1. General Information & Significant Accounting Policies

A. General information

IL&FS Transportation Networks Limited (ITNL), the Company is a public limited company incorporated in India. Its parent and ultimate holding company is Infrastructure Leasing & Financial Services Limited (“IL&FS”).The addresses of its registered office and principal place of business are The IL&FS Financial Center, Plot C-22, ‘G’ Block, Bandra Kurla Complex, Bandra (East), Mumbai - 400 051. ITNL is a developer, operator and facilitator of surface transportation infrastructure projects, taking projects from conceptualization though commissioning to operations and maintenance under public to private partnership on build-operate transfer (“BOT”) basis in India.

B. Critical accounting judgments and key sources of estimation uncertainty

B.1 Critical accounting judgments

The preparation of Financial Statements in conformity with the recognition and measurement principles of Ind AS requires management to make estimates and assumptions that affect the reported balances of assets and liabilities, disclosures of contingent liabilities at the date of the Financial Statements and the reported amounts of income and expenses for the periods presented.

Management believes that the estimates used in the preparation of the financial statements are prudent and reasonable. Actual results could differ from these estimates. In case the actual results are different those from estimates, the effect thereof is given in the financial statements of the period in which the events materialize. Any change in such estimates is accounted prospectively.

The matters to be disclosed will be dictated by the circumstances of the individual entity, and by the significance of judgments and estimates made to the performance and financial position of the entity. Instead of disclosing this information in a separate note, it may be more appropriate to include such disclosures in the relevant asset.

Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimates are revised and future periods are affected.

B.2 Key sources of estimation uncertainty

Key source of estimation of uncertainty at the date of Financial Statements, which may cause a material adjustment to the carrying amounts of assets and liabilities within the next financial year, is in respect of fair value measurement of financial instruments, receivables, loans and advances, valuation of deferred tax assets, useful life of assets, cash flow models for impairment and ECL.

Key estimations in relation to fair value measurement of financial instruments

When the fair values of financial assets and financial liabilities recorded in the balance sheet cannot be measured based on quoted prices in active markets, their fair value is measured using valuation techniques including the discounted cash flow model. The inputs to these models and the discount rates are taken from observable markets where possible, but where this is not feasible, a degree of judgment is required in establishing fair values. Judgments include considerations of inputs such as liquidity risk, credit risk and volatility. Changes in assumptions about these factors could affect the reported fair value of financial instruments. Refer Note 30 for further disclosures.

Key estimations in relation to fair value measurement of receivables, loans and interest accrued thereon

The Company has performed valuation for its receivables, loans and interest accrued thereon as to whether there is any ECL. When the fair value of receivables, loans and interest accrued thereon cannot be measured based on quoted prices in active markets, their fair value is measured using valuation techniques including the discounted cash flow model. The inputs to these models and the discount rates are taken from observable markets where possible, but where this is not feasible, a degree of judgment is required in establishing fair values. Judgements include considerations of inputs such as expected earnings in future years, liquidity risk, credit risk and volatility. Changes in assumptions about these factors could affect the reported fair value of these receivables, loans and interest accrued thereon.

Key estimations in relation to fair value measurement investments

The Company has performed valuation for its investment as to whether there is any impairment in their fair values. When the fair value of investments cannot be measured based on quoted prices in active markets, their fair value is measured using valuation techniques including the discounted cash flow model. The inputs to these models and the discount rates are taken from observable markets where possible, but where this is not feasible, a degree of judgment is required in establishing fair values. Judgements include considerations of inputs such as expected earnings in future years, liquidity risk, credit risk and volatility. Changes in assumptions about these factors could affect the reported fair value of these investments.

Key estimations in relation to Construction revenue and cost

The Company, being a part of construction industry major components of contract estimate are budgeted costs and revenue to complete the contract. While estimating these components various assumptions are considered by the management such as (i) Work will be executed in the manner expected so that the project is completed timely (ii) consumption norms will remain same (iii) Assets will operate at the same level of productivity as determined (iv) Wastage will not exceed the normal % as determined etc. (v) Estimates for contingencies (vi) There will be no change in design and the geological factors will be same as communicated and (vii) price escalations etc. Due to such complexities involved in the budgeting process, contract estimates are highly sensitive to changes in these assumptions. All assumptions are reviewed at each reporting date.

Key estimations in relation to Useful lives of Property, plant and equipment & Intangible assets

Useful lives of Property, plant and equipment & Intangible Assets (other than the life prescribed under Schedule II of the Companies Act, 2013) are estimated based on internal technical evaluation, taking into account the nature of the asset, the estimated usage of the asset, the operating conditions of the asset, past history of replacement, anticipated technological changes. All these evaluations and assessments involve judgements on part of the management.

Key estimations in relation to deferred tax assets and MAT credit entitlement

In assessing the realisability of deferred tax assets and MAT credit entitlement the management of the Company estimates whether the Company will earn sufficient taxable profit in future periods.

The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which the temporary differences become deductible. The amount of the deferred tax assets and MAT credit entitlement considered realizable could be reduced in the near term, if estimates of future taxable income during the carry forward period are reduced.

C. Recent accounting pronouncements

i. Standards issued but not yet effective

On March 28, 2018, the Ministry of Corporate Affairs (MCA) has notified the Companies (Indian Accounting Standards) Amended Rules, 2018 (“Amended Rules “) as per which Ind AS 115 “Revenue from Contract with Customers” supersedes Ind AS 11 “Construction Contracts” and Ind AS 18 “Revenue” and also MCA has carried out amendments to other existing Ind AS.These amendments shall be applicable to the Company for all accounting periods commencing on or after April 01, 2018.

ii. Impairment Of Investments

The Company performed its annual impairment test for year ended 31 March 2018 for its investments in SPVs based on fair value less costs to sell. The Company has prepared cash flow projection models for each SPV for the purpose of testing of impairment of investments made in these SPVs. The Company is following one valuation approach i.e. Discounted Cash Flow (DCF) Method, under which the value of each SPV is derived by discounting the future debt free cash flow accruing to the SPV over remaining life of the project. As at March 31, 2018, the recoverable value of certain SPVs investment is below the carrying amount recorded in books of accounts indicating potential impairment in these investments. As a result of this analysis, the Company has recognised impairment loss of Rs. 363.57 crore as above. The Company has adjusted the impairment losses arising on account of deemed equity contribution in case of HREL and JRPICL of Rs. 293.29 crore with reversal of expected credit loss of Rs. 448.76 crore (refer Note 22). The impairment losses of CNTL and JSEL are included in Other Expenses (refer Note 28).

Key Assumptions Used:

Following are the key assumptions used for the purpose of calculation of value of investment in each SPV and thereby for testing impairment:

Revenue Growth

Operating Expenses

Interest Rate and Repayement Schedule

Discount Rate

Terminal growth Rate

Revenue Growth

The SPVs of the Company operate under the Build, Operate and Transfer (BOT) and Design, Build, Finance, Operate and Transfer (DBFOT) contracts with the government authorities (grantor). Under these Contracts SPVs gets toll collection rights (Toll Projects) or fixed annuity amount (Annuity Projects) from the grantors of Contracts against construction services rendered. For Toll Projects, the Company has considered recent available traffic study for estimating projected revenue growth. For Annuity Projects, the Company has considered the annuity schedules agreed with grantors.

Operating Expenses

The Company has operating and maintainance agreement with its SPVs for all the estimated maintainance expenses during concession period. The operating expenses of the SPVs has been considered basis these agreements.

Interest Rate and Repayement Schedule

The Company has projected Interest rate and repayment schedule of borrowings based on the existing loan agreements with various lenders of each SPV.

Discount Rates

Discount rates represent the current market assessment of the risks specific to each SPV, taking into consideration the time value of money and individual risks of the underlying assets that have not been incorporated in the cash flow estimates.

Terminal growth Rate

The Company has estimated Terminal growth rate based on the inflation of the markets where it is operating.

Sensitivity to changes in key assumption:

Implications of the key assumption for the recoverable amount is discussed below:

Discount rate

Change in market risks and global economic and political scenario may result into increase in the expected discount rate. In such scenario, the Company may have to provide for additional impairment.

a. In addition to above impairment loss of Rs. 363.56 crores, the Company has recognised impairment loss of Rs. 3.13 crores on it Investment Properties under development (refer Note 3)

b. During the year ended March 31, 2018, the Company has sold its investment of 2,000,000 equity share held in Rajasthan Land Holding Limited to Pario Developers Private Limited against consideration received by way of preference shares which is included as investment in above schedule.The profit on sale of Rs. 147.50 Crores is included under revenue from operations.

c. During the year ended March 31, 2018, the Company has sold its investment of 14,735,076 equity share held in Gujarat Road and Infrastructure Company Limited to Oriental Tollways Private Limited and IL&FS Financial Services Limited. The profit on sale of Rs. 214.13 Crores from this transaction is included under revenue from operations.

d. During the year ended March 31, 2018, the Company has sold its Investment of 32,140,691 in equity share held in Moradabad Bareilly Expressway Limited to Oriental Tollways Private Limited. The profit on sale of Rs. 48.21 Crores from this transaction is included under revenue from operations.

e. During the year ended March 31, 2018, the Company has sold its investment of 12,000,000 Pipavav Railway Corporation Limited to IL&FS Financial Services Limited. The profit on sale of Rs. 31.88 Crores from this transaction included under revenue from operations.

f. The Company had given sub-debt to its subsidiary, Hazaribagh Ranchi Expressway Limited of Rs. 175.11 crores, Jharkhand Road Projects Implementation Company Limited of Rs. 118.17 crores, Sikar Bikaner Highway Limited of Rs. 109.45 crores, Rapid Metro Rail Gurgaon Limited of Rs. 11.46 crores and Rapid MetroRail Gurgaon South Limited of Rs. 17.74 crores . During the year, the same has been converted into Investments.

g. The Company has pledged 14,300,000 equity shares aggregating Rs. 14.50 Crores (As at March 31, 2017 - 14,300,000 equity shares aggregating Rs. 14.50 Crores) of Vansh Nimay Infraprojects Limited (“Borrower”) with Vistra ITCL (India) Limited (formerly known as IL&FS Trust Company Limited) (“Security Trustee”) to secure the dues of the Borrower including without limitation all principal amounts, interest expenses, penalties, costs, fees, etc payable by the Borrower in relation to the facility extended by the Consortium of Financial Institutions and Banks under the Pooled Municipal Debt Obligation Facility (“PMDO”).

h. The Company’s investment in “Covered Warrants” aggregating to Rs. 177.30 Crores (As at March 31, 2017 Rs. 177.30 Crores) issued by Infrastructure Leasing & Financial Services Limited (“IL&FS”) are instruments under which the holder is entitled to a proportionate share of the dividend and the residual interest / economic benefit on the shares of the underlying investments. However, the rights available as equity shareholder are with IL&FS.

i. The Company’s investment in redeemable / optionally convertible cumulative preference shares of West Gujarat Expressway Limited (“WGEL”) are convertible, at the option of the Company, into 1 equity share and carry a coupon of 2% per annum upto the conversion, accrued annually in arrears (“Coupon”). An additional coupon consisting of 95% of the balance distributable profits, that may be available with WGEL after it has met all other obligations, would also accrue on the said preference shares (“Additional Coupon”).

j. Pursuant to the order of the Hon’ble High Court of Allahabad, the collection of toll at an associate company was suspended since October 26, 2016 and the matter is pending with the Arbitrator. Based on the provisions of the Concession agreement (relating to the Compensation and other recourses) supported by legal opinion, the Company is confident that the underlying value of the Intangible and other assets of associate are fully recoverable. Consequently the Company is of the view that it would be appropriate to carry its investment of the associate at Rs. 162.33 crores.

k. The Company has given non-disposal undertakings to the lenders and the grantors of the concession for its investment in infrastructure companies promoted by it with regard to its investments in the equity share capital of these companies as a part of promoter’s undertaking to such lenders, equity investors and the grantors of the concession, the carrying value of which is Rs. 1,893.30 Crores as at March 31, 2018. (Rs. 1,752.15 Crores as at March 31, 2017)

l. During the year the Company has purchased Elsamex Maintenance Services Limited ,Elsamex India Private Limited, Yala Contruction Company Liimited and Grusamar India Limited from Elsamex S.A.

As part of normal asset monetisation plan, the company had considered certain SPVs to be transferred to InvIT and fair valued the corresponsing financial asset. In view of invIT not being pursued, during the year the Company has reassessed its busniess plan for these subsidiaries and reversed the expected credit loss (net of impairment of Rs. 293.28 Crore) of Rs. 110.55 Crore recognised on its financial asset and included in other income. The Company has given loans to these InvIT subsidiaries i.e. Hazaribaug Ranchi Expressway Limited, Sikar Bikaner Highways Limited, Jharkhand Road Projects Implementation Company Limited @ zero percent as the Company has committed to senior lenders that it will provide financial support to its subsidiaries in case of cost over runs. Since loans to these subsidiaries are given at zero percent the Company has considered difference between 0% to 8.56%-10.85% as deemed cost of investments. Accordingly the company has recognised deemed equity contribution of Rs. 402.73 Crore. and reversed the expected credit loss of Rs. 403.84 Crore created in earlier years. Further the Company has also considered impairment on deemed equity contribution in Jharkhand Road Projects Implementation Company Limited and Hazaribagh Ranchi Expressway Limited of Rs. 293.29 Crore refer note 4(viii).

a. There are no receivables due from directors or other officers of the company either severally or jointly with any other person; and from firms or private companies respectively in which any director is a partner, a director or a member.

b. Trade receivables are generally on terms of 30 to 90 days and certain receivables carry interest for overdue period.

c. Expected credit loss (“ECL”) is the difference between all contractual cash flows that are due to the Company in accordance with the contract and all the cash flows that the entity expects to receive (i.e., all cash shortfalls), discounted at the weighted average cost of borrowings of the Company.

d. The estimated realization date of the receivables has been taken by considering the cash flow model of the respective project SPVs which in the view of the management is the most realistic and appropriate way for estimating the realization date of the receivables with respect to the project SPVs. In respect of other than project SPVs, the management has carried out its internal assessment procedures and accordingly the realization date has been estimated.

1. Cash and cash equivalents

For the purposes of the statement of cash flows, cash and cash equivalents include cash on hand and in banks, net of outstanding bank overdrafts. Cash and cash equivalents at the end of the reporting period as shown in the statement of cash flows can be reconciled to the related items in the balance sheet as follows:

a. Cash at Banks earns interest at floating rates based on daily bank deposit rates. Short-term deposits are made for varying periods between one day and three months, depending on the immediate cash requirements fo the Company, and earn interest at the respective short term deposits rates.

b. For the purpose of the statement of cash flows, cash and cash equivalents comprise following :

c. Non-cash transactions excluded from cash flow statement

i. Fixed deposit with IndusInd bank of Rs. 3.42 crore converted into Loan to Jharkhand Road Projects Implementation Company Limited.

ii. During the year , Interest accured from Karyavattom Sports Facilities Limited converted into Loan Rs. 3.32 crore.

iii. During the year , there has been conversion of receivable into loan of Rs. 17.93 crore.

iv. During the year, the short term loan given to certain Group Companies have been assigned to Certain existing lenders of the Company aggregating Rs. 3072.43 crore.

v. The Company had given sub-debt to its subsidiaries, Hazaribagh Ranchi Expressway Limited of Rs. 175.11 crore Jharkhand Road Projects Implementation Company Limited of Rs. 118.17 crore, Sikar Bikaner Highways Limited of Rs. 109.45 crore, Rapid Metro Gurgoan Limited of Rs. 11.46 crore and Rapid Metrorail Gurgoan South Limited of Rs. 17.74 crore. During the year, the same has been converted into Investment

For the above investments in subsidiaries, the Company has entered into letter of intent (LOI)/ Memorandom understanding (MOU) with customer for sale of such investments. The LOI/MOU has certain condition precedence which are outstanding as on March 31, 2018 and accordingly these investments are considered as held for sale and carried at cost or as per market value whichever is lower.

iv. The Company has one class of equity shares with face value of Rs. 10 each fully paid-up. Each shareholder has a voting right in proportion to his holding in the paid-up equity share capital of the Company.

In the event of liquidation of the company, the holders of equity shares will be entitled to receive remaining assets of the Company, after distribution of all preferential amounts. The distribution will be in proportion to the number of equity shares held by the shareholders.

Where final dividend proposed by the Board of Directors, is subject to the approval of the shareholders in the Annual General Meeting.

Note 1: The Company has issued several series of Non Convertible Debentures (NCDs). In terms of Section 71(4) of the Companies Act, 2013 read with rule 18(7)(b)(iii) of the Companies (Share Capital and Debentures) Rules 2014, the Company being an Infrastructure Company is required to create Debenture Redemption Reserve to the extent of 25% of the value of privately placed NCDs until such NCDs are redeemed.

Note 2: The general reserve is used from time to time to transfer profits from retained earnings for appropriation purposes. As the general reserve is created by a transfer from one component of equity to another and is not an item of other comprehensive income, items included in the general reserve will not be reclassified subsequently to profit or loss.

Note 3: During the year ended March 31, 2018, the dividend of Rs. Nil per share (Rs. Nil including dividend distribution tax of Rs. Nil) was paid to holders of fully paid equity shares. During the year ended March 31, 2017, the dividend paid was Rs. 2 per share (Rs. 75.03 crore including dividend distribution tax of Rs. 9.29 crore).

f. Rights of CRPS and CNCRPS holders are as follows:

The holder(s) of CRPS and CNCRPS shall have no voting rights other than in respect of matters directly affecting the rights attached to the CRPS and CNCRPS. In the event of any due and payable dividends on the CRPS and CNCRPS remaining unpaid for a period of two years prior to the start of any General Meeting of the Equity Shareholders, the holder(s) of CRPS and CNCRPS shall gain voting rights in respect of all matters placed by the Company at a General Meeting of its Equity Shareholders in accordance with the provisions of the Companies Act and the Articles of Association of the Company. In the event of winding up or repayment of capital, the holder(s) of the CRPS and CNCRPS shall carry a preferential right vis-a-vis equity shareholders to be repaid the amount of paid up capital, unpaid dividends and fixed premium, in accordance with the provisions of the Companies Act and the Articles of Association of the Company. The claims of holder(s) of CRPS and CNCRPS shall be subordinated to the claims of all secured and unsecured creditors of the Company but senior to equity shareholders and pari passu amongst other preference shareholders.

During the current year, preference dividend of Rs. 84.72 Crore (previous year ended March 31, 2017: Rs. 78.86 Crore) was paid to holders of CRPS and CNCRPS.

1. In terms of Section 135 of the Companies Act, 2013, a Corporate Social Responsibility (CSR) Committee has been formed by the Company. The areas for CSR activities as per the CSR policy are (i) Promotion of education, (ii) promoting gender equality and empowering women, (iii) reducing child mortality and improving maternal health, (iv) ensuring environmental sustainability, (v) employment enhancing vocational skills, (vi) social business projects, (vii) contribution to the Prime Minister’s National Relief Fund or any other fund set up by the Central Government or the State Governments for socioeconomic development and relief and funds for the welfare of the Scheduled Castes, the Scheduled Tribes, other backward classes, minorities and women and (viii) such other matters as may be prescribed.

In line with Guidance Note on Accounting for Expenditure on Corporate Social Responsibility Activities, issued by the

Institute of Chartered Accountants of India, the disclosure of the CSR expenditure during the year, is as under:

(a) Gross amount required to be spent by the company during the year: Rs. 4.95 crore (previous year Rs. 5.89 Crore)

2. Financial instruments

2.1 Capital management

The Company endeavours to maintain sufficient levels of working capital, current assets and current liabilities which helps the company to meet its expense obligations while also maintaining sufficient cash flow.

The capital structure of the Company consists of net debt (borrowings as detailed in note 16 offset by cash and bank balances) and equity of the Company (comprising issued capital, reserves and retained earnings as detailed in note 14 and 15). The capital structure of the Company is reviewed by the management on a periodic basis.

2.1.1 Gearing ratio

The gearing ratio at end of the reporting period was as follows.

Formulae used for the computation of the Ratios:

a) Net Debt/Equity Ratio = Net Debt / (Equity Share Capital Other Equity)

Debt is defined as long-term borrowings(Including Preference share capital), current maturities of long-term borrowings, short-term borrowings and interest accrued thereon (excluding derivative, financial guarantee contracts), as described in note 16.

Equity includes equity share capital and reserves of the Company that are managed as capital.

In order to achieve its overall objective, the Company’s management, amongst other things, aims to ensure that it meets the financial covenants attached to the borrowings. Breaches in meeting the financial covenants would permit the bank to seek action as per terms of the agreement.

As at March 31, 2018 there are no significant concentrations of credit risk for financial assets designated as FVTPL. The carrying amount reflected above represents Company’s maximum exposure to credit risk for such financial assets.

2.3 Financial risk management objectives

The Company’s Corporate Treasury function monitors and manages the financial risks relating to the operations of the Company. These risks include market risk (including currency risk, interest rate risk and other price risk), credit risk and liquidity risk.

The Company seeks to minimise the effects of these risks by using derivative financial instruments to hedge risk exposures. The use of financial derivatives is governed by the Company’s policies approved by the Board of Directors. Compliance with policies and exposure limits is reviewed on a continuous basis. The Company does not enter into or trade in financial instruments, including derivative financial instruments, for speculative purposes.

The Corporate Treasury function reports to the Company’s management, which monitors risks and policies implemented to mitigate risk exposures.

2.4 Market risk

The Company does not have activities that exposes it primarily to the financial risks of changes in foreign currency exchange rates and interest rates.

There has been no change to the Company’s exposure to market risks or the manner in which these risks are managed and measured.

2.5 Foreign currency risk management

The Company undertakes transactions denominated in foreign currencies; consequently, exposures to exchange rate fluctuations arise. Exchange rate exposures are managed within approved policy parameters utilising cross currency interest rate swaps.

The carrying amounts of the Company’s unhedged foreign currency denominated monetary assets and monetary liabilities at the end of the reporting period are as follows.

2.6.1 Foreign currency sensitivity analysis

The Company is mainly exposed to the currency of United States and the currency of Eurozone.

The following table details the Company’s sensitivity to a 10% increase and decrease in the ‘ against the relevant foreign currencies. 10% sensitivity indicates management’s assessment of the reasonable possible change in foreign exchange rates. The sensitivity analysis includes only outstanding unhedged foreign currency denominated monetary items and adjusts their translation at the period end for a 10% change in foreign currency rates.

In management’s opinion, the sensitivity analysis is unrepresentative of the inherent foreign exchange risk because the exposure at the end of the reporting period does not reflect the exposure during the year.

2.6.2 Cross currency interest rate swap contracts

Under these swap contracts, the Company agrees to exchange the difference between fixed interest amounts based on functional currency notional principal amounts and floating rate interest amounts calculated on agreed foreign currency notional principal amounts. Also the Company agrees to exchange difference between the functional currency notional principal amount and the amount calculated based on the spot exchange rates on the foreign currency notional principal amount on specified dates. Such contracts enable the Company to mitigate the risk of changing interest rates and foreign exchange rates on the cash flows of issued foreign currency variable rate debt. The fair value of these swaps at the end of the reporting period is determined by discounting the future cash flows using the foreign currency and interest rate curves at the end of the reporting period and the credit risk inherent in these contracts, and is disclosed below. The average interest rate is based on the outstanding balances at the end of the reporting period.

The following tables detail the notional principal amounts and remaining terms of interest rate swap contracts outstanding at the end of the reporting period.

The cross currency interest rate swap contracts are generally settled on a quarterly basis. The floating rate on the interest rate swaps is the 3 months LIBOR. The Company settles the difference between the fixed and floating interest rate on a net basis.

All cross currency interest rate swap contracts exchanging floating rate interest amounts for fixed rate interest amounts are designated as cash flow hedges in order to reduce the Company’s cash flow exposure resulting from variable interest rates on borrowings. The cross currency interest rate swaps and the interest payments on the loan occur simultaneously and the amount accumulated in equity is reclassified to profit or loss over the period that the floating rate interest payments on debt affect profit or loss.

2.7 Interest rate risk management

The Company is exposed to interest rate risk as it borrows funds at both fixed and floating interest rates. The risk is managed by the Company by maintaining an appropriate mix between fixed and floating rate borrowings.

The Company’s exposures to interest rates on financial assets and financial liabilities are detailed in the liquidity risk management section of this note.

2.7.1 Interest rate sensitivity analysis

The sensitivity analyse below have been determined based on the exposure to the interest rates for all non-derivative variable interest rate instruments at the end of the reporting period. For floating rate liabilities, the analysis is prepared assuming the amount of the liability outstanding at the end of the reporting period was outstanding for the whole year. A 50 basis point increase or decrease represents management’s assessment of the reasonably possible change in interest rates.

If interest rates had been 50 basis points higher/lower and all other variables were held constant, the impact of the same is given in below table which is mainly attributable to the Company’s exposure to interest rates on its variable rate borrowings.

The Company’s sensitivity to interest rates has decreased during the current year mainly due to the reduction in variable rate debt instruments and the increase in interest rate swaps to swap floating rate debt to fixed rate debt.

2.8 Commodity Price Risk

The Company requires construction materials for implementation (construction, operation and maintenance) of the projects, such as cement, bitumen, steel and others, for which, they have fixed price contract (with capped escalation charges) with the EPC contractor and Operation & Maintenance Contractor so as to manage the exposure to price increases in raw materials. Hence, the sensitivity analysis is not required.

2.9 Other price risks

The Company is exposed to equity price risks arising from equity investments which is not material.

2.10 Credit risk management

Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to the Company. The Company is exposed to credit risk from its operating activities (primarily trade receivables) and its financing activities (primarily loans given).

The credit risk on derivative financial instruments is limited because the counterparties are banks with high credit-ratings assigned by international credit-rating agencies.

2.10.1 Trade receivables and loans given :

Customer credit risk is managed by Company’s accounts and treasury function. Outstanding receivables and loans are regularly monitored and provision is made for expected credit loss, if any. The trade receivables and loans given are unsecured. As at March 31, 2018, the Company had 9 customers (as at March 31, 2017: 9 customers) that owed the Company more than Rs. 100 crore each and accounted for approximately 92 %(as at March 31, 2017: 82%) of all the receivables outstanding. As at March 31, 2018, the Company had 12 loanees (as at March 31, 2017: 15 loanees) that owed the Company more than crore each and accounted for approximately 77.34% (as at March 31, 2017: 89%, ) of all the loans outstanding.

2.11 Liquidity risk management

The Company manages liquidity risk by maintaining adequate reserves, banking facilities and reserve borrowing facilities, by continuously monitoring forecast and actual cash flows, and by matching the maturity profiles of financial assets and liabilities. The endeavour of the Company is to constantly improve the ratio of short term to long term maturity profile so as to minimise the risk of having to refinance the borrowing at regular short intervals.

2.11.1 Liquidity and interest risk tables

The following tables detail the Company’s remaining contractual maturity for its non-derivative financial liabilities with agreed repayment periods. The tables have been drawn up based on the undiscounted cash flows of financial liabilities based on the earliest date on which the Company can be required to pay. The tables include both interest and principal cash flows. To the extent that interest flows are floating rate, the undiscounted amount is derived from interest rate curves at the end of the reporting period. The contractual maturity is based on the earliest date on which the Company may be required to pay.

The amounts included above for variable interest rate instruments for both non-derivative financial assets and liabilities is subject to change if changes in variable interest rates differ to those estimates of interest rates determined at the end of the reporting period.

The following table details the Company’s expected maturity for its non-derivative financial assets. The table has been drawn up based on the undiscounted contractual maturities of the financial assets including interest that will be earned on those assets. The inclusion of information on non-derivative financial assets is necessary in order to understand the Company’s liquidity risk management as the liquidity is managed on a net asset and liability basis.

The amounts included above for variable interest rate instruments for both non-derivative financial assets and liabilities is subject to change if changes in variable interest rates differ to those estimates of interest rates determined at the end of the reporting period.

The following table details the Company’s liquidity analysis for its derivative financial instruments. The table has been drawn up based on the undiscounted contractual net cash inflows and outflows on derivative instruments that settle on a net basis. When the amount payable or receivable is not fixed, the amount disclosed has been determined by reference to the projected interest rates as illustrated by the yield curves at the end of the reporting period.

2.12 Fair value measurements

This note provides information about how the Company determines fair values of various financial assets and financial liabilities.

2.12.1 Fair value of the Company’s material financial assets and financial liabilities that are measured at fair value on a recurring basis

Some of the Company’s financial assets and financial liabilities are measured at fair value at the end of each reporting period.

The following table gives information about how the fair values of these financial assets and financial liabilities are determined (in particular, the valuation technique(s) and inputs used).

The fair values of the financial assets and financial liabilities above have been determined in accordance with generally accepted pricing models based on a discounted cash flow analysis, with the most significant inputs being the discount rate that reflects the credit risk of counterparties.

3. Employee benefit plans

3.1 Defined contribution plans

The Company offers its employees defined contribution benefits in the form of provident fund, family pension fund and superannuation fund. Provident fund, family pension fund and superannuation fund cover substantially all regular employees. Contributions are paid during the year into separate funds under certain statutory / fiduciary-type arrangements. While both the employees and the Company pay predetermined contributions into the provident fund and pension fund, contributions to superannuation fund are made only by the Company. The contributions are normally based on a certain proportion of the employee’s salary. The assets of the plans are held separately from those of the Company in funds under the control of Regional provident fund office and third party fund manager.

The total expense recognised in profit or loss of Rs. 5.95 crores (for the year ended March 31, 2017: Rs. 6.02 crore) represents contributions payable to these plans by the Company at rates specified in the rules of the plans.

3.2 Defined benefit plans

The Company offers its employees defined-benefit plans in the form of gratuity (a lump sum amount). Benefits under defined benefit plans are typically based on years of service rendered and the employee’s eligible compensation (immediately before retirement). The gratuity scheme covers substantially all regular employees. In the case of the gratuity scheme, the Company contributes funds to the Life Insurance Corporation of India which administers the scheme on behalf of the Company. Commitments are actuarially determined at year end. Actuarial valuation is based on “Projected Unit Credit” method. The Company recognizes Actuarial Gain & Loss in the Other Comprehensive Income Account in the year in which they occur.

Under the plans, the employees are entitled to post-retirement lumpsum amounting to 30 days of final salary for each completed years of service. The eligible salary is Basic pay. Benefits are vested to employee on completion of 5 years.

Investment risk The present value of the defined benefit plan liability (denominated in Indian Rupee) is calculated using a discount rate which is determined based on the benchmark yields available on Government Bonds at the valuation date with terms matching that of the liabilities. If the return on plan asset is below this rate, it will create a plan deficit.

Interest risk A decrease in the bond interest rate will increase the plan liability; however, this will be partially offset by an increase in the return on the plan’s investments.

Longevity risk The present value of the defined benefit plan liability is calculated by reference to the best estimate of the mortality of plan participants both during and after their employment. An increase in the life expectancy of the plan participants will increase the plan’s liability.

Salary risk The present value of the defined benefit plan liability is calculated by reference to the future salaries of plan participants. As such, an increase in the salary of the plan participants will increase the plan’s liability.

Salary increase rates take into account inflation, seniority, promotion and other relevant factors.

The actuarial calculations used to estimate defined benefit commitments and expenses are based on the following assumptions, which if changed, would affect the defined benefit commitment’s size, funding requirements and pension expense. The principal assumptions used for the purposes of the actuarial valuations were as follows.

All of the Plan Asset is entrusted to LIC of India under their Company Gratuity Scheme. The reimbursement is subject to LIC’s Surrender Policy. Since the scheme funds are invested with LIC of India Expected rate of return on Plan assets is based on rate of return declared by fund managers.

The actual return on plan assets was Rs. 1.07 crore (2017: Rs. 0.81 crore).

Significant actuarial assumptions for the determination of the defined obligation are discount rate, expected salary increase and mortality. The sensitivity analyses below have been determined based on reasonably possible changes of the respective assumptions occurring at the end of the reporting period, while holding all other assumptions constant.

- If the discount rate is 100 basis points higher/(lower), the defined benefit obligation would decrease by Rs. 15.21 crore (decrease by Rs. 0.82 crore as at March 31, 2017) and increase by Rs. 17.08 crore (increase by Rs. 0.93 crore as at March 31, 2017)

- If the salary escalation rate increases (decreases) by 1%, the defined benefit obligation would increase by Rs. 17.02 crore (increase by Rs. 0.90 crore as at March 31, 2017) and decrease by Rs. 15.24crore (decrease by Rs. 0.81 crore as at March 31, 2017)

- If the Attrition rate increases (decreases) by 1%, the defined benefit obligation would increase by Rs. 16.09 crore (increase by Rs. 0.07 crore as at March 31, 2017) and decrease by Rs. 16.09 crore (decrease by Rs. 0.08 crore as at March 31, 2017)

The sensitivity analysis presented above may not be representative of the actual change in the defined benefit obligation as it is unlikely that the change in assumptions would occur in isolation of one another as some of the assumptions may be correlated.

Furthermore, in presenting the above sensitivity analysis, the present value of the defined benefit obligation has been calculated using the projected unit credit method at the end of the reporting period, which is the same as that applied in calculating the defined benefit obligation liability recognised in the balance sheet.

There was no change in the methods and assumptions used in preparing the sensitivity analysis from prior years.

1. Analysis of Defined Benefit Obligation

The number of members under the scheme have increased by 6.60%. Similarly the total salary increased by 15.59% during the accounting period. The resultant liability at the end of the period over the beginning of the period has increased by 36.33%

2 Expected rate of return basis

Since the scheme funds are invested with LIC of India Expected rate of return on Plan assets is based on rate of return declared by fund managers.

3 Description of Plan Assets and Reimbursement Conditions

100% of the Plan Asset is entrusted to LIC of India under their Company Gratuity Scheme. The reimbursement is subject to LIC’s Surrender Policy

The average duration of the benefit obligation at March 31, 2018 is 7.18 years (as at March 31, 2017: 9.87 years)

The expected contributions to the defined benefit plan for the next annual reporting period as at March 31 2018 is Rs. 2.65 Crore (as at March 31 2017 is Rs. 1.64 Crore)

4. Letter of comfort, letter of awareness and letter of financial support or Guarentees

a. The Company has issued letter of comfort / letter of awareness to banks and a related party in respect of loans availed by a few of its subsidiaries aggregating to Rs. 2,654.51 Crore as at March 31, 2018 (as at March 31, 2017 Rs. 2,535 Crore)

b. Letter of financial support has been issued to ITNL Road Infrastructure Development Company Limited, West Gujarat Expressway Limited, Vansh Nimay Infraprojects Limited, ITNL International Pte. Ltd., Singapore, ITNL Offshore Pte. Ltd., Singapore, ITNL Africa Projects Ltd., Nigeria, ITNL International DMCC, Dubai, Sharjah General Services Company LLC, Dubai IIPL USA LLC, MP Border Checkposts Development Company Limited and Thiruvananthapuram Road Development Company Limited to enable them to continue their operations and meet their financial obligations as and when they fall due.

c. Guarantees or counter guarantees issued to outsider in respect of Group companies amounting to Rs. 1,500 Crore which is backed by Parent.

5. Lease

The Company holds certain properties under a non-cancellable operating lease. The Company’s future lease rentals under the operating lease arrangements as at the year ends are as under:

6. Segment Disclosures: The Company operates in a single business segment viz. Surface Transportation Business. Also it operates in a single geographic segment. In the absence of separate reportable business or geographic segments the disclosures required under the Indian Accounting Standard 108 on Operating Segment are not applicable.

7. Approval of Financial Statements

The financial statements were approved for issue by the Board of Directors on May 29, 2018

8. IND-AS issued but not effective yet

On March 28, 2018,the Ministry of Corporate Affairs (MCA) has notified Ind AS 115 - Revenue from Contract with Customers and certain amendment to existing Ind AS. These amendments shall be applicable to the Company from April 01, 2018.

(a) Issue of Ind AS 115 - Revenue from Contracts with Customers

Ind AS 115 will supersede the current revenue recognition guidance including Ind AS 18 Revenue, Ind AS 11 Construction Contracts and the related interpretations. Ind AS 115 provides a single model of accounting for revenue arising from contracts with customers based on the identification and satisfaction of performance obligations.

The Compnay continue to evaluate the available transaction method and its contractual arrangments. The ultimate impact on revenue resulting from the application of IND-AS 115 will be subject to asseements that are dependent on many variables, including, but not limited to, the terms of the contractual arrangements and the mix of business. The company considerations also include, but are not limited to, the comparability of its financials statements and the comparability within its industry from application of the new standard to its contractual arrangements. The company has established an implementation team to implement IND-AS 115 related to the recognition of revenue from contracts with customers and it continues to evaluate the changes to accounting system and proccess, and additional disclosure requirement that may be necessary.

(b) Amendment to Existing issued Ind AS

The MCA has also carried out amendments of the following accounting standards:

i. Ind AS 21 - The Effects of Changes in Foreign Exchange Rates

ii. Ind AS 40 - Investment Property

iii. Ind AS 12 - Income Taxes

iv. Ind AS 28 - Investments in Associates and Joint Ventures and

v. Ind AS 112 - Disclosure of Interests in Other Entities Application of above standards are not expected to have any significant impact on the Company’s Financial Statements.

9. The figures for the year ended March 31, 2017 have been regrouped and / or re-arranged wherever necessary to conform to the classification adopted in the year ended March 31, 2018.