SIGNIFICANT ACCOUNTING POLICIES AND NOTES ON ACCOUNTS COMPANY OVERVIEW Hathway Cable and Datacom Limited (the Company) is a Public Company domiciled in India and incorporated under the provisions of the Companies Act, 1956. The Company is Multi System Operator (MSO) engaged in distribution of television channels through analog and digital cable distribution network and internet services through cable. Its equity shares are listed on National Stock Exchange of India Limited (NSE) & Bombay Stock Exchange Limited (BSE) in India. 1.00 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES 1.01 BASIS OF brPARATION The financial statements of the Company are consistently brpared and brsented under historical cost convention on an accrual basis in accordance with the generally accepted accounting principles in India (Indian GAAP). The Company has brpared the financial statements to comply in all material aspects with the accounting standards notified under section 133 of the Companies Act, 2013 (the Act), read together with rule 7 of the Companies (Accounts) Rules, 2014 and the relevant provisions of the Act. In accordance with first proviso to section 129(1) of the Act and clause 6 of the General Instructions given in Schedule III to the Act, the terms used in these financial statements are in accordance with the Accounting Standards as referred to herein. All assets and liabilities have been classified as current or non-current as per the Company's normal operating cycle and other criteria set out in the Schedule III to the Act. Based on the nature of operations, the Company has ascertained its operating cycle as 12 months for the purpose of current - non-current classification of assets and liabilities. The accounting policies have been consistently applied by the Company and are consistent with those used in the brvious year except to the extent stated in note 1.02. 1.02 CHANGE IN ACCOUNTING POLICY In the current year, the Company changed, with retrospective effect, its method of providing debrciation on certain fixed assets from the Written Down Value (WDV) method at the rates brscribed in Schedule XIV to the Companies Act, 1956 to the Straight Line (SLM) method at the rates derived from the useful life stated in Schedule II to the Act. The above change is in case of all fixed assets except Set Top Boxes and Internet access devices at customer location. In case of later, debrciation is provided over 8 years on SLM. Refer note no. 4.16 also. 1.03 USE OF ESTIMATES The brparation of financial statements in conformity with Indian Generally Accepted Accounting Principles (GAAP) requires management to make judgements, estimates and assumptions that affect the reported amounts of revenue, expenses, assets and liabilities and disclosures relating to contingent liabilities as at the date of financial statements and reported amounts of revenues and expenses during the reporting period. Although these estimates are based on the management's best knowledge of current events and actions, actual results could differ from these estimates. Differences on account of revision of estimates, actual results and existing estimates are recognised in periods in which the results are known/ materialised in accordance with the requirements of the respective accounting standard, as may be applicable. 1.04 FIXED ASSETS a) Tangible Assets (i) The fixed assets are stated at cost less accumulated debrciation and impairment losses, if any. Cost comprises of purchase price, non refundable taxes and all expenses incurred in bringing the assets to its brsent location and condition for its intended use and includes installation and commissioning expenses. Such indirect expenditure incurred during the br-commencement period is allocated proportionately over the cost of the relevant assets. (ii) Set Top Boxes (STBs) and Internet Access devices on hand at the year-end are included in Capital Work in Progress. On installation, such devices are capitalized or treated as sale as the case may be. (iii) Gains or losses arising on de-recognition of fixed assets being the difference between the net disposal proceeds and the carrying amount of the asset and are recognized in the Statement of Profit and Loss when the asset is de-recognized. b) Intangible Assets (i) Intangible assets comprises of Cable Television Franchise, Movie & Serial Rights, Bandwidth Rights, Goodwill and Softwares. Cable Television Franchisee rebrsents purchase consideration of a network that is mainly attributable to acquisition of subscribers and other rights, permission etc. attached to a network. (ii) Intangible assets are recognized only if they are separately identifiable and the Company expects to receive future economic benefits arising out of them. Such assets are stated at cost less accumulated amortization and impairment losses. (iii) The amortization period and the amortization method are reviewed at least at each financial year-end. If the expected useful life of the asset is significantly different from brvious estimates, the amortization period is changed accordingly. If there has been a significant change in the expected pattern of economic benefits from the asset, the amortization method is changed to reflect the changed pattern. c) Fixed Asset not in active use and held for sale is classified under "Other Non Current Assets" and are recognised at the lower of their carrying amount or market value less cost to sell. 1.05 DEbrCIATION / AMORTISATION The enactment of the Companies Act, 2013 requires that the Company should reassess useful life of its fixed assets and provide debrciation based on such re-assessment with effect from April 1, 2014. a) Debrciation is the systematic allocation of the debrciable amount of an asset over its useful life and is provided on a straight-line basis over the useful life as brscribed in Schedule II to the Act, unless otherwise specified. b)Debrciable amount for assets is the cost of an asset less its estimated residual value. c)In case of additions or deletions during the year, debrciation is computed from the month in which such assets are put to use and up to brvious month of sale, disposal or held for sale as the case may be. In case of impairment, debrciation is provided on the revised carrying amount over its remaining useful life. d)The cost of STBs & Internet Access device at the customer location are debrciated on straight-line method over a period of eight years . e)Useful life of assets individually costing less than Rs. 5,000/- is considered as one year. f)The intangible assets are amortized on a straight line basis over their expected useful lives as follows: (i) Cable Television Franchise is amortized over a period of twenty years. (ii) Non Compete Fees classified as Goodwill is amortized over the non-compete period stated in the underlying agreements and in absence of the same, over ten years. (iii) Goodwill arising on transfer of business of subsidiaries is fully amortized in the same year. (iv) Goodwill other than mentioned above is amortized over the specific tenor of the relevant agreement and in absence of such tenor, over ten years. (v) Softwares are amortized over the license period and in absence of such tenor, over five years. (vi) Movie and Serial Rights are amortized on exploitation over the balance license period in equal installments. (vii) Bandwidth Rights are amortized over the period of the underlying agreements. 1.06 INVESTMENTS Investments, which are readily realizable and intended to be held for not more than one year from the date on which such investments are made, are classified as current investments. All other investments are classified as long-term investments. On initial recognition, all investments are measured at cost. The cost comprises purchase price and directly attributable acquisition related cost such as brokerage, fees and duties. a) Long-Term Investments Long-term investments in shares are stated at cost. The provision for diminution in value of long-term investments is made if such diminution is considered other than temporary. b) Current Investments Current investments are carried in the financial statements at lower of cost and fair value determined on an individual investment basis. Certificate of Deposits are valued at lower of amount of cost and proportionate income thereon or rates published by FIMMDA. Other current investments are recorded at lower of cost or fair value. On disposal of an investment, the difference between its carrying amount and net disposal proceeds is charged or credited to the Statement of Profit and Loss. 1.07 INVENTORIES Inventories are valued as follows: Spares and maintenance items are valued at lower of cost (net of taxes recoverable) on first in first out basis and net realizable value. Stock-in-trade comprising of Access Devices are valued at cost on weighted average method or at net realizable value, whichever is lower. 1.08 BORROWING COSTS Borrowing Costs that are attributable to the acquisition, construction or production of qualifying assets are capitalized as part of such assets. A qualifying asset is an asset that necessarily requires a substantial period of time to get ready for its intended use or sale. All other Borrowing costs are recognized as an expense in the period in which they are incurred. 1.09 PROVISIONS, CONTINGENT LIABILITIES AND CONTINGENT ASSETS a) A Provision is recognized when the Company has a brsent obligation as a result of past event and it is probable that an outflow of resources would be required to settle the obligation, and in respect of which a reliable estimate can be made. Provisions are not discounted to its brsent value and are determined based on management's estimate for the amount required to settle the obligation at the Balance Sheet date. Provisions are reviewed on each Balance Sheet date and are adjusted to effect the current best estimation. b) Contingent liabilities are disclosed separately by way of note to financial statements after careful evaluation by the management of the facts and legal aspects of the matter involved in case of: (i) a brsent obligation arising from the past event, when it is not probable that an outflow of resources will be required to settle the obligation. (ii) a possible obligation, unless the probability of outflow of resources is remote. c) Contingent Assets are neither recognized nor disclosed. 1.10 EMPLOYEE BENEFITS a) Short-term employee benefits are recognized as an expense at the undiscounted amount in the Statement of Profit & Loss of the year in which the related service is rendered. b) Post employment and other long term employee benefits viz., gratuity, leave encashment, etc., are covered under Defined Benefit Plan. The cost of providing benefits are recognized as an expense in the Statement of Profit and Loss for the year in which the employee has rendered services. The amount of expense is determined on the basis of actuarial valuation at each year-end by Projected Unit Credit Method. Actuarial gains and losses in respect of post employment and other long term benefits are charged to the Statement of Profit and Loss in the period in which they occur. The Company brsents the entire liability pertaining to leave encashment as a short term provision in the Balance Sheet, since it does not have an unconditional right to defer its settlement for 12 months after the reporting date. 1.11 EMPLOYEE STOCK OPTION SCHEME Stock options granted under the stock options schemes are accounted as per the accounting treatment brscribed by the guidance note on Employee Share Based Payments issued by the Institute of Chartered Accountants of India and SEBI (Share Based Employee Benifits) Regulations 2014. The excess of fair price on the date of grant over the exercise price is recognized uniformly over vesting period of the option. 1.12 ACCOUNTING FOR LEASES The transactions where the Company conveys or receives right to use an asset for an agreed period of time for a payment or series of payments are considered as Lease. a) As Lessee - Operating Lease Lease rentals in respect of assets taken on 'Operating Lease' are charged to Statement of Profit and Loss over the lease term on systematic basis, which is more rebrsentative of the time pattern of the Company's benefit. b) As Lessor - Operating Lease Assets subject to Operating Leases are included in Fixed Assets. Lease income is recognized in the Statement of Profit and Loss over the lease term on systematic basis which is more rebrsentative of the time pattern of the Company's benefit. Costs, including debrciation are recognized as an expense in the Statement of Profit & Loss. c) As Lessee - Finance Lease Finance Leases, which effectively transfers to the lessee substantially all the risks and benefits incidental to ownershipof the leased item, are capitalized at the lower of the fair value and brsent value of the minimum lease payments at the inception of the lease term and disclosed as leased assets and debrciated as per the applicable policy. Lease payments are apportioned between the finance charges and reduction of the lease liability so as to achieve aSconstant rate of interest on the remaining balance of the liability. The finance charge is allocated over the lease term so as to produce a constant periodic rate of interest on the remaining balance of liability. Initial direct cost of lease iscapitalized. 1.13 REVENUE RECOGNITION Revenue is recognized on accrual basis to the extent it is probable that the economic benefits will flow to the Company and the revenue can be reliably measured. INCOME FROM SERVICES a) Subscription income includes subscription from Subscribers / Cable Operators relating to cable TV, Internet, activation o> of devices and from broadcasters relating to the placement of channels. Revenue from Operations is recognized on m accrual basis based on underlying subscription plan or agreements with the concerned subscribers / parties. b) Revenue from brpaid Internet Service plans, which are active at the end of accounting period, is recognized on time > proportion basis. In other cases of brpaid Internet Service plans, entire revenue is recognized in the period of sale. No c) Subscription Income from Cable TV Operators, is accrued monthly based on number of connections declared by the m i— m said operators to the Company. In cases where revision of number of connections and / or rate is under negotiations at —m o the time of recognition of revenue, the Company recognizes revenue as per invoice raised. Adjustments for the year, if any, arising on settlement is adjusted against the Revenue. Other cases are reviewed by the management periodically. d) Advertisement revenue is accrued on release of the advertisement for public viewing. e) The Company collects service tax on behalf of the government and, therefore, it is not an economic benefit flowing tothe Company. Hence, it is excluded from revenue. SALE OF GOODS Revenue from sale of Access Devices is recognized when all the significant risks and rewards of ownership of the goodsare passed to the buyer, usually on delivery of the devices. The Company collects value added taxes (VAT) on behalf of the Government and, therefore, these are not economic benefits flowing to the Company and hence not included in revenue OTHER OPERATING INCOME Other Operating Income comprises of fees for rendering management, technical and consultancy services. Income fromsuch services is recognized upon achieving milestones as per the terms of underlying agreements. INTEREST INCOME Interest income is recognized on a time proportion basis taking into account the amount outstanding and the applicable interest rate. Interest income is included under the head "Other Income" in the Statement of Profit and Loss. 1.14 TAXATION a) Provision for Current Tax is made on the basis of taxable profits computed for the current accounting year in accordance M0> with the Income Tax Act, 1961. b) Deferred Tax is calculated at the tax rates and laws that have been enacted or substantively enacted as of the Balance Sheet date and is recognized on timing difference that originate in one period and are capable of reversal in one or more subsequent periods. Deferred Tax assets are recognized on carry forward of unabsorbed debrciation and tax losses, only if, there is virtual certainty that such deferred tax assets can be realized against future taxable income. Other deferred tax assets are recognized only to the extent that there is a reasonable certainty of realization in future. 1.15 FOREIGN CURRENCY TRANSACTIONS a) Foreign currency transactions are recorded at the exchange rate brvailing at the date of transactions. Exchange difference arising on settlement of transactions is recognized as income or expense in the year in which they arise except for transactions covered under (c) below. b) Monetary assets and liabilities related to foreign currency transactions remaining unsettled at the end of the year are restated at the year-end rate and difference in translations and realized gains / (losses) on foreign currency transactions are recognized in the statement of profit & loss except for transactions covered under (c) below. c) The exchange difference in respect of long-term monetary items arising in respect of accounting period commencing on or after December 07, 2006 to the extent they relate to the acquisition of debrciable capital assets are added to or deducted from the cost of the assets and are debrciated over the balance life of the assets. d) The brmium or discount arising at the inception of forward exchange contracts is amortized as expense or income over the life of the contract. Exchange differences on such contracts are recognized in the Statement of Profit and Loss in the year in which the exchange rates change. Any profit or loss arising on cancellation or renewal of forward exchange contract is recognized as income or as expense for the year. e) Synthetic Swap: Outstanding forward / future contracts against firm commitments and derivative contracts, other than stated above, are marked to market and the resulting loss, if any, is charged to the Statement of Profit & Loss. Gain, if any, on such marked to market is not recognized unless it is reversal of loss recognized earlier. 1.16 EARNINGS PER SHARE (EPS) Basic earnings per share are calculated by dividing the net profit or loss for the period attributable to equity shareholders (after deducting brference dividends and attributable taxes) by the weighted average number of equity shares outstanding during the period. Partly paid equity shares are treated as a fraction of an equity share to the extent that they are entitled to participate in dividends relative to a fully paid equity share during the reporting period. The weighted average number of equity shares outstanding during the period is adjusted for events such as bonus issue, bonus element in a rights issue, share split, and reverse share split (consolidation of shares) that have changed the number of equity shares outstanding, without a corresponding change in resources. For the purpose of calculating diluted earnings per share, the net profit for the period attributable to equity shareholders and the weighted average number of shares outstanding during the period are adjusted for the effects of all dilutive potential equity shares. 1.17 IMPAIRMENT The Company assesses at each Balance Sheet whether there is any indication that assets may be impaired. If any such indications exist, the Company estimates the recoverable amount of the assets or the cash-generating unit and if the same is less than its carrying amount, the carrying amount is reduced to its recoverable amount. The reduction is treated as an impairment loss and is recognized in the Statement of Profit and Loss. If at the Balance Sheet date there is an indication that if a brviously assessed impairment loss no longer exists, the recoverable amount is reassessed and the assets are reflected at the recoverable amount. 1.18 MEASUREMENT OF EBITDA The Company has elected to brsent earnings before interest, tax, debrciation and amortization (EBITDA) as a separate line item on the face of the Statement of Profit and Loss. The Company measures EBITDA on the basis of profit/ (loss) from continuing operations. In its measurement, the company does not include debrciation and amortization expense, finance costs and tax expense. 1.19 CASH AND CASH EQUIVALENTS Cash and cash equivalents comprise cash at bank, cash in hand, demand deposits with banks and other short-term investments with an original maturity of three months or less. 2 .1 During the year under review, the Company has not capitalized any borrowing cost in the absence of acquisition of any qualifying assets. 2.2 The enactment of the Companies Act, 2013 requires that the Company should reassess useful life of its fixed assets and provide debrciation based on such re-assessment with effect from April 1, 2014. The Company has decided to provide debrciation on all fixed assets, except Set top boxes on straight line basis (SLM) as against written down value basis (WDV) based on useful life specified in Schedule II to the said Act. There is no change in the method of debrciation for Set top boxes. a) This change has resulted in net surplus of Rs. 64.02 (March 31, 2014 : Rs. NIL) and is disclosed under as Exceptional Items. Had the Company continued to use the earlier method of debrciation, the debit to the Statement of Profit and Loss after tax for the current period (year to date) would have been higher by Rs. 8.02 (March 31, 2014 : Rs. NIL)b) Based on transitional provision provided in Note 7(b) of Schedule II to the Act, the charge to retained earnings in respect of assets having no useful life as on the effective date, net of deferred tax is Rs.12.56 (March 31 2014 : Rs. NIL). 2.3 deferral/capitalization of exchange differences The Ministry of Corporate Affairs (MCA) has issued the amendment dated December 29, 2011 to AS 11 The Effects of Changes in Foreign Exchange Rates, to allow companies deferral/capitalization of exchange differences arising on long-term foreign currency monetary items. In accordance with the amendment/earlier amendment to AS 11, the company has capitalized exchange gain / (loss), arising on long-term foreign currency loan, amounting to Rs.(8.64) [March 31, 2014: Rs.(34.39)j to the cost of plant and equipment. The company has also capitalized exchange gain / (loss), arising on long-term foreign forward contract, undertaken to partially hedge the foreign current loan, amounting to Rs. 11.10 (March 31, 2014 : Rs.(2.53 ) to the cost of plant and equipments. The company does not have any other long-term foreign currency monetary item. Hence, the amount of exchange loss deferred in the "Foreign Currency Monetary Item Translation Difference Account" is Rs. NIL (March 31, 2014 : Rs. NIL). 2.4 The Company has booked INR USD Cross Currency Swap Contracts of USD 3.50 (March 31, 2014 : Rs. NIL ) against the underlying INR borrowing of Rs. 215.71 (March 31, 2014 : Rs. NIL). The actual interest earned on notional INR deposit, interest paid on notional USD borrowing and marked to market loss on USD exposure aggregating net loss of Rs. 5.27 (March 31, 2014 : Rs. NIL) are included in interest expenses under finance cost in note number 3.08 in Notes to the financials Statement. 2.5 Rupees figures are mentioned in Crore unless otherwise stated. 2.6 Pursuant to introduction of Digital Addressable System (DAS), in terms of TRAI Regulations the Company is required to inter alia enter into inter connect agreements with local cable operators in notified cities. However, due to market conditions, the Company is still to fully implement the regulations. Pending execution of documentations, income recognized is based on various underlying factors including rate charged by other MSO's, ongoing negotiations with cable operators etc. The management has reviewed the outstanding receivables and is confident that it is stated at realizable amount and no adjustment is required. Further, the Company has changed the manner in which it recognises subscription income relating to secondary points in Delhi from gross of LCO revenue share to net of LCO revenue share in line with the principle followed prior to November 1, 2013. This change has been effected from October 1, 2014. Had the Company recognized and brsented the revenue on net basis, Total Subscription Income from Cable Television for the quarter and the year ended on March 31, 2015 would have been lower by t NIL and t 27.51 respectively and the same has no impact on profitabity of the company. 2.7 The Company has it's brsence in various cities, which form part of phase III of DAS rollout in terms of TRAI regulations, including Hyderabad where DAS rollout is sub-judice. Preparatory to DAS rollout dates in each of these markets, the Company has established required infrastructure. The monetization of these investments is subject to successful DAS rolled out. 2.8 Previous year figures have been rearranged and regrouped wherever necessary. As per our report of even date For G. M. Kapadia & Co. Chartered Accountants Firm's Registration No : 104767W VIREN THAKKAR Partner Membership No : 49417For and on behalf of the Board GANAPATHY SUBRAMANIAM Chief Financial Officer JAGDISHKUMAR G PILLAI DIN : 00036481 Managing Director & C.E.O AJAY SINGH FCS - 5189 Company Secretary & Compliance Officer VINAYAK AGGARWALDIN : 00007280 Director Mumbai Dated: May 29, 2015 |