There are no material overdues compared to original plans as on March 31, 2023 and March 31, 2022.

The Company evaluates completion of the projects based on its original plan which includes certain projects relating to research and development monitored on an ongoing basis.

Details of Lease:

The note provides information for leases where the company is a lessee. The company has taken land, various offices and plant and machinery on lease. Rental contracts for offices and plant and machinery are typically made for fixed periods of 2 to 15 years, but have extension options.

The total cash outflow for leases for the year ended March 31, 2023 is ?28 crores. (March 31, 2022 - ?20 crores) Extension and Termination option:

Extension and termination options are included in a number of property and equipment leases held by the company. These terms are used to maximise operational flexibility in terms of managing contracts. The majority of extension and termination options held are exercisable only by the company and not by the respective lessor.

Commitment for leases not yet commenced on March 31, 2023 was ?Nil (March 31, 2022 - ^ Nil).

During the year ended March 31, 2023, the Company considered indicators of impairment such as operational losses in previous years, changes in outlook of future profitability among other potential indicators for investments held in subsidiaries and business operations either directly or indirectly.

Speedon Network Limited (SNL) is a wholly owned subsidiary of the Company. In the current year, the fair value less cost to sell of SNL has been determined using replacement cost method using level III inputs by an independent valuer which is lower than its carrying value. The replacement cost is computed using the factors such as number of home passes, the cost to install each home pass, depreciation adjustment and first mover advantage premium. Accordingly, impairment of ?4 crores (31 March 2022: ?22 crores) in the value of investment held has been recognised in the current year.

The Company has not advanced or loaned or invested funds (either borrowed funds or share premium or any other sources or kind of funds) to any other person or entity, including foreign entities (“Intermediaries”) with the understanding (whether recorded in writing or otherwise) that the Intermediary shall, whether, directly or indirectly lend or invest in other persons/ entities identified in any manner whatsoever by or on behalf of the Company (‘ultimate beneficiaries’) or provide any guarantee, security or the like on behalf of the Ultimate Beneficiaries other than loans aggregating ?79 crores given during the year to STL UK Holdco Limited and Sterlite Technologies UK Ventures Limited, subsidiaries of the Company in the ordinary course of business and in keeping with the applicable regulatory requirements. for onward funding to one of the overseas subsidiary of the Company towards meeting its business requirements. Accordingly, no further disclosures, in this regard, are required.

Significant changes in Contract assets

Contract assets have increased from previous year as entity has entered into new contracts during the year and has provided more services ahead of the agreed billing and payment schedules for fixed price contracts.

During the year ended 31 March 2023, ?626 crores (31 March 2022: ?1,146 crores) of opening unbilled revenue has been reclassified to Trade receivables upon billing to customers on completion of milestones.

Refer note 18 for information on other assets pledged as security by the Company.

Amounts recognised in profit or loss:

Write-downs of inventories to net realisable value amounted to ?20 crores (March 31, 2022: ?55 crores). These were recognised as an expense and included in ‘(Increase) / decrease in inventories of finished goods, work-in-progress and traded goods’ in statement of profit and loss of respective year.

Refer note 18 for information on inventories pledged as security by the Company.

Year ending March 31, 2022:

During the year ended March 31, 2022, company has sold the investment in MTCIL. The gain on sale of investment in Maharashtra Transmission Communication Infrastructure Limited of ?26 crores is disclosed in other income as Profit on sale of subsidiaries and investment in joint venture.

Further, the Company had decided to sell land and building at Hyderabad during the year ended 31 March 2021. Hence it was classified as held for sale during the year ended 31 March 2021 and measured at the lower of its carrying amount and fair value less costs to sell. The fair value of the building was determined using the sales comparison approach. No write down was recognised as fair value of the assets is higher than cost. During the year ended March 31, 2022, company has sold the Land and building at Hyderabad. The gain of ?67 crores is recognised as an exceptional item in the statement of profit and loss.

b. Terms and rights attached to equity shares

The Company has only one class of equity shares having a par value of ?2 per share. Each holder of equity shares is entitled to one vote per share.

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.

g. Details of shares bought back during the 5 years preceding 31 March 2023:

On March 24, 2020, the Board of Directors had approved the buyback of Equity Shares for a total amount not exceeding ?145 crores, being 9.95% and 9.32% of the aggregate of the total paid-up equity capital and free reserves (including securities premium) of the Company based on the audited standalone and consolidated financial statements, respectively, of the Company for the financial year ended March 31, 2019. The Company closed the buy back on August 27, 2020. The Company has bought back 88,67,000 shares for ?100 crores (excluding taxes).

Nature and Purpose of reserves other than retained earnings Securities Premium

Securities premium is used to record the premium on issue of shares. The reserve is utilised in accordance with the provisions of the Companies Act, 2013.

Capital Reserve

Capital reserve was created on account of merger of passive infrastructure business of wholly owned subsidiary, Speedon Network Limited, in the year ended March 31, 2017.

General Reserve

General reserve is created out of the amounts transferred from debenture redemption reserve on account of redemption of debentures.

Cash Flow Hedge Reserve

The Company uses hedging instruments as part of its management of foreign currency risk associated with its highly probable forecasted sales and purchases and interest rate risk associated with variable interest rate borrowings as described in note 45. For hedging foreign currency risk, the Company uses foreign currency forward contracts which are designated as cash flow hedges. For hedging interest rate risk, the Company uses interest rate swaps which are also designated as cash flow hedges. To the extent these hedges are effective, the change in fair value of the hedging instrument is recognised in the cash flow hedging reserve. Amounts recognised in the cash flow hedging reserve are reclassified to profit or loss when the hedged item affects profit or loss. When the forecasted transaction results in the recognition of a non-financial asset (e.g. inventory), the amount recognised in the cash flow hedging reserve is adjusted against the carrying amount of the non financial asset.

Employee Stock Option Outstanding

The share options outstanding account is used to recognise the grant date fair value of options issued to employees under employee stock option plan (ESOP Scheme) approved by shareholders of the Company.

Debenture Redemption Reserve

The Company had created a debenture redemption reserve (DRR) of 25% of the total oustanding debentures out of the profits which are available for the purpose of redemption of debentures as per provisions of the Companies Act, 2013. The outstanding amounts were repaid in the previous year.

Capital Redemption Reserve

As per provisions of the Companies Act, 2013, the Company has created a capital redemption reserve (CRR) of 2 Crores against face value of equity shares bought back by the Company during the year ended 31 March 2021.

a) 8.25% Non convertible debentures carry 8.25% p.a rate of interest. Total amount of non-convertible debentures is due in 4 equal annual installments starting from FY 2027-28 till FY 2030-31. These non-convertible debentures are secured by way of first pari pasu charge on specified movable fixed assets at Shendra plant (project Gaurav) (both present and future).

b) 7.30% Non convertible debentures carry 7.30% p.a rate of interest. Total amount of non-convertible debentures is due in the FY2023-24. These non-convertible debentures are secured by way of mortgage of immovable fixed assets of the Company located at Aurangabad.

c) 9.10% Non convertible debentures carry 9.10% p.a rate of interest. Total amount of non-convertible debentures is due in the FY2025-26. These non-convertible debentures are secured by way of a first pari-passu charge over movable fixed assets of the Company, other than assets located at Shendra Aurangabad.

d) Foreign Currency term loan from bank amounting to ? Nil (March 31, 2022: ?38 crores) carries interest @ Libor 2.70 % p.a. Loan amount is repayable in 20 quarterly equated instalments of USD 0.13 crores starting from April 2018. The term loan is secured by way of first pari-passu charge on entire movable fixed assets (both present and future) and mortgage of immovable fixed assets of the Company located at Dadra & Nagar Haveli and Pune. The loan has been repaid during FY2022-23.

e) Foreign Currency term loan from bank amounting to ? Nil (March 31, 2022: ?62 crores) crores carries interest @ GBP Libor 2.60 % p.a. Loan amount is repayable in 6 half yearly equated instalments of GBP 0.13 crores starting from Feb 2022. The term loan is secured by way of first pari-passu charge on entire movable fixed assets (both present and future) of the Company. The loan has been repaid during FY2022-23.

f) Indian rupee term loan from bank amounting to ?166 crores (31 March 2022: ?249 crores) carries interest @ One Year MCLR 0.15% p.a. Loan amount is repayable in 12 quarterly instalments from June 2022 of ?20.75 crores per Quarter (excluding interest). The term loan is secured by way of first pari pasu charge on entire movable fixed assets at Shendra plant (project Gaurav) (both present and future).

g) Secured Indian rupee term loan from bank amounting to ?200 crores (31 March 2022 Unsecured indian rupee term loan: ?200 crores) carries interest @ overnight MCLR. Loan amount is repayable as a bullet repayment in the month of October 2023. The term loan is secured by way of first pari pasu charge on entire movable fixed assets at Shendra plant (project Gaurav) (both present and future).

h) Unsecured Indian rupee term loan from bank amounting to ? Nil (March 31, 2022: ?200 crores) carries interest 6.6% p.a. Loan amount has been repaid during FY2022-23.

i) Unsecured Indian rupee term loan from NBFC amounting to ?175 crores (March 31, 2022: Nil) carries interest @ 9.15% p.a. Loan amount is repayable in FY2024-25.

j) Unsecured Indian rupee term loan from NBFC amounting to ?74 crores (March 31, 2022: ?25 crores) carries interest @

5.5% p.a. Loan amount is repayable in FY2023-24 & 2024-25.

(i) Working capital demand loan from banks is secured by first pari-passu charge on entire current assets of the Company (both present and future) and second pari-passu charge on plant & machinery and other movable fixed assets of

the Company. Working Capital Demand Loans have been taken for a period of 7 days to 180 days and carry interest @ 6.85 % to 8.60% p.a (March 31, 2022: 4.50 % to 7.00% p.a).

(ii) Commercial Papers are unsecured and are generally taken for a period from 60 Days to 180 days and carry interest @ 7.55% to 8.40% p.a (March 31, 2022: 4.50% to 6.00% p.a ).

(iii) Other loans include buyer’s credit arrangements (secured) and export packing credit (secured and unsecured). These secured loans are secured by hypothecation of raw materials, work in progress, finished goods and trade receivables. Export packing credit is taken for a period ranging from 30-180 days. Interest rate for both the products range from 6.85% - 8.05% p.a (March 31, 2022: 4.00% - 6.50% p.a).

Borrowing secured against current assets:

The company has borrowings from banks and financial institutions on the basis of security of current assets. The quarterly returns or statements of current assets filed by the company with banks and financial institutions are in agreement with the books of accounts except as disclosed in Note no.49.

Utilisation of borrowed funds

The company has not received any fund from any person(s) or entity(ies), including foreign entities (Funding Party) with the understanding (whether recorded in writing or otherwise) that the company shall:

a. directly or indirectly lend or invest in other persons or entities identified in any manner whatsoever by or on behalf of the Funding Party (Ultimate Beneficiaries) or ;

b. provide any guarantee, security or the like on behalf of the ultimate beneficiaries.

The borrowings obtained by the company during the year from banks and financial institutions have been applied for the purposes for which such loans were taken.

The company has not been declared wilful defaulter by any bank or financial institution or government or any government authority.

There are no charges or satisfaction which are yet to be registered with the Registrar of Companies beyond the statutory period. Net debt reconciliation

i) Compensated Absences

The compensated absences cover the Company’s liability for sick and privilege leave. The Company does not have an unconditional right to defer settlement for any of these obligations. However, based on past experience, the company does not expect all employees to take the full amount of accrued leave or require payment within the next 12 months and accordingly amounts have been classified as current and non current based on actuarial valuation report.

ii) Post employment benefit obligation - Gratuity

The Company provides for gratuity for employees in India as per the Payment of Gratuity Act, 1972 (amended). Employees who are in continuous service for a period of 5 years are eligible for gratuity. The amount of gratuity payable on retirement/termination is the employees last drawn basic salary per month computed proportionately for 15 days salary multiplied for the number of years of service. The gratuity plan is a funded plan and the Company makes contributions to fund managed by Life Insurance Corporation of India. The Company does not fully fund the liability and maintains a target level of funding to be maintained over a period of time based on estimate of expected gratuity payments.

The above sensitivity analysis is based on a change in an assumption while holding all other assumptions constant.

In practice, this is unlikely to occur, and changes in some of the assumptions may be correlated. When calculating the sensitivity of the defined benefit obligation to significant actuarial assumptions the same method (present value of the defined benefit obligation calculated with the projected unit credit method at the end of the reporting period) has been applied as when calculating the defined benefit liability recognised in the balance sheet.

The methods and types of assumptions used in preparing the sensitivity analysis did not change compared to the prior period. Risk exposure

Through its defined benefit plans, the Company is exposed to a number of risks, the most significant of which are detailed below:

Asset volatility:

The plan liabilities are calculated using a discount rate set with reference to bond yields; if plan assets underperform this yield, this will create a deficit. Plan assets are maintained with fund manager, LIC of India.

The Company’s assets are maintained in a trust fund managed by public sector insurance company (LIC of India). LIC has a sovereign guarantee and has been providing consistent and competitive returns over the years. The plan asset mix is in compliance with the requirements of the respective local regulations.

Changes in bond yields:

A decrease in bond yields will increase plan liabilities.

Future salary escalation and inflation risk:

Rising salaries will often result in higher future defined benefit payments resulting in a higher present value of liabilities especially unexpected salary increases provided at management’s discretion may lead to uncertainties in estimating this risk.

Life expectancy

Increases in life expectancy of employee will result in an increase in the plan liabilities. This is particularly significant where inflationary increases result in higher sensitivity to changes in life expectancy.

The weighted average duration of the defined benefit obligation is 8 years (March 31, 2022 - 8 years). The expected maturity analysis of gratuity is as follows:

Maturity Analysis of defined benefit obligation:

The expected maturity analysis of undiscounted gratuity is as follows:

Revenue disaggregation in terms of nature of goods and services has been included above.

The total contract price of ?5,259 crores (31 March 2022: ?4,798 crores) is reduced by the consideration of ?13 crores (31 March 2022: ?26 crores) towards variable components.

Refer note 2 and 3 for accounting policy and significant judgements, respectively.

The Company’s unsatisfied (or partially satisfied) performance obligations can vary due to several factors such as terminations, changes in scope of contracts, periodic revalidations of the estimates or other relevant economic factors. The aggregate value of unsatisfied (or partially satisfied) performance obligations is ?3,950 crores (31 March 2022: ?4,124 crores) which is expected to be recognised over a period of one to nine years. Amount of unsatisfied (or partially satisfied) performance obligations does not include contracts with original expected duration of one year or less since the Company has applied the practical expedient in Ind AS 115.

The Company has recorded provision of ?Nil (31 March 2022: ?64 crores) based on final settlement with the customer for supplies made in the previous years by an adjustment to revenue from a period.

"This relates to government grants pertaining to indirect tax benefits availed under Industrial Promotion Scheme, Remission of Duties or Taxes on Export Products Scheme and Duty Drawback Scheme.

a. Defined Contribution Plans:

The Company has a provident fund plan which is a defined contribution plan. Contributions are made to provident fund administered by the Government in India for employees at the rate of 12% of basic salary as per local regulations. The obligation of the Company is limited to the amount contributed and it has no further contractual nor any constructive obligation.

33. Employee Share Based Payments

The Company has established employees stock options plan, 2010 (“ESOP Scheme”) for its employees pursuant to the special resolution passed by shareholders at the annual general meeting held on July 14, 2010. The employee stock option plan is designed to provide incentives to the employees of the Company to deliver long-term returns and is an equity settled plan. The ESOP Scheme is administered by the Nomination and Remuneration Committee. Participation in the plan is at the Nomination and Remuneration Committee’s discretion and no individual has a contractual right to participate in the ESOP Scheme or to receive any guaranteed benefits. Options granted under ESOP scheme would vest in not less than one year and not more than five years from the date of grant of the options. The Nomination and Remuneration Committee of the Company has approved multiple grants with related vesting conditions. Vesting of the options would be subject to continuous employment with the Company and hence, the options would vest with passage of time. In addition to this, the Nomination and Remuneration Committee may also specify certain performance parameters subject to which the options would vest. Such options would vest when the performance parameters are met.

Once vested, the options remain exercisable for a period of maximum five years. Options granted under the plan are for no consideration and carry no dividend or voting rights. On exercise, each option is convertible into one equity share. The exercise price is ?2 per option.

The Company has charged ?9 crores (March 31, 2022: ?12 crores) to the statement of profit and loss in respect of options granted under ESOP scheme.

b) Fair Value of the options granted during the year-

During the current year remuneration committee has approved three grants. Following are the details of assumptions under the grant, related vesting conditions and fair valuation model used based on the nature of vesting.

Date of Grant- July 19, 2022

The company has granted 72,280 options under ESOP scheme based on following criteria and related assumptions Vesting criteria - Continuous employment with the company.

Options granted to employees under the ESOP Scheme 2010 are considered to be potential equity shares. They have been included in the determination of diluted earnings per share to the extent to which they are dilutive. The options have not been included in the determination of basic earnings per share. Details relating to the options are given in note 33.

35. Code on Social Security, 2020

The Indian Parliament has approved the Code on Social Security, 2020 which would impact the contributions by the Company towards Provident Fund and Gratuity. The draft rules for the Code on Social Security, 2020 have been released by the Ministry of Labour and Employment on November 13, 2020. The Company is in the process of assessing the additional impact on Provident Fund contributions and on Gratuity liability contributions and will complete their evaluation and give appropriate impact in the financial statements in the period in which the rules that are notified become effective.

2. The Company had issued Corporate guarantees amounting to ?114 crores to the Income tax Authorities in FY2003-04 on behalf of the Group companies. The matter against which corporate guarantee was paid by STL was decided in favour of the Group companies by both ITAT and HC orders against which the Department has filed an appeal with the Supreme Court. The above corporate guarantee is backed by the corporate guarantee issued by Volcan Investments Limited (refer note 48) in the favour of the Company.

* In an earlier year, one of the Bankers of the Company had wrongly paid an amount of ?19 crores under the letter of credit facility. The letter of credit towards import consignment was not accepted by the Company, owing to discrepancies in the documents. Thereafter, the bank filed claim against the Company in the Debt Recovery Tribunal (DRT). Against the DRT Order dated 28 October 2010, the parties had filed cross appeals before the Debt Recovery Appellate Tribunal. The Debt Recovery Appellate Tribunal vide its Order dated 28 January 2015 has allowed the appeal filed by the Company and has dismissed the appeal filed by the bank. The bank has challenged the said order in Writ petition before the Bombay High Court. The management doesn’t expect the claim to succeed and accordingly no provision for the contingent liability has been recognised in the financial statements.

In the FY21-22, the Company had received show cause notices with respect to 4 Service tax registrations of ?57 crores each demanding service tax on difference between value of services appearing in 26AS (at legal entity level) vis-a-vis respective service tax registrations for the period 2016-17. Management has assessed that the show-cause notice is not required to be disclosed as contingent liability as it is erroneous in nature and the probability of an unfavourable outcome is remote.

Further, Income tax orders for AY 2013-14, 2014-15 and 2017-18 were received with respect to Elitecore Technologies Private Limited (which is now a non-existent entity in these years since it had merged with the company with effect from 29 September 2016) with a demand of ?55.67 crores mainly relating to addition on certain aspects like treatment of purchase of software/hardware. Management has assessed that based on principles arising from judicial precedents, including those passed by the Hon’ble Supreme Court and Jurisdictional Bombay High Court, the notices issued in the name of nonexistent entity are not merely an irregularity but also suffer from jurisdictional defect which cannot be cured. On this primary ground and certain other strong grounds, including procedural defects, the company (on behalf of Elitecore Technologies private limited) has filed a writ before the Hon’ble High Court. The order of High Court for AY 2013-14 and AY 2014-15 came in favour of Company via order dated March 27, 2023. While the order for AY 2017-18 is awaited. Hence, management believes that the probability of an unfavourable outcome is remote and the demand of ?5 crores pertaining to the said case (AY 2017-18) is not disclosed as a contingent liability.

3. The Company has not provided for disputed liabilities disclosed above arising from disallowances made in assessments which are pending with different appellate authorities for its decision. The Company is contesting the demands and the management, including its tax advisors, believe that its position will likely be upheld in the appellate process. No liability has been accrued in the financial statements for the demands raised. The management believes that the ultimate outcome of these proceedings will not have a material adverse effect on the Company’s financial position. In respect of the claims against the company not acknowledged as debts as above, the management does not expect these claims to succeed. It is not practicable to indicate the uncertainties which may affect the future outcome and estimate the financial effect of the above liabilities.

Amount due to Micro and Small enterprises are disclosed on the basis of information available with the Company regarding status of the suppliers as Micro and Small enterprises.

40. Research and Development Expenditure

STL through its extensive research capabilities, constant innovation and unique capabilities at following R&D centres is able to provide customers end to end solutions from manufacturing of cable to system integration to providing software products required by telecom players:

- Aurangabad - R&D activities to manufacture cable which can cater most bandwidth demand.

- Gurgaon - R&D activities to design, build, manage broadband network for global service providers, smart cities, rural broadband etc.

- Ahmedabad - R&D activities to develop innovative telecom software products which can cater demand for business support system and operating support system.

(e) There is no provision made with respect to a liability incurred by entering into a contractual obligation during the current year.

44. Exceptional Items

During the year ended March 31, 2022, the amount of ?53 crores reported under exceptional items in the financial statements includes profit of ?67 crores recognised on account of transfer of land situated at Hyderabad and a provision of ?14 crores with respect to an order against the Company for a claim filed by a vendor for non-fulfilment of certain contractually agreed off take obligations.

45. Financial Risk Management

The Company’s principal financial liabilities, comprise borrowings, trade and other payables and other financial liabilities. The main purpose of these financial liabilities is to finance the Company’s operations. The Company’s principal financial assets include Investments, loans, trade and other receivables, cash and short-term deposits and other financial assets that arise directly from its operations. The Company also enters into derivative transactions.

The Company’s activities expose it to market risk, credit risk and liquidity risk. The Company’s senior management oversees the activities to manage these risks. All derivative activities for risk management purposes are carried out by specialist teams that have the appropriate skills, experience and supervision. It is the Company’s policy that no trading in derivatives for speculative purposes should be undertaken.

The Risk Management policies of the Company are established to identify and analyse the risks faced by the Company, to set appropriate risk limits and controls and to monitor risks and adherence to limits. Risk management policies and systems are approved and reviewed regularly by the Board to reflect changes in market conditions and the Company’s activities.

Management has overall responsibility for the establishment and oversight of the Company’s risk management framework.

The risks to which Company is exposed and related risk management policies are summarised below -

(a) Market risk

Market risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in market prices. Market risk comprises three types of risk: interest rate risk, currency risk and price risk, such as equity price risk and commodity risk. Financial instruments affected by market risk mainly includes loans given and borrowings, financial assets and liabilities in foreign currency, investments in quoted instruments and derivative financial instruments.

The sensitivity analysis in the following sections relate to the position as at March 31, 2023 and March 31, 2022.

The sensitivity analysis have been prepared on the basis that the amount of debt, the ratio of fixed to floating interest rates of the debt, derivatives and the proportion of financial instruments in foreign currencies are all constant and on the basis of hedge designations in place at March 31, 2023 and March 31, 2022.

Interest rate risk

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

The Company is exposed to the interest rate fluctuation in domestic as well as foreign currency borrowing. The Company manages its interest rate risk by having a balanced portfolio of fixed and variable rate borrowings. The Company enters into interest rate swaps, in which it agrees to exchange, at specified intervals, the difference between fixed and variable rate interest amounts calculated by reference to an agreed-upon notional principal amount. There are no interest rate swaps outstanding as at March 31, 2023. At March 31, 2023, after taking into account the effect of interest rate swaps, approximately 88% of the Company’s borrowings are at a fixed rate of interest (March 31, 2022: 83%).

Foreign currency risk

The company operates internationally and is exposed to foreign exchange risk arising from foreign currency transactions, primarily with respect to the USD, EURO and GBP. Foreign exchange risk arises from future commercial transactions and recognised assets and liabilities denominated in a currency that is not the company’s functional currency (INR). The risk is measured through a forecast of highly probable foreign currency cash flows. The objective of the hedges is to minimise the volatility of the INR cash flows of highly probable forecast transactions.

The Company has a policy to keep minimum forex exposure on the books that are likely to occur within a 15-month period for hedges of forecasted sales and purchases. As per the risk management policy, foreign exchange forward contracts are taken to hedge its exposure in the foreign currency risk. During the year ended March 31, 2023 and 2022, the company did not have any hedging instruments with terms which were not aligned with those of the hedged items.

When a derivative is entered into for the purpose of hedge, the Company negotiates the terms of those derivatives to match the terms of the underlying exposure. For hedges of forecast transactions the derivatives cover the period of exposure from the point the cash flows of the transactions are forecasted up to the point of settlement of the resulting receivable or payable that is denominated in the foreign currency.

Out of total foreign currency exposure the Company has hedged the significant exposure as at March 31, 2023 and as at March 31, 2022.

Commodity price risk

The Company is affected by the price volatility of certain commodities. Its operating activities require the ongoing purchase and manufacture of copper cables and therefore require a continuous supply of copper. To meet requirements the company enters into contracts to purchase copper. The prices in these purchase contracts are linked to the price on London Metal Exchange.

The Company has a risk management strategy to mitigate commodity price risk.

Based on a 1 month forecast of the required copper supply, the Company hedges the purchase price using future commodity purchase contracts. The forecast is deemed to be highly probable.

Commodity price sensitivity

As per the Company’s policy for commodity price hedging, all the commodity price exposures as on reporting dates are fully hedged. Thus, there are no open unhedged exposures on the reporting dates.

Price risk

The Company’s investment in non-listed equity securities are susceptible to market price risk arising from uncertainties about future values of the investment securities. The Company manages the equity price risk through diversification and by placing limits on individual and total equity instruments. Reports on the equity portfolio are submitted to the Company’s senior management on a regular basis. The Company’s Board of Directors review and approve all equity investment decisions.

The Company also invests into highly liquid mutual funds which are subject to price risk changes. These investments are generally for short duration and therefore impact of price changes is generally not significant. Investment in these funds are made as a part of treasury management activities.

(b) Credit risk

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

Trade receivables and Contract assets

Customer credit risk is managed by each business unit subject to the Company’s established policy, procedures and control relating to customer credit risk management. Credit quality of a customer is assessed taking into account its financial position, past experience and other factors, eg. credit rating and individual credit limits are defined in accordance with credit assessment. Outstanding customer receivables are regularly monitored and any shipments to major customers are generally covered by letters of credit or other forms of credit assurance.

The Company provides for expected credit loss of trade receivables and contract assets based on life-time expected credit losses (simplified approach). The Company assesses the expected credit loss for Global Services Business (GSB) considering the individual nature and risks of the contracts. The expected credit losses for other businesses is assessed using a provision matrix as per the practical expedient prescribed under IND AS 109.

The credit risk of customers of Global Services Business (GSB) is assessed individually considering the nature and risks involved in each contract. Such assessment is considered in determining the adequacy of expected credit loss for trade receivables and contract assets of the business which requires significant managment judgement. Refer Note 3 for details of the judgement involved.

A major portion of the GSB trade receivables and contract assets consists of government customers. The credit risk in receivable from government customers is considered to be low. In case of disputes, the Company considers interpretation of contractual terms, project status, probability of settlement, counter-claims, latest discussions / correspondence and legal opinions wherever applicable in assessing the recoverability. The average project execution cycle in GSB ranges from 12 to 36 months based on the nature of contract and scope of services to be provided. General payment terms include mobilisation advance, progress payments with a credit period ranging from 45 to 90 days and certain retention money to be released at the end of the project. In some cases retentions are substituted with bank/corporate guarantees.

For other businesses, a provision matrix is used to measure the lifetime expected credit losses as per the practical expedient prescribed under Ind AS 109. The trade receivables and contract assets for other businesses are mainly related to contracts for sale of goods.

An impairment analysis is performed at each reporting date on an individual basis for major customers. In addition, a large number of minor receivables are grouped into homogenous groups and assessed for impairment collectively using a provision matrix to measure the lifetime expected credit losses as per the practical expedient prescribed under Ind AS 109. The assessment is based on historical information of defaults. The maximum exposure to credit risk at the reporting date is the carrying value of each class of financial assets.

The Company does not hold collateral as security. The Company evaluates the concentration of risk with respect to trade receivables as low, as its customers are located in several jurisdictions and operate in largely independent markets. During the period, the company made write-offs of Nil (31 March 2022: Nil) trade receivables and it does not expect to receive future cash flows or recoveries from collection of cash flows previously written off.

Financial assets and cash deposits

Credit risk from balances with banks and financial institutions is managed by the Company’s treasury department in accordance with the Company’s policy. Investments of surplus funds are made only with approved counterparties and within credit limits assigned to each counterparty. Counterparty credit limits are reviewed by the Company on an annual basis, and may be updated throughout the year. The limits are set to minimise the concentration of risks and therefore mitigate financial loss through counterparty’s potential failure to make payments.

Other financial assets that are potentially subject to credit risk consists of inter corporate loans. The company assesses the recoverability from these financial assets on regular basis. Factors such as business and financial performance of counterparty, their ability to repay, regulatory changes and overall economic conditions are considered to assess future recoverability. The company charges interest on such loans at arms length rate considering counterparty’s credit rating.

Based on the assessment performed, the company considers all the outstanding balances of such financial assets to be recoverable as on balance sheet date and appropriate provision for impairment is considered in financial statements.

The Company’s maximum exposure to credit risk for the components of the balance sheet at March 31, 2023 and March 31, 2022 is the carrying amounts of each class of financial assets.

(c) Liquidity risk

Liquidity risk is the risk that the Company may encounter difficulty in meeting its present and future obligations associated with financial liabilities that are required to be settled by delivering cash or another financial asset. The Company’s objective is to, at all times, maintain optimum levels of liquidity to meet its cash and collateral obligations. The Company requires funds both for short term operational needs as well as for long term investment programs mainly in growth projects. The Company closely monitors its liquidity position and deploys a robust cash management system. It aims to minimise these risks by generating sufficient cash flows from its current operations, which in addition to the available cash and cash equivalents, liquid investments and sufficient committed fund facilities which will provide liquidity.

Cash flow hedges

Foreign exchange forward contracts are designated as hedging instruments in cash flow hedges of highly probable forecast transactions/firm commitments for sales and purchases in USD, EUR and GBP. The foreign exchange forward contract balances vary with the level of expected foreign currency sales and purchases and changes in foreign exchange forward rates.

The cash flow hedges for such derivative contracts as at March 31, 2023 were assessed to be highly effective and a net unrealised loss of ?33 crores, with a deferred tax liability of ?9 crores relating to the hedging instruments, is included in OCI. Comparatively, the cash flow hedges as at March 31, 2022 were assessed to be highly effective and an unrealised gain of ?1 crores, with a deferred tax liability of ?0.30 crores was included in OCI in respect of these contracts. The amounts retained in OCI at March 31, 2022 are expected to mature and affect the statement of profit and loss during the year ended March 31, 2024 and 31 March 2025.

At March 31, 2023, the company does not have any currency/interest rate swap agreemnts in place. As at March 31, 2022, the company had currency/interest rate swap agreements in place with a notional amount of USD 0.5 crores (?42.45 crores) and GBP 0.63 crores (?57.60 crores whereby the company received a variable rate of interest of Libor 2.70% and paid interest at a fixed rate equal to 10.0425% on the notional amount with USD-INR rate fixed at ?66.3850 per USD for the USD Interest Swap. For the GBP Interest Swap, the company received a variable rate of interest of Sterling Overnight Index Average and paid ineterst at a fixed rate equal to 1.74% p.a on the notional amount of GBP Loan. The swaps were being used to hedge the exposure to changes in the foreign exchange rates and interest rates. As at March 31, 2023, the company does not have any outstanding borrowings in foreign currency.

The cash flow hedges for such derivative contracts as at March 31, 2022 were assessed to be highly effective and a net unrealised loss of ?1.1 crores, with a deferred tax asset of ?0.28 crores relating to the hedging instruments, is included in OCI.

The Company’s hedging policy requires for effective hedge relationships to be established. Hedge effectiveness is determined at the inception of the hedge relationship and through periodic prospective effectiveness assessments to ensure that an economic relationship exists between the hedged item and hedging instrument. The company enters into hedge relationships where the critical terms of the hedging instrument match exactly with the terms of the hedged item, and so a qualitative assessment of effectiveness is performed. If changes in circumstances affect the terms of the hedged item such that the critical terms no longer match exactly with the critical terms of the hedging instrument, the company uses the hypothetical derivative method to assess effectiveness.

Ineffectiveness is recognised on a cash flow hedge where the cumulative change in the designated component value of the hedging instrument exceeds on an absolute basis the change in value of the hedged item attributable to the hedged risk. In hedges of foreign currency forecast sale may arise if:

- the critical terms of the hedging instrument and the hedged item differ (i.e. nominal amounts, timing of the forecast transaction, interest resets changes from what was originally estimated), or

- differences arise between the credit risk inherent within the hedged item and the hedging instrument.

Refer note 17 for the details related to movement in cash flow hedging reserve.

46. Capital Management

For the purpose of the Company’s capital management, capital includes issued equity capital and all other equity reserves attributable to the shareholders of the Company. The primary objective of the Company’s capital management is to ensure that it maintains a strong credit rating, healthy capital ratios in order to support its business and maximise shareholder value and optimal capital structure to reduce cost of capital.

The Company manages its capital structure and makes adjustments to it in light of changes in economic conditions and the requirements of the financial covenants. To maintain or adjust the capital structure, the Company may adjust the dividend payment to shareholders, return capital to shareholders or issue new shares. The Company monitors capital using a gearing ratio, which is net debt divided by total capital plus net debt. The Company’s policy is to keep the gearing ratio optimum.

The Company includes within net debt interest bearing loans and borrowings less cash and cash equivalents excluding discontinued operations.

The recent investments by the Company in new businesses, increasing the capacity of existing businesses and increase in working capital due to certain projects has lead to increase in capital requirement. The Company expects to realise the benefits of these investments in near future.

c) Valuation technique used to determine fair value

The fair value of the financial assets and liabilities is included at the amount at which the instrument could be exchanged in a current transaction between willing parties, other than in a forced or liquidation sale. The following methods and assumptions were used to estimate the fair values:

The fair values of the quoted mutual funds are based on quoted price at the reporting date.

The Company enters into derivative financial instruments with financial institutions with investment grade credit ratings. Foreign exchange forward contracts, interest rate swaps are valued using valuation techniques, which employs the use of market observable inputs. The most frequently applied valuation techniques include forward pricing model, using present value calculations. The models incorporate various inputs including the credit quality counterparties, foreign exchange spot and forward rates, yield curves of the respective currencies, currency basis spread between the respective currencies, interest rate curves etc. The changes in counterparty credit risk had no material effect on the hedge effectiveness assessment for derivatives designated in hedge relationships and other financial instruments recognised at fair value.

d) Valuation processes

The finance department of the company includes a team that oversees the valuations of financial assets and liabilities required for financial reporting purposes, including level 3 fair values.

External valuers are involved for valuation of significant assets, such as unquoted financials assets. Involvement of external valuers is decided by the valuation team. Selection criteria includes market knowledge, reputation, independence and whether professional standards are maintained. The Valuation team decides, after discussions with the company’s external valuers, which valuation techniques and inputs to use for each case.

The main level 3 inputs for used by the company are derived and evaluated as follows:

Discount rates are determined using a capital asset pricing model or based on weighted average cost of capital of counterparty, to calculate a post-tax rate that reflects current market assessments of the time value of money and the risk specific to the asset.

Risk adjustments specific to the counterparties (including assumptions about credit default rates) are derived from risk assessment (based on review of financial condition, economic factors) by management.

Earnings growth factor for unlisted equity securities are estimated based on market information for similar types of companies.

Changes in level 3 fair values are analysed at the end of each reporting period during the valuation discussion between the valuation team and external valuer. As part of this discussion the team presents a report that explains the reason for the fair value movements.

The significant unobservable inputs used in the fair value measurement categorised within Level 3 of the fair value hierarchy together with a quantitative sensitivity analysis as at March 31, 2023 and March 31, 2022 are as shown above.

The management assessed that cash and cash equivalents, trade receivables, trade payables, other current assets and liabilities approximate their carrying amounts largely due to the short-term maturities of these instruments.The management has further assessed that borrowings availed and loans given approximate their carrying amounts largely due to the interest rates being variable or in case of fixed rate borrowings/loans, movements in interest rates from the recognition of such financial instrument till period end not being material.