air india book · 31,2015,the consolidated statement of proﬁt & loss, consolidated cash flow...

CONSOLIDATED

FINANCIAL STATEMENT

OF AIR INDIA GROUP

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COMMENTS OF THE COMPTROLLER AND AUDITOR GENERAL OF INDIA UNDER SECTION 143(6)(b) READ WITH SECTION 129(4) OF THE COMPANIES ACT, 2013 ON THE CONSOLIDATED FINANCIAL STATEMENTS OFAIR INDIA LTD. FOR THE YEAR ENDED 31 MARCH 2015.

The preparation of consolidated financial statements of Air India Limited for the year ended 31 March 2015 in accordance with the financial reporting framework prescribed under the Companies Act, 2013 is the responsibility of the management of the company. The statutory auditor/ auditors appointed by the Comptroller and Auditor General of India under section 139(5) read with section 129(4) of the Act are responsible for expressing opinion on the financial statements under section 143 read with section 129(4) of the Act based on independent audit in accordance with the standards on auditing prescribed under section 143(10) of the Act. This is stated to have been done by them vide their Audit Report dated 23 May 2016, leaving Airline Allied Services Limited (one of the subsidiaries of Air India Limited), whose audited accounts were not available on that date.

I, on behalf of the Comptroller and Auditor General of India, have conducted a supplementary audit under section 143(6)(a) read with section 129(4) of the Act, of the consolidated financial statements of Air India Limited for the year ended 31 March 2015. We conducted a supplementary audit of the financial statements of Air India Limited and its subsidiaries (as per Annexure 'A') for the year ended 31 March 2015. Further, section 139(5) and 143 (6) (b) of the Act are not applicable to Air India SATS Airport Services Private Limited (being a private jointly controlled entity of AIL-SATS) incorporated in India, for conduct of supplementary audit. Accordingly, C&AG has neither appointed the Statutory Auditors nor conducted the supplementary audit of Air India SATS Airport Services Private Limited. This supplementary audit has been carried out independently without access to the working papers of the statutory auditors and is limited primarily to inquiries of the statutory auditors and company personnel and a selective examination of some of the accounting records.

Based on my supplementary audit, I would like to highlight the following significant matters under section 143(6)(b) read with section 129(4) of the Act which have come to my attention and which in my view are necessary for enabling a better understanding of the consolidated financial statements and the related audit report:

Note no. 2C- Significant Accounting Policies Item 4 -Inventories

As per this note, Inventories are valued at weighted average cost. However, as per Accounting Standard (AS) 2, Inventories should be valued at cost or Net Realisable Value, whichever is lower. Hence Inventory Policy is in contravention to AS-2.

For and on the behalf of theComptroller & Auditor General of India

Sd/- Tanuja Mittal

Principal Director of Commercial Audit &ex-officio Member Audit Board-II, Mumbai

Date: 26 July 2016Place: Mumbai

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Annexure - A

1 Air India Charters Limited

2 Air India Engineering Services Limited

3 Air India Air Transport Services Limited

4 Hotel corporation of India Limited

5 Airline Allied Services Limited

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MANAGEMENT REPLIES TO THE COMMENTS OF THE COMPTROLLER AND AUDITOR GENERAL OF INDIA UNDER SECTION 143(6)(b) READ WITH SECTION 129(4) OF THE COMPANIES ACT, 2013 ON THE CONSOLIDATED FINANCIAL STATEMENTS OF AIR INDIA LTD. FOR THE YEAR ENDED 31 MARCH 2015.

Audit Observation Management Reply

Note No 2C – Significant Accounting PoliciesItem 4 – Inventories

As per this Note, Inventories are valued at weighted average cost. However, as per Accounting Standard (AS-2), Inventories should be valued at cost or Net Realizable Value, whichever is lower. Hence, Inventory Policy is in contravention to AS-2.

According to Para 3.2 of AS-2 Net Realizable Value has been defined as “Net Realizable Value is the estimated selling price in ordinary course of business less the estimated cost of completion and the estimated cost necessary to make the sale''.

It would be seen from the definition that the “inventory to have a net realizable value should be capable of being sold in the ordinary course of business”.

However, in the case of Air India, inventory mainly consist of aircraft parts, consumables and expendables which are not meant for sale but are meant for internal consumptions only hence, have been valued at weighted price.

This is most appropriate valuation policy for the Company considering the type of industry and inventory held for it.

Hence, the Company's Accounting Policy is not at variance with the AS -2 but only a refinement of the same as compared to previous years.

Net Realizable Value basis is more applicable for FMCG industry or goods held for sale in normal course of business which is not applicable to the company as these aircraft parts, consumables and expendables are used on its own aircrafts. Except in the case of scrap which is valued at net realizable value.

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INDEPENDENT AUDITORS' REPORT TO THE MEMBERS OF AIR INDIA LIMITED REPORT ON THE CONSOLIDATED FINANCIAL STATEMENTS

We have audited the accompanying consolidated financial statements of AIR INDIA LIMITED (“Holding Company”), consisting of its subsidiaries and jointly controlled entity, (the Holding Company and its subsidiaries together referred to as “the Group”) comprising of the Consolidated Balance Sheet as at March 31,2015,the Consolidated Statement of Profit & Loss, Consolidated Cash Flow Statement for the year ended on that date and a summary of the accounting policies and other explanatory information (hereinafter referred to as ”the consolidated financial statements”).

MANAGEMENT'S RESPONSIBILITY FOR THE CONSOLIDATED FINANCIAL STATEMENTS

The Holding Company's Board of Directors is responsible for the preparation of these consolidated financial statements in terms of the requirements of the Companies Act, 2013 (hereinafter referred to as "the Act") that give a true and fair view of the consolidated financial position, consolidated financial performance and consolidated cash flows of the Group in accordance with the accounting principles generally accepted in India, including the Accounting Standards specified under Section 133 of the Act, read with Rule 7 of the Companies (Accounts) Rules, 2014. The respective Board of Directors of the companies included in the Group are responsible for maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding the assets of the Group and for preventing and detecting frauds and other irregularities; the selection and application of appropriate accounting policies; making judgments and estimates that are reasonable and prudent; and the design, implementation and maintenance of adequate internal financial controls, that were operating effectively for ensuring the accuracy and completeness of the accounting records, relevant to the preparation and presentation of the financial statements that give a true and fair view and are free from material misstatement, whether due to fraud or error, which have been used for the purpose of preparation of the consolidated financial statements by the Directors of the Holding Company, as aforesaid.

AUDITOR'S RESPONSIBILITY

I. Our responsibility is to express an opinion on these consolidated financial statements based on our audit. While conducting the audit, we have taken into account the provisions of the Act, the accounting and auditing standards and matters which are required to be included in the audit report under the provisions of the Act and the Rules made there under.

We conducted our audit in accordance with the Standards on Auditing specified under Section 143(10) of the Act. Those Standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free from material misstatement.

ii. An audit involves performing procedures to obtain audit evidence about the amounts and the disclosures in the consolidated financial statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal financial control relevant to the Holding Company's preparation of the consolidated financial statements that give a true and fair view in order to design audit procedures that are appropriate in the circumstances but not for the purpose of expressing an opinion on whether the Holding Company has an adequate internal financial controls system over financial reporting in place and the operating effectiveness of such controls. An audit also includes evaluating the appropriateness of the accounting policies used and the reasonableness of the accounting estimates made by the Holding Company's Board of Directors, as well as evaluating the overall presentation of the consolidated financial statements.

iii. We did not audit the financial statements/ financial information of the following subsidiaries and jointly controlled entity, whose financial statements/ financial information reflect the total assets as at March

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31, 2015, total revenues and net cash flows for the year ended on that date to the extent to which they are reflected in the Consolidated Financial Statements.

(Rs. In millions)

Name of the Company Total Assets Total Revenues Net Cash Flows

A. Subsidiaries Incorporated in India

i. Air India Air Transport Services Limited (AIATSL) 4708.91 6470.12 446.35

ii Air India Charters Limited (AICL) 38657.03 22949.60 90.84

iii Air India Engineering Services Limited (AIESL) 5221.62 1420.06 406.61

iv Hotel Corporation of India Limited (HCI) 1298.80 528.58 (80.86)

v Airline Allied Services Limited (AASL)* *1835.38 *2279.52 *242.38

B. Joint Ventures Incorporated in India

i. Air India SATS Airport Services Private Limited (AI-SATS) 2106.57 2521.84 (20.00)

These financial statements / financial information, except the subsidiary mentioned at (v) above , have been audited by other auditors whose reports have been furnished to us by the Management and our opinion on the consolidated financial statements, in so far as it relates to the amounts and disclosures included in respect of these subsidiaries and jointly controlled entity, and our report in terms of sub-section (3) and (11) of Section 143 of the Act in so far as it relates to the aforesaid subsidiaries and jointly controlled entity is based solely on the reports of the other auditors.

The financial statements/ financial information of Airline Allied Services Limited (AASL) reflecting the total assets as at March 31, 2015, total revenues and net cash flows as stated at (v) in the table above are unaudited. However, the management of the said subsidiary has stated that the financial statements have been prepared to show true and fair view of the State of Affairs of the Company and have been furnished to us by the Management

We believe that the audit evidence obtained by us in respect of the company audited by us and the audit evidence obtained by the other auditors mentioned above in terms of their reports and the statement by the management of the company whose accounts have not been audited, referred to para (v) above in the table, is sufficient and appropriate to provide a basis for our audit opinion on the consolidated financial statements.

Basis for Qualified Opinion

1. The Group has not complied with:

i) AS 2- “Valuation of Inventories” to the extent of Cost of measurement as required in Para 6 of AS – 2, to arrive at the correct weighted average cost of inventories and respective consumption the cost of freight, duty and incidental direct cost, against the inventory of

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Rs 12,255.2 million, has not been considered, the precise impact of the same remains unascertained (Refer para (e) of Note no-39).

ii) AS 3 – Cash Flow Statement to the extent of disclosure/adjustment of unrealized gain/ loss on foreign currency fluctuation in the Cash Flow Statement, the precise impact of the same remains unascertained

iii) AS 6 – “Depreciation Accounting” to the extent of the depreciation charged on the Land which is included in the cost of the Building amounting to Rs. 20696.6 million at the time of revaluation in the year 2007-08 (refer note no. 8), the precise impact of the same remains unascertained;

iv) AS 10 read with AS 6 whereby :

a. No depreciation has been charged on the Standby Equipments, Machinery Spares and Insurance Spares grouped under Inventories, the precise impact of the same remains unascertained. [Refer Para (f) of Note 39].

b. Certain fixed Assets categorized as Special Tools and Rotables are grouped under Inventories and have not been depreciated; the precise impact of the same remains unascertained. [Refer para (f) Note no-27].

c. Depreciation amounting to Rs. 78.2 million has been charged against flats constructed for sale including flats which have been sold and possession has also been handed over. [Refer para(b) Note no- 27.

v) AS-11- “The Effect of Changes in Foreign Exchange Rates” to the extent of the recognition on reporting date, as stated in Para 11(a) of the AS -11, the impact of the transactions relating to foreign procurement of Aircraft Spares and closing balances of certain foreign currency monetary items, remains to be ascertained. [Refer para(c) of Note no 32].

Further, Exchange difference of Rs. 791.34 million, has been capitalized as at the beginning of the year instead of end of the year as required under AS-11 read together

stwith AS-6 and Notification No. G.S.R. 225(E) dated 31 March 2009 issued by Ministry of Corporate Affairs. As such, depreciation for the year, losses for the year and accumulated depreciation are overstated by Rs. 53.80 million.

vi) AS 15 –“Employee Benefits” to the extent of the correct measurement and recognition of the other Post- retirement medical benefits as per the requirement of Para 50 and 51 of AS- 15.The overall impact remains to be ascertained [Refer Para (C)(b) of Note No 50. Further, an excess provision of Gratuity Liability of Rs.61.32 million and Leave Encashment of Rs.17.44 million is made against the required provision based on the actuarial valuation and AS 15 as on 31st March 2015.

vii) AS 26 – Intangible Assets, Revenue expenditure incurred amounting to Rs. 2713.83 million during the period from October 2014 to December 2014 is capitalized as Intangible Assets instead of charging as revenue expenditure (Refer para (j) Note No 27)

viii) The impact of following adjustments that would be necessary arising out of reconciliation/confirmation of balances as stated in [Note No.34 (a) to (f), Note Nos. 41 to 45] on the Financial Statements is not ascertained:

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a. SA 505 – “External Evidence” of certain Receivables and Payables and its consequential impact, if any, on completion of the exercise;

b. Reconciliation of certain Statutory Dues in line with the Returns Filed / Statutory Records maintained and reconciliation of unmatched Receivables and Payables.

2. Change in Accounting Policies

During the current year, the certain Companies in the group have changed its accounting policy for the treatment of repairable spares from inventory to Fixed Assets and depreciation from Written Down Value to Straight Line Method in line with Holding Company (Refer note no 40).

Had these changes in Accounting Policy not been carried out during the year, depreciation for the year would have been lower by Rs. 2510.7 million, consumption/ Scrappage would have been higher by 2943.9 million, Fixed Asset would have been higher by Rs. 225.9 million and Resulting loss due to above would have been higher by Rs. 659.1 million.

3. Non Provisions

Non provision of the items/matters indicated (i) to (x) below has resulted into the loss being shown lower by Rs. 9474.94 Million

a) Inventory for the:

i. Consumption not accounted for unadjusted old completed work orders amounting to Rs. 627.17Million. (Refer para (b) Note No 39).

ii. Consumption not accounted for Rs. 1043.3 Million lying in various intermediary accounts (Refer para (c) Note No 39).

iii. Obsolete Inventory lying in CF6 Engine parts amounting to Rs. 503.7 Million. (Refer para (d) Note No 39).

iv. Receivables for the:

The old disputed Trade receivables outstanding for more than three (3) years from various parties amounting to Rs.208.09 Million (including revaluation during the year by Rs.3.1 Million);

Various tenants of Air India Buildings outstanding for more than three (3) years to the extent Rs.240.9 Million;

v. Differential Guarantee Fee including additional guarantee fee shown as Contingent Liability, in our opinion it should be shown as firm liability for the year amounting to Rs. 3870.7 Million for which approval from Government of India is yet to be received. This has resulted in understatement of loss for the year by Rs.3870.7 Million and understatement of accumulated carried forward losses by Rs.10,215 Million.[Refer Note no 25A (viii)].

vi. Damages claimed by Provident Fund authorities (Delhi) shown as Contingent Liability, in our opinion it should be shown as firm liability for the year amounting to Rs.24.03 million as stated in Note no.25A (x).

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vii. The Revised Pay structure for Pilots, Cabin Crew and Service Engineers is yet to be implemented due to which the liability remains unascertained.[Refer Note no. 25 A (vii).]

viii. Inspite of written communication from MOCA regarding payment of interest on delayed payment to Airport Authority of India, Rs.2,390.8 Million has not been provided for and the same has been shown as Contingent Liability;(Refer Note no-44(I))

ix. Non- provision of loss caused to the property and assets due to floods, precise amount is yet to be ascertained, as referred to in Note no. 27(h)

x. No liability has been provided for against lease rentals/turnover levy and interest on delay in payment aggregating to Rs. 257.63 million and Rs. 308.62 million thereon payable to AAI, MIAPL and DIAPL [Refer Note no 41(ii), 43(ii) and 44(ii)].

We further Report that in view of the observations made by us in the paragraphs 1, 2 and 3 above and considering the impact to the extent quantifiable, Loss for the year is understated by Rs 12637.11 Million with Accumulated losses being understated by Rs.18,416.51 Million, Current Assets including Inventories are understated by Rs. 10976.19 Million, Fixed Assets are overstated by Rs 16275.38 Million, Liabilities are understated by Rs .13,117.32 million.

Qualified Opinion

In our opinion and to the best of our information and according to the explanations given to us, except for the effects of the matters described in paras (1) to (3) relating to the “Basis for Qualified Opinion” above (and based upon the opinion of the Management of the Subsidiary not audited referred to para (iii) of Auditor Responsibility), the aforesaid Consolidated Financial Statements give the information required by the Act in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India:

a) in the case of the Consolidated Balance Sheet, of the State of Affairs of the Group and jointly controlled entity as at March 31, 2015;

b) in the case of the Consolidated Statement of Profit and Loss, of the “Loss” for the year ended on that date; and

c) In the case of the Consolidated Cash Flow Statement, of the Cash Flows for the year ended on that date.

Emphasis of Matter

We draw attention in respect of:

1. Para (a) Note no.27. in respect of Land including Buildings amounting to Rs.76,820.4 Million for which Original Title Deeds are not available / in possession;

2. Para (c) Note no 27 towards advance given for purchase of Nerul Land (partially encroached) Rs. 24.6 Million where execution of lease deed and possession thereof is pending;

3. Non provision of remaining 25% amount Rs. 9,683.5 Million payable as per the report of Justice Dharmadhikari Committee for the payment of Salaries including arrears shown as contingent liabilities. (Refer Note no. 25 A (vii).

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4. Expired Duty Credit Entitlement Scrip's under Serve From India Scheme (SFIS) Unutilized and Unapproved amounting to Rs.11,551.5 Million not provided for. Consequently, the carried forward loss of the Company stands understated and Advances Recoverable has been overstated by the same amount. (Refer Note No. 29);

5. Misappropriation/ Shortage of cash of Rs. 4.58 Million at Moscow Station and an additional cash shortage of Rs. 1.4 Million at Sydney Stations. Refer Para (b) & (c) of Note no- 36);

6. The year- end balances of Inventory items as well as Consumption during the year have been accounted for based on Reports generated out of RAMCO, which are yet to be reconciled with the Financial Accounts amounting to Rs.58.25 Million;

7. Completed Work Orders of earlier years but closed during the year amounting to Rs. 5,908 Million has been charged to Material Consumption instead of showing separately as Prior Period Expenses;

8. The accounts of Air India Ltd., Hotel Corporation of India Limited, Airline Allied Services Limited and Air India Charters Ltd. have been prepared on going concern basis. However the Net worth of these companies has been eroded and the likelihood of their continued functioning would depend only on implementation of the respective proposals for profitable working.

9. Impact on Earnings Per Share, to the extent of the Understatement of the losses remaining unadjusted, due to the Qualifications given above;

10. The impact of the Inter Company reconciliation (Refer Note No. 57) remains unascertainable.

11. Disclosure requirement of Schedule-III the Companies Act 2013 have not been complied with respect to:

Ø Term of repayment of Loan (Refer foot Note no- 4(iia) of Note no-4)

Ø Nature of Security separately for each case (Refer Foot Note no- 4(iia) of note no-4)

Ø Disclosure of Foreign Currency Fluctuation under Finance Cost [Refer note no- 32 (b)]

Ø Dues to MSME, shown under Trade Payable which are remaining to be identified and Interest Payable, if any in respect thereof.

Ø Disclosure of information as prescribed in clauses (a) to (e) except (d) (which is not applicable to the Company) of Note 5(viii) of Part II of Schedule III of the Companies Act, 2013

12. In respect of non compliance with certain provisions of the Companies Act, 2013, by the Hotel Corporation of India Ltd, to the extent stated below:

Ø Section 149(4) relating to appointment of Independent Directors.

Ø Section 177(2) and Section 178 relating to composition of Audit Committee and Nomination and Remuneration Committee of the Board.

Ø Section 173 relating to meetings of the Board of Directors.

Other Matters :

The Auditors were requested not to visit foreign stations of Air India Limited and hence, Auditor of Air India Limited have not visited the foreign stations. Visits were necessary for verification of the original records of the stations and to examine the internal control thereof. Records / financial transactions / information of under

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mentioned were not made available:

Ø Receivables, Advances and Deposits of Rs. 5,565.42 Million

Ø Liabilities of Rs. 3,584.78 Million

Ø Miscellaneous Revenue of Rs. 628.66 Million

Ø Other Expenses of Rs. 20,629.91 Million (Refer Note no-37)

Report on other Legal and Regulatory Requirements

1. As required by the Companies (Auditor's Report) Order,2015 ('the order”) issued by the Central Government in terms of sub section 11 of Section 143 of the Act, based on the comments in the auditors' reports of the Holding Company, subsidiary companies and jointly controlled entity incorporated in India, we give in the Annexure –A, a statement on the matters specified in paragraphs 3 and 4 of the order, to the extent applicable.

2. As required by Section 143 (3) of the Act, we report, to the extent applicable, that:

a. We have sought and obtained all the information and explanations, except for the effect of the matter described under “other matters” herein above which to our best of knowledge and belief were necessary for the purposes of our audit of the aforesaid consolidated financial statements.

b. Except for the effect of the matter described in the “Basis for Qualification” paragraph above in our opinion, proper Books of Account as required by law have been kept so far as appears from our examination of those books and returns adequate for the purposes of our audit.

c. The Consolidated Balance Sheet and the Consolidated Statement of Profit and Loss and the Consolidated Cash Flow Statement dealt with by this report are in agreement with the relevant Books of Account maintained for the purpose of preparation of the consolidated financial statements.

d. Except for the effects of the matter described in Para No 1 of “Basis for Qualified Opinion” above, in our opinion the aforesaid Consolidated Financial Statements comply with the Accounting Standards specified under Section 133 of the Act, read with Rule 7 of the Companies (Accounts) Rules 2014.

e. Section 164(2) of Companies Act, 2013 is not applicable to the Government Companies.

f. With respect to the Other matters to be included in the Auditor's Report in accordance with Rule 11 of the Companies (Audit and Auditors) Rules, 2014, in our opinion and to the best of our information and according to the explanations given to us :

i. The Consolidated financial statements has disclosed the impact of pending litigations on the consolidated Financial position of the Group and the jointly controlled entity -Refer Note No 25 to the consolidated financial statements;

ii. The Group and the jointly controlled entity have made provisions for material foreseeable losses, if any, on long term contracts including derivative contracts;

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iii. The Clause for transfer of an amount to the Investor Education and Protection Fund by the Group and the jointly controlled entity is not applicable.

For and on Behalf of For and on Behalf of For and on Behalf ofThakur, Vaidyanath Aiyar & Co Sarda and Pareek PKKG Balasubramaniam & AssociatesChartered Accountants Chartered Accountants Chartered AccountantsFRN: 000038N FRN: 109262W FRN: 001547S

V. Rajaraman Gaurav Sarda R.H.S. RamakrishnanPartner Partner Partner M.No.2705 M.No.110208 M.No.021651

Place: New Delhi Date : 23 May 2016

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ANNEXURE – A TO THE INDEPENDENT AUDITORS REPORT :(the word “Group” represents, the Holding Company, its Subsidiaries and Jointly Controlled entity in this Report) .

On the basis of the information and explanations given to us, and the reports of the other Auditors on the subsidiaries and jointly controlled entity incorporated in India, we report that :

1. Fixed Assets :

a. Fixed Assets Register of Group are under process of updation on ERP system with respect to its full particulars including quantitative details and situation of the Fixed Assets, except for the cost/value of Fixed Assets of Air India SATS Airport Services Private Limited and Air India Engineering Services Limited amounting to Rs. 2935.6 Million.

b. The Fixed Assets are physically verified by the respective management of Group except for the cost / value of Fixed Assets of Rs. 32962.2 million of two subsidiaries viz. AICL and HCIL for which physical verification has not been conducted.

c. The reconciliation is stated to be in progress, the resultant impact, if any, of the same, on the accounts will be dealt with in the year in which the finality is reached.

2. Inventory :

i. The Physical Verification of major Inventories of entities comprised in the Group for the biennial period 2012-14 has been carried out by the group except in the case of HCI, it is done every year. The Inventory has been physically verified by the respective management of the group, necessary accounting adjustments in respect of the discrepancies found on Physical verification, are to be carried out after reconciliation with book balances

ii. Physical Verification of inventory followed by the respective management of the entities of the group, needs to be improved considering the size and nature of its business.

3. Loans :

The group has not granted any loans, secured or unsecured, to companies, firms or other parties covered in the register maintained under Section 189 of the Companies Act, 2013. Therefore, the provisions of Clauses 3(iii)(a) and 3(iii)(b) of the Order are not applicable.

4. Internal Control :

The laid down internal control system for the purchase of inventory, fixed assets and for the sale of goods and services in each of the unit comprised in the group needs to be strengthened, commensurate with its size and strictly followed.

5. Deposits :

The group has not accepted during the year any deposits from the public within the meaning of Sections 73 to 76 of the Act and the rules framed there under to the extent notified.

6. Cost Records :

Provision of Section 148 (1) of Companies Act, 2013 regarding maintenance of Cost Records is not

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applicable to Group, except the Subsidiaries viz. AISATS and AIATSL. However, the said required cost records have not been maintained by the subsidiary AIATSL.

7. Statutory dues :

a. Undisputed Statutory dues

i. The group is generally regular in depositing the undisputed statutory dues, including provident fund, employees' state insurance, income tax, sales tax, wealth tax, service tax, duty of customs, duty of excise, value added tax, cess and other material statutory dues, as applicable, with the appropriate authorities except in the case of a subsidiaries AIESL and HCIL which are not regular in depositing.

ii. Further, the undisputed dues amounting to Rs. 195.09 Millions outstanding as at 31st March 2015 for a period of more than six months from the date they became payable were not deposited by Group.

b. Disputed Statutory dues

The dues of income tax, sales tax, service tax, wealth tax, duty of customs, duty of excise, value added tax and cess as at March 31, 2015 of the Group which have not been deposited on account of a dispute are given in Annexure I

c. Investor Education and Protection Fund:

The Group does not have any amount which is pending to be transferred to the Investor Education and Protection Fund in accordance with the provisions of the Companies Act, 1956 (1 of 1956) and the rules made there under

8. Accumulated Loss :

The consolidated accumulated loss of the Group is Rs. 416845.5 million which is more than fifty percent of the networth of the entities under the group and cash loss for the year is Rs.40543.3 Million and that of the previous year was Rs. 47527.7 Million.

9. Default in repayment of dues :

The group has not defaulted in repayment of dues to financial institutions, banks or debenture holders, except in the case of Holding Company where certain delays in the repayment of dues to Financial Institutions / Banks and an overdue Interest on Loans of Rs. 430.6 Million (P.Y. Rs. 356.4 Million).

10. Guarantee for loan :

In respect of Guarantee given by the Holding Company for loans taken by its subsidiaries from Banks, the terms and conditions thereof are not, prima facie, prejudicial to the interest of the Holding Company.

11. Loan :

The Term loans availed by the entities of the Group has been applied for the purposes for which the loans were obtained.

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12. Fraud :

No fraud on or by the entities comprised in the group has been noticed or reported during the year except an irregularity of Cash of Rs.4.58 million at Moscow station of holding company which is under investigation.

For and on Behalf of For and on Behalf of For and on Behalf ofThakur, Vaidyanath Aiyar & Co Sarda and Pareek PKKG Balasubramaniam & AssociatesChartered Accountants Chartered Accountants Chartered AccountantsFRN: 000038N FRN: 109262W FRN: 001547S

V. Rajaraman Gaurav Sarda R.H.S. RamakrishnanPartner Partner Partner M.No.2705 M.No.110208 M.No.021651

Place: New Delhi Date : 23 May 2016

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Sr No. Name of Stature Nature of Dues Amount Forum where dispute Outstanding is pending (Rs.In Million)

Air India

1 Finance Act, 1994 Custom Duty 16.56 Central Board of Excise & Customs

2 Finance Act, 1994 Custom Duty 14.43 Supreme Court

3 Finance Act, 1994 Custom Duty 186.56 CESTAT

4 Finance Act, 1994 Custom Duty 130.97 Custom Duty, Commissioner of Customs

5 Finance Act, 1994 Custom Duty 589.26 Commissioner of Customs (Appeals)

6 Finance Act, 1994 Service Tax 1,041.34 CESTAT

7 Finance Act, 1994 Service Tax 7.38 Commissioner of Service Tax

8 Finance Act, 1994 Service Tax 2.75 Service Tax Department

9 Income Tax Act-1961 Income Tax 374.80 Commissioner of Income Tax

10 Income Tax Act-1961 Income Tax 93.80 ITAT

11 Other Statutory Dues Municipal taxes 238.63 Property Tax/ House tax Municipal Taxes demanded by Municipal Corporation

AICL

1 Tax deducted at Source Income Tax 322.44 Commissioner of Income as per Income tax for Tax (Appeals) Assessment Year 2007-08 to 2014-15 2 Tax deducted as Source Income Tax 29.10 Income Tax department as per Income tax for Assessment Year 2009-10 and Assessment Year 2010-11

Annexure - I

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3 Service Tax for Financial Central Excise 523.50 Directorate General of Year 2005-06 to Central Excise Intelligence 2014-15

4 Customs Duty for various Central Excise 17.18 Customs & Excise Dept. transactions

HCI

1 Sales Tax Tax 1.89 Joint Commissioner of Interest 0.02 Sales Tax Appeal Penalty 0.002 Less paid 1.00 Total 0.92



4 VAT Tax 6.55 Joint Commissioner of Interest 6.96 Sales Tax Appeal Penalty 6.55 Less paid 3.50 Total 16.56

5 VAT Tax 6.95 Joint Commissioner of Interest 7.03 Sales Tax Appeal Less paid 0.60 Total 13.38

6 VAT Tax 5.05 Joint Commissioner of Less paid 0.50 Sales Tax Appeal Total 4.55

7 VAT Tax 4.38 Joint Commissioner of Interest 2.46 Sales Tax Appeal Penalty 4.38 Less paid 1.20 Total 10.03

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8 VAT Tax 15.74 Joint Commissioner of Less paid 0.50 Sales Tax Appeal Total 15.24

9 Luxury tax Tax 2.17 Addl. Commissioner Sales Less paid 0.87 tax Total 1.29

10 Luxury tax Tax 6.50 Addl. Commissioner Sales Interest 9.33 Tax Penalty 0.01 Less paid 2.53 Total 13.31

11 Luxury tax Tax 1.98 Commissioner of Sales Tax Interest 2.07 Penalty 0.10 Less paid 2.69 Total 1.46

12 Luxury tax Tax 0.69 Commissioner of Sales Penalty 0.01 Tax Total 0.71

13 Luxury tax Interest 2.57 Asst. Commissioner of Penalty 0.29 Luxury Tax Total 2.86

14 Luxury tax Interest 8.82 Asst.Commissioner of Penalty 0.31 Luxury Tax Total 9.14

15 Excise Duty Tax 19.72 Commissioner of Central –Appellate Tribunal, Mumbai

AISATS

1 Income Tax Act, 1961 Income Tax 36.31 Appellate authority up to Commissioner's Level

2 Income Tax Act 1961 Income Tax 50.29 CIT appeals

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MANAGEMENT REPLIES TO THE INDEPENDENT AUDITORS' REPORT ON THE CONSOLIDATED FINANCIAL STATEMENT OF AIR INDIA GROUP COMPANIES FOR THE FINANCIAL YEAR 2014-15

Sr.No. AUDIT OBSERVATIONS MANAGEMENT COMMENTS

REPORT ON THE STANDALONE FINANCIAL STATEMENTS

We have audited the accompanying consolidated financial statements of AIR INDIA LIMITED (“Holding Company”), consisting of its subsidiaries and jointly controlled entity, (the Holding Company and its subsidiaries together referred to as “the Group”) comprising of the Consolidated Balance Sheet as at March 31,2015,the Consolidated Statement of Profit & Loss, Consolidated Cash Flow Statement for the year ended on that date and a summary of the accounting policies and other explanatory information (hereinafter referred to as ”the consolidated financial statements”).

MANAGEMENT'S RESPONSIBILITY FOR THE STANDALONE FINANCIAL STATEMENTS

The Holding Company's Board of Directors is responsible for the preparat ion of these consolidated financial statements in terms of the requirements of the Companies Act, 2013 (hereinafter referred to as "the Act") that give a true and fair view of the consolidated financial position, consolidated financial performance and consolidated cash flows of the Group in accord-ance with the accounting principles generally accepted in India, including the Accounting Standards specified under Section 133 of the Act, read with Rule 7 of the Companies (Accounts) Rules, 2014. The respective Board of Directors of the companies included in the Group are responsible for maintenance of adequate account-ing records in accordance with the provisions of the Act for safeguarding the assets of the Group and for preventing and detecting frauds and other irregularities; the selection and application of appropriate accounting policies; making judgments and estimates that are reason-able and prudent; and the design, implementation and maintenance of adequate internal financial controls, that were operating effectively for ensuring the accuracy and completeness of the accounting records, relevant to the preparation and presentation of the financial

This is a statement of fact.

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statements that give a true and fair view and are free from material misstatement, whether due to fraud or error, which have been used for the purpose of preparation of the consolidated financial statements by the Directors of the Holding Company, as aforesaid.

AUDITOR'S RESPONSIBILITY

i. Our responsibility is to express an opinion on these consolidated financial statements based on our audit. While conducting the audit, we have taken into account the provisions of the Act, the accounting and auditing standards and matters which are required to be included in the audit report under the provisions of the Act and the Rules made there under.

We conducted our audit in accordance with

the Standards on Auditing specified under Sect ion 143(10) of the Act. Those Standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free from material mis-statement.

ii. An audit involves performing procedures to obtain audit evidence about the amounts and the disclosures in the consolidated financial statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal financial control relevant to the Holding Company's preparation of the consolidated financial statements that give a true and fair view in order to design audit procedures that are appropriate in the circumstances but not for the purpose of expressing an opinion on whether the Holding Company has an adequate internal financial controls system over financial reporting in place and the operating effectiveness of such controls. An audi t a lso includes evaluat ing the


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appropriateness of the accounting policies used and the reasonableness of the accounting estimates made by the Holding Company's Board of Directors, as well as evaluating the overall presentation of the consolidated financial statements.

iii. We did not audit the financial statements/ financial information of the following subsidiaries and jointly controlled entity, whose financial statements/ financial information reflect the total assets as at March 31, 2015, total revenues and net cash flows for the year ended on that date to the extent to which they are reflected in the Consolidated Financial Statements.

(Rs. In millions)

Name of the Total Total Net Cash Company Assets Revenues Flows

A Subsidiaries Incorporated in India

I Air India Air Transport Services Limited (AIATSL) 4708.91 6470.12 446.35

Ii Air India Charters Limited (AICL) 38657.03 22949.60 90.84

iii Air India Engineering Services Limited (AIESL) 5221.62 1420.06 406.61

iv Hotel Corporation of India Limited (HCI) 1298.80 528.58 (80.86)

v Airline Allied Services Limited (AASL)* *1835.38 *2279.52 *242.38

B Joint Ventures Incorporated in India

I Air India SATS Airport Services Private Limited (AI-SATS) 2106.57 2521.84 (20.00)

These financial statements / financial information, except the subsidiary mentioned at (iv) above, have been audited by other auditors whose reports have been furnished to us by the Management and our opinion on the consolidated financial statements, in so far as it relates to the amounts and disclosures included in respect of these subsidiaries and jointly


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controlled entity, and our report in terms of sub-section (3) and (11) of Section 143 of the Act in so far as it relates to the aforesaid subsidiaries and jointly controlled entity is based solely on the reports of the other auditors.

The financial statements/ financial information of

Airline Allied Services Limited (AASL) reflecting the total assets as at March 31, 2015, total revenues and net cash flows as stated at (v) in the table above are unaudited. However, the management of the said subsidiary has stated that the financial statements have been prepared to show true and fair view of the State of Affairs of the Company and have been furnished to us by the Management.

We believe that the audit evidence obtained by us in respect of the company audited by us and the audit evidence obtained by the other auditors mentioned above in terms of their reports and the statement by the management of the company whose accounts have not been audited, referred to para (v) above in the table, is sufficient and appropriate to provide a basis for our audit opinion on the consolidated financial statements.

BASIS FOR QUALIFIED OPINION

1. The Company has not complied with:

I) AS 2- “Valuation of Inventories” to the extent of Cost of measurement as required in Para 6 of AS – 2, to arrive at the correct weighted average cost of inventories and respective consumption the cost of freight, duty and incidental direct cost, against the inventory of Rs 12,255.2 million, has not been considered, the precise impact of the same remains unascertained (Refer para (e) of Note no-. 39)

ii) AS 3 – Cash Flow Statement to the extent of disclosure/adjustment of unrealized gain/ loss on foreign currency fluctuation in the Cash Flow Statement, the precise impact of the same remains unascertained

iii) AS 6 – “Depreciation Accounting” to the extent of the depreciation charged on the Land which is included in the cost of the Building amounting to Rs.

The inventory is valued at the weighted average rates in the RAMCO System without taking into consideration the cost of Freight, Duty and Incidental (FDI) direct cost which are written off to the profit and loss account as and when incurred. However, we are in discussion with RAMCO as to how to capture the cost of FDI to place the inventory in the present location and condition.

It was not possible to segregate the gain/loss on foreign currency fluctuations in the cash flow statement due to the multitude of transactions carried out by the company. However, efforts will be made to comply with this requirement in the future years.

In a majority of cases wherein the valuation of land and bui ld ings was separate the depreciation was charged only on the buildings

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20696.6 million at the time of revaluation in the year 2007-08 (refer note no. 8), the precise impact of the same remains unascertained;

iv) AS 10 read with AS 6 whereby :

a) No depreciation has been charged on the Standby Equipments, Machinery Spares and Insurance Spares grouped under Inventories, the precise impact of the same remains unascertained. [Refer Para (f) of Note 39].

b) Certain fixed Assets categorized as Special Tools and Rotables are grouped under Inventories and have not been depreciated; the precise impact of the same remains unascertained. [Refer para (f) Note no-27].

c) Depreciation amounting to Rs. 78.2 million has been charged against flats constructed for sale including flats which have been sold and possession has also been handed over. [Refer para(b) Note no- 27.

v) AS-11- “The Effect of Changes in Foreign Exchange Rates” to the extent of the recognition on reporting date, as stated in Para 11(a) of the AS -11, the impact of the transactions relating to foreign

and no depreciation has been charged on land. However, in certain cases where there is an undivided interest in the land which is not c lear ly d is t ingu ishab le in va lue , the depreciation has been charged on the total combined value of the land and buildings and a Note to this effect has been given in the accounts (Note No 8)

At the time of merger both the erstwhile organizations (AI and IA) used different forms of accounting for rotables. Subsequent to merger, rotables have been re-classified as fixed assets for following uniform accounting. However, a small number of equipment/machinery spares/ insurance spares continue to remain in inventory for which no depreciation has been charged. However, the management will make efforts to identify all such assets if any, and re-classify the same for the purpose of charging depreciation.

The quantum of such assets which have been categorized as rotables and special tools and grouped under inventories are minimal. However, efforts will be made to identify such category of assets and re-classify them for the purpose of charging depreciation.

The sale in respect of properties in the land owned by AI at Nerul is not yet completed since the title in the property has not yet been passed on to the proposed society/association formed by the employees for administering the property sold to them. It is also understood that these societies are not yet registered pending the completion of certain documentation. Due to this the sale proceeds received from the employees have also not been adjusted in the books of accounts and the properties continue to be owned by AI. Depreciation is therefore being charged on these properties and subject to the completion of these formalities in FY 2015-16 necessary accounting action will be taken.

It may be noted that this accounting treatment for giving effect to exchange rate differences is being followed consistently by the company since the migration of aircraft inventory into

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procurement of Aircraft Spares and closing balances of certain foreign currency monetary items, remains to be ascertained. [Refer para(c) of Note no 32].

Further, Exchange difference of Rs. 791.34 million, has been capitalized as at the beginning of the year instead of end of the year as required under AS-11 read together with AS-6 and Notification No. G.S.R.

st225(E) dated 31 March 2009 issued by Ministry of Corporate Affairs. As such, depreciation for the year, losses for the year and accumulated depreciation are overstated by Rs. 53.80 million.

vi) AS 15 –“Employee Benefits” to the extent of the correct measurement and recognition of the other Post- retirement medical benefits as per the requirement of Para 50 and 51 of AS- 15.The overall impact remains to be ascertained [Refer Para (C)(b) of Note No 50 ]

Further, an excess provision of Gratuity Liability of Rs.61.32 million and Leave Encashment of Rs.17.44 million is made against the required provision based on the actuarial valuation and AS 15 as on 31st March 2015.

vii) AS 26 – Intangible Assets, Revenue expenditure incurred amounting to Rs. 2713.83 million during the period from October 2014 to December 2014 is capitalized as Intangible Assets instead of charging as revenue expenditure (Refer para (j) Note No 27)

RAMCO. Moreover, it may also be stated that the impact of the same is not material/ negligible. Nevertheless, the comment of Audit is noted and all efforts shall be made to iron out these differences at the time of final interface of RAMCO and SAP Systems.

However, the necessary accounting treatment will be given in the FY 2015-16.

It may be noted that an adhoc provision of Rs 500 million has been made towards Post Retirement Medical Benefits for the year 2014-15 as the relevant statistical data could not be gathered on account of the amendment of the Scheme i.e. for enhanced Contribution for Medical Benefits. The Management is of the opinion that the provision of Rs 500 million is adequate. However, once the relevant statistics are collected and actuarial valuation thereof is carried out after giving effect to the transfer of employees to the hived off subsidiary companies namely AIESL and AIATSL, the necessary accounting treatment would be carried out in 2015-16. The same has been adequately disclosed in Note No 50 C (b).

Any MRO prior to its operationalization has to take a certification from DGCA and other Regulatory authorities that it has the basic infrastructure and licensed manpower support to start the operations of the Company. Though the manpower of AI was transferred to the subsidiary company in February 2013, the Company could not commence business on a standalone basis due to the various Court cases and Company not possessing the requisite license from DGCA and other authorities. After the Company resolved its Court cases in May 2013 it took considerable time to comply with the various requirements of the licensing authorities before the CAR 145 certification was issued by DGCA. This required the Company to show that consider-able trained, licensed and experienced manpower along with the infrastructure existed

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viii) The impact of following adjustments that would be necessary arising out of reconciliation/confirmation of balances as stated in [Note No.34 (a) to (f), Note Nos. 41 to 45] on the Financial Statements is not ascertained:

a) SA 505 – “External Evidence” of certain Receivables and Payables and i ts

in the Company which qualifies the Company for a Certification as MRO. It is, therefore, proposed to Capitalize the expenditure incurred by the Company mainly on manpower at least three months before it obtained the license for certification as License Cost. In this connection Management had relied on an opinion from the tax consultants wherein the revenue expenditure incurred including manpower cost directly attributable to DGCA License for CAR-145 MRO with certification for practically making ready the MRO Set up for obtaining DGCA License for its planned activities / work has been capitalized as Intangible Assets.

The main conditions for capitalizing an internal ly generated asset as per AS (Accounting Standard) 26 corresponding to IAS 38 (International Accounting Standard ) as “Intangible Asset “ is

1. Asset will generate future Economic benefits

2. The Intangible asset is available for use3. Ability to measure the expenditure

attributable to the Intangible Asset

Since all these conditions are satisfied in the relevant case it has been decided to capitalize the cost of obtaining a License under CAR 145

Hence all operational expenses including salaries and benefits incurred for the period

st st1 October 2015 to 31 December 2015 has been capitalized in the books as as “Intangible Asset” which has an economic value in the future. It is because of the license that the company is able to carry on its business on a standalone basis and not only certifiy AI flights but also in respect of third parties.

The company has confirmed the balances with the major vendors, banks and financial

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consequential impact, if any, on completion of the exercise;

b) Reconciliation of certain Statutory Dues in line with the Returns Filed / Statutory Records maintained and reconciliation of unmatched Receivables and Payables.

2. Change in Accounting Policies

During the current year, certain Companies in the group have changed its accounting policy for the treatment of repairable spares from inventory to Fixed Assets and depreciation from Written Down Value to Straight Line Method in line with Holding Company (Refer note no 40).

Had these changes in Accounting Policy not been carried out during the year, depreciation for the year would have been lower by Rs. 2510.7 million, consumption/ Scrappage would have been higher by 2943.9 million, Fixed Asset would have been higher by Rs. 225.9 million and Resulting loss due to above would have been higher by Rs. 659.1 million.

3. Non Provisions

Non provision of the items/matters indicated (i) to (x) below has resulted into the loss being shown lower by Rs. 9474.94 Million

a) Inventory for the:

i) Consumption not accounted for unadjusted old completed work orders amounting to Rs. 627.17Million. (Refer para (b) Note No 39).

ii) Consumption not accounted for Rs. 1043.3 Million lying in various intermediary accounts (Refer para (c) Note No 39).

institutions to whom the company owes the money. Similarly, in respect of receivables from the Agents/GSA/Vendors the company is confident of realizing its dues but for the provisions made in respect of certain accounts.The company has hired an external firm of Chartered Accountants to reconcile the statutory dues with the returns filed/statutory records maintained. The company would give effect to any adjustments as and when these reconciliations are completed.

A repairable is defined as an item in which the operating cycle is more than 12 months and can be continuously repaired until scrapped. Effective FY 14-15 repairables are being classified as Fixed Assets instead of inventories. This has primarily been done to bring the accounting of Repairables in line with the generally followed accounting principles.

The Repairables will be classified as a separate item of cost in the fixed assets and amortized over a period of 10 years from the date of its purchase. However, ifany repairable is scrapped during ten years the amount (WDV) will be written off in the year of scrappage.

Inventories at the year-end include balances under in-house repairing jobs carried under “work order suspense internal/External” which contains materials issued and repair charges in respect of work orders in progress which have not been closed as of year-end. These items include consumables/expendables against which provision has been made as per past practice at the rate of 50%. Accounting for the remaining items shall be done as and when these work orders are closed in the RAMCO system.

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iii) Obsolete Inventory lying in CF6 Engine parts amounting to Rs. 503.7 Million. (Refer para (d) Note No 39).

iv) Receivables for the:

The old disputed Trade receivables outstanding for more than three (3) years from var ious part ies amount ing to Rs.208.09 Million (including revaluation during the year by Rs.3.1 Million);

Various tenants of Air India Buildings outstanding for more than three (3) years to the extent Rs.240.9 Million;

v) Differential Guarantee Fee including addit ional guarantee fee shown as Contingent Liability, in our opinion it should be shown as firm liability for the year amounting to Rs. 3870.7Million for which

Pending reconciliation/ rectification of Inventory balances, no provision has been made towards inventory balances lying under various intermediary accounts for which consumption/ issue/scrappage has not been updated in RAMCO till 31.03.2015. Necessary accounting adjustments shall be carried out in due course when these accounts are reconciled.

During the year significant efforts have been made to ensure that completed work orders of current and earlier years which were hitherto open in the RAMCO System are closed during the year resulting in an increased debit in Material Consumption. The closure of work orders is an ongoing process and the remaining work orders will be reviewed and renewed efforts made for timely closure of the same.

In case of CF6 Engine Parts, the use of such spares in other aircraft is being ascertained or alternatively these spares would be transferred to the MRO subsidiary company for carrying out third party jobs.

These are HAJ dues receivable from the Govt of India. Accordingly, in line with the Accounting Policy being consistently followed by the Company in respect of Govt Dues, no provision has been considered necessary for the same.

During the course of the year 2014-15, sett lements were arrived at based on Arbitration/Court Awards in favor of the company on account of which the receivables on this account have substantially reduced. On the same lines the remaining dues have been considered as good and the same are also l ikely to be recovered in due course. Accordingly, no provision has been considered against these dues.

The Company has provided for a Guarantee Fee of 0.2% on all Govt. Guarantees for the period FY 2011-12 to 2014-15.

However, the company has taken up the issue

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approval from Government of India is yet to be received. This has resul ted in understatement of loss for the year by Rs.3870.7 Million and understatement of accumulated carried forward losses by Rs.10,215 Million.[Refer Note no 25A (viii)].

vi) Damages claimed by Provident Fund authorities (Delhi) shown as Contingent Liability, in our opinion it should be shown as firm liability for the year amounting to Rs.24.03 million as stated in Note no.25A (x).

of waiver of guarantee fee on all Govt. Guaranteed loans with the Ministry of Finance through the Ministry of Civil Aviation. This subject was also discussed and highlighted during TAP and FRP Oversight Committee Meetings.

The company is confident that the Ministry of Finance will favorably consider the proposal of the MOCA since the company is under a Financial Restructuring Plan wherein the Govt. is actively infusing Equity into the company.

Hence, the balance amount of Guarantee fees i.e the difference between 0.5%-1.5% and 0.2% has been shown as Contingent Liability. In addition the company has also provided Contingent Liabil ity towards additional guarantee fee for delayed payment, if any to be charged by the Govt.

The matter has also been recently taken up by the Ministry of Civil Aviation with the Ministry of Finance for the waiver of the Guarantee Fee. The Company is vigorously following up this matter and is hopeful of a favorable resolution of this issue shortly.

The Employees' Provident Fund Organization has raised demands for interest/ damages for belated payments made by Centaur Hotel Delhi during the period April, 2008 to December, 2012 and by Chefair Delhi for the period April, 2009 to March, 2014 respectively aggregating to Rs. 118.91 lakhs as interest and Rs.240.26 lakhs as damages. During the year, the Company has made a provision for the interest of Rs 118.91 lakhs and shown as Prior Period Expenses. The Company has filed an appeal with Provident Fund Tribunal for waiver of damages for Centaur Delhi. Since the Company is hopeful of positive outcome, no provision for the said damages has been made in the books of accounts. The bank account of Delhi was frozen by Provident Fund authorities in March, 2015 from which they have recovered Rs. 50 Lacs. The bank account of Chefair Mumbai is frozen by Provident Fund authorities in April 2015 and further sum of Rs. 67 lacs is recovered by them. The above bank accounts

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vii) The Revised Pay structure for Pilots, Cabin Crew and Service Engineers is yet to be implemented due to which the liability remains unascertained. [Refer Note no. 25 A (vii).]

viii) Inspite of written communication from MOCA regarding payment of interest on delayed payment to Airport Authority of India, Rs.2,390.8 Million has not been provided for and the same has been shown as Contingent Liability;(Refer Note no-44(I))

have been de-frozen by the Provident Fund authorites vide their order dated 6th October, 2015.

thThe Supreme Court has given a deadline of 15 December 2015 to file the revised remuneration structure of the Pilots, Cabin Crew and Service Engineers. Discussions have already been held by the Management with these categories and a draft proposal for the revised pay structure of the Pilots has already been sent to the Ministry of Civil Aviation for its approval. In respect to the Cabin Crew and Service Engineers the matter is still being discussed with the Unions concerned in order to arrive at a mutually acceptable pay structure which could be signed by both parties. Unless this exercise is completed it would not be possible for the management to ascertain the exact liability in respect of such categories as the pay structure involves the abolishing of various allowances and the revision of the revised basic pay by combining certain other allowances.

The company has continuously contested its liability of payment of Interest on its dues to AAI. This was based on the ground that the interest charged by AAI is totally disproportionate considering the financial position of the company which is under a F inancia l Restructuring plan (FRP). Besides this, due to delayed infusion of Equity by Air India from GOI, AI had to incur additional Interest charges on account of higher borrowings. Further, AAI has also been asked to produce proof of pecuniary loss suffered by them as a result of the delay in the payment of dues by AI. Moreover, the Ministry's letter regarding the provision of interest of 9% pertained only to 2012-13 outstanding and not to future years.

In order to avoid any such charge the company has set up an Escrow Account towards payment of UDF/DF/PSF charges from the IATA BSP dues, in favour of AAI. This Escrow account would help reduce the outstanding towards AAI and make the same current in respect of Statutory Dues. In addition an amount of Rs 50 lakhs is being paid on a daily bas is in o rder to ex t ingu ish the o ld

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outstandings.

During the year, torrential rains and floods from the Dal Lake inundated the Company's property at Srinagar. The Company is in the process of ascertaining the loss to the property and assets (including impairment loss if any) on account of the floods and the same shall be recorded as and when finality is reached. In the meanwhile, the Company has lodged an insurance claim of Rs 4.85 crores with the Insurance Company against which the Company has received Rs. 50 lakhs as adhoc payment which has been accounted under the head "Other Income" in the Statement of Profit and Loss and the balance,if any, shall be recorded as and when received.

a) During the year, provision has been made in the Statement of Profit and Loss for lease rentals at the rate of Rs. 163/- per sq m and turnover levy payable @2% of annual turnover payable to:

i) Mumbai International Airport Ltd (MIAL) for Chefair Flight Catering Mumbai

ii) Delhi International Airport Ltd (DIAL) for Centaur Hotel Delhi Airport & Chefair Flight Catering Delhi

b) No provision has been made for the following:

i) Lease rentals and turnover levy payable to Airports Authority of India upto 2 May 2006

ii) Lease rental differential payable to Mumbai International Airport Ltd (MIAL) for Chefair Flight Catering Mumbai, effective 3 May 2006

iii) Lease rental differential payable to Delhi International Airport Ltd (DIAL) for Centaur Hotel Delhi Airport and Chefair Flight Catering Delhi, effective 3 May 2006

c) No provision has been made for Interest upto 31st March 2015 on amount due to AAI, DIAL and MAIL.

Based on the clarifications given by the Management against the qualifications given

ix) Non- provision of loss caused to the property and assets due to floods, precise amount is yet to be ascertained, as referred to in Note no. 27(h)

x) No liability has been provided for against lease rentals/turnover levy and interest on delay in payment aggregating to Rs. 257.63 million and Rs. 308.62 million thereon payable to AAI, MIAPL and DIAPL [Refer Note no 41(ii), 43(ii) and 44(ii)].

We further Report that in view of the observations made by us in the paragraphs 1, 2 and 3 above and

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considering the impact to the extent quantifiable, Loss for the year is understated by Rs 12637.11 Million with Accumulated losses being understated by Rs.18416.51 Million, Current Assets including Inventories are understated by Rs. 10976.19 Million, Fixed Assets are overstated by Rs 16275.38 Million, Liabilities are understated by Rs 13117.32 million.

QUALIFIED OPINION

In our opinion and to the best of our information and according to the explanations given to us, except for the effects of the matters described in paras (1) to (3) relating to the “Basis for Qualified Opinion” above (and based upon the opinion of the Management of the Subsidiaries not audited referred to para (iii) of Auditor Responsibility), the aforesaid Consolidated Financial Statements give the information required by the Act in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India:

a) in the case of the Consolidated Balance Sheet, of the State of Affairs of the Group and jointly controlled entity as at March 31, 2015;

b) in the case of the Consolidated Statement of Profit and Loss, of the “Loss” for the year ended on that date; and

c) In the case of the Consolidated Cash Flow Statement, of the Cash Flows for the year ended on that date.

EMPHASIS OF MATTER

We draw attention in respect of;

1) Para (a) Note no.27. in respect of Land including Buildings amounting to Rs.76,820.4 Million for which Original Title Deeds are not available / in possession;

by the Auditors, the Management is of the view that there is no understatement of loss for the year under review nor any overstatement/ understatement of assets/ liabilities.

Audit comments are noted.

The company has appointed a Global Real Estate Consultant as its property consultants for the purpose of registration & reinstatement of property rights of the company in respect of such unregistered properties. This matter is also being pursued actively with the Ministry of Urban Development through the Ministry of Civil Aviation and the Company is hopeful of reinstatement of the title deeds in the future.


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In terms of the rationalized Pay-Scales determined by the Management in line with the recommendations of the Justice Dharam-adhikari Report (JDC) the Management has paid 75% of the allowances payable to various categories effective July 2012 so that any adjustments as a result of the implementation of the JDC Report could be made at the time of fina l se t t l emen t . Based on the JDC recommendations, the pay structure for General cadre officers (GCO) and staff category has since been implemented w.e.f. October 2014 and February 2015 respectively. The Company has yet to implement the revised pay structure for the Pilots, Cabin Crew and Service Engineers.

Unless the exercise of working out the arrears payable to all the employees is completed, the total quantum of liability on this account is not exactly ascertainable. The Company has to work out the liabilities on the rationalized Pay Structure after deducting the payments made on account of those allowances which have been abolished under the JDC recommend-ations. However, on an adhoc basis, in respect of these allowances, the Company has provided for contingent liability to the extent of Rs 9683.5 million (Gross) (Previous Year: Rs 6738.6 million) on adhoc basis. The same has been adequately disclosed in the Notes to Accounts.

The company has approached the Ministry of Civil Aviation to take up with the office of DGFT for extending the validity of the SFIS Scrips amounting to Rs 6815.6 million and the Ministry of Civil Aviation has already forwarded a draft detailed Cabinet note to the DGFT office on 11th November 2014 for extending the validity of the scrips which have so far expired. The management is hopeful of having the scrips revalidated in due course after receiving the necessary approvals.

2) Para (c) Note no 27 towards advance given for purchase of Nerul Land (partially encroached) Rs. 24.6 Million where execution of lease deed and possession thereof is pending;

3) Non provision of remaining 25% amount Rs. 9,683.5 Million payable as per the report of Justice Dharmadhikari Committee for the payment of Salaries including arrears shown as contingent liabilities. (Refer Note no. 25 A (vii).

4) Expired Duty Credit Entitlement Scrip's under Serve From India Scheme (SFIS) Unutilized and Unapproved amounting to Rs.11,551.5 Million not provided for. Consequently, the carried forward loss of the Company stands understated and Advances Recoverable has been overstated by the same amount. (Refer Note No. 29);


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Further, as regards the claim of FY 2007-08 for Rs.4,735.9 million, which was accounted for in FY 2013-14, the Management is confident of receiving these scrips in due course of time from the office of the Director General of Foreign Trade (DGFT) as this application is under process for necessary action through the Ministry of Civil Aviation. This case is being followed up with the Ministry of Commerce and Industry and the company is expecting a favorable settlement of the same. We also understand that DGFT have issued Scrips to another airline in India in the recent past after a lapse of time.

The utilization of these Scrips will be primarily towards payment of excise duty for domestic sourcing of ATF. The company is also planning to transfer certain amount of Scrips to its Group companies/ Subsidiaries /JV's who are planning to import Capital equipment and machinery in the next two years for their use and also for payment of normal customs duty on spares.

The Management is confident of receiving these Scrips in due course of time from the office of the Director General of Foreign Trade (DGFT) and accordingly, no provision for the same has been considered necessary in the books of accounts.

The matter is under investigation by the management and suitable corrective action would be taken in the future by strengthening internal controls at the stations to plug such leakages. Meanwhile, the concerned Manager at Moscow has been made accountable for this cash shortage. At Sydney the matter is being looked into and appropriate action will be taken based on the findings from the investigations being undertaken.

This is a statement of fact. We expect this issue to be resolved on up gradation of the RAMCO system to the higher version.

5) Misappropriation/ Shortage of cash of Rs. 4.58 Million at Moscow Station and an additional cash shortage of Rs. 1.4 Million at Sydney Stations. Refer Para (b) & (c) of Note no- 36);

6) The year- end balances of Inventory items as well as Consumption during the year have been accounted for based on Reports generated out of RAMCO, which are yet to be reconciled with the Financial Accounts amounting to Rs.58.25 Million;


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This is a Statement of Fact. However, it may be noted that during the year the company has made significant efforts to close the old open/pending work orders which has resulted in an increased debit to Material Consumption during the current year.It is also stated that as per consistent practice being followed by the company the consumption is booked in the year of work order closure.

In order to improve its operational & financial performance, the Company has formulated a TAP which entails both operational & financial turnaround of the company. Based on the company's assumption on Turnaround Plan (TAP) which has been independently vetted by consultant, a Financial Restructuring Plan (FRP) has been prepared and implemented effective 1st October 2011 which envisages aligning of the debt repayments of the Company in line with the projected Cash Flows.

Due to the support of GOI as well as the various measures taken by the Company towards improving its operating and financial position, it is expected that the financial condition of the company would continue to improve in the future. With the recent steep fall in fuel prices in FY 2015-16 and softening of interest rates it is expected that the Company would become operationally profitable and a moderate profit of Rs80.0 million has been projected in the FY 2015-16. However exchange rate continues to be a worrying factor. Barring unforeseen circumstances the Company hopes to return to Cash Positive status earlier than contemplated under the TAP. In respect to AICL, the low cost subsidiary of AI, there has been substantial improvement in the operating and financial performance in 2015-16 and a net profit has been projected. Similarly AIATSL has also budgeted a net profit for 2015-16; As regards AIESL the company is likely to become profitable in the next 2-3 years by getting adequate third party jobs. Further, in respect of HCI and AASL the Management of these companies are working to ensure that the company breaks even in future

7) Completed Work Orders of earlier years but closed during the year amounting to Rs. 5,908 Million has been charged to Material Consumption instead of showing separately as Prior Period Expenses;

8) The accounts of Air India Ltd., Hotel Corporation of India Limited, Airline Allied Services Limited and Air India Charters Ltd. have been prepared on going concern basis. However the Net worth of these companies has been eroded and the likelihood of their continued functioning would depend only on implementation of the respective proposals for profitable working.


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Accordingly, the Accounts of the parent company as also all its subsidiary companies are therefore being prepared on the 'Going Concern' basis.

This is a statement of fact


This is a statement of fact. Due to the confidential nature of the agreements entered into with the consortium of banks wherein the terms of payments, rates of interest, the nature of security has been clearly specified, it has not been disclosed. However, the same is available with the company, the important extracts of which are already disclosed in the accounts.

Due to the tight schedule for the preparation and audit of the accounts the auditors were requested to verify the issues pertaining to foreign stations on the SAP itself. It may however, be stated that in the last two financial

9) Impact on Earnings Per Share, to the extent of the Understatement of the losses remaining unadjusted, due to the Qualifications given above;

10) The impact of the Inter Company reconciliation (Refer Note No. 57) remains unascertainable.

11) Disclosure requirement of Schedule-III the Companies Act 2013 have not been complied with respect to:

Ø Term of repayment of Loan (Refer foot Note no- 4(iia) of Note no-4)

Ø Nature of Security separately for each case (Refer Foot Note no- 4(iia) of note no-4)

Ø Disclosure of Foreign Currency Fluctuation under Finance Cost [Refer note no- 32 (b)]

Ø Dues to MSME, shown under Trade Payable which are remaining to be identified and Interest Payable, if any in respect thereof.

Ø Disclosure of information as prescribed in clauses (a) to (e) except (d) (which is not applicable to the Company) of Note 5(viii) of Part II of Schedule III of the Companies Act, 2013 12)In respect of non compliance with certain provisions of the Companies Act, 2013, by the Hotel Corporation of India Ltd, to the extent stated below:

Ø Section 149(4) relating to appointment of Independent Directors.

Ø Section 177(2) and Section 178 relating to composition of Audit Committee and Nomination and Remuneration Committee of the Board.

Ø Section 173 relating to meetings of the Board of Directors.

OTHER MATTERS:

The Auditors were requested not to visit foreign stations of Air India Limited and hence, Auditor of Air India Limited have not visited the foreign stations. Visits were necessary for verification of the original records of the stations and to examine the internal control thereof. Records / financial


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years i.e. FY 2012-13 and FY 2013-14, the auditors have inspected a total of nearly 20 foreign stations abroad during these two years and had examined the procedures and the internal controls prevailing at the stations. It may also be stated that all these stations abroad are subject to Govt Audit by the respective regional audit offices of CAG abroad. For the FY 2015-16 we will request the auditors to submit their plan of visit to foreign stations taking into consideration the visits already made during the last 2-3 years so that all stations are visited by rotation. Also the stations to be visited abroad needs to be approved by the Audit Committee as well as the CAG Office. However, the auditors had full access to the SAP system for the verification of the expenditure incurred at foreign stations and the revenue earned.



transactions / information of under mentioned were not made available:

Ø Receivables, Advances and Deposits of Rs. 5,565.42 Million

Ø Liabilities of Rs. 3,584.78 MillionØ Miscellaneous Revenue of Rs. 628.66 MillionØ Other Expenses of Rs. 20,629.91 Million (Refer

Note no-37)

REPORT ON OTHER LEGAL AND REGULATORY REQUIREMENTS

1) As required by the Companies (Auditor's Report) Order,2015 ('the order”) issued by the Central Government in terms of sub section 11 of Section 143 of the Act, based on the comments in the auditors' reports of the Holding Company, subsidiary companies and jointly controlled entity incorporated in India, we give in the Annexure –A, a statement on the matters specified in paragraphs 3 and 4 of the order, to the extent applicable.

2) As required by Section 143 (3) of the Act, we report, to the extent applicable, that:

a. We have sought and obtained all the information and explanations, except for the effect of the matter described under “other matters” herein above which to our best of knowledge and belief were necessary for the purposes of our audit of the aforesaid consolidated financial statements.

b. Except for the effect of the matter described in the “Basis for Qualification” paragraph above in our opinion, proper Books of Account as required by law have been kept so far as appears from our examination of those books and returns adequate for the purposes of our audit.


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c. The Consolidated Balance Sheet and the Consolidated Statement of Profit and Loss and the Consolidated Cash Flow Statement dealt with by this report are in agreement with the relevant Books of Account maintained for the purpose of preparation of the consol idated financial statements.

d. Except for the effects of the matter described in Para No 1 of “Basis for Qualified Opinion” above, in our opinion the aforesaid Consolidated Financial Statements comply with the Accounting Standards specified under Section 133 of the Act, read with Rule 7 of the Companies (Accounts) Rules 2014.

e. Section 164(2) of Companies Act, 2013 is not applicable to the Government Companies.

f. With respect to the Other matters to be included in the Auditor's Report in accordance with Rule 11 of the Companies (Audit and Auditors) Rules, 2014, in our opinion and to the best of our information and according to the explanations given to us :

i. The Consolidated financial statements has disclosed the impact of pending litigations on the consolidated Financial position of the Group and the jointly controlled entity -Refer Note No 25 to the consolidated financial statements;

ii. The Group and the jointly controlled entity have made provisions for material foreseeable losses, if any, on long term contracts including derivative contracts;

iii. The Clause for transfer of an amount to the Investor Education and Protection Fund by the Group and the jointly controlled entity is not applicable.

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ANNEXURE-A TO INDEPENDENT AUDITORS' REPORT

(Referred to in paragraph 1 of our Report on Other Legal and Regulatory Requirements relevant to paragraph 3 & 4 of “the Order”)


1. FIXED ASSETS

a) Fixed Assets Register of Groupare under process of updation on ERP system with respect to its full particulars including quantitative details and situation of the Fixed Assets, except for the cost/value of Fixed Assets of Air India SATS Airport Services Private Limited and Air India Engineering Services Limited amounting to Rs. 2935.6 Million.

b) The Fixed Assets are physically verified by the respective management of Group except for the cost / value of Fixed Assets of Rs. 32962.2 million of two subsidiaries viz. AICL and HCIL for which physical verification has not been conducted.

c) The reconciliation is stated to be in progress, the resultant impact, if any, of the same, on the accounts will be dealt with in the year in which the finality is reached.

2. INVENTORY

i) The Physical Ver ificat ion of major Inventories of entities comprised in the Group for the biennial period 2012-14 has been carried out by the group except in the case of HCI, it is done every year. The Inventory has been physically verified by the respective management of the group, necessary accounting adjustments in respect of the discrepancies found on Physical verification, are to be carried out after reconciliation with book balances

ii) Physical Verification of inventory followed by the respective management of the

The Company has a regular procedure for the physical verification of all aircraft, APUs and other related equipment which constitutes nearly 95% of the total value of the assets which are tallied with the Assets Register maintained. As regards the remaining assets, the Company has already implemented the Fixed Assets module which streamlines the data on Fixed Assets including the details of location and quantitative details on the SAP system. All requests for the acquisition of fixed assets are processed through the FA Module in the SAP wherein the actual expenditure is compared with the budgets available and thereby incorporating proper internal controls for the monitoring and verification of the assets.

The Fixed Assets of AICL mainly comprise Aircraft and engines and related equipment. The Management will take necessary action for ensuring that the Fixed assets are regularly verified as per the laid down procedure and correct/adjust any discrepancies noticed on the Physical Verification with the approval of the competent authority in the FY 2015-16.

The exercise of Physical Verification of Inventories for the biennial period 2012-14 has been completed by independent firms of Chartered Accountants. However, necessary accounting action of the discrepancies found on such physical verification will be carried out after obtaining confirmation from Materials Management Department (MMD).

In addition, streamlining of the physical verification process would be completed along-with the up-gradation of the RAMCO system.

The Aud i t commen ts a re no ted and


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entities of the group, needs to be improved considering the size and nature of its business.

3. LOANS

The group has not granted any loans, secured or unsecured, to companies, firms or other parties covered in the register maintained under Section 189 of the Companies Act, 2013. Therefore, the provisions of Clauses 3(iii)(a) and 3(iii)(b) of the Order are not applicable.

4. INTERNAL CONTROLS

The laid down internal control system for the purchase of inventory, fixed assets and for the sale of goods and services in each of the unit comprised in the group needs to be strengthened, commensurate with its size and strictly followed.

5. DEPOSITS :

The group has not accepted during the year any deposits from the public within the meaning of Sections 73 to 76 of the Act and the rules framed there under to the extent notified.

6. COST RECORDS :

Provision of Section 148 (1) of Companies Act, 2013 regarding maintenance of Cost Records is not

Management would put in place a perpetual Inventory system by which the actual Inventory is physically verified and compared with the records and inventory practices will be upgraded by benchmarking the current practices to the best practices prevailing in the industry.

thAs per the notification dated 5 June 2015 issued by Ministry of Corporate Affairs. However, the provisions of Section 189 (1)(a) is not applicable and no loans has been given to parties mentioned in clause (b) of the said Section.

The Company is in the continuous process of strengthening its Internal Controls to make them commensurate with the size and nature of the company's business. The IT Systems are also being continuously upgraded in order to synchronize with the complexities of the business. The company has also introduced the “Maker/Checker” concept in order to strengthen the internal controls at various levels of authorization. With the implementation of the fixed assets module the purchase of company's assets were also recorded on a systematic basis after due authorization. The bank reconciliations are now carried out on SAP by the stations/regions and cases of manual interventions have been reduced to the minimum. However, the company will reiterate the observations made by the Auditors to all the stations/regions so that there is strict compliance of the laid down procedures.

Statement of Fact

Statement of Fact


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applicableto Group, except theSubsidiaries viz. AISATS and AIATSL. However, the said required cost records have not been maintained by the subsidiary AIATSL.

7. STATUTORY DUES :

i) Undisputed Statutory dues

The group is generally regular in depositing the undisputed statutory dues, including provident fund, employees' state insurance, income tax, sales tax, wealth tax, service tax, duty of customs, duty of excise, value added tax, cess and other material statutory dues, as applicable, with the appropriate authorities except in the case of a subsidiaries AIESL and HCIL which are not regular in depositing.

ii) Further, the undisputed dues amounting to Rs. 195.09 Millions outstanding as at 31st March 2015 for a period of more than six months from the date they became payable were not deposited by Group.

b) Disputed Statutory dues:

The dues ofincome tax, sales tax, service tax, wealthtax, duty of customs, duty of excise, value added tax and cess as at March 31, 2015 of the Group which have not been deposited on account of a dispute are given in Annexure I

c) Investor Education and Protection Fund:

The Group does not have any amount which is pending to be transferred to the Investor Education and Protection Fund in accordance with the provisions of the Companies Act, 1956 (1 of 1956) and the rules made there under.

8. ACCUMULATED LOSS

The consolidated accumulated loss of the Group is Rs. 416845.5 million which is more than fifty percent of the networth of the entities under the

Statement of Fact

Statement of fact. These were basically due to liquidity constraints

Statement of fact.

Statement of fact.


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group and cash loss for the year is Rs.40543.3 Million and that of the previous year was Rs. 47527.7 Million.

9. DEFAULT IN REPAYMENT OF DUES :

The group has not defaulted in repayment of dues to financial institutions, banks or debenture holders, except in the case of Holding Company where certain delays in the repayment of dues to Financial Institutions/Banks and an overdue Interest on Loans of Rs. 430.6 Million (P.Y. Rs. 356.4 Million).

10. GUARANTEE FOR LOAN :

In respect of Guarantee given by the Holding Company for loans taken by its subsidiaries from Banks, the terms and conditions thereof are not, prima facie, prejudicial to the interest of the Holding Company.

11. LOAN :

The Term loans availed by the entities of the Group has been applied for the purposes for which the loans were obtained.

12. FRAUD :

No fraud on or by the entities comprised in the group has been noticed or reported during the year except an irregularity of Cash of Rs.4.58 million at Moscow station of holding company which is under investigation.

Due to the liquidity position faced by the company, there have been certain delays in the payment of Interest. However, the same have been paid subsequently. Certain banks have levied penalties for such delayed payments which have been taken up with the respective banks for waiver.

Statement of fact.

Statement of fact.

This matter is already being investigated and depending on the findings necessary corrective action will be taken in order to avoid the recurrence of such incidents. However, it may be mentioned that this has primarily occurred because of the absence of a proper accounts set up at the Moscow Station.

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41

CONSOLIDATED BALANCE SHEET AS AT 31ST MARCH 2015 0.00 0.00

(Rupees in Million)

Note No.

I EQUITY AND LIABILITIES :

Shareholders' Fundsa) Share Capital 2 171,780.0

143,450.0

b) Reserves and Surplus 3 (413,440.0)

(355,200.5)

(241,660.0)

(211,750.5)

Share Application Money Pending Allotment 39,470.0

10,000.0

Non-current Liabilitiesa) Long Term Borrowings 4 369,176.2

383,927.9

b) Other Long Term Liabilities 5 1,055.8

1,458.8

c) Long Term Provisions 6 17,665.0

15,068.1

387,897.0

400,454.8

Current Liabilitiesa) Short Term Borrowings 7 154,640.2

130,957.4

b) Trade Payables 5 80,123.2

73,886.8

c) Other Current Liabilities 5 76,321.8

83,704.1

d) Short Term Provisions 6 3,057.1

2,824.5

314,142.3

291,372.8

TOTAL 499,849.3

490,077.1

II ASSETS :Non-current Assetsa) Fixed Assets 8 (i) Tangible Assets 369,277.8

363,927.1

(ii) Intangible Assets 4,473.7

1,625.6

(iii) Capital Work-in-Progress 12,637.1

3,700.3

(iv) Intangible Assets under development 13.5

13.5

386,402.1

369,266.5

b) Non-Current Investments 9 177.2

177.2

c) Deferred Tax Assets (net) 28,558.4

28,441.7

d) Long Term Loans and Advances 10 24,311.0

24,295.2

e) Long Term Trade Receivables 11 22.1

19.1

f) Other Non-Current Assets 12 32.5

53.8

439,503.3

422,253.5

Current Assetsa) Inventories 13 14,248.8

22,468.0

b) Trade Receivables 11 24,105.7

23,104.6

c) Cash and Bank Balances 14 8,569.3

7,774.1

d) Short Term Loans and Advances 10 7,176.5

5,656.4

e) Other Current Assets 12 6,245.7

8,820.5

60,346.0

67,823.6

TOTAL 499,849.3

490,077.1

Significant Accounting Policies 1

Notes forming part of the Financial Statement 2-58

The accompanying notes are an integral part of the Financial Statements

-

This is the Balance Sheet referred to in our report of even date.

Particulars As at March 31, 2014 As at March 31, 2015

For and on Behalf of For and on Behalf of For and on behalf of the Board

Sd/-(Ashwani Lohani)Chairman & Managing Director

Sd/-(V.S. Hejmadi)Director-Finance

Sd/-(Kalpana Rao)Company Secretary

For and on Behalf of

Thakur, Vaidyanath Aiyar & Co. Sarda and PareekChartered Accountants Chartered Accountants FRN : 000038N FRN : 109262W

P.K.K.G. Balasubramaniam & AssociatesChartered Accountants FRN : 001547S

Sd/- Sd/-(V. Rajaraman) (Sitaram Pareek)Partner PartnerM.No. 02705 M.No. 016617

Sd/-(R.H.S. Ramakrishnan)PartnerM.No. 021651

Place : New DelhiDate : 23 May 2016

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CONSOLIDATED STATEMENT OF PROFIT AND LOSS FOR THE YEAR ENDED 31ST MARCH 2015(Rupees in Million)

The accompanying notes are an integral part of the Financial Statements

This is the Balance Sheet referred to in our report of even date.

Note No.I Revenue

1. Revenue from Operation 15 i) Scheduled Traffic Services 199,504.0 179,851.6

ii) Non-Schedule Traffic Services 12,328.3

11,851.1

iii) Other Opreating Revenue 15,623.8

15,673.0

Revenue from Operation 227,456.1

207,375.7

Operating Revenue 227,456.1

207,375.7

II 2. Other Income (Net) 16 5,534.8

8,655.7

III Total Revenue (I+II) 232,990.9

216,031.4

IV Expenses

1. Aircraft Fuel & Oil 94,722.0

105,927.2

2. Other Operating Expenses 17 82,472.2

68,481.9

3. Employee Benefit Expenses 18 34,836.6

35,536.5

4. Finance Costs 19 42,827.0

43,212.2

5. Depreciation and Amortization Expense 20 22,103.9

21,358.5

6. Other Expenses 21 17,903.8

17,903.0

7. Prior Period Adjustments (Net) 22 772.6

(857.5)

Total Expenses 295,638.1

291,561.8

V Loss before Exceptional and Extraordinary (III-IV) (62,647.2)

(75,530.4)

Items and Tax

VI Exceptional Items 23 (453.9)

515.7

VII Loss before Extraordinary Items and Tax (V+VI) (63,101.1)

(75,014.7)

VIII

Extra Ordinary Items (Net) 24 439.3

6,128.5

IX Loss before Tax (VII+VIII) (62,661.8)

(68,886.2)

X Tax Expenses : i) Fringe Benefit Tax -

-

i) Current Tax 299.3

66.7

i) Tax Adjustment relating to earlier year (3.8)

-

ii) MAT Credit (46.7)

(35.7)

iii) Excess MAT Credit for earlier year 10.3

7.3

iv) Deferred Tax (116.7)

(8.7)

XI Loss after Tax for the year (IX-X) (62,804.2)

(68,915.8)

XII Earning per Share of Rs. 10 each

Basic and Diluted (3.76)

(5.23)

Significant Accounting Policies 1

Notes forming part of the Financial Statement 2-58

Particulars 2014-15 2013-14











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CONSOLIDATED CASH FLOW STATEMENT FOR THE YEAR ENDED MARCH 31, 2015(Rupees in Million)

Particulars

A. CASH FLOW FROM OPERATING ACTIVITIESNet Profit /(-) Loss Before Taxation (62,661.8)

(68,886.2)

Adjustments for :Provision No Longer Required - Vayudoot (1,436.7)

Depreciation 22,321.9

21,358.5

Finance Cost 42,827.0

43,212.2

(Profit)/Loss on sale of Assets (4,582.9)

(4,036.6)

Provision for Obsolescence / Inventory Reconciliation (8,223.9)

(1,005.7)

Provision for Bad & Doubtful Receivables and Advances 866.8

1,546.1

Provision for Employee Benefits 2,401.6

1,984.9

Provision for Wealth Tax 0.2

(1.3)

Provision for Frequent Flyer Programme 188.4

(42.4)

Dividend income (106.5)

(92.5)

Interest on Bank & Other Deposits (434.3)

55,258.3

(330.3)

61,156.2

Cash surplus/(-) defecit before variation in Net Working (7,403.5)

(7,730.0)

Changes in Working Capital

Increase / Decrease in Trade and other Recievables (809.5)

(18,926.7)

(-)Increase / Decrease in Inventories 16,443.1

(3,074.5)

Increase / (Decrease) in Trade and Other Payables 2,992.7

6,000.4

18,626.3

(16,000.8)

Income Tax Paid(net refund) (19.8)

Net cash (-)outflow / Inflow from Operations 11,203.0

(23,730.7)

B. CASH FLOW FROM INVESTING ACTIVITIES:

Purchase of Fixed Assets (78,802.2)

(63,526.6)

Proceeds from Fixed Assets 43,923.9

63,553.4

Decrease/Increase in Capital Reserve 4,704.2

557.7

Decrease in Surplus Assets (1.2)

25.0

Changes in Bank Deposits (Maturity of more than 3 months) (451.8)

(376.0)

Dividend Received 106.5

92.5

Interest received on Bank & Other Deposits 434.3

330.3

Net cash (-)outflow / Inflow from Investing Activities (30,086.3)

656.3

C. CASH FLOW FROM FINANCING ACTIVITIESFinance Cost (42,827.0)

(43,212.2)

Change in Long Term Borrowings (14,751.7)

5,132.6

Proposed dividend and dividend Tax (72.7)

(70.9)

Change in short term borrowings 19,141.2

6,877.3

Foreign Currency Monetary Items Translation Difference A/c (63.1)

(2,813.8)

Issue of Equity Shares 57,800.0

60,000.0

Net cash (-)outflow / Inflow from Financing Activities 19,226.7

25,913.0

Net Increase / (-)Decrease in Cash & Cash equivalents 343.4

2,838.6

Cash at the beginning of the year 5,630.2

2,791.6

Cash and cash equivalents as at the end of the year 5,973.6

5,630.2

2013-142014-15











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NOTES FORMING PART OF THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 MARCH 2015

NOTE “1”

BASIS OF CONSOLIDATION

1. The consolidated financial statements relate to Air India Limited (the Company), its subsidiaries and interest in Joint Venture Companies. The Company, its Subsidiaries and Joint Ventures constitute the Group and hereinafter referred to as “The Group”.

a) Basis of Accounting:

i. The financial statement of the subsidiary companies and joint venture companies in the consolidation are drawn up to the same reporting dates as of the Company.

ii. The consolidated financial statements have been prepared in accordance with the Accounting Standard (AS)21-'Consolidated Financial Statements' and Accounting Standard (AS) -27 'Financial Reporting of Interests in Joint Ventures as prescribed under Section 133 of The Companies Act, 2013 ('Act') and Generally Accepted Accounting Principles (GAAP).

b) Principles of Consolidation:

The consolidated financial statements have been prepared as following principle:-

i. The financial statement of the company and its subsidiaries are combined on the line basis by adding together the book value of like items of assets, liabilities, income and expenses after eliminating intra-group balances, intra-group transaction resulting in unrealized profit or losses.

ii. The consolidated financial statement are prepared using uniform accounting policies for like transaction and other events in similar circumstances and are presented to the extent possible, in the manner as the company's separate financial statement except as otherwise stated.

iii. The excess of Company's portion of the equity of the Subsidiary over the cost to the Company of its Investment in the Subsidiary Company at the date on which investment in Subsidiary is made is recognized as Capital Reserve in the Consolidated Financial Statement. Similarly the excess of cost to the Company of its Investments in Subsidiary over the Company's portion of the equity of the subsidiary at the date on which investment in subsidiary is made is recognized as Goodwill in the Consolidated Financial statement.

iv. The consolidated financial statement include the interest of the company in joint ventures, which has been accounted for using proportionate consolidation method of accounting and reporting whereby the company's share of each assets, liability, income and expense of a joint controlled entity is considered as a separate line item after eliminating propionate share of unrealized profit in accordance with the Accounting Standard (AS -27) “Financial Reporting of Interests in Joint Ventures'.

v. Government of India is the Minority Shareholder in one of the Subsidiaries of Air India. Since the Govt of India is the sole shareholder of Air India also, the Govt of India is not considered as a Minority Shareholder and hence the minority interest is not segregated and disclosed separately.

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2. The Subsidiaries and Joint Venture Companies considered in the preparation of the Consolidated Financial Statement are as follows:-

Name of the Company Proportion (%) Proportion (%) Country of of Share holding of Share Incorporation as on holding as on 31.03.2015 31.03.2014

Subsidiaries Incorporated in India

Airline Allied Services Limited (AASL) 100% 100% India

Air India Air Transport Services Limited (AIATSL) 100% 100% India

Air India Charters Limited (AICL) 100% 100% India

Air India Engineering Services Limited (AIESL) 100% 100% India

Hotel Corporation of India Limited (HCI) 80.24% 80.24% India

Joint Ventures Incorporated in India

Air India SATS Airport Services Private Limited (AI- SATS) 50% 50% India

NOTE “2”

A. CORPORATE INFORMATION

Air India Ltd represents the merged company which came into existence consequent upon the st

amalgamation of erstwhile Indian Airlines Ltd and erstwhile Air India Ltd as on 1 April 2007. Air India along with its subsidiary companies AICL and AASL provides domestic and international air transport Services within India as also across the globe, AIESL provides MRO facilities, AIATSL provides ground handling services to airlines and HCI provides hotel services & flight kitchen services to aviation companies. The aircraft fleet of the Group company consists of a wide range of aircraft mainly comprising of Airbus and Boeing aircraft such as A-319, A-320, A-321, B-747, B-777B-787,ATR & CRJ. The Airline Industry has generally been affected by economic slowdown coupled with high fuel cost. The company has during the financial year 2011-12 adopted/ implemented a Turnaround Plan (TAP) and a Financial Restructuring Plan (FRP) to improve its operational and financial performance.

B. ACCOUNTING CONVENTION

i) The Consolidated Financial Statements of the Group have been prepared on going concern concept on accrual basis (except as specifically stated) under historical cost convention, and are in compliance with generally accepted accounting principles and the Accounting Standards referred to in Section 133 of the Companies Act, 2013 read with Rule 7 of the companies(Accounts) Rules 2014.

ii) The preparation of the consolidated financial statements are in conformity with generally accepted accounting principles in India and requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent liabilities at the date of the consolidated financial statements and the reported amounts of revenue and expenses during the reporting period. Management believes that the estimates used in the preparation of consolidated financial statements are prudent and reasonable. Differences between the consolidated actual results and estimates are recognized in the period in which results are known / materialized.


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iii) The company being in service sector, there is no specific operating cycle: 12 months period has been adopted as “the Operating Cycle “in terms of the provision of Schedule III to the Companies Act 2013.

C. SIGNIFICANT ACCOUNTING POLICIES

1. FIXED ASSETS

i) a) Fixed Assets are stated at cost,(net of directly attributable credits from manufacturers) including incidental costs incurred pertaining to the acquisition and bringing them to the location for use and interest on loans borrowed where applicable, upto the date of putting the concerned asset to use.

b) Aircraft Rotables/Repairable, are shown as fixed assets.

ii) Expenditure on major modernization /modification /conversion of aircraft, engines resulting in increased efficiency/economic life, is capitalized.

iii) Assets under leases, in respect of which substantially all the risks and rewards of ownership are transferred to the Company, are considered as Finance Leases and are capitalized.

iv) Physical Verification of Assets

Physical Verification of Assets is done on a rotational basis so that every asset is verified in every two years and the discrepancies observed in the course of the verification are adjusted in the year in which report is submitted.

2. DEPRECIATION & AMORTISATION

a) Depreciation is provided on all assets on straight-line method over the useful life of assets as prescribed in the Schedule II of the Companies Act 2013, keeping a residual value of 5% of the original cost.

b) The life of assets adopted are in accordance with the manner prescribed under Schedule II of the Companies Act, 2013 except for the assets given below. The life of these assets have been determined by qualified persons and approved by the Board of Directors, keeping a residual value of 5% of the original cost.

i) The details of such assets are given hereunder:

S.No Type of Asset Life Adopted Life Prescribed by Company by Schedule II

1 Computer System 5 yrs 10 months 6 yrs

2 Electrical Fittings 15 yrs 10 yrs

3 Furniture & Fixtures 15 yrs 10 yrs

4 Office Equipment 15 yrs 5 yrs

5 Workshop equipment, instrument,

machinery and plants 20 yrs 15 yrs

6 Ground support and ramp equipments 20 yrs 15 yrs


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S.No Type of Asset Life Adopted Life Prescribed by Company by Schedule II

AI-SATS

7 Buildings 15 yrs 60yrs

8 Computers 3 yrs 6 yrs

9 Furniture and Fittings 5-7 yrs 10 yrs

10 Plant and Machinery3-6 yrs15 yrs

11 Vehicles 7 yrs 8yrs

ii) In case of AICL Motor Cars are depreciated at 20% instead of 9.5% upto 95% of the value. Tractors have been treated as Workshop equipment

iii) Aircraft rotables relating to Air bus family are depreciated upto 95% of the value over the residual average useful life of the aircraft fleet relating to respective engineering base, from relevant year of purchase.

iv) Aircraft rotables relating to Boeing are depreciated up-to 95% of the value over the residual average useful life of the related aircraft fleet from the relevant year of purchase.

v) Average useful life of the related aircraft fleet from the relevant year of purchase.

vi) Depreciation on additions to “Rotables” and “Other Fixed Assets” is provided for the full year in the year of acquisition and no depreciation is provided in the year of disposal.

vii) Aircraft repairables are amortized over a period of 10 years (in case of post migration i.e. Boeing repairables acquired after 28th May 2012 and Airbus repairables acquired after 25th Nov 2012) and 5 years (in case of pre-migration) from the date of its purchase unless scrapped earlier.

However, in case of AICL Repairable spares (serviceable and unserviceable awaiting repairs) are those which have an economic life greater than the operating cycle and can be reused after repairs; and are expensed at the time of scrappage and are however classified as Current Assets, which were hitherto charged to consumption at the time of initial issue. The cost of repairs of such spares continues to be charged off as and when incurred.

viii) Machinery spares which can be used only in connection with an item of fixed asset and whose use is expected to be irregular are capitalized and depreciated over the useful life of the principal item of the relevant assets. Subsequent expenditure on fixed assets after its purchase/ completion is capitalized only if such expenditure results in an increase in the future benefits from such assets beyond its previously assessed standard of performance.

c) Major modifications /refurbishment, modernization/ conversion carried to leased assets are shown under improvement to leasehold assets and amortized over the balance period of lease.

d) i) Leasehold Land other than perpetual lease is amortized over the period of lease.


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ii) In case of AICL Leasehold improvements are amortized over the lease term or estimated useful life, whichever is lower.

e) Intangible assets which have a useful economic life are amortized over the estimated useful life: Software of Passenger Services System over 10 years and in other cases over 5 years.

f) Assets of small value not exceeding Rs.5000 in each case are fully provided for/charged off. However, in such cases pertaining to HCI, depreciation is provided on straight line basis in accordance with Schedule II.

3. INVESTMENTS

a) Long-term investments are stated at cost less permanent diminution in value, if any. Investments in Subsidiaries are considered as long term and are valued at cost. Diminution, in value is recognized only when the possibility of restoring the value of the investment to its original face value becomes a distant possibility.

b) Current investments are valued at lower of cost and fair value

4. INVENTORIES

Inventories are valued at weighted average cost except for ATF in aircraft as at the yearend valued at prevailing closing rate.

However, Inventory in case of AI SATS is valued at cost or net realizable value and cost is determined on the first in –first out method.(FIFO).

i) Expendables/consumables are charged off at the time of initial issue except those meant for repairs of repairable which are expensed when the work order is closed. At the yearend estimated cost of expendables/consumables required for restoration of repairable are provided for in respect of open work orders.

ii) In case of HCI, stock is valued at cost except in case of soft furnishing (linen) and Stores & Supplies (cutlery & crockery ) which are being valued at cost irrespective of the period of use and written off to the Statement of Profit and Loss and when discarded.

iii) Obsolescence provision for aircraft stores and spare parts:

a) Provision is made for the non-moving inventory exceeding a period of five years (net of realizable value of 5%) except for (b) & ©.

b) Provision is made in full (net of estimated realizable value) for aircraft fleet which has been phased out unless the same can be used in other Aircraft.

c) Obsolescence provision in respect of inventories exclusively relating to aircraft on dry/wet lease, is made on the basis of the completed lease period compared to the total lease period as at the year-end.

iv) Obsolescence provision for non-aircraft stores and spares is made for non-moving inventory exceeding a period of five years.

5. MANUFACTURER'S CREDIT

Manufacturers 'credits entitlements dues from those from whom they are due are accounted for on accrual basis and credited to ' incidental revenue' by contra debit to ' advances'; when the


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49

credit entitlement are used the 'advances' are adjusted against the liability created for either acquiring an asset or incurring an expenditure.

However, in case of AICL credits allowed by the Manufacturers / Vendors are reviewed and evaluated by the company and directly identifiable credits are adjusted towards the Cost of the Asset. Other credits in the nature of Operational Support are credited to the Profit & Loss Account.

6. REVENUE RECOGNITION

a) Passenger, Cargo, Mail Revenue, are recognized when transportation services are provided. At the end of each financial year, based on available historical statistical data, a certain estimated percentage of the value of tickets/airway bills remaining unutilized is recognized as Revenue.

In case of AIATSL, Ground Handling, Security Handling and other related services are recognized when the services are provided. Un-billed services in respect of Ground Handling and other related services at the end of each financial year, based on available data, are estimated and are recognized as Revenue.

b) Loss or gain on reissue/refund/ involuntary transfer of passengers to other carriers is also included in the revenue for the period of uplift.

c) Blocked Space arrangements/Code share revenue/expenditure is recognized on an actual basis, based on uplift data received from the code share partners. Wherever details from code share partners are not available, revenue/expenditure is booked to the extent of documents/information received, and adjustments required, if any, are carried out at the time of such information being received.

d) Income from Interest is recognized on a time proportion basis. Dividend is recognized as income when the right to receive is established.

e) The claims receivable from Insurance Company are accounted for on their acceptance by the Insurance Company.

f) Warranty claims /credit notes received from vendors are recognized on acceptance of claim/receipt of credit note.

g) Other Operating Revenue is recognized when goods are delivered or services rendered during the year.

h) Haj Operations Amount receivable from the Government of India and Central Haj Committee towards expenses incurred by the Company for carrying Haj Ballottee pilgrims is accounted for as Charter Revenue.

I) Gain or Loss arising out of sale / scrap of Fixed Assets including aircraft over the net depreciated value is taken to Statement of Profit & loss as Non-operating revenue or Expenses.

j) In case of AISATS Rental Income under operating leases is recognized on a straight line basis over the lease term.

k) In case of AASL, The Grants / VGF are accounted as Other Income on prorate basis over the agreed period of aircraft lease months. Viability Gap Funding (VGF) is accounted for difference between revenue and cost of operation (on the basis of the Block Hours operated), on accrual basis.


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l) In case of HCI, Health Club income is accounted on cash basis.

7. PROVISION FOR DOUBTFUL DEBTS

Debts are provided for if they are either more than three years old or specifically known to be doubtful even within three years

However, in respect of debts pertaining to the Govt, whether State or Central Deptartments or Public Sector Undertakings which are known to be recoverable with certainty, are not provided for, in spite of their age exceeding three years

8. FOREIGN CURRENCY TRANSACTIONS

i) Foreign Currency transactions of Integral Foreign Operations

a) Foreign currency Revenue and Expenditure transactions relating to Integral Foreign Operations are recorded at established monthly rates (based on published IATA rates).

b) Interline settlement with Airlines for transportation is carried out at the exchange rate published by IATA for respective month.

ii) Foreign Currency Monetary Items:

a) The Company has opted for accounting the exchange differences arising on reporting of long-term foreign currency monetary items in line with Accounting Standards notified under the section 133 of Companies Act 2013 read with rule 7 of the companies (Accounts) Rules 2014 pertaining to Accounting Standard 11

st th(AS-11) notified by Government of India on 31 March 2009 (as amended on 29 December 2011) and further as amended from time to time. Accordingly, the effect of exchange differences arising on settlement or reporting of long term monetary items at the rates different from those at which they were initially recorded during the period, or reported in previous financial statements, is accounted as addition or deduction to the cost of the assets so far as it relates to acquisition of depreciable capital assets and is depreciated over the balance life of the concerned asset and in other cases such difference is accumulated by transfer to “Foreign Currency Monetary Items Translation Difference Account” to be amortized over the balance period of the long term Assets or Liability.

b) Foreign currency monetary items other than those identified as long term at the

year-end are converted at the yearend exchange rate circulated by Foreign Exchange Dealers Association of India (FEDAI), and the gains/losses arising out of fluctuations in exchange rates are recognized in the Statement of Profit and Loss.

c) Exchange variation is not considered at the year-end in respect of Debts and Loans & Advances for which doubtful provision exists since they are not expected to be realized

9. RETIREMENT BENEFITS

The Retirement Benefits to the employees comprise of Defined Contribution Plans and Defined Benefit Plans.

a) Defined Contribution Plans consist of contributions to Employees Provident Fund and Employees State Insurance Scheme. The Group has created separate Trusts to


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51

administer Provident Fund contributions to which contributions are made regularly. ESI dues are regularly deposited with government authorities.

b) The Group Defined Benefit Plans, which are not funded, consist of Gratuity, Leave Encashment including Sick Leave and Post Retirement Medical Benefits and other benefits. The liability for these benefits except for (c) below is actuarially determined under the Projected Unit Credit Method at the year end as per Indian Laws.

c) Liability for Gratuity, Leave Encashment, Pension and other retirement Benefits for staff directly recruited at foreign stations is provided in compliance with local laws prevailing in the respective countries based on available information as at the year end.

d) In case of HCI, Voluntary Retirement Scheme is accounted for in the year of announcement of scheme by the company and acceptance of the same by the employees.

e) In case of HCI, Post Retirement Medical Benefit Scheme is accounted as and when claim arises.

10. BORROWING COST

a) Borrowing cost that are directly attributable to acquisition, construction or Production of qualifying assets including capital work–in-progress are capitalized upto the date of commercial use of the assets.

b) Interest incurred on funds that are generally borrowed and used indirectly for acquisition of qualifying assets exceeding the value of Rs.10.0 million is capitalized at the weighted average borrowing rate on loans outstanding at that point of time.

c) In case of AICL, Borrowing cost other than those stated in Para (a) is treated as period cost.

11. IMPAIRMENT OF ASSETS

The carrying values of Fixed Assets of the identified cash-generating unit are reviewed for impairment at each Balance Sheet date to determine whether there is any indication of impairment. The aircrafts are grouped at the fleet type level to constitute a cash-generating unit, for comparing the recoverable amount (higher of its net selling price and value in use) with the carrying amount. The net selling prices of aircraft fleet and equipment are estimated by the management using published sources as available. If the carrying value of a cash-generating unit exceeds its estimated recoverable amount an impairment loss is recognized in the Statement of Profit & Loss and the asset value of the cash-generating unit is reduced to its recoverable amount.

12. OPERATING LEASE

a) Leases where the lessor effectively retains substantially all the risks and rewards of ownership of the leased assets are classified as Operating Lease and Lease rental payable for the year is charged to Statement of Profit and Loss.

b) In respect of leases which have been extended by paying a termination/release sum, by which the Group acquires, a residual right in the aircraft, such sum paid is amortized over the remaining useful life of the aircraft determined by flying hours.

c) Contributions made to lessors on account of Maintenance Reserve for which, maintenance is expected to arise during the lease period is treated as an Expense.


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52

In case of AICL, Contributions made to lessors on account of Maintenance Reserve for which, maintenance is expected to arise during the lease period is treated as a prepaid Expenses. These contributions are expensed whenever the maintenance expenditure arises or at the end of expiry of the lease period .

13. COMMODITY HEDGING TRANSACTIONS

Commodity hedging contracts are accounted for on the date of their settlement and realized gains / losses in respect of settled contracts are recognized in the Statement of Profit and Loss.

14. TAXES ON INCOME

Provision for current tax is made in accordance with the provisions of Income Tax Act, 1961.

Deferred tax is recognised on timing differences between book and taxable profit using the tax rates and laws that have been enacted or substantively enacted as on the Balance Sheet date. The Deferred tax assets are recognised and carried forward to the extent that there is a virtual certainty based on operational and financial restructuring, revenue generation and cost reduction programme of the Group that the assets will be realised in the future.

Minimum alternate tax (MAT) paid in a year is charged to the statement of profit and loss as current tax. The Group recognises MAT credit available as an asset only to the extent that there is reasonable certainty that the Group will pay normal income tax during the specified period, i.e., the period for which MAT credit is allowed to be carried forward. In the year in which the Group recognizes MAT credit as an asset in accordance with the Guidance Note on Accounting for Credit Available in respect of Minimum Alternative Tax under the Income-tax Act, 1961, the said asset is created by way of credit to the statement of profit and loss and shown as “MAT Credit Entitlement.” The Group reviews the “MAT credit entitlement” asset at each reporting date and writes down the asset to the extent the company does not have reasonable certainty that it will pay normal tax during the specified period. (AIATSL, AISATS)

15. PROVISIONS, CONTINGENT LIABILITIES & CONTINGENT ASSETS

a) Provisions involving a substantial degree of estimation in measurement are recognized when there is a present obligation as a result of past events and it is probable that there will be an outflow of resources.

b) Contingent liabilities exceeding Rs.0.1 million in each case are disclosed in respect of possible obligations that arise from past events but their existence is confirmed by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the Group.

c) Contingent Assets are neither recognized nor disclosed in the financial statements.

16. FREQUENT FLYER PROGRAMME

The Group operates Frequent Flyer Program that provides travel awards to its members based on accumulated mileage points. The estimated pax amenities and legal liability, if any, for free travel under this Program are provided for and charged to Statement of Profit and Loss.

17. OTHER LIABILITIES

Liabilities which are more than three years old are written back unless such liabilities are specifically known to be payable in the future.


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53

18. PREPAID EXPENSES/LIABILITY FOR EXPENSES

Pre-paid expenses / Liabilities for expenses are recognized as under:-

a) Foreign Stations – Rs. 50,000/- and above in each case.

b) Domestic Stations – Rs 10,000/- and above in each case.

19. PRIOR PERIOD ITEMS:

The Income and Expenditure which arise in the current period as a result of errors and omissions in preparation of financial statements of one or more prior period are considered as Prior Period Items and are shown separately in the financial statements. However, in case of HCI, expenditure/income pertaining to prior year(s) is classified as Prior Period Items only in cases where the amount exceeds Rs 25,000/- per transaction.

20. EARNINGS PER SHARE

Basic earnings per share is computed by dividing the profit / (loss) after tax (including the post-tax effect of extraordinary items, if any) by the weighted average number of equity shares outstanding during the year. Diluted earnings per share is computed by dividing the profit/(loss) after tax (including the post-tax effect of extraordinary items, if any) as adjusted for dividend, interest and other charges to expense or income (net of any attributable taxes) relating to the dilutive potential equity shares, by the weighted average number of equity shares considered for deriving basic earnings per share and the weighted average number of equity shares which could have been issued on the conversion of all dilutive potential equity shares. Potential equity shares are deemed to be dilutive only if their conversion to equity shares would decrease the net profit per share from continuing ordinary operations. Potential dilutive equity shares are deemed to be converted as at the beginning of the period, unless they have been issued at a later date. The dilutive potential equity shares are adjusted for the proceeds receivable had the shares been actually issued at fair value (i.e. average market value of the outstanding shares). Dilutive potential equity shares are determined independently for each period presented. The number of equity shares and potentially dilutive equity shares are adjusted for share splits / reverse share splits and bonus shares, as appropriate.


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NOTE "2" : SHARE CAPITAL

(Rupees in Million)

As at As atParticulars

March 31, 2015 March 31, 2014

AUTHORISED

25,000.0 Million Equity Shares of Rs.10 each 250,000.0

200,000.0

(Previous Year : 20,000.0 Million Equity Shares of Rs.10 each)

250,000.0

200,000.0

ISSUED, SUBSCRIBED AND FULLY PAID-UP SHARES

17,178.0 Million Equity Shares of Rs. 10 each 171,780.0

143,450.0

(Previous Year : 14,345.0 Million Equity Shares of Rs.10 each)

171,780.0

143,450.0

B.i)

(Number of Shares in Millions) (Share Value Rupees in Millions)

Particulars 2014-15 2013-14 2014-15 2013-14

Equity Shares at the beginning of the year 14,345.0

9,345.0

143,450.0

93,450.0

Add : Equity Shares Allotted during the

year2,833.0

5,000.0

28,330.0

50,000.0

Equity Shares at the end of the year 17,178.0

14,345.0

171,780.0

143,450.0

ii) Term/rights attached to equity shares

iii) Share Holding Pattern :

Reconciliation of number of shares :

The company has single class of shares i.e. Equity Shares having a par value of Rs. 10 per share. Each

holder of equity shares is entitled to one vote per share.

In the event of liquidation of the company, 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.

The Company is a Government Company with 100% share held by President of India and his nominees,

through administrative control of Ministry of Civil Aviation.


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NOTE "3" : RESERVES AND SURPLUS(Rupees in Million)


March 31, 2015 March 31, 2014

1. CAPITAL RESERVE

Opening Balance 2,134.4 1,567.0

Add : Additions during the year 4,924.7 577.9

Add : Additions due to consolidation -

30.6

Add : Transfer of Capital Reserve from Vayudoot Ltd -

35.5

Less : Transfer to the Statement of Profit and Loss as reduction 220.5

76.6

from Depreciation (Refer Note 20)

Closing Balance 6,838.6

2,134.4

2. GENERAL RESERVE

Opening Balance (1,417.7)

8.5

Add : Additions during the year 13.4

(1,426.2)

-

Closing Balance (1,404.3)

(1,417.7)

3. OTHER RESERVES -

a) Foreign Currency Monetary Item Translation Difference Account -


(588.1)

Exchange gain/(loss) during the year (297.4)

(3,018.6)

Amortisation during the year 234.3

204.8

Closing Balance (3,465.0)

(3,401.9)

4. Surplus / (Deficit) in the Statement of Profit & Loss


(283,550.5)

profit/Loss for the year (62,804.2)

(68,915.3)

Adjustment in Depreciation as per Schedule II * (3.7)

Less : Appropriations -

Proposed final dividend on equity shares 60.6

60.6

Tax on dividend 12.1

10.3

Transfer to Reserve 13.4

10.5

Net deficit in the Statement of Profit & Loss (415,441.2)

(352,547.2)

-

5. SECURITY PREMIUM -

Opening Balance 31.9

31.9

31.9

31.9

TOTAL (1+2+3+4+5) (413,440.0)

(355,200.5)

* Represents amount recognised in the opening balance of retained earnings where the remaining useful life of an asset is nil.


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56

NOTE "4" : LONG TERM BORROWINGS(Rupees in Million)

Particulars

As at As at As at As at March 31, 2015 March 31, 2014 March 31, 2015 March 31, 2014

I Bonds / Debentures 136,950.0

136,950.0

-

-

-

II Term Loans -

a) from Banks (Secured) 124,767.1

126,998.8

2,527.6

1,260.1

b) from Banks (Unsecured) 5,379.9

4,138.0

167.9

-

c) from Other Parties (Unsecured) 230.5

230.4

9.9

9.5

-

III Finance Lease Obligations 101,848.7

115,610.7

18,749.9

24,727.3

-

TOTAL 369,176.2

383,927.9

21,455.3

25,996.9

Non-Current Current

4(I) Debentures

(Rupees in Million)

Month of

Redemption

Amount to be

Redeemed

Rate of Interest

Dec-2031 4,714.0

9.08%

Nov-2031 10,086.0

9.08%

Sep-2031 15,000.0

10.05%

Dec-2030 4,714.0

9.08%

Nov-2030 10,086.0

9.08%

Dec-2029 4,714.0

9.08%

Nov-2029 10,086.0

9.08%

Dec-2028 4,714.0

9.08%

Nov-2028 10,086.0

9.08%

Dec-2027 4,714.0

9.08%

Nov-2027 10,086.0

9.08%

Sep-2026 40,000.0

9.84%

Mar-2020 7,000.0

9.13%

Mar-2020 950.0 9.38%

Total 136,950.0

136,950 Redeemable, Unsecured Non-convertible Debentures of face value of Rs.1 Million each (Previous

Year : 136,950 Debentures), are guaranteed by Government of India. Maturity Profile and Rate of interest are

as set out below :

b) Debenture Redemption Reserve as required under Section 71(4) of the Companies Act, 2013

created in the absence of earning profits by the Company.


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4(IIa) Details of Secured Term Loans from Banks are as under :

(Rupees in Millions)

SR NO As at 31.03.2015 As at 31.03.2014

1 2,871.9 2,901.0

2 3,458.2 3,491.9

3 12,924.1 13,056.4

4 16,556.6 16,407.7

5 8,439.3 8,524.9

6 9,191.6 9,313.8

7 7,477.8 7,551.5

8 1,340.3 1,365.4

9 1,994.7 1,958.3

10 4,308.0 4,352.1

11 4,302.4 4,346.2

12 7,064.1 7,128.1

13 8,781.5 8,874.6

14 12,103.8 12,258.5

15 2,726.7 2,754.6

16 6,596.8 6,664.1

17 6,312.4 6,395.4

18 5,744.3 5,802.1

19 2,598.1

2,618.5

124,792.6 125,765.1

UCO Bank

United Bank of India

TOTAL

Oriental Bank of Commerce

Punjab National Bank

Punjab & Sind Bank

State Bank of India

Syndicate Bank

Dena Bank

The Federal Bank Limited

IDBI Bank Limited

Indian Bank

Indian Overseas Bank

Bank of Baroda

Bank of India

Canara Bank

Central Bank of India

Corporation Bank

Restructuring Lender

Allahabad Bank

Andhra Bank

For all Secured Term Loans from Banks, interest rate is linked to respective Bank's Prime Lending Rate

/ Base Rate / Libor plus Margin. These loans are repayable in Quarterly Instalments starting from 31st

December 2013 and ending in 30th September 2026. Disclosure as regards amount of repayment

instalment and rate of interest are not made due to complexity of repayment schedules and

confidentility clause with the banks as regards interest rate.

All Term Loans from above Banks are secured by following 29 aircrafts and 12 immovable properties at

market value and all Current Assets (Previous Year 29 aircrafts, 12 immovable properties and all

Current Assets). However equitable mortgage for 7 immovable properties with banks are yet to be

created.

4(IIb) One of the subsidairy has taken , Term Loan of Rs. 2500 Million (Previous Year Rs. 2500 Million) from

Indian Overseas Bank against the Corporate Guarantee given by Air India Limited (Holding company)

and the collateral security of A320 Aircraft(VT-ESH) owned by Air India Limited (Holding Company)

with payment term - Bullet payment due on 30 March 2015 i.e five years after the first disbursement.


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4(IIc) Total Unsecured Term Loan from Banks of Rs.5,547.8 Million (Previous Year Rs.4,138.0 Million) has been guaranteed by the Government of India to the full extent.

4(IId) Unsecured Term Loan from Others of Rs.240.4 Million (Previous Year Rs.239.9 Million) are guaranteed by the Government of India to the full extent.

4(III) Long Term Maturities of Finance Lease Obligations of Rs.120598.6 Million (Previous Year Rs.140338 Million) are guaranteed by the Government of India to the extent of Rs.100148.1 Million (Previous Year Rs.117348.1 Million)

(Rupees in Million)

Equal Number Amount of Rate of Interest Starting Month ofof Loan Loan as at Month of Maturity

Instalments 'March 31, 2015 Repayment

22 1,231.2

Libor + 2.15 Mar-2015 Mar-2021

1 4,316.6 Libor + 1.45 /2.5 Jul/Sep-2011 Sep-2016

(Rupees in Million)

Equal Number Month ofof Loan Maturity

Instalments

50

Oct-2039

44

Amount of Loan as at

'March 31, 2015

165.4

75.0

Rate of Interest

Interest Free

Interest Free

Starting Month of

Repayment

Oct-1990

Oct-1987 Mar-2037

(Rupees in Million)

Number of Amount of Rate of Starting Month ofEquated Interest Month of Maturity

Loan Loan as at

Repayment Instalments

March 31, 2015

58 16,007.3 Libor + 0.24 Aug-2011 Jul-202278 31,588.0 Libor + 0.93 Mar-2010 Sep-202124 21,375.6 Libor + 0.75 Feb-2008 Feb-202141 7,047.9

Libor - 0.05+0.55 Jan-2009 May-202057 11,102.8 2.46% to 2.89% Fixed Oct-2007 Dec-201919 15,799.9 Libor + 0.75 Mar-2007 Dec-2019

15 VT-AXH/AXJ/AXP-

FEB2008

Nov-18

16 VT-AXQ - FEB2008 Feb-19

15VT-AXI/AXN-

DEC2007

Dec-18

17 VT-AXR - DEC2007 Jun-1916 VT-AXM - JAN2008 Jan-1918 VT-AXT - JAN2008 Jul-1918 VT-AXU - JAN2008 Oct-19

24 VT-AYA -JUN2009 Mar-2123 VT-AXZ - MAR2009 Dec-20

21 VT-AXW/AXX-

FEB2009May-20

23 4,207.9 Libor + 0.93 Apr-2010 Oct-21

Libor -0.05/0.76

Fixed for each

Loan ranging

between 2.46%

to 2.73%

8,852.7

4,616.6

*Current maturities of long term borrowings have been grouped under the head Other Current Liabilities (Refer Note No.5)


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NOTE "5" : LIABILITIES(Rupees in Millions)

Particulars Other Long Term Liabilities


Trade Payable - - 80,123.2 73,886.8

(A) - - 80,123.2 73,886.8

Other Liabilities

a) Current maturities of long-term debts - 2,705.4 1,269.6

b) Current maturities of finance lease obligations - 18,749.9 24,727.3

c) Interest accrued but not due on borrowings - 7,099.1 6,815.1

d) Interest accrued and due on borrowings - 430.6 356.4

e) Forward Sales (Net) [Passenger / Cargo] - 23,670.9 21,653.8

f) Advance from customers (Net) - 77.6 823.1 341.1

g) Others Liabilities (Net) 1,055.8 1,381.2 22,722.8 28,524.3

h) Advance Against Share Capital - 120.0 16.5

(B) 1,055.8 1,458.8 76,321.8 83,704.1

TOTAL (A + B) 1,055.8

1,458.8

156,445.0

157,590.9

*

**

NOTE "6" : PROVISIONS

Particulars


Provision for Employee Benefits

a) Gratuity 9,276.3

8,421.1

1,099.7

1,632.9

b) Leave Encashment 6,261.4

4,578.9

808.9

914.5

c) Post Employment Medical and Other Benefits 2,127.3

2,068.1

529.3

85.8

(A) 17,665.0

15,068.1

2,437.9

2,633.2

Other Provisions

a) Wealth Tax -

-

17.1

16.9

b) Frequent Flyer Programme -

-

291.9

103.5

c) Provision for Proposed Dividend -

-

60.6

60.6

d) Dividend Distribution Tax -

-

12.1

10.3

e) Provision for tax -

-

237.5

-

(B) -

619.2

191.3

TOTAL (A + B) 17,665.0

15,068.1

3,057.1

2,824.5

Long Term Provisions Short Term Provisions

Details of Current maturities of long term debts / Finance Lease Obligation have been grouped under Other Current Liabilities. (Refer Note No.4).Interest accrued and due includes :

Other Current Liabilities

Rs.43.9 Million being interest on Secured Term Loans from Banks, paid subsequently (Previous Year : Rs.NIL Million) (Refer Note 4).Rs.270.4 Million being interest on Secured Loans repayable on demand from Banks, paid subsequently (Previous Year : Rs. 164.6 Million) (Refer Note 7).Rs.116.3 Million being interest on Unsecured Loans repayable on demand from Banks, paid subsequently (Previous Year : Rs. 191.8 Million) (Refer Note 7)


CFS

60

NOTE "7" : SHORT TERM BORROWINGS(Rupees in Millions)

As at As atParticulars March 31, 2015 March 31, 2014

I Loans repayable on demand :

a) From Banks (Secured) 1 / 2 / # 125,513.4

89,922.4

b) From Banks (Unsecured) # 29,126.8

41,035.0

TOTAL 154,640.2

130,957.4

1.


Sr.No. As at 31.03.2015 As at 31.03.2014

1 3,850.0

850.0

2 1,010.0

1,010.0

3 3,917.5 3,973.9

4 6,797.8 4,908.9

5 4,754.1 2,715.3

6 2,716.5 2,716.5

7 2,210.0 2,210.0

8 2,390.4 395.8

9 232.3

162.7

10 625.1 599.2

11 1,264.2 1,265.3

12 1,280.0 1,280.0

13 5,085.8 2,024.2

14 2,597.7 2,597.7

15 3,757.5 3,718.8

16 806.4 806.4

17 17,380.7

17,048.6

18 2,266.5 1,177.8

19 1,867.7 1,862.4

20 1,697.8

1,697.8

21 9.5

2,500.0

66,517.5

55,521.3

Syndicate Bank

UCO Bank

United Bank of India

TOTAL (1)

The loans to the tune of Rs.66,517.5 Million are secured by Hypothecation of 35 aircraft, 12

immovable properties at market value and all Current Assets (Previous Year : 32 aircraft, 12

immovable properties and all Current Assets). However equitable mortgage for 7 immovableproperties with banks are yet to be created.

Oriental Bank of Commerce

Punjab National Bank

Punjab & Sind Bank

Standard Chartered Bank

State Bank of India

HDFC Bank Ltd.

The Federal Bank Limited

IDBI Bank Limited

Indian Bank

Indian Overseas Bank

Bank of India

Canara Bank

Central Bank of India

Corporation Bank

Dena Bank

Secured loans repayable on demand from Banks are to the tune of Rs.66,517.5 Million (Previous Year Rs.55,521.3 Million). Details of Secured Loans from Banks are as under :

List of Lender

Allahabad Bank

Andhra Bank

Bank of Baroda


CFS

61

2.


Sr.No. As at 31.03.2015 As at 31.03.2014

1 12,375.0 5,931.6

2 36,718.7 22,453.2

3 5,937.5

5,691.9

4 -

-

55,031.2

34,076.7

TOTAL (1 + 2) 121,548.7

89,598.0

#

Standard Chartered Bank

TOTAL (2)

The loans to the tune of Rs.55,031.2 Million (Previous Year Rs.34,076.7 Million) are secured by

Hypothecation of 9 aircraft at market value (Previous Year : 6 aircraft).

Disclosure as regards Bank wise amount and period of default is not made due to complexity of data

& confidentiality clause with the banks. (Also refer Note 4 & 5)

Secured loan repayable on demand from Bank is to the tune of Rs.55,031.2 Million (Previous Year

Rs.34,076.7 Million). Details of Secured Loans from Banks are as under :

Name of the Lender

Bank of India

Deutsche Bank

Investec Bank

NOTE "8" : FIXED ASSETS

(Rupees in Million)Sl. ParticularsNo. As at Additions Deductions / As at As at For Deductions/ Total Upto As at As at

April 01, 2014 - Adjustments March 31, 2015 April 01, 2014 the year Adjustments March 31, 2015 March 31, 2015 March 31, 2014

TANGIBLE ASSETS :

A. LAND & BUILDINGS1 Land-Freehold 7,143.8 - (14.8) 7,158.6 - - - - 7,158.6 7,143.8 2 Land-Leasehold 63,441.0 19.7 - 63,460.7 884.3 107.4 33.8 957.9 62,502.8 62,556.7 3 Buildings 19,072.6

2,331.9

36.8

21,367.7

5,853.9

747.1

12.5

6,588.5

14,779.2

13,218.7

4 Leasehold Improvements 18.1

13.0

-

31.1

10.6

6.2

-

16.8

14.3

7.5

SUB TOTAL "A" 89,675.5

2,364.6

22.0

92,018.1

6,748.8

860.7

46.3

7,563.2

84,454.9

82,926.7

B. AIRCRAFT FLEET, ROTABLES & REPAIRABLES1

Airframes

(a) Owned & Self Operated 250,684.0

32,821.4

28,762.7

254,742.7

59,323.0

12,011.9

3,738.9

67,596.0

187,146.7

191,361.0 2

Aero Engines & Power Plants

(a) Owned & Self Operated 98,962.4

15,075.6

12,606.8

101,431.2

22,820.9

4,727.9

1,683.6

25,865.2

75,566.0

76,141.5 3

Simulators & Link Trainers 2,864.8

6.5

-

2,871.3

708.8

123.9

-

832.7

2,038.6

2,156.0 4

Airframe Rotables 6,821.2

1,221.7

-

8,042.9

2,401.4

394.3

-

2,795.7

5,247.2

4,419.8 5

Aero-Engine Rotables 1,589.6

-

-

1,589.6

568.2

69.6

-

637.8

951.8

1,021.4 6

Aircraft Repairables -

8,338.9

-

8,338.9

-

2,510.7

-

2,510.7

5,828.2

-

SUB TOTAL "B" 360,922.0

57,464.1

41,369.5

377,016.6

85,822.3

19,838.3

5,422.5

100,238.1

276,778.5

275,099.7

C. OTHER- FIXED ASSETS

1 Workshop Equipment, Instruments, 4,378.8

3,999.8

3,068.0

5,310.6

1,998.3

474.1

1,375.4

1,097.0

4,213.6

2,380.6

Machinery and Plants -

2 Ground Support & Ramp Equipment 4,790.7

3,421.7

3,096.2

5,116.2

2,383.3

293.9

0.3

2,676.9

2,439.3

2,407.4

3 Furniture & Fixtures 413.0

31.1

0.3

443.8

269.7

26.5

0.3

295.9

147.9

143.3

4 Vehicles 306.1

8.2

11.4

302.9

240.9

17.7

7.0

251.6

51.3

65.2

5 Office Appliances & Equipment 728.0

18.6

1.4

745.2

408.8

47.1

0.9

455.0

290.2

319.2

6 Computer System 1,570.9

43.4

1.1

1,613.2

1,082.5

132.8

1.2

1,214.1

399.1

488.4

7 Electrical Fittings & Installations 260.9

442.7

-

703.6

164.3

36.3

-

200.6

503.0

96.6

SUB TOTAL "C" 12,448.4

7,965.5

6,178.4

14,235.5

6,547.8

1,028.4

1,385.1

6,191.1

8,044.4

5,900.7

TOTAL FOR TANGIBLE ASSETS 463,045.9

67,794.2

47,569.9

483,270.2

99,118.9

21,727.4

6,853.9

113,992.4

369,277.8

363,927.1

INTANGIBLE ASSETS :

A. COMPUTER SOFTWARE 2,796.3

92.7

-

2,889.0

1,170.7

470.3

-

1,641.0

1,248.0

1,625.6

B. OTHERS -

3,353.6

-

3,353.6

-

127.9

-

127.9

3,225.7

-

TOTAL FOR INTANGIBLE ASSETS 2,796.3

3,446.3

-

6,242.6

1,170.7

598.2

-

1,768.9

4,473.7

1,625.6

TOTAL ASSETS 465,842.2

71,240.5

47,569.9

489,512.8

100,289.6

22,325.6

6,853.9

115,761.3

373,751.5

365,552.7

Previous Year 468,685.1

65,761.4

68,604.2

465,842.3

87,936.2

21,441.6

9,088.0

100,289.8

365,552.7

Capital Work-in-Progress 12,637.1

3,700.3

Intangible Assets under Development 13.5 13.5

GRAND TOTAL 386,402.1 369,266.5

GROSS BLOCK DEPRECIATION NET BLOCK

1 The Company has during the year capitalized translation difference of Rs.7,336.2 Million (Previous Year : Rs.17,939.3 Million) arising on settlement and reporting of long term monetary items. Additions


CFS

62

to "Aircraft Fleet, Rotables & Repairables" includes Exchange Rate Fluctuations (Net of Debit & Credit) on underlying loans in foreign currency : Rs. 7,298.8 Million (Previous Year: Rs. 17,775.0 Million).

2 "Aircraft Fleet, Rotables & Repairables" includes 37 Aircraft (Three B777-200LR, Twelve B777-300 ER, Ten A-319 & Twelve A-321) (Previous Year : 39 Aircraft - {Five B777-200LR, Twelve B777-300ER, Ten A-319 & Twelve A-321}) & 5 GE Spare Engines (Previous Year 5 GE Spare Engines) and Registration of these 37 Aircraft & 5 Spare Engines continues to be in the name of SPV Company for which beneficial ownership is with Air India Ltd.

Future Lease rental obligations aggregate to Rs.120598.6 Million (Previous Year : Rs.140338 Million) for which liability of an equal amount is included in the year-end balance of " Future Lease Obligations"

3 Borrowing costs capitalized during the year are Rs.8,345.8 Million (Previous Year : Rs.1,650.0 Million)

4 Deductions under the block of "Aircraft Fleet, Rotables & Repairables" includes 2 B777-200 LR sold during the year (Previous Year : 3 B777-200 LR). Gross Block Rs.15,076.1 Million (Previous Year : Rs.22,638.7 Million), Provision for Depreciation Rs.4,046.1 Million (Previous Year : Rs.6,249.8 Million) and Loss on this account amounts to Rs.2,838.0 Million (Previous Year : Rs.3,872.5 Million). Gain due to receipt of seats from ETIHAD Rs.906.6 million has reduced the loss on sale of 3 B777-200 LR airctaft.

5 Deductions under the block of "Aircraft Fleet, Rotables & Repairables" includes 4 B787-8 aircraft (Previous Year : 7 B787-8 aircraft) which were transferred under a Sale & Lease back arrangement during the year. Gross Block Rs.26,293.4 Million (Previous Year : Rs.44,692.7 Million), Provision for Depreciation Rs.1,376.4 Million (Previous Year : Rs.2,380.9 Million) and Profit on this account amounts to Rs.4,047.3 Million (Previous Year : Rs.7,797.6 Million).

6 Depreciation includes credit of Rs.31.8 Million (Previous Year : Debit of Rs. 6.5 Million) for Prior Period and debit of Rs.199.6 Million (Previous Year : Debit of Rs.55.7 Million) to Capital Reserve.

7 Land (Freehold/Leasehold) and buildings include Gross Block Rs.76,820.4 Million (Previous Year : Rs.76,856.8), accumulated depreciation Rs. 5,302.9 Million (Previous Year : Rs. 4,696.8 Million) for which title deeds to be regularised.

8 A) Buildings ( on Leasedhold Land) includes cost of residential flats:-

i) 4 flats in Sher-e-Punjab Society, Andheri, Mumbai: conveyance deeds in respect there of are pending execution. Share Certificates have not been received by the Company

ii) 2 flats in Everest Apartments Cooperative Housing Society, Andherit, Mumbai: The Company has received 10 equity shares (previous year- 10 equity shares) at a cost of Rs. 500 (Previous Year-Rs. 500)

B) Mutation in respect of the property of housing colony at Srinager is not required since records of rights have been obtained in favour of the Company from the concerned Niab Tehsildar. Some part of the land has been encroached by a school for which the Company has filed a suit in the Court.

9 As per Accounting Policy, the Company has carried out impairment of assets as required under AS 28.

10 "Intangible Asset - Others" represents 1) Membership Fees for joining Star Alliance capitalized during the year.

2) DGCA License - All expenses incurred including Manpower Cost prior to 3 months from the date of obtaining the license and directly attributable to DGCA license for CAR-145 MRO with certification has been capitalised

11 Special tools included in Workshop Equipment, Instrument Machinery & Plants and Other Fixed Assets are being Depreciated at year wise total Block Amount.

12 During the year one of the subsidiary company has changed , the method of providing Depreciation from WDV to STL based on the remaining life of assets.


CFS

63

NOTE "9" : NON-CURRENT INVESTMENTS


Particulars As at As at

March 31, 2015 March 31, 2014

A (Unquoted Equity Instruments) (at cost)

TRADE INVESTMENTS

1) 271,847 Equity Shares (Previous Year : 271,938 Equity Shares) 13.9 13.9

of EUR 5.00 each fully paid up in SITA (Societe Internationale de Telecommunications A eronautiques). (91 Shares redeemed during the year)

2) 1,896 class B Shares (Previous Year : 2,216 Shares) of BHT 100 0.3 0.3

each fully paid up in Aeronautical Radio of Thailand Ltd.

(320 Shares redeemed during the year)

3) 2,617,098 Equity Shares of MAR 10 each fully paid up in 9.5 9.5

Air Mauritius Ltd.

4) 2,301,244 Equity Shares of MAR 10 each fully paid up in 16.7 16.7 Air Mauritius Holding Ltd.

5) 6% Debenture Bonds of Banco De Roma face value EUR 15.49 *0.0 *0.0

guaranteed by the Government of Italy (Deposited with Civil Aviation

Department, Italy). * (Rs. 3,057.69).

6) 10,000,000 Equity Shares of Rs. 10 each fully paid up in 100.0 100.0 Cochin International Airport Limited.

7) 618,460 Depository Certificates of SITA Information Network 28.8 28.8 Computing N.V.

8) 50 Equity Shares of EUR 152.45 each fully paid up in Association 0.4 0.4 Sportive Du Golf Isabella.

TOTAL OF UNQUOTED INVESTMENTS 169.6 169.6

B QUOTED (AT COST-TRADE)

375,407 Shares of EUR 0.48 each fully paid up in France Telecom 7.6 7.6 (Market Value Rs.332.8 Million, Equivalent to EUR 4.0 Million).

(Previous Year: Rs. 205.8 Million, Equivalent to EUR 3.0 Million)

TOTAL 177.2 177.2

Aggregate amount of unquoted investments 169.6 169.6

Aggregate provision for diminution in value of investments

Aggregate amount of quoted investments (Market value : Rs.332.8 Million 7.6 7.6

(Previous Year : Rs.205.8 Million)


CFS

64

NOTE "10" : LOANS AND ADVANCES(Rupees in Millions)

Particulars As at As at As at As at

March 31, 2015 March 31, 2014 March 31, 2015 March 31, 2014

Capital Advances

Unsecured Considered Good 1,706.3

2,508.6

-

-

Doubtful 7.6

208.4

-

-

1,713.9

2,717.0

-

- Less : Provision for Doubtful Advances 7.6

208.4

-

-

(A) 1,706.3 2,508.6 -

Security Deposits

Unsecured Considered Good 5,125.3 4,717.9 149.5 63.9 Doubtful 43.5

43.5

-

-

5,168.8 4,761.4 149.5 63.9

Less : Provision for Doubtful Advances 43.5 43.5

-

-

(B) 5,125.3 4,717.9 149.5 63.9

Advances recoverable in Cash or in Kind*

Unsecured Considered Good 11,753.0 12,483.4 4,624.5 3,038.3 Doubtful 594.0 660.8 - -

12,347.0 13,144.2 4,624.5 3,038.3

Less : Provision for Doubtful Advances 594.0

660.8

-

-

(C) 11,753.0 12,483.4 4,624.5 3,038.3

Loans and Advances to Employees

Secured Considered Good 0.2 0.4 - 1.4 Unsecured Considered Good 22.5 33.0 270.3 112.9

Doubtful 19.5 12.4 - - 42.2 45.8 270.3 114.3

Less : Provision for Doubtful Advances 19.5

12.4

-

-

(D) 22.7 33.4 270.3 114.3 Other Loans and Advances

Advance Payment of Income Tax and TDS (net of provision for taxation) 1,388.9 1,410.9 341.3 - Prepaid Expenses 161.3 668.5 1,785.1 2,439.9 Balances with Statutory / Government Authorities 2,636.3 2,281.2 5.8 - Advance to Related Parties* - - Unsecured Considered Good 1,517.2 191.3 - - -

(E) 5,703.7 4,551.9 2,132.2 2,439.9

TOTAL (A + B + C + D + E ) 24,311.0 24,295.2 7,176.5 5,656.4

* Advances recoverable in Cash or Kind includes unreconcilled Inter-corporate Debit balance (net) of Rs.11.5 Million (Previous Year : 11.5 Million), which is under reconciliation, for which provision has been made.

Long Term Loans & Advances Short Term Loans & Advances


CFS

65

NOTE "11" : TRADE RECEIVABLES(Rupees in Millions)

ParticularsAs at As at As at As at


Outstanding for a period exceeding six months from the date they are due for payment

Unsecured, Considered Good 22.1 19.2 10,577.6 8,886.0 Doubtful 6,166.4 4,690.7 - -

6,188.5 4,709.9 10,577.6 8,886.0 Less : Provision for Doubtful Receivables 6,166.4 4,690.8 - -

(A) 22.1 19.1 10,577.6 8,886.0 Other Receivables

Unsecured, Considered Good - - 13,528.1 14,218.6 Doubtful 149.6 629.8 - -

149.6 629.8 13,528.1 14,218.6 Less : Provision for Doubtful Receivables 149.6 629.8 - -

(B) - - 13,528.1 14,218.6 -

Total (A + B) 22.1 19.1 24,105.7 23,104.6

* Trade Receivables amounting to Rs. 423.8 Million (Previous Year Rs. 624.9 Million ) are backed by Bank Guarantees.

Non-current Receivables Current Receivables

NOTE "12" : OTHER ASSETS(Rupees in Millions)

Particulars Other Non-current Assets

As at As at As at As at


1. Deposits - Others (having maturity of more than 12 months)* 26.5 38.2 - -

Less : Provision for Doubtful Deposits 0.1 0.1 - -

26.4 38.1 - -

2. Interest Accrued on

i) Fixed Deposits - - 61.7 41.3

ii) Loan to Employees 6.1 15.7 17.2 22.0

6.1

15.7

78.9

63.3

3. Surplus Assets ** 171.0

171.0

229.1

227.9

Less : Provision for Diminution in Value of Asset 171.0

171.0

-

-

-

-

229.1

227.9

4 Other Non-Trade ReceivablesUnsecured, Considered Good -

-

5,937.7

8,529.3

Doubtful 2,580.5

2,448.6

-

-

2,580.5

2,448.6

5,937.7

8,529.3

Less : Provision for Doubtful Receivables 2,580.5

2,448.6

-

-

-

5,937.7

8,529.3

TOTAL 32.5

53.8

6,245.7

8,820.5

Other Current Assets

* Deposits - Others Non Current (having maturity of more than 12 months) includes Rs. 1.5 Million (Previous Year Rs. 1.5 Million) pertains to Blocked amount lying in current Account.

** Items of the Fixed Assets retired from the active use and held for disposal are transferred to 'Surplus Assets'. Realisable value of Surplus Assets has been considered to be minimum 5% of Gross Block or realisable value wherever ascertained.


CFS

66

NOTE "13" : INVENTORIES (As taken, valued & certified by the Management)



March 31, 2015 March 31, 2014

Stores and Spare Parts 18,732.0 35,486.0 Loose Tools 195.7

109.6

-

18,927.7

35,595.6

Less : Provision for Obsolescence / Inventory Reconciliation 5,860.7

14,084.6

13,067.0

21,511.0

Goods-in-Transit 1,181.8

957.0

TOTAL 14,248.8

22,468.0

NOTE : "14" : CASH AND BANK BALANCES



March 31, 2015 March 31, 2014

Cash and Cash Equivalents

1. Balances with Banks :

a) On Current Accounts 3,933.7

3,833.9

b) Deposit Accounts (Maturity less than 12 months)* 1,858.1

1,534.7

2. Cheques, Drafts on Hand 75.3

90.7

3. Cash on Hand (as certified by the Management) 41.2

45.3

4. Remittances in Transit 65.3

125.6 (A) 5,973.6

5,630.2

Other Bank Balances

1 Margin money deposits 2,595.7

2,143.9

(B) 2,595.7

2,143.9

TOTAL (A + B) 8,569.3

7,774.1

* Includes Security Deposit from employees amounting to Rs.0.3 Million (Previous Year : Rs. 0.8

Million)


CFS

67

NOTE "15" : TRAFFIC REVENUE(Rupees in Millions)


i) Scheduled Traffic Services

1 Passenger 185,202.9 166,580.4 2

Excess Baggage 1,686.4 1,708.5

3

Mail 797.0

765.2

4

Cargo 11,817.7

10,797.5

(A) 199,504.0

179,851.6

ii) Non-Scheduled Traffic Services

1

Charter 11,401.0

11,198.5 2

Block Seat Arrangement 583.9

468.0

3

Subsidy for Operation from Government 343.4

184.6 (B) 12,328.3

11,851.1

iii) Other Operating Revenue

1

Handling and Servicing 5,924.0

6,102.7

2

Hotels and Flight Kitchen 273.4

174.3

3

Manufacturers Credit 2,240.2

2,409.0

4

Incidental 7,186.2

6,987.0

(C ) 15,623.8

15,673.0

TOTAL (A+B+C) 227,456.1

207,375.7

NOTE "16" : OTHER REVENUE(Rupees in Millions)


1

Interest Income on :

Bank Deposits 284.8

245.1

Others 149.5

85.2

2

Dividend from Long Term Investments (Trade) 106.5

92.5

3

Rent Receipts 411.1

323.8

4 Profit on Sale of Fixed Assets (Net) * 4,582.9 7,909.1

TOTAL 5,534.8 8,655.7

* Profit on Sale of Fixed Assets (Net) includes :

a) Rs.4,047.3 Million (Previous Year : Rs.7,797.6 Million) Profit on Sale & Lease Back of four B787-800 (Previous Year : seven B787-800) Dreamliner Aircraft (Refer Note 48 Ba).

b) Rs.544.0 Million (Previous Year : Rs.NIL Million) gain due to receipt of seats from ETIHAD pertaining to sale of 3 B777-200LR during F.Y. 2013-14 (Refer Note 30a).


CFS

68

NOTE "17" : OTHER OPERATING EXPENSES(Rupees in Millions)


1 Insurance 1,676.7 1,501.1 2 Material Consumed - Aircraft 10,159.0 3,754.8 3 Outside Repairs - Aircraft 13,732.8 13,225.2 4

Navigation, Landing, Housing and Parking 15,824.9

15,217.1

5

Hire of Aircraft 11,929.1

8,715.7

6

Handling Charges 8,263.3

8,116.4

7

Passenger Amenities 7,535.9

6,287.9

8

Booking Agency Commission (Net) 4,151.6

3,738.9

9

Communication Charges -

- i) Reservation System 7,392.3

6,570.8

ii) Others 1,715.5

1,261.8 10

Cost of Material Consumed 91.1

92.2

TOTAL 82,472.2

68,481.9

NOTE "18" : EMPLOYEE BENEFIT EXPENSES(Rupees in Millions)


1

Salaries, Wages and Bonus 20,366.3

23,324.8

2

Crew Allowances 8,229.4

7,169.0

3

Contribution to Provident and Other Funds 1,314.9

1,160.0

4

Staff Welfare Expenses 2,035.0

1,897.8

5

Provision for Gratuity 1,389.2

1,033.8

6

Provision for Leave Encashment 1,001.8

670.6

7 Provision for Retirement Benefit 500.0 280.5

TOTAL 34,836.6 35,536.5

NOTE "19" : FINANCE COST(Rupees in Millions)


1 Interest on :

a) Debentures 12,890.9

12,890.9

b) Aircraft Loans 494.7

3,965.4

c) Other Loans 24,900.4

20,734.0

38,286.0

37,590.3

2 Other Borrowing Costs 1,672.4

2,509.8

3 Delayed Payment Charges to Fuel Companies 2,855.4

2,595.1

4 Interest on Delayed Payment of TDS / Service Tax 13.2 517.0

TOTAL 42,827.0 43,212.2


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NOTE "20" : DEPRECIATION AND AMORTIZATION EXPENSE



1 Depreciation of Tangible Assets 21,725.7 20,995.2 2 Amortization of Intangible Assets 598.7 439.9

(A) 22,324.4

21,435.1

Less : Recoupment from Capital Reserve (Refer Note 3.1) 220.5

76.6

(B) 220.5

76.6

TOTAL (A- B) 22,103.9

21,358.5

NOTE "21" : OTHER EXPENSES(Rupees in Millions)


1 Travelling Expenses

i) Crew 2,027.1

2,019.2

ii) Others 1,004.7

722.6

2 Rent 1,315.2

1,303.7

3 Rates and Taxes 359.8

495.5

4 Repairs to : -

i) Buildings 170.7

154.9

ii) Others 1,930.3

1,572.9

5 Hire of Transport 793.7

764.7

6 Electricity & Heating Charges 1,200.2

1,120.5

7 Water Charges 19.1

36.4

8 Directors' Fees 0.9

0.5

9 Publicity and Sales Promotion 634.8

436.9

10 Printing and Stationery 163.3

115.0

11 Legal Charges 144.0

197.1

12 Auditors' Remuneration and Expenses 16.4

14.9

13 Provision for Bad & Doubtful Receivables and Advances 1,553.4

1,546.1

14 Provision for Obsolescence (Net) 32.3

522.5

15 Provision for Inventory Migration Surplus / Written back 49.3

-

16 Expenses on Block Seat Arrangements 458.9

384.7

17 Exchange Variation (Net) 2,994.7

2,056.2

18 Provision for Inventory Repairs/Reconciliation -

1,423.3

19 Miscellaneous Expenses 2,058.5

2,058.1

20 Provision for Redelivery & other charges 156.4

71.4

21

Bank Charges 820.1

885.9

TOTAL 17,903.8

17,903.0


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NOTE "22" : PRIOR PERIOD ADJUSTMENTS (Net)


Revenue Heads

1) Passenger Revenue (222.0)

163.6

2) Cargo Revenue 11.0

2.3

3) Mail 7.7

1.5

4) Handling, Servicing and Incidental Revenue 5.5

151.4

5) Revenue Share from AICL -

(8.2)

6) Others 152.6

87.7

(A) (45.2)

398.3

Expenditure Heads

1) Handling Charges 58.2

22.9

2) Depreciation (31.8)

6.5

3) Stores and Equipments 52.9

48.5

4) Passenger Amenities (0.3)

(58.7)

5) Publicity 13.7

2.9

Delayed Payment Charges to Fuel Companies (157.8)

47.8

6) Insurance (151.6)

(28.5)

7) Salaries/Staff Welfare Expenses 62.7

3.9

8) Landing, Parking and Navigation 19.9

183.4

9) Commission 42.1

13.0

10) Communication Charges - Others 80.0

(176.9)

11) Rent, Rates and Taxes (27.3)

81.7

12) Exchange variation 225.9

(1,055.0)

13) Legal and professional Charges 5.5

72.6

14) Hire of Aircraft -

4.9

15) Interest 208.6

336.4

16) Crew Hotel Expenses 1.3

-

17) Fuel (Ops.) - Aircraft 151.2

-

18) Expenses on Computer Reservation 14.5

-

19) Others (Net) 159.7

35.4

(B) 727.4

(459.2)

TOTAL (B - A) 772.6

(857.5)



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NOTE "23" : EXCEPTIONAL ITEMS



1 Inventory Migration Surplus / Written Back 403.1 1,338.5 Less :Provision for Inventory Repairs - Expen - 192.4 Less : Provision for Inventory Reconciliation - 54.6

403.1

1,091.5

2 Provision No Longer Required 1,618.4

3,296.7

3 Loss on Sale of B777-200LR Aircraft * (2,475.4)

(3,872.5)

TOTAL (453.9)

515.7

NOTE "24" : EXTRA ORDINARY ITEMS (NET)


Particulars March 31, 2015 March 31, 2014

1 Arbitration awards (20.0)

(5.4)

2 Duty Credit Entitlement under SFIS -

4,735.9

3 Compensation / Liquidated Damages from

Vendors (Refer Note 31a)459.3

1,398.0

TOTAL 439.3

6,128.5

* Loss on Sale of 2 B777-200LR (Previous Year : 3 B777-200LR) Aircraft includes gain of Rs.362.6 Million (Previous Year : Rs. NIL Million) due to receipt of seats from ETIHAD pertaining to these aircraft (Refer Note 30a).


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NOTES FORMING PART OF THE CONSOLIDATED FINANCIAL STATEMENTS:

25. Contingent Liabilities not provided for:

A. Claims not acknowledged as debts (excluding interest and penalty wherever likely to be applicable) and being contested to the extent ascertainable and quantifiable:

(Rs in Millions)

S.No Description 2014-15 2013-14

(i) Claims on account of denied boarding, loss of passenger baggage, mishandled baggage, delayed flight, cancellation of flights, damaged consignments and late receipt of cargo etc. 335.8 621.9

(ii) Income Tax Demand Notices received by the Company which are under Appeal 4,238.9 2,761.6

(iii) Customs Duty and Service Tax demanded by the Tax Authorities 2,530.0 5,081.6

(iv) Property Taxes/House Tax demanded by the Municipal Authorities 238.6 147.9

(v) Claims of Licence Fees, X-Ray, TNLC, Landing Charges, Parking Charges, Levies etc. 6,640.4 4,458.3

(vi) Claims on account of Staff/Civil/Arbitration/Labour Cases pending Court Cases/Vasant Vihar Property 8,520.8 4,595.1

(vii) Estimated Claims of employees towards rationalization of pay structure to be made in line with Justice Dharamadhikari Committee Report since the company has filed the case in the Supreme Court 9,683.5 6,738.6

(viii) Government Guarantee Fee

a) Difference between 0.5-1.5% and 0.2% 4,171.2 2,524.9

b) Additional Guarantee Fee 6,043.8 3,819.4

(ix) Class Action Suits/Litigations which are pending Is Unascertainable Is Unascertainable against the company for which amount if unascertainable.

(x) Others 711.7 568.4

Total 43,114.7 31,317.7

B. Corporate Guarantees, Letters of Comfort given to the third parties are : (Rs in Millions)


1. Airline Allied Services Ltd. 2,274.9 13.9 2. Air India Charters Ltd. 0.0 58.2

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26. Commitments are in respect of estimated amount of contracts remaining to be executed on Capital Account are given hereunder:

(Rs in Millions)


Capital Commitments

i) For Aircraft Projects 92213.2 136158.8

ii) Spare Engines 652.5 625.5

iii) Others 1178.8 1928.1

Total 94044.5 138712.4

27. Fixed Assets

a) Land (Freehold/Leasehold) and buildings include Gross Block Rs.76,820.4 million (Previous Year: Rs.76,856.8 million)of Air India Ltd. for which registration formalities are yet to be completed and in some cases where original title deeds are not in the possession of the company. Air India Ltd. has appointed a Global Real Estate Consultant as its property consultants for the purpose of registration & reinstatement of property rights in respect of such unregistered properties. These inter-alia include the following:

i) Lease hold land Rs.4,770.7 million (Previous Year: Rs.4,770.7 million), admeasuring 3.54 acres (Previous Year: 3.54 Acres) at Baba Kharag Singh Marg, New Delhi for which completion of registration formalities is under progress.

ii) Leasehold properties pending registration formalities also include Housing Colony, Vasant Vihar, New Delhi amounting to Rs 51,295.1 million. The Company is actively following up for completion of the registration formalities of this property. However, during the year L&DO has raised a demand vide Notice dated 26.11.2014 for unauthorized occupational charges amounting to Rs.3,736.0 million and this demand has been contested by the company as L&DO has not considered the replies given by Air India on their earlier Notices etc. The company has also taken up this matter through the Ministry of Civil Aviation with the Ministry of Urban Development to revoke this demand. The above demand however, has been shown as Contingent Liability for the year.

iii) 4 Flats HCI Sher-e –Punjab Society, Andheri, Mumbai for which conveyance deed is yet to be executed.

b) Air India Ltd. had 508 flats constructed in Nerul on a portion of land admeasuring 28,626 sqmtrs and it has been decided to sell these flats to the employees of the company and organizations under the control of Ministry of Civil Aviation. In terms of the orders of Hon'ble High Court at Bombay (the Court), the company issued allotment letters to 332 allottees out of 508 flats constructed and physical possession of 280 flats has also been handed over. However, title to the underlying land can only be conveyed by a tripartite conveyance deed between Societies, Air India and CIDCO which is not yet done. Therefore, in the opinion of management pending conveyance of title of land in favor of the registered societies, Air India continues to hold the title to the underlying land. The sale proceeds amounting to Rs 407.7 million received from the concerned members in respect of flats sold have not been appropriated against the cost and are being carried forward under the head “Other Non-Current Liabilities”. Liability if any, on account of taxes on transfer of the flats sold is also not ascertainable at this stage. The cost of land and the cost of construction is being carried as Fixed Assets and depreciation has also been charged. Necessary accounting entries to portray

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the correct picture (including reversal of depreciation amounting to Rs 643.1 million) will be made in the books of accounts on completion of these formalities.

c) Long Term Loans & Advances include a sum of Rs.24.6 million (Previous Year: Rs.24.6 million) being the advance paid by the company for the purchase of another plot of Land at Nerul (apart from (b) above). The possession of the plot allotted by CIDCO in this regard has not been handed over to Air India and no agreement/lease deed has been executed so far.

d) As per the terms of the aircraft/engine Purchase Agreement entered into with the Boeing Company, Boeing had committed to construct the airframe/engine MRO at the site. The

thairframe MRO facility so constructed has been handed over to AI by Boeing on 29 December 2014 under an agreement. The cost of this airframe MRO facility valued at Rs. 4,789.9 million has been debited to the respective asset account by credit to the Capital Reserve account. The tools purchased in phased manner amounting to Rs 468.3 million being shown under Capital-Work-in Progress, would be capitalized in the FY 2015-16.

st e) With effect from 1 January 2013, item-wise details of various fixed assets have been migrated

to SAP to the extent of details available in respect of quantities/location/date of purchase. In other cases block of items have been migrated into SAP as one item. Updating SAP Value Register with Asset registers maintained in stores/materials management division (MMD), for individual line-wise asset details is under process. The precise details of assets with location and description thereof are also being worked out.

f) In certain business areas of Air India Ltd., Special Tools which are included under “Other Fixed Assets” are being depreciated on the basis of year wise gross block for each class of assets. In certain other Business Areas, Special Tools are included under Inventories and hence depreciation is not being provided. Depreciation not provided, could not however, be quantified.

g) There are certain rotables which are still lying in Inventory and not migrated into RAMCO. These are being identified so as to ensure that all rotables are being shown as Fixed Assets and depreciated. Depreciation on such rotables not provided could not however be quantified.

h) During the year, torrential rains and floods from the Dal Lake inundated the property of Hotel Corporation of India at Srinagar. The Company is in the process of ascertaining the loss to the property and assets (including impairment loss if any) on account of the floods and the same shall be recorded as and when finality is reached. In the meanwhile, the Company has lodged an insurance claim of Rs 48.5 million with the Insurance Company against which the Company has received Rs. 5 million as adhoc payment which has been accounted under the head "Other Income" in the Statement of Profit and Loss and the balance, if any, shall be recorded as and when received.

Chefair Delhi acquired one Hi - lift TATA Chassis at a cost of Rs10,14,395/- during the financial st

year 2007-08. Based on operational considerations it was transferred to Chefair Mumbai on 21 March, 2009 for customization to meet local requirements. This process has been inordinately

stdelayed and hence it continues to reflect as Capital Work–in–Progress as on 31 March, 2015.

i) During the previous year, Hotel Corporation of India had entered into an MOU with Airports Authority of India (AAI) for renovation of Centaur Delhi, Chefair Delhi and Centaur Srinagar for which the Company had paid an advance of Rs 100 million in June 2013. During the current year fixed assets aggregating to Rs. 77.10 million have been capitalized on the basis of xerox copies of invoices received from AAI. In the absence of installation reports, the company has relied on the declaration made by AAI in this regard. The Company has computed depreciation for the year based on the dates referred to in the AAI statements. The balance amount of Rs. 22.89 million with AAI reflects as capital advance which will be used for further renovation of Centaur Delhi.

Further, during the current year, the Company has received a sum of Rs 120 million from the Government of India for renovation of Centaur Delhi, Chefair Delhi and Centaur Srinagar. Out of the above, the Company has advanced a sum of Rs. 100 million to AAI against another MOU

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entered into for renovation of Centaur Delhi and Srinagar. The balance Rs. 20 million is to be utilized for procurement of equipments for Chefair Delhi.

Subsequent to the sale of Centaur Hotel Juhu Beach in 2002, State Govt. of Maharashtra claimed an amount of Rs 44.8 million from M/s V. Hotels and from the Company for premium payable on the transfer of 1810 sq.mtr of land attached to the hotel property which was on lease from the State Govt. and is to be kept open to sky - to be used only as garden. The same was disputed by the Company before the Revenue Minister, Government of Maharashtra. The Order of the State Government dated 1.6.2014 has directed M/s V. Hotels to make payment of the said premium which has been challenged by them in the Bombay High Court.

j) Based on the opinion from the tax consultants, the revenue expenditure incurred during the period from October 2014 to December 2014 for practically making ready the MRO Set up for obtaining DGCA License for its planned activities / work considered as directly attributable to DGCA License and accordingly Rs. 2713.8 million is capitalized as Intangible Assets.

28. Physical Verification

a) Physical Verification of major assets of Air India Ltd. viz. Airframes, Aero-engines, APUs and Simulators, which constitutes around 95% of the Gross Block of Assets, was carried out during the year. Moreover, reconciliation of land & buildings as per financial books vis-à-vis records of holding departments was also carried out. Wherever discrepancies in the Physical Verification were observed necessary corrective action is being taken.

Out of Other Assets constituting around 5% of the Gross Block, assets at the base stations are covered in the biennial physical verification exercise conducted by the company. The remaining assets at outstations are physically verified by Internal Audit only to the extent of station inspections conducted during the biennial period. Physical Verification exercise for the biennial period 2012-14 has been completed and necessary accounting action has also been taken in certain cases. For the rest, reconciliation is in progress and necessary accounting action will be taken in due course. In respect of the Physical Verification for the biennial period 2010-12, in certain cases the accounting action is still pending and will be carried out in due course of time.

b) The exercise of Physical Verification of Inventories of Air India Ltd. for the biennial period 2012-14 has been completed by independent firms of Chartered Accountants and necessary accounting entries have been incorporated in the accounts wherever confirmation from Materials Management Division (MMD) has been received. However, necessary accounting action of the discrepancies found on such physical verification will be carried out after reconciliation at the shop floor level and wherever identified necessary action has been taken. In respect of the biennial period 2010-12 necessary accounting action has been taken in respect of the discrepancies observed in the inventory.

29. SFIS Scrips

Air India Ltd. was issued certain Duty Credit Scrips (SFIS) in respect of the FY 2009-10 and 2010-11. The unutilized amount out of these Scrips as on 31st March 2015 is Rs. 6,815.6 million and had expired on 27th September 2014, for which the Company has sought renewal. Further, in respect of the FY 2007-08, the Company has also filed SFIS claim for the issuance of Scrips for Rs. 4,735.9 million (Rs. 5,261.0 million less 10% delay in filing claims) and were accounted as Revenue in the books during 2013-14. DGFT had sought certain clarification/justification before granting approval for extension/issuance of these Scrips, which have since been submitted by the company. The company is actively following up with the appropriate authorities for the early extension/issuance of the above Scrips amounting to Rs 11,551.5 million which has been shown under "Loans and Advances".

30. Sale of B-777-200 LR

a) During the year, certain Shipsets (Seats and In-Flight Entertainment Equipment) pertaining to the 5 B-777-200 LR aircraft sold by Air India Ltd. (3 during 2013-14 and 2 during 2014-15) have been returned to the company by the party which could be reused as rotables. The estimated

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value of the Shipsets as per independent valuer is Rs. 906.6 million which has been debited to Capital Work in progress by appropriately crediting the same to the Statement of Profit & Loss Account.

b) The Board of the Directors of Air India Ltd. had decided earlier to sell/lease 3 B777–200 Aircrafts, however subsequently the management has decided to reconfigure the above 3 777-200 LR aircraft and use it for long haul operations to North America. The reconfiguration is being done in consultation with Boeing and has been approved by the Board. The reconfiguration will be completed in the financial year 2016-17. Meanwhile the Company has decided to utilize

ndthese aircraft for Delhi-San Francisco operations w.e.f. 2 December 2015.

31. Compensation/Credits

a) Compensation due to Delayed Deliveryth Air India Ltd. has signed a Delay Settlement Agreement on 5 September 2012 with Boeing for

full and final settlement on account of delay in delivery of B787 aircraft. As per the Delay Settlement, Boeing has agreed for enhanced compensation in addition to the liquidated damages as per the original Purchase Agreement entered with Boeing in December 2005. During the year, AI has accepted delayed delivery of 7 B787 aircraft, whereby an amount of Rs. 459.3 million (USD 7.5 million) (Previous Year Rs.891.0 million (USD 15.0 million)) has been accounted for as Compensation/Liquidated Damages under Extraordinary Income in the Statement of Profit & Loss.

b) Fuel Burn allowance from GE

The B787 Purchase Agreement with Boeing and Air India Ltd. provides certain fuel burn guarantees with regard to performance of the aircraft. Since there is a shortfall in the fuel burn guarantees. The company is in discussion with the Boeing for this additional fuel burn compensation. It may be noted that the shortfall in fuel burn is contributed by the airframe as well as the engines installed on the aircraft.

As per the agreement signed with GE, the engine Manufacturer for B-787 aircraft, they have agreed to compensate AI with a fuel burn allowance in respect of the Block4 engines and PIP1 engines fitted on 20 B787 aircraft delivered to AI. Accordingly, in FY 2014-15 the accrued fuel burn allowance of Rs 298.3 million (USD 4.8 million) (Previous Year Rs. 459.7 million (USD 7.4 million)) has been as given by GE and same has been accounted for as Miscellaneous Income on account of these Block4 / PIP1 engines.

c) Grant Receivable

i) The grant receivable from NEC for ATR North East operations by AASL was accounted st

for as income taking into accounts the operations of ATR for the year ending 31 December 2012 amounting Rs. 495.44million. NEC contested the claim of Grant support for the year 2012, however, the committee set up under Planning Commission to resolve the issue, has recommended that MoCA may provide budgetary support to meet the VGF for the year 2012.

ii) The North East Council has signed a MOU for VGF for operating fights in North East Sector effective August 2014. The Union Territory of Lakshadweep (UTL) has continued to sanction VGF for Agati operations for the year 2014-15.

32. Effect of changes in Exchange rates ( AS-11)

a) Air India Ltd., as per the consistent practice, has been treating the bridge loans (short term borrowings) availed for acquisition of Aircrafts, during the intermediary period before arrangement of long term finance / sale thereof , as borrowings and as such these are treated as long term monetary items for the purpose of capitalization under the amended AS-11.

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b) Exchange difference arising out of settlement and reporting of foreign currency borrowings other than long term monetary items as stated in Accounting Policy No. 8 (ii), in relation to amount of principal of these foreign currency borrowings to the extent of difference between the interest on local currency borrowing and the interest on foreign currency borrowings is being accounted as Foreign Exchange loss/gain instead of borrowing costs and charged to the Statement of Profit and Loss. However, it does not have any impact on the loss for the year.

c) Transaction relating to Foreign Inventory Procurements and Closing balances of certain foreign currency monetary items, have not been translated at the date of transaction/in accordance within the provisions of AS-11 due to complexity of transactions. The impact of translation of these balances is not ascertained; however the same is not likely to be material.

33. Accounting Practices Followed

a) Maintenance of adequate records for scrap sale and consumption of non-aircraft material is under process. As per past practice these are accounted for on cash basis based on the scrap sale/consumption reports received.

b) As per consistent practice being followed the claims for reimbursements from employees availing medical, educational and other leave without pay, claims of interest from suppliers / other parties are accounted for on cash basis due to uncertainties involved. Other staff claims and lost baggage claims are recognized on cash basis consistently.

c) Liability for amounts payable towards IATA dues, liabilities for expenses and manufacturers' credits are recognized to the extent of claims/ invoices received.

d) Due to the complexities of the transactions the reversal of CENVAT credit for non-taxable services is being accounted for on estimated basis instead of the requirement of Rule 6 (3) of the Cenvat Credit Rules 2004.

34. Confirmations/Reconciliations

a) The balance confirmation were sought for most of the receivables and payables (except for Trade Receivables amounting to Rs. 333.4million, Trade Payables amounting to Rs.87.27miliion, Loans and Advances of Rs.559.89 million, Deposits amounting to Rs.34.51 million and Other Liabilities amounting to Rs.458.62 million for which no confirmation were sought) including Oil Marketing Companies, however some of the parties only have responded. Wherever the balances confirmed by the parties are not in agreement, the reconciliation is under process.

b) The process of identification of unmatched receivables and payables (including items migrated to SAP at block level instead of line items and certain bank balances grouped under receivables) is still under process of matching/reconciliation. Impact, if any, of consequential adjustment arising out of reconciliation will be dealt with in the year of completion of reconciliation.

c) The Service Tax including Input credit to be availed , Tax Deducted at source (TDS), Refunds to be received in respect of Income Tax, VAT, Employee Provident Fund (EPF), Employee State Insurance Scheme (ESIS), Profession Tax, Airport Tax and Revenue Related taxes are being reconciled to be in line with the Returns filed/ statutory records maintained.

d) Air India Ltd. has made provision of Rs 618.3 million (Previous Year: Rs.686.7 million),towards Preferred Agents Programme and Corporate Incentive on estimate basis pending receipt of data and corporate/agent-wise details from respective user department. The management is taking steps to compile the data relating to liability in this regard and necessary accounting adjustment if any required shall be carried out in due course.

e) Certain Ledger accounts in SAP is under process of reconciliation to overcome the issues faced due to wrong ledger mapping in SAP system, delay in updation of data/ Accounting entries in

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SAP system and lack of uniformity to be maintained by all the regions/locations is under process of strengthening. The consequential impact remains unascertained.

f) The difference between Pax/Cargo credit sales and related intermediary sales accounts maintained by stations is under process of reconciliation by the outsourced service provider.

g) Cost Sharing Arrangement between Hotel Corporation of India Ltd. and J & K government has been settled. However the receivable from J&K Government in respect of cost sharing with SKICC amounting to Rs 86.51 million and the payable to J & K Government on account of joint construction amounting to Rs 39.67 million, lease premium Rs. 2.71 million and lease rent Rs. 2.44 million aggregating to Rs. 44.82 million and amount receivable on account of joint construction is Rs. 41.78 million are subject to reconciliation and confirmation.

h) During 2002-03, Hotel Corporation of India Ltd. accounted for Rs 29.8 million as receivable from M/s Sahara Hospitality Ltd on account of Net Current Assets transferred to the respective buyers of Centaur Hotel Mumbai Airport. The buyers M/s Sahara Hospitality Ltd. disputed the same. Based on the Arbitration award the amount receivable from M/s Sahara Hospitality Ltd. is Rs 18.8 million plus legal costs Rs 4 million. The accounts have been suitably adjusted to the extent of award amount of Rs 18.8 million in the earlier year. Against the said Award, the buyers preferred an appeal in the High Court of Bombay. In July 2015 the Company has received order from High Court which is in favour of the buyer, which has been challenged by the Company before the Division Bench of the Hon'ble High Court of Bombay. In the opinion of the Management, the amount receivable from M/s Sahara Hospitality Ltd Rs 18.8million are considered good for recovery and the shortfall, if any, will be adjusted in the year in which finality is reached based on the award of the High Court of Bombay.

i) Dues of Provident Fund and ESI of Hotel Corporation of India Ltd. aggregating to Rs.18.423 million (Previous Year-54.09 million) which are relating to Chefair Delhi and T-3 lounge aggregating to Rs.11.98 million are subject to reconciliation and hence the differences , if any arising therefrom will be adjusted in the year in which finality is reached.

35. Internal Control

The Group Companies are in the process of strengthening the internal audit process so as to ensure the coverage of all the areas as envisaged in the Minimum Audit Programme and ensure effective internal controls at stations, regional offices, user departments and Central Accounts Office. Two independent Chartered Accountants firms have been appointed by Air India Ltd. for strengthening its internal audit process.

36. Cash and Bank Balances

a) The process of year end physical verification of cash in hand and cheques in hand in Air India Ltd. is being reviewed in order to cover the entire cash balance under physical verification through officials other than those holding the cash balances. Reconciliation / Confirmation from Certain Banks including those bank balances which are grouped under Trade Payables is under progress. Impact if any, is not ascertainable.

b) During the year 2013-2014, Air India Ltd. identified shortage of cash amounting to AUD 147,061.97 equivalent to Rs 8.4 million. Shortage of cash was further enhanced during the year to AUD 202,002.63 equivalent to Rs. 9.8 million based on reconciliation with original supporting records of receipts (including tickets sold) and expenditure at the station. Provision for the same

sthas been made during the year as on 31 March 2015.

c) Certain irregularities of cash at Moscow station of Air India Ltd. have come to the notice of the management which is being investigated.

d) Rs. 300 million realized after the invocation of the Bank Guarantee of M/s GATI Ltd. has been shown as payable in the books, as the matter is under dispute and the same has not been adjusted against freighter dues.

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37. Foreign Stations have not been visited by the auditors during the year for the audit review and have relied upon the entries made in SAP and the summary returns received from the foreign stations.

38. Sales Related Matters:

a) Dues from erstwhile GSA appointed by Air India Ltd. amounting to Rs.68.4 million (Previous Year: Rs 145.7 million) is outstanding beyond credit period includes an amount of Rs.34.6 million (Previous Year: Rs 46.3 million) which has been disputed by GSA hence no confirmations has been provided by GSA Agents for disputed amounts. No provision has been considered necessary since these are being followed up with the respective agents.

b) During the year provision has been made by Air India Ltd. for an amount of Rs 92.2 million (Previous Year: Rs.537.0 million) against defaults from agents.

39. Inventories

a) The physical verification of migrated (unserviceable) inventory has been completed during the last year 2013-14 by an external firm of Chartered Accountants. The discrepancy noticed have been sent to the various shop floor levels for identification and taking necessary corrective action which is still under process. The financial impact is not ascertainable.

b) The work order suspense account, include expendable items of Rs.1254.25 million (Previous Year: Rs. 879.5 million) which are to be charged off to consumption on issuance. As against the above, a provision of Rs. 627.17 million (Previous Year: Rs. 498.5 million) has been retained and accounting for the remaining items shall be done as and when these work-orders are closed in the RAMCO system.

c) Pending reconciliation /rectification of inventory balances, no provision has been made towards the inventory balances up to March 2014 aggregating to Rs.1043.3million (Previous Year: Rs. 1485.1 million) lying under various intermediary suspense head under RAMCO System for which consumption/issue/ scrappage has not been updated till 31/03/2015. Necessary accounting adjustments required shall be carried out in due course.

d) Air India Ltd. carries inventory of CF6 engines, relating to the phased out fleet of aircraft, amounting to Rs 503.7 million (Previous Year: 801.3 million). However the use of these spares on other aircraft types needs to be ascertained by its subsidiary company AIESL for possible transfer of these Inventories to them. Pending this no provision for obsolescence has been created in the accounts of Air India Ltd.

e) The accounting of FDI (Freight, Duty and Incidentals) in RAMCO is done by Air India Ltd.on block level instead of at transaction level. The company is streamlining the process for capturing such cost in RAMCO at transaction level so as to arrive at the correct weighted average cost of inventory. The precise financial impact of the above is being ascertained and shall be accounted for in due course.

f) Air India Ltd. continues to hold standby equipment/machinery spares/insurance spares as part of the inventory since these items can be used for both the purposes of modification in the aircraft and also for maintenance jobs as well as for outside repairs. No depreciation on the same is being charged.

g) Provision of Rs.5578.15 million (Previous Year: Rs.13709.03 million), has been made due to Obsolescence / Inventory Reconciliation/slow moving inventory. Wherever possible the value of the Inventory has been written down against the provisions available to bring it in line with the Actual serviceable inventory carried in the books.

40. Impact due to Change in Accounting Policy

Air India Ltd. has changed its accounting policy in respect of Repairable Spares. A Repairable is defined as an item whose operating cycle is more than 12 months and can be continuously repaired until scrapped. Henceforth, Repairable Spares are being classified as Fixed Assets instead of inventories as classified earlier. Further, AIATSL has changed its accounting policy during the year from WDV to SLM

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basis. As a result of change of these Accounting Policies, Inventory has reduced by Rs.8338.9 million and Fixed Asset is increased by Rs.8564.8 million. . Had these changes in the Accounting Policies not been carried out the loss for the year would have been higher by Rs 659.10 million

41. Mumbai International Airport Ltd (MIAL)

i) Air India Ltd. is under a monthly payment plan with MIAL to clear the outstanding dues in respect to UDF/ADF/PSF through IATA/BSP Escrow account w.e.f. Feb'14 @ Rs 100 million pm and thereafter from July'14 @ Rs. 120 million pm and the rest through periodical daily payment which would gradually extinguish all the outstanding. Accordingly as on 31-03-2015 the outstanding dues including Contingent Liability as per books amount to Rs 2,305.6 million (Previous Year: Rs 3,184.8) out of which the undisputed dues are Rs 462.9 million (Previous Year: Rs 2,100.8 million) and Rs 1,890.1 million (Previous Year: Rs 1,148.9 million) is provided as contingent liability.

The accounts with MIAL are however subject to confirmation, reconciliation and accounting adjustments, the impact, if any, arising out of the same is not ascertainable.

ii) Further, in case of Hotel Corporation of India Ltd., provision for lease rental payable to MIAL for Chefair Flight Catering Mumbai has not been made of Rs.9.48 million(Previous Year 8.38 million). Also, interest on amount due amounting to RS.42.84 million (Previous Year Rs.34.41 million) has not been provided.

42. Cochin International Airports Ltd (CIAL)

As per the confirmation received from CIAL to Air India Ltd., the dues as per their books as on 31.03.2015 is Rs 90.2 million (Previous Year: Rs. 328.7 million). As per AI books, the total dues payable to CIAL is Rs.72.5 million (Previous Year: Rs.71.4 million). Bill wise details of the dues outstanding & balance difference are being compiled and the account is under reconciliation.

43. Delhi International Airport Ltd (DIAL)

i) The outstanding liability as per the records of Air India Ltd. as on 31.3.2015 is Rs.3,852.1 million (Previous Year: Rs 4,866.8 million) and after adjusting certain amounts the net payable to DIAL is Rs 3,797.8 million (Previous Year: Rs 4,763.3 million) as against the Rs.3,796.8 million shown by DIAL (Previous Year: Rs.4,831.3 million). Besides, there were certain disputes regarding space areas/parking charges, cargo charges and interest. However, a contingent liability of Rs 1,290.0 million (Previous Year: Rs 1,076.3 million) has been made towards the claims of interest from DIAL.

ii) Further, in case of Hotel Corporation of India Ltd., provision for lease rental payable to DIAL for Centaur Hotel Delhi Airport and Chefair Flight Catering Mumbai has not been made of Rs.45.38 million(Previous Year 45.13 million). Also, interest on amount due amounting to Rs.123.58 million (Previous Year Rs.117.276 million) has not been provided.

44. Airports Authority of India (AAI)

i) All bills received from AAI .upto 2014-15 have been duly accounted for and necessary provisions have been made in the books wherever bills have not been received. As per its books, there is a firm liability to the tune of Rs 13031.87 million (Previous Year: Rs 9,257.7 million)(including Liabilities provided by AASL for landing & parking charges which is under reconciliation) and a Contingent Liability of Rs 2,413.5 million (Previous Year: Rs 1,421.6 million), out of this amount the Contingent Liability on account of interest is Rs 2,390.8 million (Previous Year: Rs 1,408.3 million). For the early liquidation of AAI dues, Air India Ltd. has

ndopened an Escrow Account for the payment of PSF & UDF dues of AAI effective 2 Fortnight of July'2014 to which the company is depositing Rs 120.0 million per month which was subsequently revised to Rs 180.0 million per month effective June 2015. Further, as per the decision taken by MoCA, AI is paying Rs 150.0 million per month from June 2015 for the

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liquidation of other AAI dues. The account with Airport Authority of India are however subject to confirmation, reconciliation and accounting adjustments, the impact, if any, will be accounted for in the year of adjustment.

ii) In case of Hotel Corporation of India , no provisions have been made for lease rentals and turnover levy payable upto 2 May 2006 amounting to Rs.202.76million (Previous Year 202.76

stmillion) and for interest on amount due as on 31 March 2015 of Rs.142.18 million(Previous Year 130.33 million).

45. Greater Hyderabad International Airport Ltd (GHIAL)

As per the confirmation received from GHIAL, Hyderabad, the dues as per their books against Air India Ltd.as on 31.03.2015 is Rs. 1,328.3 million (Previous Year: Rs 1,982.5 million). However as per Air India Ltd. books total dues payable is Rs. 534.7 million (Previous Year: Rs 1,384.4 million). The major reason for the difference is on account of Interest amounting to Rs 719.0 million (Previous Year: Rs. 551.0 million) claimed by M/S GHIAL on account of delayed payments is not accounted as the company has disputed the same. However, same is disclosed as Contingent Liability. The account with M/S GHIAL is under reconciliation and necessary accounting adjustment will be done in due course.

46. Segment Reporting

a) The details of geographical area wise revenue earned (derived by allocating revenue to the area in which the sales were made) are given here under:

(Rs in Millions)


a) USA/Canada 17630.9 17346.6

b) UK/Europe 16191.7 14606.1

c) Asia (excluding India, Africa & Australia) 29251.0 27356.5

d) Gulf 13417.1 12177.1

e) India 150965.4 135873.9

Total 227456.1 207360.2

b) Major revenue-earning asset are the aircraft fleet, which are flexibly deployed across national and international route network. There is no suitable basis for allocation of assets and liabilities to geographical segments. Consequently area-wise assets and liabilities are not capable of ascertainment.

c) Segment details revenue in respect of joint venture has not been given since the operations cannot be divided between joint venture parties.

47. Related Party Transactions:

i) The Holding Company and its subsidiaries companies are State Controlled enterprise as defined under AS-18 (Para 9) and hence transactions undertaken between them do not fall within the definition of related party transactions. Therefore, transactions between State Controlled Holding and Subsidiaries have not been disclosed.

ii) There are no other transactions with key managerial personnel except Remuneration and Perquisites paid to Chairman & Managing Director and Functional Directors and Sitting Fees to Independent Directors.

However, other related information as required by Accounting Standard (AS-18) are given below:

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A. Key Management Personnel & Relatives :

(During FY 2014-15 and till September 2015)

Sr.No. Name Position on Designation Board

1 Mr. Ashwani Lohani CMD Chairman & Managing Director (Appointed as Director effective 28 September 2015)

2 Mr. Rohit Nandan CMD Chairman & Managing Director (Ceased to be CMD effective 27 September 2015)

3 Mr.Syed Nasir Ali Functional Director Joint Managing Director (Ceased to be JMD effective 20 December 2014)

4 Mr. S Venkat Functional Director Director- Finance

5 Mr. Nikhil Kumar Jain Functional Director Director-Personnel

6 Mr.Pankaj Srivastava Functional Director Director-Commercial 7 Mr. Gurcharan Das Independent Director Management Consultant & Author

8 Dr. Prem Vrat Independent Director Pro Chancellor & Professor, ITM University, Gurgaon

9 K.K.Nohwar Independent Director Air Marshal (Retd) PVSM Vm

10 Dr. Ravindra H.Dholkia Independent Director Professor, IIM, Ahmedabad

11 Ms. Renuka Ramnath Independent Director Founder-Multiples Alternate Asset Management Private Limited, Mumbai

12 Ms. M Sathiyavathy Govt. Nominee AS & FA, Ministry of Civil Aviation (Ceased to be Director effective 11 February 2015)

13 Shri S S Mohanty Govt. Nominee AS&FA, Ministry of Civil Aviation (Appointed effective 11 February 2015 and ceased to be Director effective 6 May 2015)

14 Ms GargiKaul Govt Nominee JS&FA, Ministry of Civil Aviation (Appointed as Director effective 6 May 2015)

15 Mr G Asok Kumar Govt. Nominee Joint Secretary, Ministry of Civil Aviation (Ceased to be Director effective 23 April 2014)

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16 Mr. Arun Kumar Govt. Nominee Joint Secretary, Ministry of Civil Aviation (Appointed effective 23 April 2014 and ceased to be Director effective 1 January 2015)

17 Shri B S Bhullar Govt Nominee Joint Secretary-Ministry of Civil Aviation (Appointed as Director effective 1 January 2015)

18 Mr Willy Ko Director Director & CEO

Changes during FY 2014-15 and till September 2015.


1 Shri Syed Nasir Ali Functional Director Joint Managing Director (Ceased to be JMD effective 20 December 2014)

2 Smt M Sathiyavathy Govt.Nominee AS & FA, Ministry of Civil Aviation (Ceased to be Director effective 11 February 2015) 3 Shri S Smohanty Govt Nominee AS & FA, Ministry of Civil Aviation (Ceased to be Director effective 6 May 2015)

4 Shri G Asok Kumar Govt. Nominee Joint Secretary, Ministry of Civil Aviation (Ceased to be Director effective 23 April 2014)

5 Shri Arun Kumar Govt Nominee Jt Secretary-Ministry of Civil Aviation (Ceased to be Director effective 1 January 2015)

A. Joint Working Group Arrangement:

Joint Working Group with M/s.Hindustan Aeronautics Ltd (HAL), Bengaluru.

The handling activities for HAL which were earlier provided by Air India have been transferred to AIATSL during current year and the revenue henceforth will be shared by HAL with AIATSL for which agreements between both will be executed in due course.

HAL has withheld an amount of Rs. 99.6 million (Previous Year: Rs.99.6 million) from the settlement of AI profit share in the HAL- AI JWG at Bengaluru due to pending litigation, which has been provided for.

B. No loans or credit transactions were outstanding with Directors or Officers or their relatives at the end of the year which is required to be disclosed in accounts under the Companies Act, 2013.

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C. In the opinion of Air India Ltd., the agreements with various Airlines, private parties termed as “Joint Operations/Code-share Agreements” do not fall within the definition of Joint Venture as mentioned in Accounting Standard (AS-18) and (AS-27), hence are not included in above disclosures.

48. LEASES:

(A) Finance Leases

a) The cost of Aircraft fleet and Equipment acquired on finance lease is Rs.226,152.6 million (Previous Year: Rs. 237,257.8 million). The future lease obligation is Rs. 120,598.7 million as at March 31, 2015 (Previous Year: Rs.140,338 million).

b) Liability on account of future minimum lease rentals is as under: (Rs in Millions)

Particulars As at 31.03.15 As at 31.03.14

a) Outstanding balance of minimum lease payments including interest thereon - Not later than one year 20,240.0 26,485.1

- Later than one year and 84,831.4 79,929.6 not later than five year

- Later than five years 20,594.9 40,640.1

Total 125,666.3 147,054.8

b) Present Value of (a) above

- Not later than one year 18,749.9 24,727.3

- Later than one year and 81,447.8 75,529.1 not later than five year

- Later than five years 20,400.9 40,081.5

Total (*) 120,598.6 140,337.9

c) Finance Charges 5,067.6 6,716.9

Note: Interest has been calculated assuming LIBOR as 0.5%

(B) Operating Lease

a) The future minimum lease rent payable as at March 31, 2015 is Rs.94,388.9 million (Previous Year: Rs.6,18,82.9 million).

The details of liability of above in respect of future minimum lease rent payable are:

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(Rs in Millions)


a) Not later than one year 9,875.7 8,378.2 b) Later than one year and 37,179.3 22,021.3 Not later than five years c) Later than five years 47,334.0 31,483.5 Total 94,389.0 61,883.0

However, in case of premature termination, the Lessee is required to pay the Lessor as per the terms of the agreement.

Lease rent expenses, in respect of aircraft taken on lease recognized in Profit & Loss Account for the year is Rs.8,949.81 million (Previous Year Rs.7,952.3 million).

b) Air India Ltd has taken various residential/commercial premises under cancellable operating lease. The details relating to expired leases out of the above are being compiled.

c) Air India Ltd had entered into a Sale & Leaseback Agreement for 7 A320 aircraft in March'2007. At the end of the SLB term of these aircraft, the Company has entered into a fresh agreement with the Lessor M/s Investec in September'2013. As per the terms of the new agreement, the Company paid @ USD 4.1 Million per aircraft as Release Amount in consideration of the Lessor releasing the Lessee from all the obligations of redelivery of aircraft in redelivery condition stipulated under the original lease agreement.

Total Release Amount of Rs.1269.4 Million charged off to Profit and Loss A/c of Air India Ltd. are as under.

(Rs in Millions)

S.No Year Amount

1 2013-14 318.6 2 2014-15 634.7 3 2015-16 316.1

d) Air India Ltd. has taken Vehicles and Office Equipment on operating lease with option to purchase but title may or may not eventually be transferred. These assets are scattered at various stations and cumulatively not significant. Complete details of future obligation in this respect could not be compiled; amount thereof is not material, hence not disclosed.

49. Payments to and Provisions for Employees:

a) Liability for wage arrears of Air India Ltd. includes Rs.2091.3 million (Net) (Previous Year Rs.2, st

386.4 million (Net) arrived on ad-hoc basis towards wage settlement up to period 31 December 2006 pending finalization of actual liability.

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b) In view of Department of Public Enterprises (DPE) guidelines applicable to PSUs no wage revision can be granted to the employees of loss-making PSUs. Air India Ltd. has been making losses since 1st January 2007 hence no provision has been made towards wage revision/settlement.

c) In terms of new wage agreement with Crew Union, an adhoc provision of Rs.500.4 million is being carried in the books of accounts of Air India Ltd. towards arrears of flying allowance.

50. Employee Benefits

(A) General description of Defined Benefit Plan

a) Gratuity: Gratuity is payable to all eligible employees of the Company on superannuation, death, or permanent disablement, in terms of the provisions of the Payment of Gratuity Act.

b) Privilege Leave Encashment: Privilege Leave Encashment is payable to all eligible employees at the time of retirement upto a maximum of 300 days. However, lapsable Privilege Leave which was hitherto allowed to be encashed has been discontinued

steffective 1 April 2013 (except the employees working in operational areas) and the employees have to avail the same.

c) Sick Leave Encashment: Sick Leave encashment is payable to all eligible employees at the time of retirement upto a maximum of 120 days subject to the condition that the employee should have at least 60 days of Sick Leave to his credit. It was also decided that sick leave standing to the credit of all existing employees as on 01.07.2012 shall stand frozen and the employee would be allowed to encash the same only at the time of retirement provided that he/she has not exhausted that leave by the time of retirement. Further, it was decided that encashment of sick leave which has accrued beyond 01.07.12 will not be allowed and the employee has to avail the same or the same will lapse.

(B) Defined Contribution Plan

Employees Provident Fund: The Company has Employees Provident Fund Trusts under the Provident Fund Act 1925, which governs the Provident Fund Plans for eligible employees. The Company as well as the employees contributes 10% of the PF Pay to the Fund out of which Provident Fund is paid to the employees. The Confirmation / Reconciliation of Company's Accounts with Employees Provident Fund Trust Accounts is under progress.

(C) Defined Benefit Plans – Gratuity & Post-Retirement Medical Benefits (Unfunded)

a) Necessary salient information in relation to AS-15 – Retirement Benefits for the entities in the group is not available in its entirety, hence, the same is not presented in the Consolidated Financial Statements.

b) In the absence of statistics for Post-Retirement Medical Benefits (after amendment of the scheme i.e. for enhanced Contribution for Medical Benefits) Air India Ltd. has decided to make an adhoc provision of Rs 500 million till:

i) Adequate statistics are collected; ii) The actuarial valuation is done in due course.

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c) The provision for Gratuity and Leave encashment has been provided based on the revised pay structure only for those employees for whom the JDC recommendations

sthad been implemented by Air India Ltd. as on 31 March 2015. In respect of those categories i.e. Pilots, Cabin Crew and Service Engineers for which recommendations are still to be implemented the actuarial liability has been provided on the old pay structure as the impact could not be ascertained. The actuarial liability of the employees transferred to the Subsidiary Cos viz. AIESL and AIATSL has been transferred to the Subsidiary Cos and shown as recovery from the Air India.

51. Deferred Tax Assets

i) During the year Deferred Tax Asset has been recognized only to the extent of Deferred Tax Liability as shown below:

(Rs in Millions)

Particulars As on 1.04.2014 DTA/DTL during As on 31.03.2015 the year

Deferred Tax Liability Related to fixed asset 74,013.4 1,082.4 75,095.8

Related to FCMI 1,051.2 19.5 1,070.7

Total 75,064.6 1,101.9 76,166.5

Deferred Tax Asset

Unabsorbed depreciation 55,916.4 1,661.6 57,578.0 Business loss 43,029.9 440.0 42,589.9 Other disallowance under income tax act 4,560.0 3.0 4,557.0 Total 103,506.3 1,218.6 104,724.9

Deferred Tax Asset/(Liability) Net 28,441.7 116.7 28,558.4

ii) As per the Turnaround Plan of Air India Ltd. the Govt. of India has also approved the infusion of equity of Rs.302, 310.0 million upto 2021 apart from reimbursement of interest on NCDs which included Upfront equity infusion of Rs. 67,500.0 million; Equity infusion for funding cash deficit Rs. 45,520.0 million (FY 2013 to FY 2021); Equity for guaranteed aircraft loans FY 2021 of Rs.189,290.0 million.

iii) The Govt. of India has so far infused Rs. 189,800.0 million up till 31.03.15 under FRP/TAP of Air India Ltd. and a further amount of Rs 33,000.0 million (including additional provision of Rs 8,000.0 million in the Supplementary Budget) is proposed to be infused during FY 2015-16 out

thof which Rs 23,320.0 million has already been infused up till 30 Sept'15. There has been a substantial improvement in the performance of the Company in the year 2014-15 vis-à-vis 2013-14 in terms of Operational Parameters which has resulted in the reduction of Operating Loss during the year when compared to the previous year. The reduction in the fuel prices by nearly 40% during 2015-16 as compared to the first half of 2014-15 has also helped the company to cut cash losses.

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th iv) Air India Ltd. joined Star Alliance with effect from 11 July 2014 which would provide global

connectivity to the airline. The joining of the Star Alliance would provide AI access to 1269 destinations in more than 193 countries around the world with a network of over 18043 flights. AI would therefore, get access to a vast global network offering unmatched reach and connectivity.

v) As a result of the aforesaid measures, AI achieved EBITDA positive status in 2012-13 and 2013-14 and is expected to be Cash Positive in 2018-19 & PAT Positive in 2021-22. With the fall in fuel prices and interest rates softening it is expected that the return to Cash Positive status would be much quicker than originally anticipated under the TAP. SBI Caps have been appointed to do on an interim assessment of the implementation of the TAP and FRP and suggest any remedial measures for midcourse correction. Though the Company was able to achieve substantial targets under most of the parameters set under the TAP and FRP, it could not make much headway in the achievement of targets laid down for Monetization of Assets and acquisition of aircraft on lease which in turn resulted in additional interest burden to the Company

vi) In view of the foregoing, the company is hopeful of adjusting the Net Deferred Tax Assets against future taxable profits. Further, it is stated that the Deferred Tax Assets created against Business Losses and Other Disallowances under IT Act are still available to the company and not lapsed.

52. Earnings Per Share (figures to be calculated as per consolidated P/L Accounts (Rs in Millions)


Profit/(Loss) After Tax & Before Extra Ordinary Items (63243.50) (75044.30)

Less: Extra-Ordinary Items 439.30 6128.50

Profit/(Loss) After Tax & Extra Ordinary Items (62804.20) (68915.80)

Weighted Average No. of Shares 16705019178 13181164384

EPS Basic & Diluted

a) Before Extra Ordinary Items (Rs per Share) (3.79) (5.69)

b) After Extra Ordinary Items (Rs per Share) (3.76) (5.23)

53. The Micro, Small and Medium Enterprises Development Act

The data related to Micro Small and Medium Enterprises is not available and is in process of compilation/ updating masters in SAP. However payments to such undertakings covered under the Micro, Small and Medium Enterprises Development Act (to the extent identified) have been made within the prescribed time limit/date agreed upon with the supplier and hence no interest is payable for delayed payments. In other cases, necessary compliance/disclosure will be ensured in due course.

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54. Remuneration to Auditors

The details of the audit fees and expenses of the Auditors:- (Rs in Millions)


Audit Fees – For the year 10.6 10.1

Fees to Taxation Matters 0.8 0.2

Out of Pocket Expenses (*) 4.9 1.5

For Other Services 0.2

Total 16.3 12.0

(*) Accounted on Payment Basis

55. Financial Restructuring Plan

Financial Restructuring Plan (FRP) was implemented by Air India Ltd. on 1st October 2011 to realign Working Capital borrowings of the Company as on 30th September 2011 in order to provide relief to the Company. FRP provided relief to the Company in the form of reduction in interest rate, rates in case of INR loans ranging from 12 % to 13% to the uniform floating rate to 11% on Short term loan (STL), and Long Term loan (LTL), Funded Interest Term Loan (FITL) and Assessed Working Capital.

All Banks participating in the FRP have confirmed balances as on 31st March 2015. However, there are few differences between balances as confirmed by the Banks vis-a-vis balances as per Air India which are under reconciliation. A part of these differences have since been reconciled and rectified by the Banks. Correspondence with Banks is in progress for reconciling the remaining differences as on 31st March 2015.

Equitable mortgages of immovable properties have been created for 5 properties at Chennai, Hyderabad and Delhi out of the total 12 properties by Air India Ltd. as stipulated in the FRP. Pursuant to the FRP, during FY 2014-15, GOI has infused Equity to the tune of Rs 57,800.0 Million. Thus, total Equity Infusion under FRP as on 31st March 2015 aggregated to Rs 189,800.0 million.

56. Going Concern

In order to improve its operational & financial performance, of Air India Ltd. has formulated a TAP which entails both operational & financial turnaround of the company. Based on the company's assumption on Turnaround Plan (TAP) which has been independently vetted by consultant, a Financial Restructuring Plan (FRP) has been prepared and implemented effective 1st October 2011 which envisages aligning of the debt repayments of the Company in line with the projected Cash Flows.

Due to the support of GOI as well as the various measures taken by the Company towards improving its operating and financial position, it is expected that the financial condition of the company would continue to improve in the future. With the recent steep fall in fuel prices in FY 2015-16 and softening of interest rates it is expected that the Company would become operationally profitable and a modicum profit of Rs 60.0 million has been projected in the FY 2015-16. However Exchange rate continues to be a worrying factor. Barring unforeseen circumstances the Company hopes to return to Cash Positive status earlier than contemplated under the TAP. The Accounts are therefore being prepared on the 'Going Concern' basis.

Further, Hotel Corporation of India Ltd. is facing severe liquidity crunch due to various factors like operational losses and its financial and operating performance has been affected in recent years due to

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a number of external and internal factors. The accumulated losses have exceeded the net worth of the company. The company has experienced delayed payments to the lenders, creditors and its employees.

However the management of the company with the support of the Government of India (GOI) is committed to the complete revival of the company by putting in place a Business Plan. Various initiatives have been taken by the management for improving the operational performance of the company and increasing the revenues leading to improved financial performance. Besides, the Company is to upgrade all the properties of the company, during the 12th Five Year Plan (2012-17). In order to facilitate this process, the Government of India has infused equity of Rs 100 million in financial year 2013-14 and received further infusion of Rs 120 million for which equity shares will be issued in financial year 2015-16. These funds are to be utilized for renovation of its properties in Delhi and Srinagar. As on 1.3.2014, as per the decision of the Cabinet, GOI, the retirement age of the employees of the Company has been reduced from 60 to 58. . This would result in substantial savings.

57. Long Term Loans & Advances includes Rs 1517.2 million (Previous Year: Rs 191.3 million) being the difference between Holding Company and its Subsidiary Companies Inter-Company transactions The impact of the adjustments that needs reconciliation is not ascertainable.

58. Previous Year figures have been re-grouped/re-arranged wherever considered necessary to be compatible with the Schedule III of the Companies Act 2013, to the extent of information being available and practicable of compilation.

Signatures to the Schedules forming part of the Balance Sheet and Statement of Profit and Loss and to the above notes.











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