aside the
penalty imposed by DoT on our Company. As on date, no appeal against the said order of TDSAT has
been preferred by DoT.
In relation to this, our Company had filed an affidavit before the High Court of Delhi confirming its
compliance with the conditions specified Interim Order. The DoT has, however, filed an application
before the High Court of Delhi against our Company and others alleging intentional and wilful
violation of the Interim Order on the grounds that our Company had provided 3G services and had
additionally decided to provide 3G services to existing subscribers who met specific criteria, despite no
such criteria being laid down by the High Court of Delhi. The DoT prayed for dismissal of the writ
petition filed by our Company and vacation of interim orders. The matter pertaining to the alleged noncompliance of the Interim Order is currently pending.
10.
Our Company has filed a special civil application before the High Court of Gujarat challenging the
communications and demand notices issued by Assistant Director General, Security-Telecom
Enforcement, Resources and Monitoring Cell (“TERM”), Gujarat whereby a total penalty of ₹ 168.6
million was imposed on our Company for its alleged failure to store customer activation form and
verification documents pertaining to Gujarat Service Area. The High Court of Gujarat has granted a
stay against these notices by its interim order dated December 28, 2012 and the matter is currently
pending final adjudication.
11.
Our Company has filed a petition dated June 6, 2014 before the TDSAT challenging the demand orders
aggregating to ₹ 842 million issued by the TERM Cell, DoT, Rajasthan (collectively, the “EMF
Demand Orders”). The EMF Demand Orders have been issued in relation to the alleged noncompliance by our Company of the terms of certain license agreements on account of its failure to (i)
submit self-certification of compliance with prescribed EMF norms, as specified; and (ii) display
proper signs, as prescribed by DoT. The TDSAT, through its order dated June 8, 2014 has granted a
stay of the EMF Demand Orders. The matter is currently pending.
12.
Our Company, along with several entities involved in the telecom industry (the “EMF Petitioners”)
has filed a petition dated August 26, 2013 before TDSAT (the “EMF Petition”). In terms of the
circular dated October 11, 2012 on the implementation of radiation norms on EMF exposure by BTS
(“EMF Circular”), the DoT has sought to impose penalty by way of invocation of bank guarantees of
the EMF Petitioners on account of their failure to submit self-certification of compliance with
prescribed EMF norms (“Self Certification”), within the specified time. The EMF Petition was filed
seeking (i) the setting aside of certain clauses of the EMF Circular on the grounds that the same were
arbitrary and levied disproportionate penalty on account of delay or failure in submitting Self
Certification; and (ii) stay on the operation of letters invoking the bank guarantees of the EMF
Petitioners. TDSAT, through its interim order dated August 26, 2013 held that until further orders, no
bank guarantees were to be invoked by DoT or in case of invoked bank guarantees, no amount were to
be received by DoT, in terms thereof. Thereafter, on August 30, 2013, TDSAT, while restraining DoT
from taking any coercive action towards realisation of the penalty, has held that in the event the EMF
Petition were to fail, the EMF Petitioners shall be liable to pay the penalty along with the applicable
interest and costs of litigation. Subsequently, on April 29, 2014, TDSAT reinforced the earlier interim
order and directed that in the event DoT failed to file its reply within the specified period, TDSAT may
proceed to dispose of the matter ex-parte. The amount involved in the matter with respect to the
Company is ₹ 4,944.87 million. The matter is pending.
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Show Cause Notices
1.
DoT has issued a show cause notice dated September 3, 2012 to our Company seeking reasons for not
imposing a financial penalty of ₹ 500 million and for not terminating the agreement granting license
for providing CMTS in Andhra Pradesh Service Area, on the grounds of alleged breach of terms and
conditions of the said agreement which, inter alia, includes suppression of actual subscriber / customer
database while reporting to Telecom Enforcement, Resources and Monitoring Cell, Andhra Pradesh.
Our Company has filed its reply dated October 31, 2012, inter alia, submitted that the show cause
notice amounts to double jeopardy and double penalization as the TERM Cell had already imposed a
penalty amounting to ₹ 0.15 million for specific numbers raised by DoT, which has been paid by our
Company under protest. The matter is currently pending.
2.
DoT has issued a show cause notice dated January 4, 2013 to our Company seeking reasons for not
imposing a financial penalty of ₹ 500 million and for not terminating the agreement granting license
for providing CMTS in Haryana Service Area, on the grounds of alleged breach of terms and
conditions of the said agreement which, inter alia, includes suppression of actual subscriber / customer
database while reporting to Telecom Enforcement, Resources and Monitoring Cell, Haryana. Our
Company has filed its reply dated March 5, 2013, inter alia, submitted that the said allegations date
three years back and have been formally replied to and that no instance of security concern due to
alleged default has been reported. The matter is currently pending.
3.
The Company has received show cause notices cum demands (the “AGR Show-causes”) from DoT
regarding calculation of AGR for the payment of license fees for the financial years 2006-07 to 2010-11.
The amount involved in the AGR Show-causes aggregate to ₹ 4,830.89 million. The AGR Show-causes
primarily related to issues arising from: (a) differences DoT’s and the Company’s in interpretation
of AGR, and (b) disallowance of deductions for intra-company transactions relating to other service
areas in the absence of proof of payment. The Company has replied to the AGR Show-causes and the
same are currently pending.
Tax Proceedings
Direct Tax Proceedings
1.
Our Company was served with an assessment order along with demand notice dated March 27, 2014
Deputy Commissioner of Income Tax, Circle 3(2), Mumbai (the “DCIT”) for ₹ 2,376.10 million in
relation to assessment year 2011-2012 (the “Assessment Order”). Pursuant to the Assessment Order,
the DCIT, disallowed, amongst other things, (i) expenditure incurred in relation to the exempt income
generated by our Company from investments, (ii) discount given to prepaid card distributors, (iii)
roaming charges paid to other operators for non-deduction of tax deducted at source (“TDS”), (iv) the
interest attributable to interest free advances given to subsidiaries, (v) revenue share license fee paid to
DoT (vi) lease rent paid to Quippo Telecom Infrastructure Ltd and to Indus Towers Limited, for use of
their respective towers. On April 23, 2014, our Company has preferred an appeal before the
Commissioner of Income Tax, Appeals (“CIT Appeals”) against the Assessment Order. Our Company
has also filed an application dated April 23, 2014 with the DCIT, for stay of demand raised through the
Assessment Order. The application for stay is currently pending before the DCIT. Further, the appeal
filed before the CIT Appeals is also currently pending.
2.
Our Company was served with an assessment order and demand notice dated March 28, 2014 by the
Income Tax Officer (OSD) (TDS)-2, Mumbai Circle (“ITO”) for ₹ 2316.71 million (the “Demand
Amount”) in relation to assessment year 2012-2013 (the “Assessment Order”). Pursuant to the
Assessment Order, the ITO has held our Company to be an assessee in default on account of non
deduction of TDS on (i) commission and discount paid to distributors (the “Commission”); and (ii)
roaming charges paid to other operators (the “Roaming Charges”). In calculating the Demand
Amount, the ITO has erroneously taken into consideration the Commission and Roaming Charges paid
for the Company on a consolidated basis, instead of the amount of the Commission and Roaming
Charges paid in relation to Mumbai circle (over which the ITO has jurisdiction) and raised the above
demand. Thereafter, our Company has filed an application dated April 10, 2014 for rectification of the
Assessment Order (the “Rectification Application”). On April 28, 2014, our Company has filed a writ
petition (no. 1166 of 2014) in the High Court of Bombay against the Assessment Order (the “Writ
Petition”). In terms of the Writ Petition, the ITO has submitted that pending the disposal of the
Rectification Application, our Company shall not be treated as an assessee in default (the “ITO
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Submission”). Subsequently, the High Court of Bombay, through its order dated April 30, 2014, (i)
listed the Writ Petition for admission; and (ii) on the basis of the ITO Submission, held that in the event
the Rectification Application were to be decided against our Company, our Company would not be
treated as an assessee in default for a period of two weeks from the date of service of such order.
Further, our Company has preferred an appeal before the Commissioner of Income Tax (Appeals) - 14
(“CIT Appeals”) against the Assessment Order on May 2, 2014 (the “Appeal”). Thereafter, on May 5,
2014, our Company has filed an application for stay of the Demand Notice before the ITO until the
final disposal of the Appeal (the “Stay Application”). The Stay Application and the Rectification
Application are currently pending. The Appeal and the Writ Petition are also currently pending.
3.
Our Company was served with an assessment order along with demand notice dated March 28, 2013 by
the Deputy Commissioner of Income Tax, Circle 3(2), Mumbai (the “DCIT”) for ₹ 15,176.93 million
in relation to assessment year 2010-2011 (the “Assessment Order”). The Assessment Order held that
the surplus of ₹ 20,694.54 million worth of net value of assets of the telecom undertaking vested in our
Company from ABTL pursuant to the scheme of arrangement between our Company and ABTL was
taxable as income under the IT Act and should be added to the taxable income of our Company as the
scheme of arrangement was inconsistent with the definition of demerger under the IT Act. Pursuant to
the Assessment Order, the DCIT disallowed, amongst other things, (i) revenue share license fee paid to
the DoT, (ii) discount given to prepaid dealers, (iii) roaming charges paid to other operators for nondeduction of tax deducted at source (“TDS”), (iv) the interest attributable to interest free advances
given to subsidiaries, and (v) the interest incurred for acquisition of Spice, all of which resulted in an
increase in the total taxable income of our Company. Our Company has preferred an appeal before the
Commissioner of Income Tax (Appeals) (“CIT Appeals”) against the Assessment Order on April 17,
2013. Our Company also filed an application, dated April 18, 2013 before the DCIT for a stay of
demand raised through the Assessment Order. The DCIT, through its order dated May 9, 2013, stayed
the demand of ₹ 6,172.20 million out of the total demand of ₹ 15,176.93 million raised through the
Assessment Order (“DCIT Order”). The DCIT Order was upheld by the Additional Commissioner of
Income Tax, Range 3(2), Mumbai, through its order dated May 29, 2013 (the “ACIT Order”) and by
the Commissioner of Income Tax – 3, Mumbai (the “CIT”), through its order dated June 12, 2013 (the
“CIT Order”). Our Company filed a writ petition dated June 17, 2013 before the High Court of
Bombay against the DCIT Order, the ACIT Order and the CIT Order (collectively, the “Impugned
Orders”) in relation to the balance demand of ₹ 9,004.70 million. The High Court of Bombay, through
its order dated September 12, 2013, quashed and set aside the Impugned Orders and directed the CIT to
consider our Company’s application for stay afresh. The DCIT, through its order dated October 10,
2013, rectified the Assessment Order by revising the demand from ₹ 15,176.93 million to ₹ 11,994.75
million (the “Revised Assessment Order”). Pursuant to the abovementioned order issued by the High
Court of Bombay, the CIT considered our Company’s application afresh. Through orders dated
ovember 8, 2013 and ovember 11, 2013 (the “New CIT Orders”), CIT directed our Company to
make payment of ₹ 1,300 million, as specified by CIT. In terms of the New CIT Orders, the CIT
further directed that subject to the aforementioned payment being made by our Company, the balance
demand in the matter was stayed until the disposal of our Company’s pending appeal before the CIT
(Appeals). The CIT also held that the enforcement of interest demand of ₹ 512.42 million was deferred
till disposal of our Company’s pending appeal before the CIT (Appeals). The proceedings before the
CIT (Appeals) are currently pending.
4.
In relation to assessment years 2003-04 and 2004-05, the Office of the Deputy Commissioner of
Income Tax, Circle – 50(1), ew Delhi (the “DCIT”) has through its orders dated February 13, 2004
and April 4, 2005, respectively (collectively, the “Assessment Orders”) held that the discount allowed
by our Company to distributors of prepaid subscriber identification module (“Prepaid Distributors”)
was in the nature of commission or brokerage, and accordingly subject to tax deduction at source and
that the relationship between our Company and the Prepaid Distributors was that of a principal and an
agent (the “Alleged Grounds”). Our Company filed appeals against the Assessment Orders before the
Office of the Commissioner of Income Tax, (Appeals) XXX, ew Delhi (the “CIT Appeals”). The
CIT Appeals, through its orders dated March 31, 2005 and March 27, 2006 upheld the Assessment
Orders (the “CIT Orders”). The Income Tax Appellate Tribunal, Delhi Bench “A”, ew Delhi,
through its order dated March 28, 2008, allowed the appeal filed by our Company against the CIT
Orders (the “ITAT Order”). Subsequently, the Commissioner of Income Tax-XVII (the “CIT”)
preferred an appeal against the ITAT Order before the High Court of Delhi. The High Court of Delhi
through its order dated February 19, 2010 set aside the ITAT Order (the “High Court Order”). Our
Company has filed two separate special leave petitions, each dated March 9, 2010, before the Supreme
167
Court of India (the “Supreme Court”) against the High Court Order. The Supreme Court, through its
order dated January 31, 2011 (in modification of its order dated March 11, 2010) clarified that the
Income Tax department will proceed to decide whether penalty is leviable on our Company and
accordingly, quantify such penalty amount. This matter (the “Delhi Circle Matter”) is currently
pending before the Supreme Court for final disposal.
In addition to the Delhi Circle Matter, tax authorities of various other circles have raised demand
against our Company on the Alleged Grounds, for various assessment years. Consequently, our
Company has various matters of similar nature pending before different judicial authorities. The
aggregate amount involved in these matters, including the Delhi Circle Matter, is ₹ 2,981 million.
These matters are currently pending.
5.
On August 31, 2009, the High Court of Gujarat had approved the scheme of arrangement between our
Company and its then wholly owned subsidiary, ICTIL (the “ICTIL Scheme” and the order, the
“ICTIL Scheme Order”). Pursuant to the ICTIL Scheme, the passive infrastructure assets (the “PIA”)
of our Company were demerged into ICTIL, as specified under the ICTIL Scheme. Thereafter, ICTIL
(together with all assets and liabilities, including the PIA) along with certain other companies were
merged with Indus Towers in terms of a scheme of arrangement approved by the High Court of Delhi
on April 18, 2013. Subsequently, on October 25, 2013, the Deputy Commissioner of Income Tax – 3,
Mumbai (the “DCIT”) has filed a ‘review cum recall of order’ application against our Company,
challenging the ICTIL Scheme Order and seeking condonation of delay in filing the application (the
“DCIT Application”). In terms of the DCIT Application, the DCIT has submitted that the ICTIL
Scheme was undertaken by our Company for the purpose of transferring its PIA to a third party (being
Indus Towers) through an intermediate transferee company (being ICTIL) so as to avoid certain
income tax, VAT and stamp duty implications. The DCIT has further alleged that the approval of the
ICTIL Scheme has resulted in a loss to the revenue authorities. Our Company has filed its reply to the
DCIT Application on February 8, 2014. The High Court of Gujarat is yet to decide on the issue
pertaining to the condonation of delay in filing the application by DCIT and the matter is currently
pending.
6.
Our Company was served with assessment orders along with demand notices by the Deputy
Commissioner of Income Tax, Circle 3(2), Mumbai and the Additional Commissioner of Income Tax,
Circle 3(2), Mumbai (collectively, the “Assessing Officers”), as applicable, in relation to assessment
years commencing from 2003-2004 till 2009-2010 (collectively, the “Assessment Orders”). Pursuant
to the Assessment Orders, the Assessing Officers have disallowed amongst other things, (i) revenue
share license fee paid to the DoT, (ii) discount given to prepaid dealers, (iii) roaming charges paid to
other operators for non-deduction of tax deducted at source (“TDS”), (iv) the interest attributable to
interest free advances given to subsidiaries, and (v) the interest incurred for acquisition of Spice
(collectively, the “Disallowances”). The Disallowances have resulted in an increase in the total taxable
income of our Company and a corresponding reduction in the returned tax losses. Our Company has
challenged the Disallowances aggregating to ₹ 6,917 million before the Commissioner of Income Tax
(Appeals) and ₹ 31,391 million before the ITAT, respectively (collectively, the “Appeals”), which are
currently pending. The returned tax losses are subject to the outcome of the Appeals.
7.
Erstwhile Idea Mobile Communications Limited (“IMCL”) (which merged with our Company with
effect from April 1, 2006) was served with assessment orders along with demand notices by the
Assistant Commissioner of Income Tax, Circle 11(1) and Deputy commissioner of Income tax Circle
11(1), New Delhi (collectively, the “Assessing Officers”), as applicable, in relation to assessment
years commencing from 2003-2004 till 2005-2006 (collectively, the “Assessment Orders”). Pursuant
to the Assessment Orders, the Assessing Officers have disallowed amongst other things, (i) revenue
share license fee paid to the DoT, (ii) amortisation of license fees; (iii) foreign exchange loss; and (iv)
prior period expenses, aggregating to ₹ 1,816.07 million (collectively, the “Disallowances”). The
Disallowances have resulted in an increase in the total taxable income of our Company (being IMCL’s
successor) and a corresponding reduction in the returned tax losses. In relation to assessment years
2003-04 and 2004-05, the ITAT, Mumbai, has ruled in favour of our Company and held that revenue
share license fees could be claimed by our Company as revenue expenditure (the “ITAT Orders”).
The Commissioner of Income Tax – 3, Mumbai has challenged the ITAT Orders through two separate
writ petitions before the High Court of Bombay, which are yet to be admitted (the “Petitions”). In
relation to assessment year 2005-06, our Company has preferred an appeal before the ITAT, which is
currently pending (the “Appeal”). The returned tax losses are subject to the outcome of the Petitions
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and the Appeal.
8.
Erstwhile Spice (which merged with our Company with effect from March 1, 2010) was served with
assessment orders along with demand notices by the Income tax officer Ward 9(4), New Delhi,
Additional Commissioner of Income Tax Range 9, New Delhi, Deputy commissioner of Income tax
Circle 9(1), New Delhi and Deputy commissioner of Income tax Circle 3(2), Mumbai (collectively, the
“Assessing Officers”), as applicable, in relation to assessment years commencing from 2005-2006 till
2010-2011 (collectively, the “Assessment Orders”). Pursuant to the Assessment Orders, the Assessing
Officers have disallowed amongst other things, (i) discount given to prepaid dealers for non-deduction
of tax deducted at source (“TDS”), (ii) roaming charges paid to other operators for non-deduction of
TDS, (iii) depreciation claimed on certain fixed assets, and (iv) interest on subordinate debentures
(collectively, the “Disallowances”). The Disallowances have resulted in an increase in the total taxable
income of our Company and a corresponding reduction in the returned tax losses for assessment years.
In relation to assessment year 2008-09, after setting off of the brought forward losses against the
taxable income of our Company, the Assessing Officers have raised a demand of ₹ 1.86 million. The
Company has challenged the Disallowances aggregating to ₹ 7,496 million before the Commissioner of
Income Tax (Appeals) and ₹ 1,670 million before the ITAT respectively (collectively, the “Appeals”),
which are currently pending. The returned tax losses are subject to the outcome of the Appeals.
Indirect Tax Proceedings
1.
A show cause notice dated June 11, 2008 was received by our Company from the Office of the
Commissioner of Service Tax, ew Delhi (the “SCN”), demanding recovery of the amount that our
Company had availed of as CENVAT credit, amongst others, on (i) the capital goods and services
utilised in the construction of telecommunications tower and parts thereof (the “Alleged Grounds”);
and (ii) capital goods, in excess of the prescribed limits, for the period from September 2004 to
December 2007. Our Company replied to the SCN through its letter dated September 24, 2008. The
Office of the Commissioner of Service Tax, Mumbai-I, through its order dated April 29, 2010, upheld
the recovery demand raised through the SCN and imposed penalty and interest on our Company in
terms of the applicable provisions of the Finance Act, 1994 and CENVAT Credit Rules, 2004 (the
“Order in Original”). On July 30, 2010, our Company preferred an appeal along with an application
for stay against the Order in Original, before the Customs, Excise and Service Tax Appellate Tribunal,
Mumbai (the “CESTAT”). The CESTAT, through its order dated May 13, 2013, (i) disallowed the
waiver of pre-deposit of a specified amount for the CENVAT credit availed in relation to towers and
shelters and utilisation of services in construction of towers; (ii) waived the service tax, interest and
penalties as prescribed by the Order in Original; and (iii) granted a stay in favour of our Company,
pending final disposal of the appeal, conditional on our Company depositing a specified amount with
the revenue authorities within the prescribed timelines. The CESTAT further held that in the event our
Company failed to abide by its directions, the stay so granted shall stand dissolved (the “CESTAT
Order”). Our Company has preferred an appeal against the CESTAT Order before the High Court of
Bombay. The High Court of Bombay, through its order, dated October 10, 2013, directed CESTAT to
decide this matter (the “Delhi Circle Matter”) on merits without insisting on pre-deposit. This matter
is currently pending.
In addition to the Delhi Circle Matter, the service tax authorities of various other circles have raised
demand against our Company on the Alleged Grounds for specified periods. Consequently, our
Company has various matters of similar nature pending before different judicial authorities. The
aggregate amount involved in these matters, including the Delhi Circle Matter, is ₹ 2,074 million.
These matters are currently pending.
2.
A show cause notice dated May 14, 2010 was received by our Company from the Office of the
Commissioner Central Excise Commissionerate, Chandigarh, (the “SCN”), demanding recovery of the
amount that our Company had availed of as CENVAT credit on various input services for the period
prior to June 1, 2007 and utilised towards service tax liability with effect from June 1, 2007 (“Alleged
Grounds”). Our Company replied to the SC through its letter dated ovember 19, 2012. The Office of
the Commissioner of Service Tax, Mumbai-I, through its order dated January 29, 2013, upheld the
recovery demand raised through the SCN and imposed penalty and interest on our Company in terms of
the applicable provisions of the Finance Act, 1994 and CENVAT Credit Rules, 2004 (the “Order in
Original”). Subsequently, our Company preferred an appeal along with an application for stay against
the Order in Original, before the CESTAT. The CESTAT, through its order dated June 25, 2013,
granted an unconditional waiver from pre-deposit of dues adjudged against our Company and granted a
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stay on recovery thereof, pending final disposal of the appeal. This matter is currently pending.
In addition to the above matter, the service tax authorities of various other circles have raised demand
against our Company on the Alleged Grounds for specified periods. Consequently, our Company has
various matters of similar nature pending before different judicial authorities. The aggregate amount
involved in these matters, including the Punjab Circle Matter is ₹ 1,335 million. These matters are
currently pending.
3.
Our Company has challenged the constitutional validity of the Madhya Pradesh Vilasita, Manoranjan,
Amod Evam Vigyapan Kar Adhiniyam, 2011 (“MP Tax Act”) by filing a writ petition (no. 9172 of
2011) against the government of Madhya Pradesh, Commissioner, Commercial Tax Department,
Madhya Pradesh and the Assistant Commissioner, Commercial Tax Department, Madhya Pradesh,
before the High Court of Madhya Pradesh at Jabalpur (the “Existing Writ Petition”), which is
currently pending. Subsequently, the Deputy Commissioner, Commercial Tax Department, Madhya
Pradesh (“DCCTD”) has, through an order dated January 13, 2014, demanded entertainment tax from
our Company for the financial year 2011-2012 on certain VAS such as caller tunes, songs, short videos,
movie clips aggregating to ₹ 306.43 million towards tax and penalty (as our Company has already paid
a sum of ₹ 40 million), in terms of the MP Tax Act (“Entertainment Tax Demand”). The DCCTD
has alleged that such services are in the nature of ‘entertainment’ and are therefore liable to
entertainment tax of 20% of the value of such services. Our Company has challenged the Entertainment
Tax Demand before the High Court of Madhya Pradesh at Jabalpur by amending the Existing Writ
Petition (the “Amended Writ Petition”) and contended that since it has already paid the applicable
service tax on the VAS, the Entertainment Tax Demand amounted to double taxation. The High Court
of Madhya Pradesh at Jabalpur, through an interim order dated March 27, 2014 held that no coercive
action was to be taken for recovery of the aforementioned amount by the DCCTD until the next date of
hearing. The Amended Writ Petition is currently pending for final hearing.
4.
Our Company has challenged the levy of entry tax in eleven states – Bihar, Haryana, Himachal
Pradesh, Jammu & Kashmir, Madhya Pradesh, Chhattisgarh, Orissa, Rajasthan, Karnataka, Uttar
Pradesh and Uttarakhand. The matter pertaining to Orissa is pending before the Supreme Court whereas
the matters pertaining to Madhya Pradesh, Jammu & Kashmir, Rajasthan, Karnataka, Uttar Pradesh and
Uttarakhand are pending before the respective High Courts. Matters pertaining to Haryana, some of the
matters pertaining to Uttar Pradesh, Madhya Pradesh and Chhattisgarh are pending before the relevant
commercial or trade tax tribunals. Matters pertaining to Bihar and Himachal Pradesh are pending
before the relevant Assistant Commissioner / Commercial Tax Officer. Some of the matters pertaining
to Uttar Pradesh, Madhya Pradesh and Chhattisgarh are also pending before Deputy / Assistant /
Additional Commissioner (Appeals). The aggregate amount involved in these matters is ₹ 654.13
million.
Show Cause Notices
1.
A show cause notice dated April 23, 2012 was received by our Company from the Office of the
Commissioner of Central Excise, Thane- I (the “SCN”), demanding payment of service tax on free of
cost SIM cards issued by our Company across our circles, for the period October 1, 2006 to June 30,
2011. Our Company has replied to the SCN through its letter dated January 30, 2013. The amount
involved in this matter is ₹ 733 million. The matter is currently pending.
Others
1.
Our Company has received a legal notice dated April 22, 2014 issued on behalf of the Kashmir
Chamber of Commerce and Industry (“KCCI” and the notice, the “Advertisement Notice”) in relation
to one of our Company’s advertisements. The Advertisement otice alleges, amongst other things, that
our Company has adversely affected the reputation and the business prospects of Kashmiris by (i)
allegedly depicting that the true test for determining the authenticity of a pashmina shawl was the ring
test; and (ii) portraying Kashimiri traders in an adverse light. The Advertisement Notice has sought,
amongst other things, (a) a public apology from our Company; (b) withdrawal of the said
advertisement; (c) payment of a total of ₹ 4,000 million to KCCI for loss of business and reputation
and for mental agony. Pursuant to the receipt of the Advertisement Notice, our Company has
withdrawn the said advertisement. Further, our Company has also responded to the allegations made in
the Advertisement Notice through a letter dated May 22, 2014.
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Litigation Involving Aditya Birla Telecom Limited
Direct tax proceedings
1.
In the assessment year 2009-2010, a sum of ₹ 20,982.50 million was received by ABTL from P5 Asia
Holding Investments (Mauritius) Limited (“P5”) for its subscription of 1,925,000 compulsory
convertible preference shares of ABTL having a face value of ₹ 10 each (“CCPS”). On December 19,
2011, the Additional Commissioner of Income Tax-10, Mumbai passed an assessment order and
consequently issued a demand notice mandating ABTL to pay ₹ 9,168.55 million on various grounds,
including (i) ABTL’s alleged failure to prove financial capacity of P5 and genuineness of the
transaction, and (ii) disallowance of ₹ 56.80 million as deduction of expenditure incurred by ABTL on
income which does not form a part of total income of ABTL. Subsequently, ABTL filed an appeal on
January 18, 2012 before the Commissioner of Income Tax (Appeals), Mumbai (“CIT Appeals”)
against the said order and notice. On January 31, 2012, ABTL had deposited an amount of ₹ 500
million under protest. On March 14, 2012, on an application made by ABTL for a stay of the above
mentioned demand, the Additional Commissioner of Income Tax-10, Mumbai directed ABTL to pay a
further sum of ₹ 750 million and agreed to grant a stay until May 31, 2012 or passing of final order by
the CIT Appeals, whichever is earlier, upon such payment. ABTL deposited the sum of ₹ 750 million
as directed. The stay period was subsequently extended until January 31, 2013. On February 11, 2013,
the Commissioner of Income Tax-10, Mumbai, directed ABTL to deposit 50% of the total demand of ₹
9,168.55 million by February 27, 2013 and kept the balance amount payable under abeyance until the
disposal of appeal by the CIT Appeals or six months, whichever is earlier. Aggrieved by this order,
ABTL filed a writ petition before the High Court of Bombay. The High Court of Bombay by its order
dated February 28, 2013 (i) directed the CIT Appeals to dispose the appeal filed by ABTL
expeditiously i.e. preferably within three months from the date on which the authenticated copy of the
order was provided to CIT Appeals, and (ii) modified the order dated February 11, 2013 to the extent
that ABTL would be entitled to a stay of the recovery of the balance amount conditional on further
deposit of a sum of ₹ 500 million within a period of four weeks from the date of the order.
Subsequently, ABTL filed a special leave petition along with an application for interim relief before
the Supreme Court challenging the order dated February 28, 2013. The Supreme Court, by its order
dated March 14, 2013, has dismissed the special leave petition and directed the CIT Appeals to dispose
of the appeal within the time as directed by the High Court of Bombay in its order dated February 28,
2013.
On June 27, 2013, the CIT Appeals upheld the assessment order dated December 19, 2011 in relation
to issue pertaining to the CCPS proceeds and partially allowed the appeal in relation to, among other
things, disallowance of expenditure attributable to earnings from income which does not form a part of
total income of ABTL. On July 11, 2013, ABTL filed an appeal before the Income Tax Appellate
Tribunal, Mumbai challenging the order dated June 27, 2013. The Income Tax Appellate Tribunal,
Mumbai disposed of the stay application by its order dated July 19, 2013 granting a stay on the
outstanding amount for a period of six months or disposal of appeal, whichever is earlier.
Subsequently, since the six month period elapsed and the appeal could not be heard, ABTL had applied
to the Income Tax Appellate Tribunal for a further extension of the stay granted through its order dated
July 19, 2013. The Income Tax Appellate Tribunal, through its order dated January 24, 2014 has
granted a further stay for a period of six months or until the disposal of appeal, whichever is earlier.
The matter is currently pending.
2.
In the assessment year 2010-2011, ABTL had filed a scheme of arrangement under Section 391 to 394
of the Companies Act with the High Courts of Gujarat and Mumbai for demerging of its telecom
business into our Company without any consideration. The said scheme was approved by the High
Courts of Gujarat and Mumbai by their orders dated December 2, 2009 and January 22, 2010,
respectively. The Deputy Commissioner of Income Tax-10(1), Mumbai pursuant to its letter dated
January 15, 2013, and subsequent communications, sought reasons from ABTL for not treating transfer
of telecom business pursuant to the scheme as ‘transfer’ for the purposes of section 45 of the Income
Tax Act, 1961 and levying tax as ‘capital gains’. ABTL filed its replies on March 7, 2013 and March
25, 2013. However, the Deputy Commissioner of Income Tax-10(1), Mumbai passed an assessment
order and issued a demand notice dated March 31, 2013 asking ABTL to pay a sum of ₹ 24,321.01
million on various grounds including (i) treating the transfer of telecom business as a slump sale
transaction, thereby subject to taxation under section 45 of the IT Act as short term capital gain and
treating the business restructuring reserve of ₹ 73,307.36 million created by ABTL as lump sum
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consideration for the purposes of computing capital gains, and (ii) disallowance of deduction of license
fees of ₹ 94.73 million under section 35ABB(2) of the IT Act. Subsequently, ABTL filed an appeal
dated April 18, 2013 before the Commissioner of Income Tax (Appeals)-XXI, Mumbai (“CIT
Appeals”) challenging the order dated March 31, 2013. The Commissioner of Income Tax-10, Mumbai
disposed of the stay application by its order dated July 31, 2013 and granted a stay on the balance
amount of ₹ 23,721.01 million payable by ABTL subject to ABTL’s payment of ₹ 600 million by
August 7, 2013. ABTL has deposited the requisite amount. Subsequently, the CIT Appeals dismissed a
majority of the grounds of the appeal filed by ABTL, through its order dated December 18, 2013 (the
“Rejection Order”). On January 15, 2014, ABTL has preferred an appeal on merits against the
Rejection Order, along with an application for stay on demand, before the Income Tax Appellate
Tribunal. The matter is currently pending.
Material Fraud Committed against the Company
Nature of Fraud
Unauthorised
services
utilised
by
external
parties / subscribers
Amount involved in
2011-12 (in ₹ million)
-
Amount involved in
2012-13 (in ₹ million)
13.13
Amount involved in
2013-14 (in ₹ million)
73.38
In relation to the frauds committed in the nature of unauthorised services utilised by external parties /
subscribers committed against our Company, our Company initiates investigation and reviews revenue
assurance controls for the reported frauds and wherever necessary take legal action, as may be appropriate in the
circumstances.
Litigation Involving our Promoters
Details of any litigation or legal action pending or taken by any Ministry or Department of the Government or a
statutory authority against any promoter of our Company during the last three years are set out below:
Litigation Involving Aditya Birla Nuvo Limited
1.
Five labour cases have been filed by former workmen of ABNL on various grounds, before various
statutory authorities i.e. tribunals and labour courts, which include alleged violations by ABNL of
various labour enactment and other issues i.e. (i) under Section 7A Employee Provident Fund &
Miscellaneous Provisions Act, 1952 (the “Act”) to the Company alleging the “charges of evasion” of
Provident Fund, Family Pension and DLI of labourers, (ii) Minimum Wages Act, 1948, (iii) payment of
wages during the period of strike, (iv) demands of labour unions. All these cases are pending before
various labour courts and tribunals.
2.
17 criminal cases have been filed before various magistrate’s courts by Labour Inspector / Officer,
Chief Agricultural Officer and Pesticides Inspector in connection with the alleged violations / noncompliances by ABNL under various labour and other acts, such as: (i) violation of Sections 12(1) and
35(2)(n) of the Contractor Labour (Regulation & Abolition) Act,1970, (iii) not conducting JMC
election in ABNL, which is mandatory as per the Rule 61A of the Industrial Disputes (Gujarat) Rules,
1966, (iv) violation of Section 24 of the Fertiliser Control Order, 1985, (v) misbranding of pesticide,
and (vi) fatal accident of contract worker at the factory. These cases are currently pending.
3.
Four cases have been filed by Factory Inspectors in connection with alleged violations / noncompliances by ABNL under the Factories Act, 1948 relating to: (i) chlorine gas leakage in September
1997 in the factory premises and (ii) violation of Sections 59(1) and 59(2) of the Factories Act, 1948,
which provide for payment of overtime to the workmen calculating his/her salary/wages, including all
the allowances. These cases are currently pending.
4.
There are 10 cases filed by the Department of Central Excise and 12 cases filed by ABNL challenging
the orders passed by the Department of Central Excise. These matters mainly relate to central excise
and are currently pending in form of various writ petitions and appeals, before various High Courts,
joint / additional commissioner’s of Central Excise, CESTAT or the Supreme Court. These matters
relate to, amongst others, (i) irregular availment of cenvat credit, (ii) disagreement on method of
calculating profit by the Department of Central Excise, (iii) demand of duty due to differential value of
certain products, (iv) non-reversal of modvat / cenvat credit, and (v) cenvat credit duty paid for re-
172
importation of goods. These issues primarily relate to Central Excise Act, 1944, Central Excise Rules,
Cenvat Credit Rules, 2004. These matters are currently pending and the aggregate amount involved is ₹
127.2 million.
5.
Five appeals have been filed by ABNL and four matters have been filed by the Department of Customs
against ABNL. These matters are pending in form of various writ petitions, appeals and show cause
notices relating to customs duty, and are pending before the Gujarat High Court, Karnataka High Court
and CESTAT, respectively for issues including: (i) levy of duties at a higher rate than the applicable
rate, (ii) challenge of the show cause notices demanding differential duty, (iii) alleged violations of
provisions under EXIM policy, (iv) customs duty paid for re-importation of goods, and (v) issues under
Export Promotion Capital Goods scheme. These matters are currently pending and the aggregate
amount involved is ₹ 118 million.
6.
ABNL is contesting seven matters comprising of appeals pending before various Revision Boards and
Commissioners. The cases have been primarily filed under Value Added Tax Act, 2003 and Central
Sales Tax Act, 1956 for various accounting years. Issues involved include, mismatch of foreign inward
amounts in ER-4 & ST-3. The matters are currently pending and aggregate amount involved is
approximately ₹ 18.3 million.
7.
25 civil disputes comprising of suits, writ petitions, show cause notices have either been filed by
ABNL or in which ABNL is a respondent. The matters are currently pending before various courts /
forums / tribunals such as Employees’ Insurance Court, various High Courts (Gujarat, Karnataka,
Allahabad, Lucknow), ADM (Finance & Revenue), Civil Courts of Hingoli, Baroda, covering various
issues such as: (i) recovery of octroi, (ii) challenge of illegal demand notices by various authorities
such as Employees’ State Insurance Corporation and Municipal Corporation, (iii) stamp duty
valuations, (iv) electricity duty for violations under (a) Section 3(1) of Jute Packaging Materials
(Compulsory Use of Packaging Commodities) Act, 1987, (b) West Bengal Land Reform Act, 1955,
and (c) the Legal Metrology Act, 2009, (v) notification issued by the State of Gujarat in connection
with the arbitrary increase in house tax, (vi) reversal of green cess amount, and (vii) violations of
certain provisions of the Factories Act, 1948. The matters are currently pending and the aggregate
amount involved is approximately ₹ 71.4 million.
8.
The Canal Officer, Veraval, Irrigation Department, claim water charges against drawal of water from
own well near Hiren Dam- II, through its order dated June 13, 2007. Against the said order, ABNL had
filed an appeal before the District Collector, Junagadh, Gujarat. The District Collector, Gujarat,
through its order dated October 16, 2009 set aside the order passed by the Canal Officer, Veraval,
Irrigation Department. The Irrigation Department, Government of Gujarat issued a show-cause notice
dated November 21, 2011 against the order passed by the District Collector, Junagadh, Gujarat. ABNL
has challenged the said notice before the Gujarat High Court by filing a special civil application on
February 9, 2011. The Gujarat High Court, through, its order dated December 13, 2011 granted an
interim stay till next date of hearing. After several hearings on the matter, the Gujarat High Court,
through its order dated April 9, 2013, admitted the petition for final hearing and confirmed its interim
stay order till final disposal of the petition. The State of Gujarat has filed a letter patents appeal against
the order dated April 9, 2013 passed by the single bench of the Gujarat High Court. The said letter of
appeal and CA is pending before the Gujarat High Court. The matter is currently pending before the
Gujarat High Court. The aggregate amount involved after accumulation of penalty is ₹ 647.3 million.
9.
47 matters in form of writ petitions, appeals, rectification applications and revisions have either been
filed by ABNL or in which ABNL is a respondent. These matters are currently pending before various
Joint Commissioner of Tax (Appeals), High Courts, the Supreme Court, Trade Tax Tribunals and
Revision Board, West Bengal. The issues involved in these sales tax matters include: (i) illegal
demands of purchase tax, (ii) sales tax on freight by enforcement divisions along with interest in
connection with various assessment period, (iii) reversal and disallowance of input tax credit, penalty
and interest, including demand of credit and refund, (iv) challenging seizure of goods under Uttar
Pradesh Value Added Tax Act, 2008 carried out by the authority on the ground of incomplete
particulars in Form 38, (v) refund of cess demand, (vi) disallowance of exemptions on showroom sales,
(vii) liability on account of freight charges, (viii) non-receipt of STD forms, (ix) challenging orders
passed under Central Sales Tax Act, 1956, West Bengal Value Added Tax Act, 2003. The matters are
currently pending and the aggregate amount involved is ₹ 446.8 million.
10.
43 income tax matters have been filed by ABNL which are currently pending before various High
173
Courts, Commissioner of Income Tax and ITAT. The issues involved in these matters include: (i)
modvat credit, (ii) deduction claims under Section 36(1)(iii) of the IT Act, (iii) deductions under
Section 80HHC of the IT Act, (iv) deductions under Section 80 IA of the IT Act, (v) disallowance
under Section 43 BF of the IT Act, (vi) disallowance under Section 40 (a) (ai) of the IT Act of
provision made, (vii) treatment as ‘agent’ under Section 163 of IT Act in respect of share purchase,
(viii) disallowance of leave salary and ESOP expenses, and (ix) allow ability of investment allowance.
These matters are currently pending and the aggregate amount involved is ₹ 1200 million.
11.
Further, 25 matters have been filed by the Department of Income Tax against ABNL which are
currently pending in form of writ petitions and appeals, before various CIT (Appeals), ITAT, various
High Courts and Supreme Court. The issues involved relate mainly to: (i) various investment
allowances, (ii) computations of liability under minimum alternate tax, (iii) deletion of penalty in
respect of tax depreciation, (iv)modvat credit, and (v) disallowance of expenses incurred on the live
stocks. These matters are currently pending and the aggregate amount involved is ₹ 550 million.
Litigation Involving Birla TMT Holdings Private Limited
Nil.
Litigation Involving Grasim Industries Limited
1.
An appeal has been filed by the District Collector of Bharuch, Gujarat on January 20, 2010 before the
High Court of Gujarat challenging the Gujarat Revenue Tribunal’s order dated March 6, 2009
(“Revenue Order”).Through the Revenue Order, the Gujarat Revenue Tribunal has reduced the
premium payable by Grasim Industries Limited (“Grasim”) on new tenure land. Furthermore, the
Collector has included premium payable in relation to certain additional new tenure land as being
subject to the outcome of the appeal. The High Court of Gujarat has granted status quo in favour of
Grasim till disposal of the appeal. The matter is currently pending and the aggregate amount involved
is ₹ 26.08 million.
2.
The State Government of Gujarat has filed an appeal in the Supreme Court against the order of the
Gujarat High Court dated January 22, 2013, whereby the Collector of Electricity Duty was instructed to
refund the cess paid by Grasim under the provisions of the Gujarat Green Cess Act, 2011 (the “said
Act”) and the rules thereunder along with interest @ 8% from the date of the aforesaid order. The
Supreme Court, on July 3, 2013, stayed the order of the Gujarat High Court and directed the
Government of Gujarat to determine the cess under the said Act but not to enforce the same against
Grasim till the final disposals of appeals. The matter is currently pending and the aggregate amount
involved is ₹ 2.24 million.
3.
Pursuant to the enactment of the Karnataka Special Tax on Entry of Goods Act, 2004, Special Entry
Tax was levied at different rates on certain commodities. The same was challenged by Grasim through
two writ petitions dated December 3, 2004 before the High Court of Karnataka, on the ground of
discrimination of free flow of goods and trade within the state. The High Court decided both the writ
petitions in favour of Grasim on March 29, 2007. The Government of Karnataka has filed two writ
appeals before the Division Bench of the High Court of Karnataka in both the matters. The appeals are
currently pending and the aggregate amount involved is ₹ 49.40 million.
4.
Five excise related matters involving Grasim are currently pending before CESTAT, High Court and
Supreme Court. The issues involved in these appeals include (i) non-inclusion of cost of packing
charges while determining the assessable value for the purpose of excise, (ii) demand of reversal of
inputs contained in caustic soda lye supplied to Staple Fibre Division of Grasim without payment of
duty under Chapter X, (iii) non-reversal of CENVAT credit as eligible under the circular issued by the
department, (iv) demand of 10% value of used brine solution supplied to Staple Fibre Division of
Grasim without payment of duty, (v) demand of differential duty by the department from Grasim on
caustic soda lye supplied to sister units. All the appeals are currently pending at different stages of
adjudication and the aggregate amount involved is approximately ₹ 9.04 million.
5.
11 cases are currently pending against Grasim before various forums in relation to alleged violations of,
or alleged non-compliances with, the applicable provisions of the Factories Act, 1948 primarily in
relation to the accidents with the workmen that have occurred at the factory premises operated by
Grasim.
174
Litigation Involving Hindalco Industries Limited
Income Tax Appeals
1.
The Income Tax Department has filed 13 cases against Hindalco Industries Limited before the Bombay
High Court, Calcutta High Court and ITAT, Mumbai challenging the orders of ITAT, Mumbai and CIT
(A), respectively for the assessment years 1993-1994 to 2002-2003. The appeals have been filed on
various grounds including: (i) exemptions under section 10 (23G) of the IT Act, (ii) allowing deduction
under Sections 35AB, 36(1)(iii), 43B, 80HHC, 80I, 80M and 80O of the IT Act, (iii) allowing expenses
incurred for earning income from service charges and allowing premium payable on redemption of
debentures as expenses, (iv) foreign travelling expenses of wives of employees, (v) professional fees
and commission paid to stockists and (vi) allowing deduction of interest on borrowed funds. All the
appeals are currently pending and the aggregate amount involved is approximately ₹ 18,420 million.
2.
16 matters have been filed by Hindalco Industries Limited challenging the orders of CIT(A) and ITAT,
which are currently pending before ITAT, at the High Courts (Bombay High Court and Calcutta High
Court), respectively. The matters relate to CIT(A) and ITAT located in Mumbai and Kolkata and
accordingly, the appeals have been filed before ITAT and the High Courts of the respective cities.
These matters relate to, amongst others, (i) reduction of benefits of profit and gains under Section 80
IA of the IT Act, (ii) professional fees for due diligence, (iii) disallowance of deductions under
Sections 36 (1) (iii), 14 A and 43B of the IT Act; (iv) interest on dividend income, (v) additions to
income on account of international transactions with associate enterprises, (vi) disallowance of foreign
trade expenses, interest on late payment of tax deducted at source, (vii) deductions under sections
32AB of the IT Act, (viii) disallowance of entertainment expenses, (ix) reference applications under
section 80 HHC of the IT Act, (x) disallowance of agency commission, software development
expenses, service charges, interest borrowed funds and modvat Credit, expenditure incurred and
contribution made to employees’ state insurance. All matters are currently pending and the aggregate
amount involved is approximately is ₹ 17,400 million.
Indirect Taxes
1.
24 cases have been filed against Hindalco Industries Limited before various tribunals, commissioners,
revisionary authority, High Courts and the Supreme Court. These matters relate to various different
legislations including Central and local sales tax, Finance Act, 1994, and cover disputes pertaining to,
amongst others, service tax, customs duty, excise duty, state value-added tax, Madhya Pradesh Transit
(Forest Produce) Rules, 2000. The matters are currently pending at various stages of adjudication and
the aggregate amount involved is approximately ₹ 5,130 million.
2.
189 separate cases have been filed by Hindalco Industries Limited before various tribunals, assistant
commissioners / commissioners, revisionary authority, High Courts and the Supreme Court. These
matters relate to various different legislations including Central and local sales tax, Finance Act, 1994,
Building and Other Construction Workers Act, 1996, the Customs Act, 1962, Building and Other
Construction Cess Act, 1996, and cover disputes pertaining to, amongst others, sales tax, entry tax,
service tax, customs duty and electricity duty. The matters are currently pending at various stages of
adjudication and the aggregate amount involved is approximately ₹ 12,190 million.
Criminal Cases
1.
Two criminal cases have been filed against Hindalco Industries Limited under the Fertilizer Control
Order, 1985 and Employees Compensation Act, 1923, which are currently pending before the Sessions
Court, Bhubaneshwar and the Chief Court of Bundi, Rajasthan, respectively.
2.
The Central Bureau of Investigation (the “CBI”) has filed a first information report (an “FIR”) in
connection with allocation of Talabira II coal block in favour of Hindalco Industries Limited. The FIR
has been filed by CBI under Section 13(2) of Prevention of Corruption Act, 1988, against Shri P. C.
Parakh, (Ex-Secretary, Ministry of Coal), Shri Kumar Mangalam Birla, Hindalco Industries Limited,
and other unknown persons/officials, alleging irregularities in the allocation of Talabira II coal block.
Currently this issue is under investigation by the CBI.
175
Civil Cases
1.
There are nine cases have been challenged by Hindalco Industries Limited and are pending before the
Supreme Court, the Allahabad High Court, the Court of Tahasildar, Rangali, Sambalpur, District
Mining Officer, Lohardag, Ranchi, Jharkhand and the Court of Certificate Officer – Mining Ranchi
involving Hindalco Industries Limited. These cases relate to the demand for payment of royalty on
unauthorised excavation of earth and Vanadium under the Mine and Mineral (Development and
Regulation) Act, 1957 and the Mineral Concession Rules, 1960. The matters are currently pending at
various stages of adjudication and the aggregate amount involved is approximately ₹ 189.3 million.
2.
Seven cases have been filed by Hindalco Industries Limited against the Electricity Boards of Kerala,
Orissa, Gujarat, Uttar Pradesh through various writ petitions and appeals which are pending before the
High Courts of Kerala, Gujarat, Allahabad and appeals have been filed before the UP Electricity
Regulatory Commission. Issues involved in these cases include: (i) challenge of various notices issued
by the electricity boards denying permission for clubbing the facility of quota in differential
connections, (ii) refund of security deposit, (iii) illegal demand for payment of bill, (iv) notice issued
for procurement of power from renewable sources, and (v) billing error due to levy of incorrect
electricity duty on electricity drawn by Hindalco Industries Limited out of its owned banked energy.
The matters are currently pending and the aggregate amount involved is approximately ₹ 800.3 million.
3.
Seven miscellaneous writ petitions and appeals have been filed by Hindalco Industries Limited and are
pending before the High Courts (of Andhra Pradesh, Orissa and Ranchi), the Supreme Court and
Deputy Director of Mines. Issues involved in these matters include: (i) issues relating to Employees’
State Insurance Corporation, (ii) payment of stamp duty, (iii) the prohibition on Hindalco Industries
Limited from carrying out its functions within a 10 kilometre radius of lakes in the state of Andhra
Pradesh being challenged, (iv) the validity of arbitrary decision of the state pollution board, for alleged
violations under the Hazardous Wastes (Management, Handling & Trans-boundary Movement) Rules,
2008, being challenged, (v) the legality of directions issued by Deputy Director Mines for deposition of
costs of ore under Mineral Concession Rules, 1960 being challenged, and (vi) alleged violations under
Transmit Permit Pass Regulations, 1973. The matters are currently pending and the aggregate amount
involved is approximately ₹ 312 million.
4.
24 cases are pending in form of various special leave petitions, transfer applications and civil appeals
before various High Courts and the Supreme Court wherein Hindalco Industries Limited has
challenged the constitutional validity of various legislations. The state governments, through its
authorities such as the panchayats, Municipal Corporations and forest departments had levied various
taxes on mining. This has been challenged by Hindalco Industries Limited as the state government is
incompetent to impose tax on the subject of minerals and mining pursuant to the declaration in Section
2 of Mine and Mineral (Development and Regulation) Act, 1957. Hindalco Industries Limited has
challenged the constitutional validity of the following state legislations under which levy of taxes on
minerals and mining is attempted:

The Orissa Rural Infrastructure and Socio Economic Development Act, 2005;

Madhya Pradesh Gramin Avasanrachna Tatha Sadak Vikas Adhiniyam, 2005;

Adhosanrachna Vikas Evam Upkar Adhiniyam, 2005;

UP Transit of Timber and Other Forest Procedure Rules, 1978 (Bauxite and Coal);

MP Panchayat Raj Adhiniyam, 1993;

MP Municipality Act, 1960;

UP Kshetra Panchyat Adhiniyam, 1961;

Shaktinagar Special Area Development Authority (Cess on Mineral Rights) Rules, 1997; and

Uttar Pradesh Special Area Development Authorities Act, 1986.
The above mentioned matters also include writ petitions and appeals on other issues such as: (i)
176
challenge of demand notice received from Central Excise authorities, (ii) show cause notice received
from the Collector of Stamps, Kanpur , (iii) revision in water rates with retrospective effect by the Uttar
Pradesh Electricity Board, wherein the power lies with the Government of Uttar Pradesh to increase
water rates under Northern India Canal and Drainage Act, 1873, (iv) recovery of differential interest on
term loan by Indian Bank for the Debt Recovery Tribunal, (v) arbitrary fixation of plot rent by railways
being challenged, (vi) defending the approval granted by Central government in relation to the mining
lease executed in favour of Hindalco Industries Limited.
The aggregate amount involved is approximately ₹ 5942.2 million.
Litigation Involving Kumar Mangalam Birla
1.
Two complaints (S.T.C no. 505 and 506 of 2003) had been filed before Judicial Magistrate Ariyalur by
State of Tamil Nadu represented by Labour Enforcement Officer against Mr. Kumar Mangalam Birla
in his capacity as Chairman of Grasim Industries Limited (now Ultratech Cement Limited) and other
persons. The complaints were for certain alleged violations of Contract Labor Act (Regulation &
Abolition) Act, 1970. An application was made before Judicial Magistrate Ariyalur for discharge of
petition against Mr. Kumar Mangalam Birla and Mr. S.K Maheshwari which was dismissed by the
Judicial Magistrate Ariyalur, through order dated February 27, 2004. A criminal miscellaneous petition
no. 5405 and 5406 of 2004 was filed before the Madras High Court for discharge of petition against
Mr. Kumar Mangalam Birla and Mr. S.K Maheshwari. Madras High Court, through its order dated
April 28, 2004, stayed all further proceedings and set aside the order dated February 27, 2004 of the
Judicial Magistrate Ariyalur. On April 15, 2014, the Madras High Court has finally disposed of the
petition whereby the criminal complaint has been quashed.
2.
A complaint was filed by food inspector before the Special Magistrate, Indore against Aditya Birla
Retail Limited (“ABRL”) and its former directors (including Mr. Kumar Mangalam Birla) as sample of
food item (muffins) sold at the ABRL store failed the required test and the Magistrate court took
cognizance in the matter and issued bailable warrants. ABRL preferred an application under Section
482 of the Code of Criminal Procedure, 1973 in the Madhya Pradesh High Court, bench at Indore who
stayed the process of the Magistrate Court on the ground that at the time of offence the framed persons
were not serving as Director on Board of ABRL. High Court has now allowed the petition and quashed
the complaint.
3.
A complaint was filed by Pune Municipal Corporation officer against ABRL and Mr. Kumar Manglam
Birla was named as the party to the complaint. The complaint was filed for the breach of notice issued
by the Pune Municipal Corporation for observation of closure of store for two days. Due to ambiguity
of the notice, ABRL observed two days closure of store in which one day closure was the day before
the required day by the Pune Municipal Corporation. The case has been compounded.
4.
The CBI has filed an FIR in connection with allocation of Talabira II coal block in favour of Hindalco
Industries Limited. The FIR has been lodged by CBI under Section 13(2) of Prevention of Corruption
Act, 1988, against Mr. Kumar Mangalam Birla, Shri P. C. Parakh, (Ex-Secretary, Ministry of Coal),
Hindalco Industries Limited, and other unknown persons/officials, alleging irregularities in the
allocation of Talabira II coal block. Currently this issue is under investigation by the CBI.
177
INDEPENDENT ACCOUNTANTS
Our Company’s current statutory auditors, Deloitte Haskins & Sells LLP, Chartered Accountants, are
independent auditors with respect to our Company as required by the Companies Act and in accordance with the
guidelines issued by the ICAI. Further, Deloitte Haskins & Sells LLP, Chartered Accountants, have audited the
financial statements as of and for the years ended March 31, 2014, 2013 and 2012 whose audited report is
included in this Placement Document.
178
GENERAL INFORMATION

Our Company was incorporated on March 14, 1995 under the Companies Act, as Birla
Communications Limited and received the certificate of commencement of business on August 11,
1995. Our Company was renamed to Birla AT&T Communications Limited and a fresh certificate of
incorporation was issued by the RoC on May 30, 1996. The name of our Company was further changed
to Birla Tata AT&T Limited and a fresh certificate of incorporation was issued by the RoC on
November 6, 2001. Subsequently, the name of our Company was changed to Idea Cellular Limited and
a fresh certificate of incorporation was issued by the RoC on May 1, 2002. Pursuant to a certificate of
registration dated October 22, 1996 registered office of our Company was transferred from Mumbai to
Gandhinagar. The Registered Office of our Company is located at Suman Tower, Plot No. 18, Sector11, Gandhinagar 382 011, Gujarat.

The Equity Shares were listed on the BSE and on the NSE on March 9, 2007. The Issue was authorised
and approved by the Board of Directors on August 1, 2013 and approved by the shareholders at an
AGM held on September 16, 2013.

Our Company has received in-principle approval to list the Equity Shares to be issued pursuant to the
Issue, on the BSE and the NSE on June 5, 2014 and June 5, 2014, respectively.

Copies of Memorandum and Articles of Association will be available for inspection between 11:00 am
to 1:00 pm on all working days at the Registered Office.

Our Company has obtained necessary consents, approvals and authorisations required in connection
with the Issue.

There has been no material change in the financial or trading position of our Company since March 31,
2013, the date of the latest financial statements prepared in accordance with Indian GAAP included in
this Placement Document, except as disclosed herein.

Except as disclosed in this Placement Document, there are no legal or arbitration proceedings against
or affecting our Company or its assets or revenues, nor is our Company aware of any pending or
threatened legal or arbitration proceedings, which are, or might be, material in the context of the Issue.

Our Company’s statutory auditors, Deloitte Haskins & Sells LLP, Chartered Accountants who have
audited the financial statements as of and for the years 2014, 2013 and 2012 which have been included
in this Placement Document, have consented to the inclusion of their reports in relation thereto in this
Placement Document.

Our Company confirms that it is in compliance with the minimum public shareholding requirements as
required under the terms of the Listing Agreements.

The Floor Price for the Equity Shares under the Issue is ₹ 136.98 per Equity Share which has been
calculated in accordance with Chapter VIII of the SEBI Regulations. Our Board, on June 9, 2014,
approved discount of ₹ 2.98 to the Floor Price of ₹ 136.98 in accordance with the approval of the
shareholders accorded on September 16, 2013 and Regulation 85(1) of the SEBI Regulations.
179
FINANCIAL STATEMENTS
INDEPENDENT AUDITORS’ REPORT ON CONSOLIDATED FINANCIAL STATEMENTS
TO THE BOARD OF DIRECTORS OF
IDEA CELLULAR LIMITED
Report on the Consolidated Financial Statements
We have examined the Consolidated Balance Sheets of Idea Cellular Limited (the “Company”) and its
subsidiaries and jointly controlled entity (the Company, its subsidiaries and jointly controlled entity constitute
“the Group”) as at March 31, 2014, March 31, 2013 and March 31, 2012 and also the Consolidated Statements
of Profit and Loss and the Consolidated Cash Flow Statements for the years ended on those dates and the
accompanying summary of the significant accounting policies and other explanatory information (together
comprising the “Consolidated Financial Statements”) annexed to this report, for the purposes of inclusion in the
Preliminary Placement Document and the Placement Document prepared by the Company in connection with
the proposed qualified institutions placement (the “QIP”) of its equity shares (the “Offering”) in accordance
with provisions of Chapter VIII of the Securities and Exchange Board of India (Issue of Capital and Disclosure
Requirements) Regulation, 2009, as amended from time to time (the “ICDR Regulations”) and initialed by us
for identification.
Management’s Responsibility for the Consolidated Financial Statements
The Company’s Management is responsible for the preparation of these Consolidated Financial Statements that
give a true and fair view of the consolidated financial position, consolidated financial performance and
consolidated cash flows of the Group in accordance with the accounting principles generally accepted in India.
This responsibility includes the design, implementation and maintenance of internal control relevant to the
preparation and presentation of the consolidated financial statements that give a true and fair view and are free
from material misstatement, whether due to fraud or error.
The Consolidated Financial Statements have been extracted/ reformatted from the audited Consolidated
Financial Statements for the years ended March 31, 2014, March 31, 2013 and March 31, 2012 (“the Audited
Financial Statements”), which have been adopted by the Board of Directors on April 28, 2014, April 25, 2013
and April 26, 2012 respectively. The above Consolidated Financial Statements have been prepared to reflect the
significant accounting policies and notes and other explanatory information adopted by the Group as at March
31, 2014.
Auditors’ Responsibility
Our responsibility is to express an opinion on these Consolidated Financial Statements based on our
examination of the Audited Financial Statements. The Consolidated Financial Statements for the years ended
March 31, 2014, March 31, 2013 and March 31, 2012 are extracted / reformatted from the Audited Consolidated
Financial Statements for the respective years and our opinion stated herein is based on our opinions dated April
28, 2014, April 25, 2013 and April 26, 2012 respectively for each of those years. Accordingly, any events
subsequent to the dates as stated above have not been considered / adjusted for those respective years.
We conducted our audit in accordance with Standards on Auditing issued by the Institute of Chartered
Accountants of India. Those Standards require that we comply with ethical requirements and plan and perform
the audit to obtain reasonable assurance about whether the Consolidated Financial Statements are free from
material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and the disclosures in the
Consolidated Financial Statements. The procedures selected depend on the auditor’s judgement, including the
assessment of the risks of material misstatement of the Consolidated Financial Statements, whether due to fraud
or error. In making those risk assessments, the auditor considers internal control relevant to the Company’s
preparation and presentation of the Consolidated Financial Statements that give a true and fair view in order to
design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Company’s internal control. An audit also includes evaluating the
appropriateness of the accounting policies used and the reasonableness of the accounting estimates made by the
Management, as well as evaluating the overall presentation of the Consolidated Financial Statements.
180
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit
opinion.
Opinion
In our opinion and to the best of our information and according to the explanations given to us, and based on the
consideration of the reports of the other auditor on the financial statements / financial information of the jointly
controlled entity referred to below in the Other Matter paragraph, the aforesaid Consolidated Financial
Statements give a true and fair view in conformity with the accounting principles generally accepted in India:
(a)
in the case of the Consolidated Balance Sheet, of the state of affairs of the Group as at
2014, March 31, 2013 and March 31, 2012;
March 31,
(b)
in the case of the Consolidated Statement of Profit and Loss, of the profit of the Group for the years
ended on these dates; and
(c)
in the case of the Consolidated Cash Flow Statement, of the cash flows of the Group for the years
ended on these dates.
Emphasis of Matter
We draw attention to Note 33 (i) to the Consolidated Financial Statements. The Department of
Telecommunication (DoT) has issued demand notices dated January 8, 2013 towards one time spectrum charges
for spectrum held by the Company beyond 6.2 Mhz for period from July 1, 2008 to December 31, 2012
amounting to Rs. 3,691.30 Million and beyond 4.4 Mhz for period from January 1, 2013 till the expiry of the
license amounting to Rs. 17,443.70 Million in the respective telecom service areas. In the opinion of the
Company, inter-alia, the above demand amounts to alteration of financial terms of the licenses issued in the past.
The Company therefore filed a petition before the Hon’ble High Court of Bombay, which has directed DoT, not
to take any coercive action until the matter is further heard.
The financial impact of the above mentioned matter is dependent upon the outcome of the petition filed by
Company in the Hon’ble High Court of Bombay and therefore no effect for the one time spectrum charges has
been given in these Consolidated Financial Statements.
Our opinion is not qualified in respect of this matter.
Other Matters
(a)
We did not audit the financial statements/ financial information of Indus Towers Limited, jointly
controlled entity of Aditya Birla Telecom Limited (Subsidiary of the company), whose financial
statements/ financial information reflect Group’s Share of total assets (net) of Rs. 24,201.76 Million,
Rs. 361.60 Million and Rs. 1,687.00 Million as at March 31, 2014, 2013 and 2012 respectively,
Group’s Share of total revenues of Rs. 22,275.84 Million, Rs. 21,077.76 Million and Rs. 12,542.08
Million for the year ended March 31, 2014, 2013 and 2012 respectively and Group’s Share of net cash
flows of Rs. 266.40 Million, Rs. 68.16 Million and Rs. 78.56 Million for the year ended March 31,
2014, 2013 and 2012 respectively as considered in the Consolidated Financial Statements. These
financial statements have been audited by other auditor whose reports have been furnished to us by the
Management and our opinion, in so far as it relates to the amounts and disclosures included in respect
of this jointly controlled entity, is based solely on the reports of the other auditor.
Our opinion is not qualified in respect of this matter.
(b)
(c)
This report should not in any way be construed as a re-issuance or re-dating of any of the previous
audit reports issued by us nor should this be construed as a new opinion on any of the financial
statements referred to herein.
This report is intended solely for your information and for inclusion in the documents prepared in
connection with the Offering and is not to be used, referred to or distributed for any other purpose,
without prior written consent.
181
For Deloitte Haskins & Sells LLP
Chartered Accountants
(Firm’s Registration o. 117366W/ W1100018)
Khurshed Pastakia
(Partner)
(Membership No. 31544)
MUMBAI, June 5, 2014
182
Consolidated Balance Sheet
₹ Mn.
Particulars
Note
31-Mar-14
As at
31-Mar-13
31-Mar-12
EQUITY AND LIABILITIES
Shareholders' Funds
Share Capital
Reserves and Surplus
3
4
33,196.32
132,054.17
165,250.49
33,143.22
109,890.42
143,033.64
33,088.45
97,394.48
130,482.93
19.25
19.25
19.25
5
6
7
8
181,284.05
18,132.83
9,229.11
4,985.96
213,631.95
118,047.16
11,180.31
7,946.08
3,142.13
140,315.68
95,221.56
6,272.98
6,057.97
1,920.41
109,472.92
9
6,471.63
27,879.98
50,444.38
1,876.89
86,672.88
4,585.31
26,871.01
47,707.33
1,248.48
80,412.13
17,275.34
21,840.43
47,188.21
72.72
86,376.70
465,574.57
363,780.70
326,351.80
218,632.38
77,326.08
114,194.13
61.20
28,970.68
1,448.37
440,632.84
208,947.36
82,591.76
8,810.81
61.20
30,479.18
330,890.31
201,304.80
68,571.84
6,798.50
61.20
22,562.74
299,299.08
2,155.34
683.08
8,006.20
1,880.96
12,181.50
34.65
24,941.73
10,280.15
726.42
9,600.77
1,429.05
10,845.34
8.66
32,890.39
976.00
925.66
8,226.98
1,520.73
15,385.67
17.68
27,052.72
465,574.57
363,780.70
326,351.80
Compulsorily Convertible Preference Shares
(issued by Subsidiary Company)
Non-Current Liabilities
Long-Term Borrowings
Deferred Tax Liabilities (Net)
Other Long-Term Liabilities
Long-Term Provisions
Current Liabilities
Short-Term Borrowings
Trade Payables
Other Current Liabilities
Short-Term Provisions
10
11
TOTAL
ASSETS
Non-Current Assets
Fixed Assets
Tangible Assets
Intangible Assets
Capital Work-in-Progress
Goodwill on Consolidation
Long-Term Loans and Advances
Other Non-Current Assets
12
12
12
13
14
Current Assets
Current Investments
Inventories
Trade Receivables
Cash and Bank Balances
Short-Term Loans and Advances
Other Current Assets
15
16
17
18
19
20
TOTAL
Significant Accounting Policies
The accompanying notes are an integral part of the
financial statements
2
183
Consolidated Statement of Profit & Loss
Particulars
Note
INCOME
Service Revenue
Sale of Trading Goods
Other Income
₹ Mn.
For the year ended
31-Mar-14
31-Mar-13
31-Mar-12
262,071.27
2,248.41
869.37
221,409.87
2,664.58
502.09
193,381.85
1,505.00
524.78
265,189.05
224,576.54
195,411.63
22
23
24
25
26
27
1,927.00
13,121.17
64,990.27
29,237.98
41,615.64
19,806.63
4,867.01
2,318.36
11,225.28
55,360.60
24,752.50
40,145.27
20,467.29
4,720.29
1,413.72
9,499.16
48,608.39
23,231.83
32,798.75
19,869.00
4,281.21
28
6,286.57
5,541.57
4,786.20
181,852.27
164,531.16
144,488.26
83,336.78
60,045.38
50,923.37
7,700.13
38,855.15
6,338.85
9,494.50
29,589.50
5,188.15
10,557.29
24,356.93
5,456.42
30,442.65
6,687.95
5,454.11
(1,377.61)
19,678.20
15,773.23
3,506.98
4,907.46
(2,750.48)
10,109.27
10,552.73
2,227.52
3,173.60
(2,078.27)
7,229.88
5.93
5.92
3.05
3.05
2.19
2.18
21
TOTAL
OPERATING EXPENDITURE
Cost of Trading Goods Sold
Personnel Expenditure
Network Expenses and IT outsourcing cost
License Fees and WPC Charges
Roaming & Access Charges
Subscriber Acquisition & Servicing Expenditure
Advertisement and Business Promotion
Expenditure
Administration & other Expenses
PROFIT BEFORE FINANCE CHARGES,
DEPRECIATION, AMORTISATION & TAXES
Finance & Treasury Charges (Net)
Depreciation
Amortisation of Intangible Assets
29
12
12
PROFIT BEFORE TAX
Provision for Taxation - Current
- Deferred
- MAT Credit
PROFIT AFTER TAX
Earnings Per Share of ₹10 each fully paid up (in
₹)
Basic
Diluted
45
Significant Accounting Policies
The accompanying notes are an integral part of the
financial statements
2
184
Consolidated Cash Flow Statement
₹ Mn.
For the year ended
31-Mar-14
A) Cash Flow from Operating Activities
Net Profit after Tax
Adjustments For
Depreciation
Amortisation of Intangible Assets
Interest and Financing Charges
Dividend Income and Profit on sale of Current
Investments
Bad Debts / Advances written off
Provision for Bad & Doubtful Debts / Advances
Employee Stock Option Cost
Provision for Gratuity, Leave Encashment
Provision for Deferred Tax
Provision for Current Tax (Net of MAT Credit
Entitlement)
Liabilities / Provisions no longer required written
back
Interest Income
(Profit) / Loss on sale of Fixed Assets / Assets
Discarded
19,678.20
C) Cash Flow from Financing Activities
Proceeds from issue of Equity Share Capital
Proceeds from Long Term Borrowings*
Repayment of Long Term Borrowings
Proceeds from Short Term Borrowings
Repayment of Short Term Borrowings
Payment of Dividend, including dividend tax
Payment of Interest and Financing Charges
Net Cash from / (used in) Financing Activities
Net Increase / (Decrease) in Cash and Cash
Equivalents
Cash and Cash Equivalents at the beginning
Decrease in Cash and Cash Equivalents pursuant to
merger of Subsidiary and certain other Companies
into Joint Venture
Cash and Cash Equivalents at the end
10,109.27
7,229.88
29,589.50
5,188.15
10,156.96
(667.37)
24,356.93
5,456.42
10,481.74
(291.71)
1,152.28
(114.76)
43.07
175.62
5,454.11
5,310.34
829.85
0.32
669.54
4,907.46
756.50
597.31
35.88
174.03
3,173.60
149.25
(749.20)
(414.83)
(450.89)
(987.68)
(205.22)
(193.89)
53.27
(134.52)
11.95
63,544.04
83,222.24
50,875.46
60,984.73
43,559.99
50,789.87
469.03
43.34
(1,890.38)
(2,203.64)
199.24
(3.97)
(3,267.17)
(266.48)
(3.37)
3,695.66
(371.99)
(13,291.34)
3,036.16
8,476.13
8,360.20
5,353.80
88,576.04
(6,383.99)
82,192.05
Cash generated from Operations
Tax paid (including TDS) (Net)
Net Cash from / (used in) Operating Activities
B) Cash Flow from Investing Activities
Purchase of Fixed assets & Intangible assets
(including CWIP)
Payment towards Spectrum and Licenses *
Proceeds from sale of Fixed Assets
Profit on sale of Current Investments, Dividend and
Interest Received
Net Cash from / (used in) Investing Activities
For the year ended
31-Mar-12
38,855.15
6,338.85
9,551.85
(1,280.37)
Operating profit before Working Capital Changes
Adjustments for changes in Working Capital
(Increase)/Decrease in Trade Receivables
(Increase)/Decrease in Inventories
(Increase)/Decrease in Other Current and Non
Current Assets
(Increase)/Decrease in Long Term and Short Term
Loans and Advances
Increase /(Decrease) in Trade Payables, Other Current
and Non Current Liabilities and Provisions
For the year ended
31-Mar-13
6,095.77
67,080.50
(4,109.58)
62,970.92
(8,468.16)
42,321.71
(4,140.89)
38,180.82
(36,984.63)
(34,986.76)
(47,326.59)
(31,436.07)
536.22
2,242.06
(213.22)
220.70
870.28
59.04
416.63
(65,642.42)
262.75
4,465.34
(22,019.96)
6,905.62
(5,286.68)
(1,305.88)
(7,681.99)
(34,109.00)
248.20
40,154.25
(37,832.52)
10,547.22
(23,237.33)
(250.24)
(9,283.00)
(46,850.92)
237.10
38,322.60
(30,345.21)
42,521.84
(43,150.47)
(11,199.84)
(24,660.80)
(19,653.42)
(3,613.98)
(8,111.17)
9,208.50
(12,284.08)
11,658.10
(3.74)
2,449.60
14,733.68
3,543.19
11,658.10
2,449.60
185
* Excluding deferred payment liability towards spectrum won in auction, being non cash transaction during
the respective years
Notes to Cash flow Statement
1.
Cash and Cash Equivalents include the following Balance Sheet amounts:
Cash on hand
26.01
26.48
16.66
Cheques on hand
183.93
223.18
135.06
Balances with banks
- In Current Accounts
235.62
750.43
354.48
- In Deposit Accounts
942.29
377.86
967.40
Investment in Units of Liquid Mutual
2,155.34
10,280.15
976.00
Funds
3,543.19
11,658.10
2,449.60
2. The above cash flow statement has been prepared under the indirect method as set out in Accounting Standard
3 on Cash Flow Statement.
186
1.
Corporate Information
Idea Cellular Limited (“the Company”), an Aditya Birla Group company, is one of the leading
national telecom service providers in India. The Company is engaged in the business of Mobility and
Long Distance services. The subsidiaries are in the business of sale of Handsets and Data cards, mobile
banking services and passive infrastructure services. The Joint Venture is in the business of providing
passive infrastructure services.
2.
Significant Accounting Policies
(a)
Basis of Preparation of Financial Statements:
The Consolidated Financial Statements of Idea Cellular Limited, its subsidiary companies and
Joint Venture (together referred to as the “Group”) have been prepared in accordance with
Accounting Standard 21 on “Consolidated Financial Statements” and Accounting Standard 27
on “Financial Reporting of Interests in Joint Ventures” notified under Section 211(3C) of the
Companies Act, 1956 (which continue to be applicable in respect of Section 133 of the
Companies Act, 2013). The Consolidated Financial Statements are prepared under historical
cost convention on accrual basis and mandatory applicable accounting standards in India.
(b)
Principles of Consolidation:
The basis of preparation of the Consolidated Financial Statements is as follows:
The Financial Statements (The Balance Sheet and the Statement of Profit and Loss) of the
Company, its subsidiaries and joint venture have been combined on a line-by-line basis by
adding together the book values of like items of assets, liabilities, income and expenses, after
eliminating intra-group balances, transactions and the resulting unrealised profit or losses.
The Financial Statements of the subsidiaries used in the consolidation are drawn upto March
31, the same reporting date as that of the Company
The differential with respect to the cost of investments in the subsidiaries over the Company’s
portion of equity is recognised as Goodwill or Capital Reserve, as the case may be. Goodwill
arising on consolidation is tested for impairment.
The Consolidated Financial Statements are prepared using uniform accounting policies for
like transactions and other events in similar circumstances except where stated otherwise.
The Consolidated Financial Statements includes following subsidiaries along with Company’s
holding therein, is as under:
No
1
2
3
4
5
6
Name of the Company
Idea Telesystems Limited
Aditya Birla Telecom Limited
Idea Cellular Services Limited
Idea Cellular Infrastructure Services Limited
Idea Cellular Towers Infrastructure Limited*
Idea Mobile Commerce Services Limited
Voting Power %
as at March 31
2014
2013
2012
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
The Consolidated Financial Statements also include following Joint Venture along with
Company’s holding therein, is as under:
No
1
*
Name of the Company
Indus Towers Limited (Indus)*
Voting Power %
as at March 31
2014
2013
2012
16.00
16.00
16.00
entire shareholding is held by Aditya Birla Telecom Limited
187
All the above subsidiaries and joint venture are incorporated in India.
(c)
Fixed Assets
Fixed assets are stated at cost of acquisition and installation less accumulated depreciation.
Cost is inclusive of freight, duties, levies and any directly attributable cost of bringing the
assets to their working condition for intended use.
Asset retirement obligations are capitalised based on a constructive obligation as a result of
past events, when it is probable that an outflow of resources will be required to settle the
obligation and a reliable estimate of the amount can be made. Such costs are depreciated over
the remaining useful life of the asset.
(d)
Expenditure during pre-operative period of license
Expenses incurred on project and other charges during construction period are included under
pre-operative expenditure (grouped under capital work in progress) and are allocated to the
cost of fixed assets on the commencement of commercial operations.
(e)
Depreciation and Amortisation
Depreciation on fixed assets is provided on straight line method (except stated otherwise) on
pro-rata basis on their estimated useful economic lives as given below:Tangible Assets
Buildings
Network Equipments
Optical Fibre
Other Plant and Machineries
Office Equipments
Computers
Furniture and Fixtures
Motor Vehicles
Leasehold Improvements
Leasehold Land
Years
9 to 30
7 to 20
15
3 to 5
3 to 5
3 to 5
3 to 10
Upto 5
Period of lease
Period of lease
Intangible Assets are amortised on straight line method as under:(i)
Cost of Rights, Licenses including the fees paid on fixed basis prior to revenue share
regime and Spectrum Fee is amortised on commencement of operations over the
validity period.
(ii)
Software, which is not an integral part of hardware, is treated as an intangible asset
and is amortised over its useful economic life as estimated by the management
between 3 to 5 years.
(iii)
Bandwidth / Fibre taken on Indefeasible Right of Use (IRU) is amortised over the
agreement period.
Assets costing upto Rs. 5,000/- are depreciated fully in the month of purchase.
(f)
Inventories
Inventories are valued at cost or net realisable value, whichever is lower. Cost is determined
on weighted average basis.
(g)
Foreign currency transactions, forward contracts & other Derivatives
(i)
Foreign currency transactions
Transactions in foreign currency are recorded at the exchange rates prevailing at the
date of the transactions. As per the transitional provisions given in the notification
issued by Ministry of Corporate Affairs dated 31st March 2009, the company has
188
opted for the option of adjusting the exchange difference on long term foreign
currency monetary items to the cost of the assets acquired out of these foreign
currency monetary items. The company has aligned its accounting policy based on
this notification and its further amendment.
Exchange difference arising out of fluctuation in exchange rates on settlement /
period end is accounted based on the nature of transaction as under:
(ii)

Short term foreign currency monetary assets and liabilities: recognised in
the Statement of Profit and Loss.

Long term foreign currency monetary liabilities used for acquisition of fixed
assets: adjusted to the cost of the fixed assets and amortised over the
remaining useful life of the asset.

Other Long term foreign currency monetary liabilities: recognised in
“Foreign Currency Monetary Item Translation Difference Account” and
amortised over the period of liability not exceeding 31 st March 2020.
Forward contracts & other Derivatives
Premium / discount amount on forward contract is amortised on period basis related
to the contract it pertains to. Profit or loss arising on cancellation of forward
exchange contract is recognised in the period in which the contract is cancelled.
Derivative contracts not covered under Accounting Standard 11 “The Effects of
Changes in Foreign Exchange Rates”, entered for hedging foreign currency
fluctuations and interest rate risk are marked to market at each reporting date. Loss, if
any, on such valuation is recognised in the Statement of Profit & Loss in that period
and gain if any, is not recognised as per the principle of prudence enunciated in
Accounting Standard 1, “Disclosure of Accounting Policies”.
(h)
(i)
Taxation
(i)
Current Tax: Provision for current Income tax is made on the taxable income using
the applicable tax rates and tax laws. Advance Income Tax and Provision for Current
Tax for the same legal entity is disclosed in the balance sheet at net as these are
settled on net basis.
(ii)
Deferred Tax: Deferred tax arising on account of timing differences and which are
capable of reversal in one or more subsequent periods is recognised using the tax
rates and tax laws that have been enacted or substantively enacted. Deferred tax
assets are not recognised unless there is virtual certainty with respect to the reversal
of the same in future years.
(iii)
Minimum Alternate Tax (MAT) credit: MAT credit is recognised as an asset only
when and to the extent there is convincing evidence that the legal entity will pay
normal Income tax during the specified period. In the year in which the MAT credit
becomes eligible to be recognized as an asset in accordance with the
recommendations contained in Guidance Note issued by the ICAI, the said asset is
created by way of a credit to the Statement of Profit and Loss and is shown as MAT
Credit Entitlement. The legal entity reviews the same at each balance sheet date and
writes down the carrying amount of MAT Credit Entitlement to the extent there is no
longer convincing evidence to the effect that it will pay normal Income tax during the
specified period.
Retirement Benefits
Contributions to Provident and Pension funds are funded with the appropriate authorities and
charged to the Statement of Profit and Loss.
Contributions to Superannuation are funded with the Life Insurance Corporation of India and
charged to the Statement of Profit and Loss.
189
Liability for Gratuity as at the period end is provided on the basis of actuarial valuation and
funded with Life Insurance Corporation of India.
Provision in accounts for leave benefits to employees is based on actuarial valuation done by
projected accrued benefit method at the period end.
(j)
Revenue Recognition and Receivables
Revenue on account of telephony services (mobile & long distance) and sale of handsets and
related accessories is recognised net of rebates, discount, service tax, etc. on rendering of
services and supply of goods respectively. Recharge fees on recharge vouchers is recognised
as revenue as and when the recharge voucher is activated by the subscriber.
Revenue from passive infrastructure is recognised on accrual basis (net of reimbursements) as
per the contractual terms on straight line method over the contract period.
Unbilled receivables, represent revenues recognised from the bill cycle date to the end of each
month. These are billed in subsequent periods as per the agreed terms.
Debts (net of security deposits outstanding there against) due from subscribers, which remain
unpaid for more than 90 days from the date of bill and/or other debts which are otherwise
considered doubtful, are provided for.
Provision for doubtful debts on account of Interconnect Usage Charges (IUC), Roaming
Charges and passive infrastructure sharing from other telecom operators is made for dues
outstanding more than 180 days from the date of billing other than cases when an amount is
payable to that operator or in specific case when management is of the view that the amount is
recoverable.
(k)
Interest & Dividend Income
Interest income is recognized on accrual basis on the outstanding amount and applicable
interest rate. Dividend income is accounted once the right to receive the income is established.
(l)
Investments
Current Investments are stated at lower of cost or fair value in respect of each separate
investment.
Long-term Investments are stated at cost less provision for diminution in value other than
temporary, if any.
(m)
Borrowing Cost
Interest and other costs incurred in connection with the borrowing of the funds are charged to
revenue on accrual basis except those borrowing costs which are directly attributable to the
acquisition or construction of those fixed assets, which necessarily take a substantial period of
time to get ready for their intended use. Such costs are capitalized with the fixed assets.
(n)
License Fees – Revenue Share
With effect from August 1, 1999 the variable License fee computed at prescribed rates of
revenue share is being charged to the Statement of Profit and Loss in the period in which the
related revenue arises. Revenue for this purpose comprises adjusted gross revenue as per the
license agreement of the license area to which the license pertains.
(o)
Use of Estimate
The preparation of financial statements in conformity with generally accepted accounting
principles requires estimates and assumptions to be made that affect the reported amounts of
assets and liabilities and disclosure of contingent liabilities on the date of the financial
statements and the reported amounts of revenues and expenses during the reporting year.
Differences between actual results and estimates are recognised in the periods in which the
190
results are known / materialise.
(p)
(q)
Leases
(i)
Operating: Lease of assets under which significant risks and rewards of ownership
are effectively retained by the lessor are classified as operating leases. Lease
payments under an operating lease are recognised as income / expense in the
Statement of Profit and Loss, on a straight-line or other systematic basis over the
lease term.
(ii)
Finance: Leased assets acquired on which significant risks and rewards of
ownership effectively transferred to the Group are capitalised at lower of fair value or
the amounts paid under such lease arrangements. Such assets are amortised over the
period of lease or estimated life of such assets whichever is less.
Earnings Per Share
The earnings considered in ascertaining the Group’s EPS comprise of the net profit after tax,
after reducing dividend on Cumulative Preference Shares for the period (irrespective of
whether declared, paid or not), as per Accounting Standard 20 on “Earning Per Share”. The
number of shares used in computing basic EPS is the weighted average number of shares
outstanding during the Period. The diluted EPS is calculated on the same basis as basic EPS,
after adjusting for the effects of potential dilutive equity shares unless the effect of the
potential dilutive equity shares is anti-dilutive.
(r)
Impairment of Assets
Assets are reviewed for impairment whenever events or changes in circumstances indicate that
the carrying amount may not be recoverable. An impairment loss is recognized in accordance
with Accounting Standard 28 on “Impairment of Assets”, for the amount by which the asset’s
carrying amount exceeds its recoverable amount as on the carrying date. The recoverable
amount is higher of the asset’s fair value less costs to sell vis-à-vis value in use. For the
purpose of impairment, assets are grouped at the lowest levels for which there are separately
identifiable cash flows.
(s)
Provisions & Contingent Liability
Provisions are recognized when the Group has a present obligation as a result of past events; it
is more likely than not that an outflow of resources will be required to settle the obligation;
and the amount has been reliably estimated. A contingent liability is disclosed where there is a
possible obligation or a present obligation that may, but probably will not, require an outflow
of resources.
(t)
Issue Expenditure
Expenses incurred in connection with issue of equity shares are adjusted against Securities
Premium Account.
(u)
Employee Stock Option
In respect of stock option granted pursuant to the company’s Employee Stock Option Scheme,
the intrinsic value of the option is treated as discount and accounted as employee
compensation cost over the vesting period.
In respect of re-pricing of existing stock option, the incremental intrinsic value of the option is
accounted for as employee cost over the remaining vesting period.
191
3.
SHARE CAPITAL
Authorised, Issued, Subscribed and Paid-up Share Capital
Particulars
As at
31-Mar-13
Numbers
₹ Mn.
31-Mar-14
Numbers
₹ Mn.
31-Mar-12
Numbers
₹ Mn.
Authorised
Equity Shares of ₹10 each
Redeemable Cumulative Non
Convertible Preference Shares of
₹10 Mn each
6,775,000,000
67,750.00
6,775,000,000
67,750.00
6,775,000,000
67,750.00
1,500
15,000.00
1,500
15,000.00
1,500
15,000.00
6,775,001,500
82,750.00
6,775,001,500
82,750.00
6,775,001,500
82,750.00
Equity Shares of ₹10 each fully
paid up
3,319,631,761
33,196.32
3,314,321,766
33,143.22
3,308,845,110
33,088.45
Total
3,319,631,761
33,196.32
3,314,321,766
33,143.22
3,308,845,110
33,088.45
Issued, Subscribed and Paid-Up
Equity Share Capital
(i)
Out of the above, 199,153,469 Equity Shares are allotted as fully paid up under the Scheme of
amalgamation of Spice Communications Limited without payments being received in cash
(b)
Share Options granted under the Employee Stock Option Scheme
Under the Employee Stock Option Scheme (“ESOS 2006”), the Company had granted
Options to its eligible employees from time to time. Further, the Shareholders of the Company
had approved a new Employee Stock Option Scheme – 2013 (“ESOS 2013”) at the Annual
General Meeting held on 16th September, 2013. The ESOS Compensation Committee has
granted 18,565,428 Options and 8,105,587 Restricted Stock Units (RSU's) to its eligible
employees under (“ESOS 2013”). These Options would vest in 4 equal annual installments
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 RSUs 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/- of the Company. The Options and RSUs granted under the ESOS 2013 and Options
granted under ESOS 2006 carry no rights to dividends and no voting rights till the date of
exercise. As at the end of financial year, details of outstanding options are as follows:
Particulars
i)
Options granted under ESOS 2006
Options outstanding at the beginning of the year
Options granted during the year
Options forfeited / lapsed during the year
Options exercised during the year
Options expired during the year
Options outstanding at the end of the year
Options exerciseable at the end of the year
Range of exercise price of outstanding options (`)
Remaining contractual life of outstanding options
(years)
ii) Options granted under ESOS 2013
Options outstanding at the beginning of the year
Options granted during the year
Options forfeited / lapsed during the year
Options exercised during the year
Options expired during the year
Options outstanding at the end of the year
Options exerciseable at the end of the year
Range of exercise price of outstanding options (₹)
As at March 31, 2014
No. of
Weighted
Options
average
exercise
price (₹ )
12,757,580
75,749
5,309,995
27,750
7,344,086
6,779,520
50.44
61.49
49.48
39.30
51.06
49.58
39.30 - 68.86
0.31 - 5.82
18,565,428
18,565,428
126.45
192
126.45
126.45
-
As at March 31, 2013
No. of
Weighted
Options
average
exercise
price (` )
18,471,360
237,124
5,476,656
12,757,580
10,292,851
49.04
60.08
45.32
50.44
47.47
39.30 - 68.86
0.75 - 6.82
-
As at March 31, 2012
No. of
Weighted
Options
average
exercise
price (` )
24,516,925
471,960
5,573,605
18,471,360
12,888,265
47.65
53.36
42.54
49.04
44.76
39.30 - 68.86
1.75 - 7.82
-
-
-
Particulars
Remaining contractual life of outstanding options
(years)
As at March 31, 2014
No. of
Weighted
Options
average
exercise
price (₹ )
5.87 - 8.87
iii) RSU's granted under ESOS 2013
Options outstanding at the beginning of the year
Options granted during the year
Options forfeited / lapsed during the year
Options exercised during the year
Options expired during the year
Options outstanding at the end of the year
Options exerciseable at the end of the year
8,105,587
8,105,587
-
Range of exercise price of outstanding options (₹)
Remaining contractual life of outstanding options
(years)
4.
10.00
10.00
-
As at March 31, 2013
No. of
Weighted
Options
average
exercise
price (` )
-
-
As at March 31, 2012
No. of
Weighted
Options
average
exercise
price (` )
-
-
-
-
10.00
-
-
7.87
-
-
RESERVES AND SURPLUS
₹ Mn.
Particulars
As at
31-Mar-13
31-Mar-14
(a) Debenture Redemption Reserve
Balance at the beginning of the year
Add: Transfer from Statement of Profit and Loss
Balance at the end of the year
(b) Securities Premium Account
Balance at the beginning of the year
Add : Premium on issue of shares under ESOS
scheme
Add : Cost of licenses impaired earlier and debited to
securities premium now adjusted against new
spectrum taken in auction
Balance at the end of the year
(c) Outstanding Employee Stock Options
Balance at the beginning of the year
Add : Charge for the year (Refer Note 37)
Less : Transfer to Securities Premium Account on
exercise of Options
Balance at the end of the year
(d) Reserve for Business Restructuring
Balance at the beginning of the year
Less : Transfer to General Reserve
Balance at the end of the year
(e) General Reserve
Balance at the beginning of the year
Add: Transfer from Statement of Profit and Loss
Add: Transfer by Joint Venture
Add: Transfer from Reserve for Business
Restructuring
Add: Reserve created by JV on merger as per scheme
(Refer Note 32)
Less: Depreciation charge on fair value portion of
fixed assets by JV
Less: Group's share of JV's discrepancy in physical
193
31-Mar-12
93.15
145.15
238.30
93.15
93.15
-
89,611.75
303.24
85,696.91
329.04
85,351.05
345.86
3,585.80
-
89,914.99
89,611.75
85,696.91
214.19
43.07
93.59
349.48
0.32
135.61
478.09
35.88
164.49
163.67
214.19
349.48
-
168.67
168.67
-
168.67
168.67
313.28
20.64
168.67
-
502.59
5,259.35
1,215.22
114.54
Particulars
31-Mar-14
verification of fixed assets as per scheme
Balance at the end of the year
(f) Surplus in statement of Profit and Loss
Balance at the beginning of the year
Add : Profit during the year
Less: Transfer to General Reserve
Less: Transfer to Debenture Redemption Reserve
Less: Dividend Distribution Tax on Interim Dividend
by JV
Less: Proposed Dividend* (Refer Note 49)
Less: Dividend Distribution Tax
Balance at the end of the year
Total
As at
31-Mar-13
31-Mar-12
4,432.18
502.59
-
19,468.74
19,678.20
145.15
142.40
11,179.42
10,109.27
313.28
93.15
250.24
3,949.54
7,229.88
-
1,328.57
225.79
37,305.03
994.30
168.98
19,468.74
11,179.42
132,054.17
109,890.42
97,394.48
* Current year amount includes dividend of ₹ 0.72 Mn related to previous financial year for shares
issued after balance sheet date and before record date of dividend.
5.
LONG TERM BORROWINGS
Particulars
31-Mar-14
SECURED LOANS
471 (previous year - 626) 9.45% Redeemable Non
Convertible Debentures of ₹10 Mn. each
(The Company has re-purchased 529 NCDs of ₹ 10 Mn
each, aggregating to ₹ 5,290 Mn. with an option to re-issue
the same in future)
Term Loans
Foreign Currency Loan
- From Banks
- From Others
Rupee Loan
- From Banks
- From Others
Vehicle Loan from Banks
Total
UNSECURED LOANS
Term Loans
Foreign Currency Loan
- From Banks
Deferred Payment Liability towards Spectrum (Refer
Note 30)
Total
194
₹ Mn.
As at
31-Mar-13 31-Mar-12
4,710.00
6,260.00
-
51,078.20
770.57
48,507.17
1,857.22
36,882.16
19,555.62
7,144.11
288.46
25,932.09
9,893.60
266.61
33,664.24
7,337.97
234.46
82,776.39
91,630.04
79,976.05
11,089.49
87,418.17
13,103.14
13,313.98
15,245.51
-
98,507.66
26,417.12
15,245.51
181,284.05
118,047.16
95,221.56
6.
DEFERRED TAX LIABILITIES
Major components of Deferred Tax are:
₹ Mn.
As at
31-Mar-14 31-Mar-13 31-Mar-12
Particulars
(a) Deferred Tax Liability:
Depreciation & Amortisation
Revenue Equalisation Reserve and Others
Total Deferred Tax Liability (A)
(b) Deferred Tax Asset:
Provision for Doubtful Debts
Expenses allowable on payment basis
Brought Forward losses
Others
Total Deferred Tax Asset (B)
Net Deferred Tax Liability (A - B)
7.
19,271.61
1,315.20
20,586.81
19,119.38
295.80
19,415.18
15,689.70
179.02
15,868.72
1,237.46
944.69
271.83
2,453.98
1,297.47
821.70
5,928.67
187.03
8,234.87
970.42
593.22
7,877.22
154.88
9,595.74
18,132.83
11,180.31
6,272.98
OTHER LONG TERM LIABILITIES
31-Mar-14
2,899.32
111.56
2,987.06
2,193.62
1,037.55
9,229.11
₹ Mn.
As at
31-Mar-13 31-Mar-12
2,428.72
2,113.70
48.38
77.85
2,950.92
2,120.88
2,081.21
1,745.54
436.85
7,946.08
6,057.97
31-Mar-14
827.04
974.95
3,183.97
4,985.96
₹ Mn.
As at
31-Mar-13 31-Mar-12
748.10
272.54
898.54
717.04
1,495.49
930.83
3,142.13
1,920.41
Particulars
Trade Payables
Capex Creditors
Unearned Income
Deposits from Customers and Others
Interest accrued but not due
Total
8.
LONG TERM PROVISIONS
Particulars
Gratuity (Refer Note 39)
Leave Encashment
Asset Retirement Obligation (Refer Note 48)
Total
9.
SHORT TERM BORROWINGS
₹ Mn.
As at
31-Mar-14 31-Mar-13 31-Mar-12
Particulars
a) SECURED LOANS
Working Capital Loan from Banks
b) UNSECURED LOANS
Working Capital Loan from Banks
Short Term Loan from Others
Buyers Credit in Foreign Currency from Banks
Commercial Papers from Banks
Total
195
5,982.05
-
7,065.33
111.50
378.08
6,471.63
2.12
328.80
4,254.39
4,585.31
248.19
2,515.20
6,446.62
1,000.00
17,275.34
10.
OTHER CURRENT LIABILITIES
Particulars
Current Maturities of Long Term Debt
Interest accrued but not due on Borrowings
Advance from Customers and Unearned Income
Capex Creditors
Deposits from Customers and Others
Book Bank Overdraft
Dividend Payable
Taxes and Other Liabilities
Total
11.
31-Mar-14
18,593.59
888.61
11,022.31
12,468.89
76.98
169.07
0.64
7,224.29
50,444.38
₹ Mn.
As at
31-Mar-13 31-Mar-12
17,805.36
20,874.86
914.88
653.93
9,614.40
9,144.69
11,375.86
9,577.50
95.39
224.38
353.11
7,677.06
47,707.33
6,584.12
47,188.21
SHORT TERM PROVISIONS
Particulars
Provision for Leave Encashment
Provision for Gratuity
Current Tax (Net of Advance Income Tax)
Proposed Dividend
Dividend Distribution Tax on Proposed Dividend
Total
196
31-Mar-14
101.63
3.84
217.90
1,327.85
225.67
1,876.89
₹ Mn.
As at
31-Mar-13 31-Mar-12
82.32
69.20
2.88
3.52
994.30
168.98
1,248.48
72.72
12.
FIXED ASSETS
A
TANGIBLE ASSETS
₹ Mn.
Particulars
Freehold Land
Leasehold Land
Buildings
Plant & Machinery
Furniture & Fixtures
Office Equipment
Vehicles
Sub-Total
Less : Depreciation
charged to General
Reserve pursuant to
merger scheme (refer
Note 32)
TOTAL
As at
Adjustment
April 1,
2013
on account
of merger
Gross Block
Additions
95.83
11.26
1,729.30
342,059.42
1,639.18
3,650.16
1,233.31
350,418.46
6,157.03
6,157.03
for the year
ended March
31, 2014
24.36
41.06
43,237.32
2.01
118.48
371.05
43,794.28
350,418.46
6,157.03
43,794.28
Disposal /
Adjustments
for the year
ended March
31, 2014
As at
As at
March 31,
2014
April 1, 2013
8.09
4,615.40
7.63
41.28
205.46
4,877.86
120.19
11.26
1,762.27
386,838.37
1,633.56
3,727.36
1,398.90
395,491.91
3.01
662.92
135,451.78
1,201.55
3,374.73
777.11
141,471.10
4,877.86
395,491.91
141,471.10
Accumulated Depreciation
Adjustment
Additions
Disposal /
Adjustments
on account
for the year
for the year
of merger ended March
ended March
31, 2014
31, 2014
0.24
121.73
2.58
(249.62)
39,426.02
4,197.04
106.87
6.54
156.88
35.77
258.63
190.39
(249.62)
40,070.37
4,432.32
1,215.22
(249.62)
38,855.15
4,432.32
As at
March 31,
2014
Net Block
As at
As at
March 31,
2014
March 31,
2013
3.25
782.07
170,431.14
1,301.88
3,495.84
845.35
176,859.53
120.19
8.01
980.20
216,407.23
331.68
231.52
553.55
218,632.38
95.83
8.25
1,066.38
206,607.64
437.63
275.43
456.20
208,947.36
176,859.53
218,632.38
208,947.36
Notes:
1.
Plant & Machinery includes assets held for disposal- Gross Block ₹ 265.03 Mn. and Net Block ₹ 13.45 Mn.
2.
Plant & Machinery includes Gross Block of assets capitalised under finance lease ₹ 12,520.40 Mn and corresponding Accumulated Depreciation being ₹ 8,846.80 Mn
3.
Additions include exchange loss amounting to ₹ 7,475.54 Mn. capitalised as per transitional provisions of notification under AS-11, issued by the Ministry of Corporate
Affairs.
4.
Depreciation charge for the year includes ₹ 5,685.80 Mn due to change in estimated useful life of certain fixed assets.
197
B
INTANGIBLE ASSETS
₹ Mn.
Particulars
Entry/License Fees &
Spectrum
Computer - Software
Bandwidth
TOTAL
GRAND TOTAL
As at
Adjustment
April 1,
2013
on account
of merger
Gross Block
Additions
for the year
ended March
31, 2014
Disposal /
Adjustments
for the year
ended March
31, 2014
As at
March 31,
2014
103,239.17
-
-
-
103,239.17
4,998.96
7,392.93
115,631.06
466,049.52
6,157.03
368.24
704.93
1,073.17
44,867.45
4,877.86
5,367.20
8,097.86
116,704.23
512,196.14
Accumulated Amortisation
As at
Adjustment
Additions
Disposal /
Adjustments
April 1, 2013
on account
for the year
for the year
of merger ended March
ended March
31, 2014
31, 2014
27,980.72
5,334.50
4,159.92
898.66
33,039.30
174,510.40
(249.62)
491.81
512.54
6,338.85
45,194.00
4,432.32
Net Block
As at
As at
As at
March 31,
2014
March 31,
2014
March 31,
2013
33,315.22
69,923.95
75,258.45
4,651.73
1,411.20
39,378.15
216,237.68
715.47
6,686.66
77,326.08
295,958.46
839.04
6,494.27
82,591.76
291,539.12
Notes:
1.
Computer - Software includes Gross Block of assets capitalised under finance lease ₹ 2,399.88 Mn and corresponding Accumulated Amortisation being ₹ 2,030.77 Mn.
2.
The remaining amortisation period of license / spectrum fees as at March 31, 2014 ranges between 2 to 19 years based on the respective Telecom Service License period.
Capital Work in Progress (Net of impairment provision of ₹ 4,844.60 Mn)
C
114,194.13
TANGIBLE ASSETS
₹ Mn.
Particulars
As at
1-Apr-2012
Freehold Land
Leasehold Land
Buildings
Plant & Machinery
Furniture & Fixtures
Office Equipment
Vehicles
TOTAL
95.83
11.26
1,726.24
306,399.28
1,600.40
3,593.59
1,065.52
314,492.12
Gross Block
Additions
Disposal /
Adjustments
for the year ended for the year ended
March 31, 2013
March 31, 2013
5.14
2.08
37,025.69
1,365.55
42.75
3.97
143.22
86.65
288.60
120.81
37,505.40
1,579.06
As at
As at
31-Mar-2013
1-Apr-2012
95.83
11.26
1,729.30
342,059.42
1,639.18
3,650.16
1,233.31
350,418.46
198
2.77
572.84
107,628.44
1,041.65
3,288.30
653.32
113,187.32
Accumulated Depreciation
Additions
Disposal /
Adjustments
for the year ended
for the year ended
March 31, 2013
March 31, 2013
0.24
91.52
1.44
28,937.46
1,114.12
163.06
3.16
171.17
84.74
226.05
102.26
29,589.50
1,305.72
As at
Net Block
As at
31-Mar-2013
31-Mar-2013
3.01
662.92
135,451.78
1,201.55
3,374.73
777.11
141,471.10
95.83
8.25
1,066.38
206,607.64
437.63
275.43
456.20
208,947.36
Notes:
1.
Plant & Machinery includes assets held for disposal- Gross Block ₹ 245.35Mn and Net Block ₹ 26.00 Mn.
2.
Plant & Machinery includes Gross Block of assets capitalised under finance lease ₹ 10,470.14 Mn and corresponding Accumulated Depreciation being ₹ 6,584.01
Mn.
3.
Exchange loss amounting to ₹ 4,120.31 Mn capitalised as per transitional provisions of notification under AS-11, issued by the Ministry of Corporate Affairs.
4.
Depreciation charge for the year includes accelerated depreciation of ₹ 170.21 Mn due to change in estimated useful life of certain fixed assets.
D
INTANGIBLE ASSETS
₹ Mn.
Particulars
Entry/License Fees &
Spectrum
Computer - Software
Bandwidth
TOTAL
GRAND TOTAL
Gross Block
As at
Additions
Disposal /
Adjustments
1-Apr-2012
for the year ended for the year ended
March 31, 2013
March 31, 2013
86,126.17
20,373.10
3,260.10
4,795.02
5,503.58
96,424.77
410,916.89
205.52
1,890.18
22,468.80
59,974.20
1.58
0.83
3,262.51
4,841.57
As at
As at
31-Mar-2013
1-Apr-2012
Accumulated Amortisation
Additions
Disposal / Adjustments
103,239.17
23,860.09
for the year ended
March 31, 2013
4,120.63
4,998.96
7,392.93
115,631.06
466,049.52
3,498.77
494.07
27,852.93
141,040.25
662.93
404.59
5,188.15
34,777.65
for the year ended
March 31, 2013
As at
Net Block
As at
31-Mar-2013
31-Mar-2013
-
27,980.72
75,258.45
1.78
1.78
1,307.50
4,159.92
898.66
33,039.30
174,510.40
839.04
6,494.27
82,591.76
291,539.12
Notes:
1.
Computer - Software include Gross Block of assets capitalised under finance lease ₹ 2,151.48 Mn and corresponding Accumulated Amortisation being ₹ 1,763.99
Mn.
2.
The remaining amortisation period of license / spectrum fees as at March 31, 2013 ranges between 4 to 19 years based on the respective Telecom Service License
period.
Capital Work in Progress (Net of impairment provision of₹ 4,844.60 Mn)
8810.81
199
E
TANGIBLE ASSETS
₹ Mn.
Particulars
As at
1-Apr-2011
Land
Leasehold Land
Building
Plant & Machinery
Furniture & Fixture
Office Equipment
Vehicles
Total Tangible Assets
95.83
11.25
1,686.49
258,086.08
1,485.15
3,462.01
902.20
265,729.01
Gross Block
Additions
Disposal /
Adjustments
for the year ended for the year ended
March 31, 2012
March 31, 2012
0.01
41.52
1.77
49,035.99
722.79
124.71
9.46
186.90
55.32
309.91
146.59
49,699.04
935.93
As at
As at
31-Mar-2012
1-Apr-2011
95.83
11.26
1,726.24
306,399.28
1,600.40
3,593.59
1,065.52
314,492.12
Accumulated Depreciation
Additions
Disposal / Adjustments
for the year ended
March 31, 2012
2.53
484.12
84,690.22
885.32
3,091.59
577.49
89,731.27
0.24
89.96
23,643.95
165.04
251.79
205.95
24,356.93
for the year ended
March 31, 2012
1.24
705.73
8.71
55.08
130.12
900.88
As at
Net Block
As at
31-Mar-2012
31-Mar-2012
2.77
572.84
107,628.44
1,041.65
3,288.30
653.32
113,187.32
95.83
8.49
1,153.40
198,770.84
558.75
305.29
412.20
201,304.80
Notes:
1.
Plant & Machinery includes assets held for disposal- Gross Block ₹ 66.09 Mn and Net Block ₹ 1.29 Mn.
2.
Plant & Machinery includes Gross Block of assets capitalised under finance lease ₹ 7,046.64 Mn and corresponding Accumulated Depreciation being ₹ 4,664.16
Mn.
3.
Exchange loss amounting to ₹ 5,635.25 Mn capitalised as per transitional provisions of notification under AS-11, issued by the Ministry of Corporate Affairs.
4.
Depreciation charge for the year includes accelerated depreciation of ₹ 149.13 Mn due to change in estimated useful life of certain fixed assets.
F
INTANGIBLE ASSETS
₹ Mn.
Particulars
As at
1-Apr-2011
Entry/License Fees
Computer - Software
Bandwidth
Total Intangible Assets
Grand Total
65,318.27
3,942.64
1,986.81
71,247.72
336,976.73
Gross Block
Additions
Disposal /
Adjustments
for the year ended for the year ended
March 31, 2012
March 31, 2012
20,807.90
852.38
3,516.77
25,177.05
74,876.09
935.93
As at
As at
31-Mar-2012
1-Apr-2011
86,126.17
4,795.02
5,503.58
96,424.77
410,916.89
200
19,398.59
2,740.21
257.71
22,396.51
112,127.78
Accumulated Amortisation
Additions
Disposal / Adjustments
for the year ended
March 31, 2012
4,461.50
758.56
236.36
5,456.42
29,813.35
for the year ended
March 31, 2012
900.88
As at
Net Block
As at
31-Mar-2012
31-Mar-2012
23,860.09
3,498.77
494.07
27,852.93
141,040.25
62,266.08
1,296.25
5,009.51
68,571.84
269,876.64
Notes:
1.
Computer - Software include Gross Block of assets capitalised under finance lease ₹ 1,965.26 Mn and corresponding Accumulated Amortisation being ₹ 1,311.98
Mn.
2.
The remaining amortisation period of license / spectrum fees as at March 31, 2012 ranges between 4 to 19 years based on the respective Telecom Service License
period.
Capital Work in Progress (Net of impairment provision of ₹ 8430.40 Mn.)
6798.50
201
13.
LONG-TERM LOANS AND ADVANCES
(Unsecured, considered good unless otherwise stated)
₹ Mn.
Particulars
Capital Advances
Deposits and balances with Government Authorities
Deposits with Body Corporates and Others
MAT Credit Entitlement
Advance Income Tax
Other Loans and Advances
Total
14.
31-Mar-14
107.43
434.21
9,376.43
11,298.78
2,138.42
5,615.41
28,970.68
As at
31-Mar-13
67.49
534.74
12,243.51
10,180.96
3,473.92
3,978.56
30,479.18
31-Mar-12
240.29
580.54
12,817.15
7,687.73
1,237.03
22,562.74
OTHER NON CURRENT ASSETS
₹ Mn.
Particulars
31-Mar-14
1,448.37
1,448.37
Revenue Equalisation Reserve
Total
15.
As at
31-Mar-13
31-Mar-12
-
-
CURRENT INVESTMENTS
₹ Mn.
Particulars
Investment in Units of Mutual Funds
Total
16.
31-Mar-14
2,155.34
2,155.34
As at
31-Mar-13
10,280.15
10,280.15
31-Mar-14
487.38
195.70
683.08
As at
31-Mar-13
545.10
181.32
726.42
31-Mar-12
976.00
976.00
INVENTORIES
₹ Mn.
Particulars
Sim and Recharge Vouchers
Trading Goods
Total
17.
31-Mar-12
529.39
396.27
925.66
TRADE RECEIVABLES
₹ Mn.
Particulars
31-Mar-14
a)
Billed Receivables
Unsecured - Considered Good
Outstanding for a period exceeding six
months from due date
Other Receivables
Unsecured - Considered Doubtful
Outstanding for a period exceeding six
months from due date
Other Receivables
Less: Provision for Doubtful Debts
b)
Unbilled Receivables
202
As at
31-Mar-13
31-Mar-12
424.93
744.19
361.03
4,147.19
4,572.12
5,557.83
6,302.02
4,586.16
4,947.19
3,282.77
3,383.39
2,728.10
335.52
3,618.29
3,618.29
4,572.12
3,434.08
424.88
3,808.27
3,808.27
6,302.02
3,298.75
255.03
2,983.13
2,983.13
4,947.19
3,279.79
Particulars
Total
18.
31-Mar-14
8,006.20
As at
31-Mar-13
9,600.77
31-Mar-14
As at
31-Mar-13
31-Mar-12
8,226.98
CASH AND BANK BALANCES
₹ Mn.
Particulars
a)
b)
19.
Cash and Cash Equivalents
Cash on hand
Cheques on hand
Balances with Banks
- In Current Accounts
- In Deposit Accounts
Other Bank Balances
Margin Money with Banks
Earmarked Bank Balance towards
Dividend
Total
31-Mar-12
26.01
183.93
26.48
223.18
16.66
135.06
235.62
942.29
1,387.85
750.43
377.86
1,377.95
354.48
967.40
1,473.60
492.47
0.64
51.10
-
47.13
-
1,880.96
1,429.05
1,520.73
31-Mar-14
557.28
3,164.10
411.25
3,475.97
As at
31-Mar-13
290.08
1,556.01
1,991.66
3,581.77
4,572.90
584.69
5,157.59
584.69
4,572.90
12,181.50
3,425.82
592.01
4,017.83
592.01
3,425.82
10,845.34
5,736.71
587.30
6,324.01
587.30
5,736.71
15,385.67
31-Mar-14
34.65
34.65
As at
31-Mar-13
8.66
8.66
31-Mar-12
17.68
17.68
SHORT TERM LOANS AND ADVANCES
(Unsecured, considered good unless otherwise stated)
₹ Mn.
Particulars
MAT Credit Entitlement
Advance Income Tax (Net of provisions)
Deposits with Body Corporates and Others
Cenvat Credit
Other Loans and Advances
- Considered Good
- Considered Doubtful
Less: Provision for Doubtful Advances
Total
20.
4,460.16
1,991.73
3,197.07
OTHER CURRENT ASSETS
Particulars
Interest receivable
Total
21.
31-Mar-12
OTHER INCOME
Particulars
Liabilities/Provisions no longer required written
back
Miscellaneous Receipts
Total
203
₹ Mn.
For the year ended
31-Mar-14
31-Mar-13
31-Mar-12
749.20
414.83
450.89
120.17
869.37
87.26
502.09
73.89
524.78
22.
COST OF TRADING GOODS SOLD
₹ Mn.
For the year ended
31-Mar-14
31-Mar-13
31-Mar-12
181.32
396.27
137.02
1,941.38
2,103.41
1,672.97
195.70
181.32
396.27
1,927.00
2,318.36
1,413.72
Particulars
Opening Stock
Add : Purchases
Less : Closing Stock
Total
23.
PERSONNEL EXPENDITURE
₹ Mn.
For the year ended
31-Mar-14
31-Mar-13
31-Mar-12
11,801.63
9,777.35
8,575.54
626.83
912.46
466.53
508.77
401.13
338.65
183.94
134.34
118.44
13,121.17
11,225.28
9,499.16
Particulars
Salaries and Allowances etc.
Contribution to Provident and Other Funds
Staff Welfare
Recruitment and Training
Total
24.
NETWORK EXPENSES AND IT OUTSOURCING COST
Particulars
Security Service Charges
Power and Fuel
Repairs and Maintenance - Plant and Machinery
Switching & Cellsites Rent
Lease Line and Connectivity Charges
Network Insurance
Passive Infrastructure Charges
Other Network Operating expenses
IT outsourcing cost
Total
25.
LICENSE FEES AND WPC CHARGES
₹ Mn.
For the year ended
31-Mar-14
31-Mar-13
31-Mar-12
18,040.75
15,545.28
14,629.71
11,197.23
9,207.22
8,602.12
29,237.98
24,752.50
23,231.83
Particulars
License Fees
WPC and Spectrum Charges
Total
26.
₹ Mn.
For the year ended
31-Mar-14
31-Mar-13
31-Mar-12
1,300.37
1,143.90
1,168.84
22,674.55
19,099.53
15,705.81
9,934.91
8,549.28
7,187.27
4,102.59
4,115.80
3,875.64
4,858.44
5,455.04
5,876.70
105.77
106.36
87.74
17,915.97
13,440.68
11,259.58
720.09
570.59
529.59
3,377.58
2,879.42
2,917.22
64,990.27
55,360.60
48,608.39
ROAMING & ACCESS CHARGES
₹ Mn.
For the year ended
31-Mar-14
31-Mar-13
31-Mar-12
6,113.56
6,660.23
4,188.96
35,502.08
33,485.04
28,609.79
41,615.64
40,145.27
32,798.75
Particulars
Roaming Charges
Access Charges
Total
204
27.
SUBSCRIBER ACQUISITION & SERVICING EXPENDITURE
Particulars
Cost of Sim & Recharge Vouchers
Commission & Discount to Dealers
Customer Verification Expenses
Collection, Telecalling & Servicing Expenses
Customer Retention & Customer Loyalty Expenses
Total
28.
₹ Mn.
For the year ended
31-Mar-14
31-Mar-13
31-Mar-12
1,476.59
1,685.16
1,897.80
10,463.58
12,117.43
12,173.96
2,310.09
1,612.10
1,403.65
4,929.83
4,569.66
3,959.37
626.54
482.94
434.22
19,806.63
20,467.29
19,869.00
ADMINISTRATION & OTHER EXPENSES
Particulars
Repairs and Maintenance - Building
- Others
Other Insurance
Non Network Rent
Rates and Taxes
Electricity
Printing and Stationery
Communication Expenses
Travelling and Conveyance
Bad Debts/ Advances written off
Provision for bad and doubtful debts / advances
Bank Charges
Directors Sitting Fees
Legal and Professional Charges
Audit Fees
Loss / (Gain) on Sale of Fixed Assets/Asset disposed off (Net)
Miscellaneous expenses
Total
29.
FINANCE AND TREASURY CHARGES (NET)
₹ Mn.
For the year ended
31-Mar-14
31-Mar-13
31-Mar-12
Particulars
Interest
- On Fixed Period Loan (net of interest capitalised ₹
403.44 Mn. and ₹42.24 Mn. in FY11-12)
- Others
Financing Charges
Less :
Interest Income
Dividend Income and Profit on Sale of Current
Investment
Gain / (Loss) on Foreign Exchange Fluctuation (Net)
Total
30.
₹ Mn.
For the year ended
31-Mar-14 31-Mar-13 31-Mar-12
63.32
61.47
60.63
411.80
366.23
314.66
42.47
37.88
33.30
865.28
875.84
821.65
177.22
132.76
93.18
499.87
399.88
353.42
83.23
80.88
83.60
136.04
109.74
102.91
1,070.88
913.52
830.58
1,152.28
(114.76)
829.85
597.31
104.00
89.52
73.76
1.40
1.25
1.24
952.11
685.81
644.27
45.89
42.45
40.57
(205.22)
53.27
11.95
1,000.76
861.22
723.17
6,286.57
5,541.57
4,786.20
8,818.20
9,275.74
9,554.28
241.54
492.11
9,551.85
298.45
582.77
10,156.96
384.89
542.57
10,481.74
987.68
1,280.37
193.89
667.37
134.52
291.71
(416.33)
7,700.13
(198.80)
9,494.50
(501.78)
10,557.29
The Department of Telecommunications (DoT) conducted auction for the 900 and 1800 Mhz spectrum
in February 2014. The Company successfully bid for its requirements in the 11 service areas of
Maharashtra, Madhya Pradesh, Kerala, Gujarat, Andhra Pradesh, Haryana, Punjab, Karnataka,
Mumbai, Delhi and North East in the 1800 Mhz band and for Delhi service area also in the 900 Mhz
205
band at a total cost of ₹ 104,242.15 Mn. As per the payment options available as part of the auction, the
Company has chosen the deferred payment option by making an upfront payment of ₹ 31,436.07 Mn.
and balance amount is recognized as “Deferred Payment Liabilities towards Spectrum” under
Unsecured Loans. This spectrum which is yet to be earmarked and allotted to the company as on March
31, 2014 is for a twenty year period.
31.
In the pending matter of transfer of licenses for service areas of Punjab & Karnataka, pursuant to
amalgamation of erstwhile Spice Communications Limited with the Company, DoT has transferred
these licenses in the name of the Company upon submission of an undertaking as directed by Hon’ble
Supreme Court in its order dated January 29, 2014.
32.
The scheme of arrangement under Section 391 to 394 of the Companies Act, for transfer of all assets
and liabilities of erstwhile Idea Cellular Towers Infrastructure Limited (a 100% subsidiary of the
Company), Vodafone Infrastructure Limited and Bharti Infratel Ventures Limited to joint venture of
the Company Indus Towers Limited (Indus), with an appointed date of April 1, 2009 was approved by
the Hon’ble High Court of Delhi on April 18, 2013 and became effective on June 11, 2013 being the
date of the last filing of certified copies of the Order of the Court sanctioning the Scheme with the
relevant Registrar of Companies. The scheme has been accounted as amalgamation in the nature of
purchase as it does not meet the conditions required for amalgamation in the nature of merger as
specified in Accounting Standard 14 (AS 14). Pursuant to the Scheme, Indus has recorded assets of the
transferor companies at their fair values and liabilities & reserves at their respective book values and
the resultant difference has been credited to General Reserve, which as per scheme is to be treated as
free reserve. The Scheme also provides specified purposes for which this General Reserve can be
utilised.
Had the accounting treatment as per AS 14 been followed, the general reserve account of the group as
at March 31, 2014 would have been lower by ₹ 3,929.59 Mn., capital reserve would have been higher
by ₹ 5,259.35 Mn., profit during the year and surplus in statement of profit & loss as on March 31,
2014 would have been lower by ₹ 1,329.76 Mn.
Subsequent to scheme becoming effective, Income Tax authorities have filed appeals before the
Division Bench of Hon’ble High Court of Delhi challenging the above order dated April 18, 2013
approving scheme of amalgamation of Idea Cellular Towers Infrastructure Limited, Vodafone
Infrastructure Limited and Bharti Infratel Ventures Limited into Indus Towers Limited. The said
appeals are yet to be admitted by the Hon’ble Court.
Further, Income Tax authorities have also filed appeals before respective Hon’ble High Courts
challenging de-merger of PI undertaking from their holding companies to Idea Cellular Towers
Infrastructure Limited, Vodafone Infrastructure Limited and Bharti Infratel Ventures Limited
respectively. All these appeals are pending before Hon’ble High Courts for condonation of delay in
filing.
33.
Contingent Liabilities
(i)
DoT has issued demand notices towards one time spectrum charges

for spectrum beyond 6.2 Mhz in respective service areas for retrospective period
from 1st July 2008 to 31st December 2012, amounting to ₹ 3,691.30 Mn., and

for spectrum beyond 4.4 Mhz in respective service areas effective 1 st January 2013
till expiry of the period as per respective licenses amounting to ₹ 17,443.70 Mn.
In the opinion of Company, inter-alia, the above demands amount to alteration of financial
terms of the licenses issued in the past. The Company had therefore, petitioned the Hon’ble
High Court of Bombay, where the matter was admitted and is currently sub-judice. The
Hon’ble High Court of Bombay has directed the DoT, not to take any coercive action until the
matter is further heard.
(ii)
The Company also has a contingent obligation to buy compulsorily convertible preference
shares from the holder at fair market value plus the agreed consideration in the event ABTL is
not able to redeem such shares which were issued by ABTL at ₹ 20,982.50 Mn. including
206
premium thereon.
(iii)
Other Matters
Particulars
Income Tax Matters not acknowledged as debts (see a.
below)
Sales Tax and Entertainment Tax Matters not
acknowledged as debts (see b. below)
Service Tax Matters not acknowledged as debts (see c.
below)
Entry Tax and Custom Matters not acknowledged as
debts (see d. below)
Licensing Disputes (see e. below)
Other claims not acknowledged as debts (see f. below)
(a)
(b)
(c)
( ₹Mn.)
As on March 31
2014
2013
2012
62,340.68 50,302.44 10,505.72
1,003.74
395.64
2,758.73
2,123.73
1,947.67
4,769.13
344.84
628.09
406.44
19,943.82
2,578.56
9,955.78
2,205.52
4,760.08
2,070.04
Income Tax Matters:

Appeals filed by the holding company against the demands raised by
Income Tax Authorities which are pending before Appellate Authorities
include mainly, disputes on account of incorrect disallowance of revenue
share license fee, disputes on non applicability of tax deduction at source on
pre-paid margin allowed to prepaid distributors & roaming settlements,
disallowance of interest proportionate to interest free advances given to
wholly owned subsidiaries etc.

Appeals filed for tax demands treating proceeds from issue of CCPS as Cash
Credit.

Appeals filed for tax demand on the net value of assets and liabilities vested
with the holding company consequent to High Court approved de-merger of
telecom undertaking from its wholly owned subsidiary.

Appeals filed for tax demand of alleged short term capital gain on the fair
valuation of investment in JV done as per High Court approved scheme.
Sales Tax and Entertainment Tax:

Sales Tax demands mainly relates to the demands raised by the VAT/Sales
Tax authorities of few states on Broadband Connectivity, SIM cards etc. on
which the company has already paid Service Tax.

In one state entertainment tax is being demanded on revenue from value
added services. However, the Company has challenged the constitutional
validity of the levy.
Service Tax:
Service tax demands mainly relates to the following matters:

Interpretation issues arising out of Rule 6(3) of the Cenvat Credit Rules,
2004,

Denial of Cenvat credit related to Towers, Shelters and OFC Ducts,

Disallowance of Cenvat Credit on input services viewed as not related to
output Service.
207
(d)
Entry tax:
In certain states entry tax is being demanded on receipt of material from outside the
state. However, the Company has challenged the constitutional validity of the levy.
(e)
(f)
Licensing Disputes:

3G Intra Circle Roaming Arrangements (ICR) – The Company had entered
into roaming arrangements with other operators to provide 3G services in
service areas where it did not won 3G spectrum. DoT has sent notices to
stop the 3G services in these service areas and also imposed penalty for
providing 3G services in select service areas under roaming arrangements.
The matter is currently pending before the Hon’ble TDSAT.

Demands due to difference in interpretation of definition of Revenue and
other license fee assessment related matters

Disputes relating to alleged non compliance of licensing conditions, EMF
procedural norms & other disputes with DoT, 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 subjudice before the Hon’ble TDSAT (Refer note 31).
Other claims not acknowledged as debts:
Mainly includes miscellaneous disputed matters with Local Municipal Corporation
and Electricity Board and others.
34.
Group’s share in certain disputed tax demand notices and show cause notices relating to Indirect tax
matters amounting to ₹ 5,892.00 Mn., ₹ 6,674.88 Mn. and ₹ 6,301.60 Mn. as at March 31, 2014, 2013
and 2012 respectively have neither been acknowledged as claims nor considered as contingent
liabilities by the Joint Venture of the Company. Based on internal assessment and independent advice
taken from tax experts by the Joint Venture, the Joint Venture is of the view that the possibility of any
of these tax demands materialising is remote.
35.
Details of guarantees given
( ₹Mn.)
Particulars
As on March 31
2014
2013
42,006.13
25,833.51
Bank Guarantees given
36.
2012
21,655.92
Capital and other Commitments
( ₹Mn.)
Particulars
Contracts remaining to be executed for capital
expenditure (net of advances) not provided for
Long term contracts remaining to be executed including
early termination commitments (if any)
37.
As on March 31
2014
2013
17,402.34
17,714.71
18,376.07
18,076.12
2012
10,860.10
7,439.13
Personnel Expenditure includes ₹ 43.07 Mn., ₹ 0.32 Mn. and ₹ 35.88 Mn. being the amortisation of
intrinsic value of ESOPs for the year ending 31 st March, 2014, 2013 and 2012 respectively.
Had the compensation cost for the Company’s stock based compensation plan been determined as per
fair value approach (calculated using Black & Scholes Option Pricing Model), the Company’s net
income would be lower by ₹ 93.56 Mn., ₹ 38.44 Mn. and ₹ 115.23 Mn. for the year ending 31st March,
2014, 2013 and 2012 respectively and earnings per share as reported would be as indicated below:
208
( ₹Mn.)
For the year Ended March 31
2014
2013
2012
19,678.20
10,109.27
7,229.88
43.07
0.32
35.88
Particulars
Net profit after tax but before exceptional items
Add: Total stock-based employee compensation expense
determined under intrinsic value base method
Less: Total stock-based employee compensation expense
determined under fair value base method
Adjusted net profit
Basic earnings per share (in ₹)
- As reported
- Adjusted
Diluted earnings per share (in ₹)
- As reported
- Adjusted
136.63
38.76
151.11
19,584.64
10,071.26
7,114.65
5.93
5.90
3.05
3.04
2.19
2.15
5.92
5.89
3.05
3.03
2.18
2.15
The fair value of each option is estimated on the date of grant / re-pricing based on the following
assumptions:
Particulars
On the date of Grant
On the date of repricing
Tranche I Tranche II Tranche III Tranche Tranche I Tranche II
IV
Dividend yield (%)
Nil
Nil
Nil
Nil
Nil
Nil
Expected life
6 yrs
6 yrs
6 yrs
6 yrs
4 yrs
5 yrs
6 months 6 months
6 months
6months 6 months 9 months
Risk free interest rate(%)
7.78
7.50
7.36 8.04-8.14
7.36
7.36
Volatility (%)
40.00
45.80
54.54
50.45
54.54
54.54
Particulars
ESOS 2013
Stock Options
Dividend yield (%)
Expected life
Risk free interest rate (%)
Volatility (%)
38.
Details of foreign currency exposures
A.
Hedged by a derivative instrument
Restricted Stock Units
0.24
6 yrs 6 months
8.81 – 8.95
34.13 – 44.81
0.24
5 yrs 6 months
8.91
43.95
Particulars
2014
Foreign Currency Loan
Foreign Currency Loan in USD
Vendor Finance in USD
Foreign Currency Loan in JPY
Equivalent INR of Foreign Currency Loan
Trade Payables and Other current liabilities
Trade Payable in USD
Interest accrued but not due on Foreign Currency Loans in
USD
Interest accrued but not due on Foreign Currency Loans in
JPY
Equivalent INR of Trade payables and other current
liabilities
209
(Amount in Mn.)
As at March 31
2013
2012
667.73
5,313.22
43,744.48
654.06
10,626.43
40,398.95
575.22
0.10
15,058.36
34,161.45
46.38
7.39
23.60
2.85
12.08
2.67
8.20
18.21
27.23
3,368.86
1,469.09
768.68
B.
Not hedged by a derivative instrument or otherwise
Particulars
2014
Foreign Currency Loan
Foreign Currency Loan in USD
Vendor Finance in USD
Equivalent INR of Foreign Currency Loan
Trade Payable:
Trade Payable in USD
Trade Payables in EURO
Trade Payables in GBP
Interest accrued but not due on Foreign Currency Loans in
USD
Equivalent INR of Trade Payables & interest accrued in
Foreign Currency
Trade Receivable:
Trade Receivable in USD
Trade Receivable in EURO
The Equivalent INR of Trade Receivables in Foreign
Currency
39.
(Amount in Mn.)
As on March 31
2013
2012
473.75
28,472.38
657.48
35,760.06
657.13
0.03
33,617.76
46.01
0.25
-
51.85
0.17
0.01
4.84
57.02
0.06
3.73
2,786.04
3,095.98
3,111.99
12.65
0.11
768.78
10.21
0.12
564.23
10.03
0.15
523.16
Employee Benefits
(a)
Defined Benefit Plan: The Group provides for its liability towards gratuity as per the actuarial
valuation. The present value of the accrued gratuity minus fund value is provided in the books
of accounts.
(i)
Changes in benefit obligation for the Company and its Subsidiaries:
Sr.
Particulars
No
1 Assumptions
Discount Rate (%)
Expected return on Plan Assets (%)
Salary Escalation (%)
2 Table showing changes in present value of Obligations
Present value of obligations as at beginning of year
Interest cost
Current Service Cost
Benefits Paid
Actuarial (Gain)/Loss on obligations
Past Service Cost
Present value of obligations as at end of year
3 Table showing changes in the fair value of Plan Assets
Fair value of plan assets at beginning of year
Expected return on plan assets
Contributions
Benefits paid
Actuarial Gain / (Loss) on Plan assets
Fair value of plan assets at the end of year
Funded Status
Actual return on plan assets
4 Actuarial Gain/Loss recognized
Actuarial Gain/(Loss) for the year -Obligation
Actuarial (Gain)/Loss for the year - plan assets
Total (Gain)/Loss for the year
210
( ₹Mn.)
For the year ended March 31,
2014
2013
2012
9.00-9.10
9.00
7.00
8.10
9.00
7.00
8.00-8.25
7.50
5.00-7.00
959.38
89.00
165.45
(25.90)
125.07
1,062.86
473.25
44.69
87.83
(18.74)
134.45
237.90
959.38
369.83
34.76
74.87
(12.66)
6.45
473.25
225.55
20.77
31.36
(25.90)
1.63
253.42
809.44
20.96
210.06
16.67
15.58
(18.74)
1.98
225.55
733.83
17.78
183.70
14.82
21.61
(12.66)
2.59
210.06
263.19
16.94
125.07
(1.63)
(126.70)
(134.45)
(1.98)
132.47
(6.45)
(2.59)
3.86
Sr.
No
5
6
7
Particulars
For the year ended March 31,
2014
2013
2012
(126.70)
132.47
3.86
Actuarial (Gain)/Loss recognized in the year
The amounts to be recognized in the Balance Sheet
Present value of obligations as at the end of year
Fair value of plan assets as at the end of the year
Funded status
Net Asset/(Liability) recognized in balance sheet
Expenses Recognised in Statement of Profit & Loss
Current Service cost
Interest Cost
Expected return on plan assets
Net Actuarial (Gain)/Loss recognised in the year
Past service cost
Expenses recognised in statement of Profit & Loss
Investment Details of Plan Assets (% allocation)
Insurer managed funds* (%)
1,062.86
253.42
809.44
(809.44)
959.38
225.55
733.83
(733.83)
473.25
210.06
263.19
(263.19)
165.45
89.00
(20.77)
(126.70)
106.98
87.83
44.69
(16.67)
132.47
237.90
486.22
74.87
34.76
(14.82)
3.86
98.67
100.00
100.00
100.00
( ₹Mn.)
Sr.
Particulars
No
8 Experience Adjustments
Defined benefit obligation
Plan Assets
Surplus/ (Deficit)
Experience Adjustments on plan liabilities
Experience Adjustments on plan assets
2014
1,062.86
253.42
(809.44)
34.07
1.63
For the year ended March 31,
2013
2012
2011
959.38
225.55
(733.83)
116.21
1.98
473.25
210.06
(263.19)
25.64
2.59
2010
369.83 258.36
183.70 148.23
(186.13) (110.13)
26.25
57.02
5.33
0.28
*
The funds are managed by LIC and LIC does not provide breakup of plan assets by investment type.
The estimate of future salary increase, considered in actuarial valuation, takes account of inflation, seniority,
promotion and other relevant factors, such as supply and demand in the employment market.
(ii)
Disclosure of benefit obligation in respect of Company’s share in Joint Venture
(a)
Gratuity cost for the year
Particulars
Current service cost
Interest cost
Actuarial losses
Total amount recognized in Statement
of Profit and Loss
(b)
( ₹Mn)
For the year ended March 31
2014
2013
2012
5.44
4.80
4.16
1.44
1.12
0.96
0.32
0.48
6.88
6.24
5.60
Amount recognised in the Balance Sheet
Particulars
Opening defined benefit obligation
Total amount recognised in Statement
of Profit and Loss
Benefits paid during the year
Amount recognised in the Balance
Sheet
211
( ₹Mn)
For the year ended March 31
2014
2013
2012
16.96
12.80
9.10
6.88
6.24
5.60
(2.40)
21.44
(2.08)
16.96
(1.90)
12.80
(c)
Experience Adjustments
Particulars
Defined benefit obligation
Surplus / (Deficit)
Experience adjustments on
Plan Liabilities
(d)
( ₹Mn)
For the year ended March 31
2014
2013
2012
2011 2010
21.44
16.96
12.80
9.10
5.96
(21.44) (16.96) (12.80) (9.10) (5.96)
0.96
0.48
0.80
0.80
0.21
Financial Assumptions
Particulars
Discount rate
Salary escalation rate
(b)
2014
9.10%
First 2 years10% and 7%
thereafter
Defined Contribution Plan : During the year, the Company has recognised the following
amounts in the Statement of Profit and Loss:
( ₹Mn.)
For the year ended March 31
2014
2013
2012
400.85
325.56
279.91
56.75
47.47
43.68
Particulars
Employers’ Contribution to Provident & Pension Fund
Employers’ Contribution to Superannuation Fund
40.
As at March 31
2013
2012
8.40%
8.40%
First 2 years- First 2 years10% and 7% 10% and 7%
thereafter
thereafter
Segment Reporting
1.
Primary Segments
The Group operates in three business segments:
(a)
Mobility Services: providing GSM based mobile and related telephony services.
(b)
International Long Distance (ILD): providing international long distance services.
(c)
Passive Infrastructure (PI): providing passive infrastructure services.
Transactions between segments are accounted on agreed terms on arm’s length basis and have
been eliminated at the Group level.
2.
Secondary Segment
The Group caters only to the needs of Indian market representing a singular economic
environment with similar risks and rewards and hence there are no reportable geographical
segments
Primary Business Information (Business Segments) for the year ended 31 st March, 2014.
Particulars
Revenue
External Revenue
Inter-segment Revenue
Total Revenue
Segment result
Interest & financing charges (Net)
Business Segments
Mobility
ILD
260,832.32
917.78
261,750.10
31,640.16
3,229.64
1,505.30
4,734.94
708.29
212
Elimination
( ₹Mn.)
Total
PI
1,127.09
23,717.61
24,844.70
5,794.33
(26,140.69)
(26,140.69)
-
265,189.05
265,189.05
38,142.78
7,700.13
Particulars
Profit before Tax
Provision for Tax (Net)
Profit after Tax
Other information
Segment Assets
Unallocated corporate Assets
Total Assets
Segment Liabilities
Unallocated corporate Liabilities
Total Liabilities
Capital Expenditure
Depreciation & Amortisation
#
Business Segments
Mobility
ILD
Elimination
Total
PI
30,442.65
10,764.45
19,678.20
402,091.80
-
1,047.94
-
47,799.03
-
(11,753.56)
-
267,535.26
-
424.99
-
24,193.26
-
(11,753.56)
-
147,298.30
40,897.61
22.76
35.14
2,929.71
5,476.47#
-
439,185.21
26,389.36
465,574.57
280,399.95
19,904.89
300,304.83
150,250.77
46,409.22
includes depreciation charge on fair value portion of fixed assets by joint venture ₹ 1,215.22 Mn. adjusted
to general reserve.
Primary Business Information (Business Segments) for the year ended 31 st March, 2013.
Particulars
Revenue
External Revenue
Inter-segment Revenue
Total Revenue
Segment result
Interest & Financing Charges (Net)
Profit before Tax
Provision for Tax (Net)
Profit after Tax
Other Information
Segment Assets
Unallocated Corporate Assets
Total Assets
Segment Liabilities
Unallocated Corporate Liabilities
Total Liabilities
Capital Expenditure
Depreciation & Amortisation
Business Segments
Mobility
ILD
Elimination
( ₹Mn.)
Total
PI
221,218.71
697.21
221,915.92
20,779.38
2,317.23
1,514.06
3,831.29
365.13
1,040.60
22,512.07
23,552.67
4,123.22
(24,723.34)
(24,723.34)
-
224,576.54
224,576.54
25,267.73
9,494.50
15,773.23
5,663.96
10,109.27
292,483.02
-
677.13
-
40,602.14
-
(10,435.50)
-
193,959.16
-
316.83
-
24,543.73
-
(10,435.50)
-
58,058.89
30,493.15
23.73
51.02
3,903.90
4,233.48
-
323,326.79
40,453.91
363,780.70
208,384.22
12,343.59
220,727.81
61,986.52
34,777.65
Elimination
( ₹Mn.)
Total
Primary Business Information (Business Segments) for the year ended 31 st March, 2012.
Particulars
Revenue
External Revenue
Inter-segment Revenue
Total Revenue
Segment result
Interest & Financing Charges (Net)
Profit before Tax
Provision for Tax (Net)
Profit after Tax
Other Information
Segment Assets
Business Segments
Mobility
ILD
PI
193,555.18
642.79
194,197.97
17,299.46
1,175.49
1,419.96
2,595.45
212.32
680.96
19,819.78
20,500.74
3,598.24
(21,882.53)
(21,882.53)
-
195,411.63
195,411.63
21,110.02
10,557.29
10,552.73
3,322.85
7,229.88
280,906.97
451.27
37,565.04
(8,237.50)
310,685.78
213
Particulars
Unallocated Corporate Assets
Total Assets
Segment Liabilities
Unallocated Corporate Liabilities
Total Liabilities
Capital Expenditure
Depreciation & Amortisation
41.
Business Segments
Mobility
ILD
-
Elimination
Total
PI
-
-
175,116.63
-
256.41
-
22,441.10
-
(8,237.50)
-
42,493.91
25,573.71
112.14
54.78
3,062.99
4,184.86
-
15,666.02
326,351.80
189,576.64
6,272.98
195,849.62
45,669.04
29,813.35
Related Party Transactions
As per Accounting Standard-18 on “Related Party Disclosure”, related parties of the Company are
disclosed below:
A.
List of related Parties
Promoters
Hindalco Industries Limited (Hindalco)
Grasim Industries Limited (Grasim)
Aditya Birla Nuvo Limited (ABNL)
Birla TMT Holdings Pvt. Limited (Birla TMT)
Entities having significant Influence
Axiata Investments 1 (India) Ltd. (AI1) (Formerly known as TMI Mauritius Ltd)
Axiata Investments 2 (India) Ltd. (AI2)
Axiata Group Berhad
Key Management Personnel (KMP)
Mr. Himanshu Kapania, MD
Mr. Akshaya Moondra, CFO
214
B.
Transactions with Related Parties
Particulars
Purchase of Service / goods
Sale of Service / goods
Interest paid on NCD
Dividend on Equity Shares
Expense incurred by
Company on behalf of
Expense incurred on
Company’s behalf by
Particulars
Remuneration
Dividend on Equity Shares
C.
₹ Mn.
For the year ended March 31, 2014
For the year ended March 31, 2013
For the year ended March 31, 2012
Promoters
Promoters
Promoters
Hindalco Grasim ABNL Birla Hindalco Grasim ABNL
Birla Hindalco Grasim ABNL
Birla
TMT
TMT
TMT
0.05
0.34
0.17
29.77
16.64 29.33
28.33
17.06
26.92
19.37
16.24
9.89
9.45
68.50
51.30 251.26
85.07
0.52
0.16
0.86
0.36
0.94
0.43
0.17
4.17
0.20
0.02
0.09
0.03
0.36
0.10
0.06
For the year ended March 31, 2014
For the year ended March 31, 2013
Entities having Significant
KMP
Entities having Significant
KMP
Influence
Influence
AI1
AI2
AI1
AI2
117.98
105.76
139.42
58.63
0.10
-
0.87
0.05
0.09
₹ Mn.
For the year ended March 31, 2012
Entities having Significant
KMP
Influence
AI1
AI2
60.05
-
Balances with Related Parties
₹ Mn.
As on March 31, 2014
As on March 31, 2013
As on March 31, 2012
Promoters
KMP
Promoters
KMP
Promoters
KMP
Hindalco Grasim ABNL
Hindalco Grasim ABNL
Hindalco Grasim ABNL
Remuneration Payable
34.54
30.52
11.44
Trade Receivable
3.63
2.35
1.48
2.95
2.51
1.90
1.60
6.70
4.20
9.45% Redeemable NCD
100.00
100.00*
Interest accrued but not due
3.91
3.94
on the above CD’s
Particulars
*
Purchased from Secondary Market
215
42.
The Company is one of the members of Aditya Birla Management Corporation Private Limited, 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 & Loss.
43.
Operating Lease: As a Lessee
The Company has entered into non-cancellable operating leases for offices, switches and cell sites for
periods ranging from 36 months to 240 months. Total minimum lease payments charged to the
Statement of Profit & Loss for the year ended 31 st March, 2014, 2013 and 2012 amounted to ₹
22,857.76 Mn., ₹ 18,462.24 Mn. and ₹ 14,651.17 Mn. respectively.
The future minimum lease payments in respect of the above are as follows.
Year ending March
31
Not later than one
year
2014
2013
2012
20,141.03
9,961.06
8,734.25
Later than one year
but not later than five
years
68,527.36
30,921.38
27,673.41
( ₹Mn.)
Later than five years
35,596.72
14,290.86
13,005.55
Operating Lease: As a Lessor
The Company has leased under operating lease arrangements certain Optical Fibre Cables (OFC) on
Indefeasible Rights of Use (“IRU”) basis. The gross block, accumulated depreciation and depreciation
expense of the assets given on IRU basis is not separately identifiable and hence not disclosed.
Rental income of ₹ 269.60 Mn., ₹ 191.49 Mn. and ₹ 107.45 Mn. in respect of such leases have been
recognized in the Statement of Profit and Loss for the year ending 31 st March, 2014, 2013 and 2012
respectively.
The future minimum lease receivables in respect of the above are as follows:
Year ending March
31
Not later than one
year
2014
2013
2012
184.72
951.38
139.65
Later than one year
but not later than five
years
12.81
20.67
48.49
( ₹Mn.)
Later than five years
0.84
0.48
44.
The company has a composite IT outsourcing agreement wherein fixed assets and services related to IT
have been supplied by the vendor. Such fixed assets received have been accounted for as finance lease.
Correspondingly, such assets are recorded at fair value of these assets at the time of receipt and
depreciated on the stated useful life applicable to similar assets of the company.
45.
Basic & Diluted Earnings per Share
Particulars
For the year ended March 31
2013
2012
10/10/10/19,678.20
10,109.27
7,229.88
19,678.20
10,109.27
7,229.88
2014
Nominal value of Equity Shares (₹)
Profit after Tax (₹ Mn.)
Profit attributable to equity shareholders (₹
Mn.)
Weighted average number of equity shares
outstanding during the year
Basic Earnings Per Share (₹)
Dilutive effect on weighted average number of
216
3,316,853,830
3,310,881,787
3,305,571,126
5.93
8,373,426
3.05
8,292,754
2.19
10,381,939
Particulars
2014
equity shares outstanding during the year
Weighted average number of diluted equity
shares
Diluted Earnings Per Share (₹)
46.
For the year ended March 31
2013
2012
3,325,227,256
3,319,174,541
3,315,953,065
5.92
3.05
2.18
The Company has the following joint venture and its percentage holding is given below:
Name of the Joint Venture
Indus Towers Limited (Indus)
Percentage holding
As on March 31
2014
2013
2012
16.00% 16.00%
16.00%
The proportionate share of assets, liabilities, income, expenditure, contingent liabilities and capital
commitment of the above joint venture companies included in these consolidated financial statements
are given below:
( ₹Mn)
Particulars
As on March 31
2014
2013
Liabilities
Reserves & Surplus
Long Term Borrowings
Other Non Current Liabilities
Deferred Tax Liability
Short Term Borrowings
Other Current Liabilities
Assets
Net Block (including CWIP)
Other Non Current Assets
Current Investment
Other Current Assets
24,201.45
9,845.28
4,998.88
2,635.84
378.08
6,555.96
1,225.39
12,303.20
2,557.28
767.80
328.80
9,268.65
1,425.34
9,100.00
2,892.85
605.68
4,863.92
6,743.41
33,360.32
9,449.44
1,825.28
3,980.64
19,808.64
2,102.45
720.00
3,820.22
18,702.32
1,537.77
976.00
4,415.30
( ₹Mn.)
For the year ended March 31
2014
2013
2012
22,453.28 21,362.04 12,716.56
13,137.76 15,030.56
6,952.43
9,315.52
6,331.48
5,764.14
1,426.24
1,310.08
1,471.17
3,903.04
2,635.36
2,535.97
3,986.24
2,386.04
1,757.00
1,518.40
813.58
563.60
2,467.84
1,572.46
1,193.40
4,182.08
699.52
585.44
527.52
187.04
347.52
Particulars
Revenues
Operating Costs
EBITDA
Finance Cost
Depreciation & Amortisation
PBT
Taxes
PAT
Contingent Liability
Capital Commitment
47.
2012
Information with respect to Subsidiaries as on March 31, 2014.
Particulars
Capital
Reserves
Total Assets
( ₹Mn.)
Aditya Birla Idea Cellular Idea Cellular
Idea
Idea Mobile
Telecom
Services
Infrastructur Telesystems Commerce
Limited
Limited
e Services
Limited
Services
Limited
Limited
119.25
0.50
0.50
0.50
45.00
74,080.02
(7.09)
532.65
140.38
(28.82)
2,406.09
85.28
3,141.49
252.82
36.53
217
Particulars
Total Liabilities
Investments other than
Investments in subsidiary
Turnover (Total
Revenue)
Profit/(Loss) before
Taxation
Provision for Taxation
Profit/(Loss)
after Taxation
Aditya Birla Idea Cellular Idea Cellular
Idea
Idea Mobile
Telecom
Services
Infrastructur Telesystems Commerce
Limited
Limited
e Services
Limited
Services
Limited
Limited
1,514.38
91.87
2,608.34
442.00
20.35
73,307.56
330.06
846.25
1,123.43
2,253.29
2,339.04
10.63
851.10
1.95
227.18
39.33
(15.88)
2.61
848.49
1.00
0.95
53.30
173.88
7.75
31.58
(15.88)
Information with respect to Subsidiaries as on March 31, 2013.
( ₹Mn.)
Particulars
Capital
Reserves
Total Assets
Total Liabilities
Investments other than
Investments
in
subsidiary
Turnover
Profit/(Loss)
before
Taxation
Provision for Taxation
Profit/(Loss)
after Taxation
Aditya Birla
Telecom
Limited
Idea Cellular
Services
Limited
Idea Cellular
Infrastructure
Services Limited
Idea Cellular
Idea
Idea Mobile
Tower
Telesystems Commerce
Infrastructure
Limited
Services
Limited
Limited
0.50
0.50
10.00
15,932.31
108.80
(12.80)
16,061.78
267.74
14.26
128.97
422.59
17.06
264.15
-
119.25
74,741.95
1,759.39
206.25
73,307.56
0.50
(8.05)
62.12
69.67
-
0.50
358.77
3,326.83
2,967.56
-
1,607.45
1,555.85
868.16
(5.57)
2,101.58
175.77
1,513.41
195.91
2,721.87
134.11
3.37
(12.45)
2.61
1,553.24
(2.69)
(2.88)
64.38
111.39
39.20
156.71
43.09
91.02
(12.45)
Information with respect to Subsidiaries as on March 31, 2012.
( ₹Mn.)
Particulars
Capital
Reserves
Total Assets
Total Liabilities
Investments
other
than Investments in
subsidiary
Turnover
Profit/(Loss) before
Taxation
Provision
for
Taxation
Profit/(Loss)
after Taxation
48.
Aditya Birla
Telecom
Limited
119.25
73,188.71
1,273.32
1,273.42
73,308.06
Idea
Idea Cellular
Cellular
Infrastructure
Services
Services Limited
Limited
0.50
0.50
(5.17)
247.38
44.65
3,580.80
49.32
3,332.92
-
Idea Cellular
Idea
Tower
Telesystems
Infrastructure
Limited
Limited
0.50
0.50
15,775.60
17.78
16,330.42
534.68
554.32
516.40
-
Idea Mobile
Commerce
Services
Limited
1.00
(0.35)
1.07
0.42
-
65.00
(0.03)
678.99
(0.74)
973.69
215.76
1,546.13
154.80
1,493.57
3.33
0.10
(0.01)
-
(0.58)
70.81
30.97
0.81
-
(0.03)
(0.16)
144.95
123.83
2.52
(0.01)
The movement in the Asset Retirement Obligation is set out as follows:
Particulars
Opening Balance
Additional Provision
Addition pursuant to merger of Subsidiary and certain other
218
( ₹Mn.)
For the Year ended March 31
2014
2013
2012
1,495.49
930.83
888.20
76.00
590.45
47.46
1,632.96
-
Particulars
For the Year ended March 31
2014
2013
2012
Companies into Joint Venture
Utilisation/Adjustment
Closing Balance
20.48
3,183.97
25.79
1,495.49
4.83
930.83
49.
The Board of Directors has recommended a dividend at the rate of ₹ 0.40 per share (Previous Year ₹
0.30) of face value of ₹ 10/- aggregating ₹ 1,553.52 Mn. including ₹ 225.67 Mn Dividend Distribution
Tax, (Previous Year ₹ 1,163.28 Mn, including ₹ 168.98 Mn. Dividend Distribution Tax) for the year
ended 31st March 2014. The payment of dividend is subject to the approval of the shareholders at the
ensuing annual general meeting of the Company.
50.
Previous years’ figures have been regrouped / rearranged wherever necessary to conform to the current
year grouping.
219
DECLARATION
Our Company certifies that all relevant provisions of Chapter VIII and Schedule XVIII of the SEBI Regulations
have been complied with and no statement made in this Placement Document is contrary to the provisions of
Chapter VIII and Schedule XVIII of the SEBI Regulations and that all approvals and permissions required to
carry on our Company’s business have been obtained, are currently valid and have been complied with. Our
Company further certifies that all the statements in this Placement Document are true and correct.
Signed by:
________________________
Himanshu Kapania, Managing Director
__________________
Rakesh Jain, Director
Date: June 9, 2014
Place: Mumbai
220
DECLARATION
We, the Directors of the Company certify that:
(i)
the Company has complied with the provisions of the Companies Act, 2013 and the rules made
thereunder;
(ii)
the compliance with the Companies Act, 2013 and the rules does not imply that payment of dividend or
interest or repayment of debentures, if applicable, is guaranteed by the Central Government; and
(iii)
the monies received under the offer shall be used only for the purposes and objects indicated in the
Placement Document (which includes disclosures prescribed under Form PAS-4).
Signed by:
________________________
Himanshu Kapania, Managing Director
__________________
Rakesh Jain, Director
I am authorized by the Securities Allotment Committee, a committee of the Board of Directors of the Company,
vide resolution number 5 dated June 5, 2014 to sign this form and declare that all the requirements of
Companies Act, 2013 and the rules made thereunder in respect of the subject matter of this form and matters
incidental thereto have been complied with. Whatever is stated in this form and in the attachments thereto is
true, correct and complete and no information material to the subject matter of this form has been suppressed or
concealed and is as per the original records maintained by the promoters subscribing to the Memorandum of
Association and the Articles of Association.
It is further declared and verified that all the required attachments have been completely, correctly and legibly
attached to this form.
Signed:
____________________
Pankaj Kapdeo, Company Secretary and Compliance Officer
Date: June 9, 2014
Place: Mumbai
221
IDEA CELLULAR LIMITED
Registered Office
Suman Tower, Plot No. 18
Sector-11, Gandhinagar 382 011
Website: www.ideacellular.com; CIN: L32100GJ1996PLC030976
Contact Person: Pankaj Kapdeo, Company Secretary and Compliance Officer
Address of Compliance Officer:
Windsor, 5th floor, off. CST Road
Near Vidya Nagari, Kalina
Santacruz (East), Mumbai 400 098
Tel: +91 95 9400 3434; Fax: +91 22 2652 7080; Email: Pankaj.kapdeo@idea.adityabirla.com;
Global Co-ordinator and Book
Running Lead Managers
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Limited
8th Floor, Mafatlal
Center
Nariman Point
Mumbai 400 021
Citigroup
Global
Markets India
Private
Limited
1202, 12th Floor, First
International Financial
Centre, G Block
C54&55, Bandra Kurla
Complex, Bandra (E)
Mumbai 400051
Morgan Stanley India
Company Private
Limited
18F/19F, Tower 2, One
Indiabulls Centre
841, Senapati Bapat Marg
Mumbai 400 013
Standard Chartered
Securities (India)
Limited
2nd Floor, 23-25
M.G. Road, Fort
Mumbai 400 001
Book Running Lead Manager
Axis Capital Limited
1st floor, Axis House,
C-2 Wadia International Centre
P.B. Marg, Worli, Mumbai 400 025
AUDITORS TO OUR COMPANY
Deloitte Haskins & Sells LLP
Chartered Accountants
Indiabulls Finance Centre, Tower 3
27th -32nd Floor, Senapati Bapat Marg
Elphinstone Road (West)
Mumbai – 400 013
LEGAL ADVISER TO OUR COMPANY
As to Indian law
Amarchand & Mangaldas & Suresh A. Shroff & Co.
Peninsula Chambers, Peninsula Corporate Park
Ganpatrao Kadam Marg, Lower Parel
Mumbai 400 013
LEGAL ADVISERS TO THE LEAD MANAGER
As to Indian law
AZB & Partners
24th Floor, Express Towers
Nariman Point
Mumbai 400 021
As to U.S. law
Jones Day
3 Church Street
#14 Samsung Hub
Singapore 049 483
222