consolidated financial statements of air india group · 2019-02-21 · (i) as per para 19 of ind as...

CONSOLIDATED

FINANCIAL STATEMENTS

OF AIR INDIA GROUP

CFS

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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 OF AIR INDIA LIMITED FOR THE YEAR ENDED 31 MARCH 2018

The preparation of consolidated nancial statements of Air India Limited for the year ended 31 March 2018 in accordance with the nancial reporting framework prescribed under the Companies Act, 2013 (Act) 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 nancial 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 20 November 2018.

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 nancial statements of Air India Limited for the year ended 31 March 2018. We conducted a supplementary audit of the nancial statements of (Air India Limited, Air India Express Limited, Hotel Corporation of India Limited, Air India Engineering Services Limited, Air India Air Transport Services Limited, Airline Allied Services Limited), but did not conduct supplementary audit of the nancial statements of (Nil) for the year ended on that date. Further, section 139(5) and 143 (6) (b) of the Act are not applicable to (Air India SATS Airport Services Private Limited) being private entity, for appointment of their Statutory Auditor nor for conduct of supplementary audit. Accordingly, C&AG has neither appointed the Statutory Auditors nor conducted the supplementary audit of this company. 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 signicant 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 nancial statements and the related audit report:

A� COMMENTS ON PROFITABILITY

Expenses

Employee Benefit Expenses (Note 22): ₹ 47523.2 million

1. Above does not include provision amounting to the extent of ₹. million towards medical benets 7924 made during the year and booked to Prior period expenses. As per para 37 of Ind AS 8, 'to the extent that a change in an accounting estimate gives rise to changes in assets and liabilities, or relates to an item of equity, it shall be recognised by adjusting the carrying amount of the related asset, liability or equity item in the period of the change.'

During 2016-17 the company, in the absence of statistics of required beneciaries for post-retirement medical benets, had decided to make an adhoc provision during the year. During the current year 2017-18 the company has made an estimate based on actuarial valuation. As it is only a change in estimate, the amount should have been recognized by adjusting the medical expenditure during the current year i.e., in the period of change.

Hence charging of medical benets to Prior Period Expenses is not in compliance with Ind AS 8 and has resulted in understatement of current year expenses, current year loss and overstatement of prior period expenses by ₹. 7924 million.

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B.� COMMENTS ON FINANCIAL POSITION

Assets

Non-Current Assets (Note 1)

Property Plant & Equipment –₹. 298170.9 million

Engine Hot and Core Section

2. The above includes ₹.128.81 million being residual value of assets derecognised during the year (₹.

73.45 million) and previous year (₹. 55.36 million). As per paragraph 68 of Ind AS 16, the gain or loss arising from de-recognition of an item of property, plant and equipment shall be included in prot or loss when the item is derecognised. Further as per paragraph 71, the gain or loss arising from the de-recognition shall be determined as the difference between the net disposal proceeds, if any, and the carrying amount of the item.

Retaining of residual value of derecognised assets in nancial statement is not in compliance with Ind AS 16. This has resulted in overstatement of the Asset- Engine Hot and Core Section by ₹. 128.81 million, the

prot for the year by ₹. 73.45 million and the retained earnings for the year 2017 by ₹. 55.36 million.��

Other financial assets –₹.1534.1 million (Note 5)

3. The above includes ₹. 183.32 million being insurance claim receivable. vide Note 41, Company disclosed that ling of the above insurance claim with insurance company is still pending and accounting of the same is a deviation from accounting policy 3 VI(e) i.e. the claim receivable from the insurance company is accounted for on the acceptance by the insurance company on such claims.

As per paragraph 18 of Ind AS 1, an entity cannot rectify inappropriate accounting policies either by disclosure of the accounting policy used or by notes or explanatory material. Further as per paragraph 27 of Ind AS 1, an entity shall prepare its nancial statements, except for cash ow information, using the accrual basis of accounting.

Accounting of unaccrued insurance claim of ₹. 183.32 million in deviation from the accounting policy of the Company is not in compliance with provision of Ind AS 1. This has resulted in overstatement of the insurance claim receivable and the prot for the year by 183.32 million.₹.

4.� This includes an amount of ₹. 18.90 million receivable from M/s. Sahara Hospitality Limited the buyer of Centaur Hotel Mumbai Airport, on account of sale of properties, keeping in view the Agreement to Sell dated 18 April 2002.

As per Note 37 (iii), the Hon'ble Arbitral Tribunal had published their award under which the buyer was to pay an amount of ₹. 18.90 million and interest thereon along with legal cost of ₹. 0.04 million. The

Company had recognized an amount of ₹. 18.90 million in the books of account as receivable from the buyer. However, the buyer preferred an Appeal in Hon'ble High Court of Bombay against the award and in July 2015, the High Court set aside the arbitration award and passed an order in favour of the buyer. This has been challenged by the Company before the divisional bench of the Hon'ble High Court which has been admitted and is pending for hearing.

As per Para 31 to 35 of Ind AS 37 (Provisions, Contingent Liabilities and Contingent Assets), 'An entity shall not recognize a contingent asset. Contingent assets usually arise from unplanned or other unexpected events that give rise to the possibility of an inow of economic benets to the entity. An example is a claim that an entity is pursuing through legal processes, where the outcome is uncertain. Contingent assets are not recognized in nancial statements since this may result in the recognition of income that may never be realized.'

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Since the Hon'ble High Court has set aside the said arbitral award, receipt of the said amount has become contingent. Inclusion of ₹. 18.90 million as receivable resulted in overstatement of long term loans & advances and understatement of accumulated loss by same amount.

Intangible Asset-₹.3115.4 million (Note 1)

5.� In 2014-15, the Company has capitalised assets under the head “Other Intangible Assets” for an amount of ₹.2713.8 million incurred during the period October to December 2014 on payment of payroll expenses, staff expenses, gratuity/leave salary expenses and other general expenses to obtain CAR 145(license from DGCA for carrying out MRO services). Capitalisation of these expenses under “other Intangible Assets” was not in accordance with accounting standards, basic accounting assumptions and principles and accordingly qualied by the Statutory Auditors in their Auditors Report for the period 2014-15, 2015-16 and 2016-17.

This is also in contravention to Ind AS 38 and the basic accounting principles. These expenses could not be said to be directly attributable to create the asset as these employees were performing their due duties in the normal course of business. This has resulted in overstatement of Other Intangible Assets and understatement of Other Equity(Debit balance of Statement of Prot and Loss)by ₹.2713.8 million.

Current Assets

Inventories –₹. 12675.2 million (Note 8)

6.� The Inventory balances (in various GL) grouped in Note 8: Inventories do not match with balances of respective GLs as per RAMCO Inventory Certicate as on March 2018. In absence of matching gures, audit is unable to vouch safe the inventory balances grouped in inventory in note 8 amounting to ₹ 9031.9 million.

C.� COMMENTS ON DISCLOSURE

Physical Verification & Reconciliation (Note 38)

7.� During the course of review of physical verication of asset done by the Company, audit observed that the Company in having Aero engine, APU, rotables and repairable amounting to ₹.16,438.7 million in RAMCO system. RAMCO system is basically for inventory management and is not interfaced with SAP hence discrepancies were noticed with xed asset register maintained in SAP. Further aircraft repairable which is an asset for the Company is noted as expenses in RAMCO in many places and reconciliation is not done.

Note No. 57(ii)

8.� As per above Note,in respect of AIXL, AIESL and AIATSL inventory is valued at weighted average basis as against the Group policy of valuing inventory at lower of cost and Net Realizable Value (NRV).

(i) As per para 19 of Ind AS 110-Consolidated Financial Statements, 'A parent shall prepare consolidated nancial statements using uniform accounting policies for like transactions and other events in similar circumstances.' As per para B87 of Ind AS 110,'If a member of the group uses accounting policies other than those adopted in the consolidated nancial statements for like transactions and events in similar circumstances, appropriate adjustments are made to that group member's nancial statements in preparing the consolidated nancial statements to ensure conformity with the group's accounting policies.’

Above cited requirements of Ind AS -110 are not complied with.

(ii) Inventory policies of Subsidiary companies namely AIESL and AIATSL have not been mentioned in their respective Financial Statements.

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

Sd/-Roop Rashi

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

Place: MumbaiDate: 18 January 2019

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CAG Observation Management Comments

A. COMMENTS ON PROFITABILITY

Expenses

Employee Benefit Expenses (Note 22): ₹ 47523.2 million

Above does not include provision amounting to the extent of ₹. 7924 million towards medical benets made during the year and booked to Prior period expenses. As per para 37 of Ind AS 8, 'to the extent that a change in an accounting estimate gives rise to changes in assets and liabilities, or relates to an item of equity, it shall be recognised by adjusting the carrying amount of the related asset, liability or equity item in the period of the change.'

During 2016-17 the company, in the absence of statistics of required beneciaries for post-retirement medical benets, had decided to make an adhoc provision during the year. During the current year 2017-18 the company has made an estimate based on actuarial valuation. As it is only a change in estimate, the amount should have been recognized by adjusting the medical expenditure during the current year i.e., in the period of change.

Hence charging of medical benets to Prior Period Expenses is not in compliance with Ind AS 8 and has resulted in understatement of current year expenses, current year loss and overstatement of prior period expenses by ₹. 7924 million.

(Ind AS) 8 deals with the treatment of Changes in accounting estimates as well as Prior Period Errors and requires that Changes in accounting estimates are to be adjusted prospectively, whereas Prior period Errors are to be adjusted retrospectively.

The provisions of IND AS -8 under the two scenario viz i) Change in Accounting Estimates and ii) Prior Period errors are given below

i) Change in Accounting Estimate as per Ind AS 8

Change in accounting estimate is dened as an adjustment of the carrying amount of an asset or a liability, or the amount of the periodic consumption of an asset, that results from the assessment of the present status of, and expected future benets and obligations associated with, assets and liabilities. Changes in accounting estimates result from new information or new developments and, accordingly, are not corrections of errors.

As a result of the uncertainties inherent in business activities, many items in nancial statements cannot be measured with precision but can only be estimated. Estimation involves judgements based on the latest available, reliable information. For example, estimates may be required of:

(a) bad debts; (b) inventory obsolescence; (c) the fair value of nancial assets or nancial

liabilities; (d) the useful lives of, or expected pattern of

consumption of the future economic benets embodied in, depreciable assets; and

(e) warranty obligations.

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

stStatements of Air India Limited for the year ended 31 March 2018

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The use of reasonable estimates is an essential part of the preparation of nancial statements and may need revision if changes occur in the circumstances on which the estimate was based or as a result of new information or more experience.

By its nature, the revision of an estimate does not relate to prior periods and is not the correction of an error.

Corrections of errors are distinguished from changes in accounting estimates. Accounting estimates by their nature are approximations that may need revision as additional information becomes known. For example, the gain or loss recognised on the outcome of a contingency is not the correction of an error.

ii) Prior period errors (Refer definition under Para 5 of Ind AS 8)

In contrast with Change in Accounting Estimates, Prior period errors are omissions from, and misstatements in, the entity's nancial statements for one or more prior periods arising from a failure to use, or misuse of, reliable information that:

(a) was available when nancial statements for those periods were approved for issue; and

(b) could reasonably be expected to have been obtained and taken into account in the preparation and presentation of those nancial statements.

Such errors include the effects of mathematical mistakes, mistakes in applying accounting policies, oversights or misinterpretations of facts, and fraud. Errors can arise in respect of the recognition, measurement, presentation or disclosure of elements of nancial statements. The Ind AS-8 Para 42 requires that an entity shall correct material prior period errors retrospectively in the rst set of nancial statements approved for issue after their discovery by:

(a) restating the comparative amounts for the prior period(s) presented in which the error occurred;


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B. COMMENTS ON FINANCIAL POSITION

Assets Non-Current Assets (Note 1) Property Plant & Equipment –₹. 298170.9

million

Engine Hot and Core Section

The above includes ₹.128.81 million being residual value of assets derecognised during the year (₹. 73.45 million) and previous year (₹. 55.36 million). As per paragraph 68 of Ind AS 16, the gain or loss arising from de-recognition of an item of property, plant and equipment shall be included in prot or loss when the item is derecognised. Further as per paragraph 71, the gain or loss arising from the de-recognition shall be determined as the difference between the net disposal proceeds, if any, and the carrying amount of the item.

Retaining of residual value of derecognised assets in nancial statement is not in compliance with Ind AS 16. This has resulted in overstatement of the Asset- Engine Hot and

or

(b) if the error occurred before the earliest prior period presented, restating the opening balances of assets, liabilities and equity for the earliest prior period presented.

In the earlier years Provision for Medical Benets was accounted in the books of Accounts on an adhoc basis. The Statutory Auditors in the earlier years qualied the same as provision on an Adhoc basis was not in line with the mandatory requirements.

During the current year the company rectied the error by making correct provisions based on actuarial valuation which included consequential adjustment to earlier year liabilities also.

Since it was in error the company followed the provisions of IND AS 8 in respect of Prior Period error.

The observation of the Audit is noted for compliance and necessary corrective action would be initiated in FY 2018-19 in consultation with the Statutory Auditors.


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Core Section by ₹. 128.81 million, the prot for

the year by ₹. 73.45 million and the retained

earnings for the year 2017 by ₹. 55.36 million.�

Other financial assets –₹.1534.1 million (Note 5)

2. The above includes ₹. 183.32 million being insurance claim receivable. vide Note 41, Company disclosed that ling of the above insurance claim with insurance company is still pending and accounting of the same is a deviation from accounting policy 3 VI(e) i.e. the claim receivable from the insurance company is accounted for on the acceptance by the insurance company on such claims.

As per paragraph 18 of Ind AS 1, an entity cannot rectify inappropriate accounting policies either by disclosure of the accounting policy used or by notes or explanatory material. Further as per paragraph 27 of Ind AS 1, an entity shall prepare its nancial statements, except for cash ow information, using the accrual basis of accounting.

Accounting of unaccrued insurance claim of ₹. 183.32 million in deviation from the accounting policy of the Company is not in compliance with provision of Ind AS 1. This has resulted in overstatement of the insurance claim receivable and the prot for the year by ₹. 183.32 million.

4. This includes an amount of ₹. 18.90 million receivable from M/s. Sahara Hospitality Limited the buyer of Centaur Hotel Mumbai Airport, on account of sale of properties, keeping in view the Agreement to Sell dated 18 April 2002.

As per Note 37 (iii), the Hon'ble Arbitral Tribunal had published their award under which the buyer was to pay an amount of ₹. 18.90 million

and interest thereon along with legal cost of ₹. 0.04 million. The Company had recognized an amount of ₹. 18.90 million in the books of

As per the existing practice followed in respect of accidents of Aircraft, the Airline would exclusively create a Control account and all proceedings in connection with the accident of the Aircraft are routed through the account.

As and when the payments are made to various vendors / manufacturers, the claims are made to the Insurance companies with supporting documents and necessary entries are captured with details of payments operated through the account.

In addition to the above, we may add that the payments are realizable from the Insurance companies as covered under the policy, the payments are not considered as the expenditure of the Company and thus the Company has reasonable certainty on the realization.

As per the Agreement to Sell, as per the Company, a sum of Rs.2.98 crores was payable by the buyer M/s Sahara Hospitality Limited (formerly known as M/s Batra Hospitality Pvt. Ltd) on account of Net Current Assets and Rs 0.11 crores against other dues and accordingly was reected as receivable in the books of accounts, which the Management considered good for recovery. On 19.4.2011 the Hon'ble Arbitral Tribunal published their award under which the buyer had to nally pay an amount of Rs 1.88 crores and interest thereon along with legal costs of Rs 0.40 crores. This was accounted in the books of accounts of the Company in 2011-12. However, the buyers


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account as receivable from the buyer. However, the buyer preferred an Appeal in Hon'ble High Court of Bombay against the award and in July 2015, the High Court set aside the arbitration award and passed an order in favour of the buyer. This has been challenged by the Company before the divisional bench of the Hon'ble High Court which has been admitted and is pending for hearing.

As per Para 31 to 35 of Ind AS 37 (Provisions, Contingent Liabilities and Contingent Assets), 'An entity shall not recognize a contingent asset. Contingent assets usually arise from unplanned or other unexpected events that give rise to the possibility of an inow of economic benets to the entity. An example is a claim that an entity is pursuing through legal processes, where the outcome is uncertain. Contingent assets are not recognized in nancial statements since this may result in the recognition of income that may never be realized.'

Since the Hon'ble High Court has set aside the said arbitral award, receipt of the said amount has become contingent. Inclusion of ₹. 18.90 million as receivable resulted in overstatement o f l ong te rm loans & advances and understatement of accumulated loss by same amount.

Intangible Asset-₹.3115.4 million (Note 1)

5. In 2014-15, the Company has capitalised assets under the head “Other Intangible Assets” for an amount of ₹.2713.8 million incurred during the period October to December 2014 on payment of payroll expenses, staff expenses, gratuity/leave salary expenses and other general expenses to obtain CAR 145(license from DGCA for carrying out MRO services). Capitalisation of these expenses under “other Intangible Assets” was not in accordance with accounting standards, basic accounting assumptions and principles and accordingly qualied by the Statutory Auditors in their Auditors Report for the period 2014-15, 2015-16 and 2016-17.

preferred an appeal in the Hon'ble High Court of Bombay against the award. On 8.5.2015 Hon'ble High Court set aside the arbitration award.

This was challenged by the Company before the divisional bench of the Hon'ble High Court of Bombay which has been admitted on 22.3.2016 and is pending for hearing.

In the meanwhile, the Management has also taken out a Notice of Motion on 2.7.2015 for issue of interim stay on the order dated 8.5.2015 and also a plea that pending hearing and nal disposal, the Hon'ble Court be pleased to direct the respondent to deposit with the Court an amount of Rs 1.88 crores together with interest thereon along with legal cost of Rs 0.40 crores and also to allow the Company to withdraw that amount from the Court. This Notice of Motion is pending for hearing.

The contingent liability in respect of the counter claim by the buyer has been duly disclosed.

The directly attributable cost incurred on the internally developed intangible assets has been capitalized in accordance with requirement of IND AS 38/ AS 26 .

In this regard it may be stated that the main conditions for capitalizing an internally developed intangible asset as per AS (Accounting Standard) 26 corresponding to IAS 38 (International Accounting Standard ) stipulates that :

l Asset will generate future Economic benetsl The Intangible asset is available for use l Ability to measure the expenditure attributable

to the Intangible Asset

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Since all these conditions are satised in the relevant case AIESL decided to capitalize the cost of obtaining a License under CAR 145 during 2014-15.

DGCA Licence for CAR-145 certication for the MRO stwas received on 1 Jan 2015. The expenditure

incurred (prior to the commencement of business) in creating this asset was capitalised in the books of the

stCompany as of 31 March 2015, based on this license, the Company has also applied for other certications like FAA, EASA approval for its facilities. The Company therefore believes that there has been no diminution in the value of the asset as of date, since the license was issued by DGCA for an indenite period of time.

In the present case the intangible asset is the MRO licence which is valid for innity and has nancial economic benets till the company is in operation. Further without the licence the company cannot operate in the industry.

The difference in amounts between the Inventory Certicate and the Note (which reects Accounts GL balances) is due inclusion of Capitalised Repairables and Part Account Group(PAG) changes in Inventory certicate which are not effected in Accounts.

Enterprise Change CR has been implemented in the current year and Fixed Assets module to be implemented along with data cleansing are expected to resolve such issues in future.

Aero engine: Fixed Asset Register is maintained in SAP and the same is updated after obtaining the relevant Assets code. The Fixed Assets Register reects the correct Aero Engines held by AI.

Internal audit have carried physical verication of Engines / Airframes and has not found any

This is also in contravention to Ind AS 38 and the basic accounting principles. These expenses could not be said to be directly attributable to create the asset as these employees were performing their due duties in the normal course of business. This has resulted in overstatement of Other Intangible Assets and understatement of Other Equity (Debit balance of Statement of Prot and Loss) by ₹.2713.8 million.

Current Assets Inventories –₹. 12675.2 million (Note 8)

6. The Inventory balances (in various GL) grouped in Note 8 : Inventories do not match with balances of respective GLs as per RAMCO Inventory Certicate as on March 2018. In absence of matching gures, audit is unable to vouch safe the inventory balances grouped in inventory in note 8 amounting to ₹ 9031.9 million

C. COMMENTS ON DISCLOSURE

Physical Verification & Reconciliation (Note 38)

7. During the course of review of physical verication of asset done by the Company, audit observed that the Company in having Aero engine, APU, rotables and repairable amounting to ₹.16,438.7 million in RAMCO system. RAMCO system is basically for inventory management and is not interfaced

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discrepancies' with the Fixed Asset Register as disclosed in Note No. 38(a)(i).

Auxiliary Power Unit: (APU) – For Boeing Aircraft, the APUs which were received alongwith the Aircraft are capitalized alongwith the Aircraft costs as the separate cost of APU is not reected in the Aircraft Invoice. However, the APUs which were separately procured, the same have been capitalized separately at its cost.

With regard to Repairable & Rotables, proper records are maintained in the Fixed Assets Register (FAR). The reconciliation of Repairable & Rotables between SAP and RAMCO will be carried out as soon as the interface implementation of RAMCO and SAP is completed.

In the Note No.57 of CFS wherever accounting policy of the subsidiary company and the holding company were in variance, the same have been disclosed. It has also been further stated in the note that impact on this account is not material hence no effect has been given in the consolidated nancial statement.

with SAP hence discrepancies were noticed with xed asset register maintained in SAP. Further aircraft repairable which is an asset for the Company is noted as expenses in RAMCO in many places and reconciliation is not done.

Note No. 57(ii)

8. As per above Note, in respect of AIXL, AIESL and AIATSL inventory is valued at weighted average basis as against the Group policy of valuing inventory at lower of cost and Net Realizable Value (NRV).

(i) As pe r pa ra 19 o f I nd AS 110 -Consolidated Financial Statements, 'A parent shall prepare consolidated nancial statements using uniform accounting policies for like transactions and other events in similar circumstances.' As per para B87 of Ind AS 110,'If a member of the group uses accounting policies other than those adopted in the consolidated nancial statements for like transactions and events in similar circumstances, appropriate adjustments are made to that group member's nancial statements in preparing the consolidated nancial statements to ensure conformity with the group's accounting policies.’

Above cited requirements of Ind AS -110 are not complied with.

(ii) I nven to ry po l i c ies o f Subs id ia ry companies namely AIESL and AIATSL have not been mentioned in their respective Financial Statements.

INDEPENDENT AUDITORS' REPORT TO THE MEMBERS OF A IR INDIA LIMITED

1. Report on the Consolidated Ind AS Financial Statements

We have audited the accompanying consolidated Ind AS nancial statements of Air India Limited(“Holding Company”), its subsidiaries, (together referred to as “the Group”) and a Joint venture, comprising the Consolidated Balance Sheet as at March 31, 2018, the Consolidated Statement of Prot & Loss(including Other Comprehensive Income), Consolidated Statement of Cash Flows and the consolidated Statement of Changes in equity for the year then ended and a summary of the Signicant Accounting Policies and other explanatory information (hereinafter referred to as “Consolidated Ind AS Financial Statements”).

2. Management's Responsibility for the Consolidated Financial Statements

The Holding Company's Board of Directors is responsible for the preparation of these consolidated Ind AS nancial 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 nancial position, consolidated nancial performance (including Other Comprehensive Income) consolidated cash ows and consolidated Changes in equity of the Group including its Joint Venture in accordance with the accounting principles generally accepted in India, including the Indian Accounting Standards (Ind AS) specied under Section 133 of the Act, read with relevant rules issued there under.

The respective Board of Directors of the companies included in the Group and of its Joint Ventureare responsible for maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding the assets of the Group and its Joint Venture 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 nancial controls, that were operating effectively for ensuring the accuracy and completeness of the accounting records, relevant to the preparation and presentation of the nancial 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 Ind AS nancial statements by the Directors of the Holding Company, as aforesaid.

3. Auditors' Responsibility

Our responsibility is to express an opinion on these consolidated Ind AS nancial 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 specied 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 Ind AS nancial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and the disclosures in the consolidated Ind AS Financial Statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the consolidated Ind AS nancial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal nancial control relevant to the Holding Company's preparation of the consolidated Ind AS nancial statements that give a true and fair view in order to design the audit procedures that are appropriate in the circumstances. An audit also includes evaluating the appropriateness of the accounting

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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 Ind AS nancial statements.

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 in terms of their reports, referred to in the table in Para 8 “Other Matters”, is sufcient and appropriate to provide a basis for our audit opinion on the Consolidated Ind AS Financial Statements.

4. Basis for Qualified Opinion

We draw your attention to the following qualications in the audit opinion of the Ind AS nancial statements of Air India Ltd.(Holding Company), and its subsidiary companies issued by Independent rm of Chartered Accountants, reproduced by us, except for the matters eliminated on Consolidation or not considered material at group level, along with our remarks wherever necessary, as under;

A. In respect of Air India Limited (Holding Company)- (vide our report on Standalone Ind AS thFinancial Statements dated 20 Nov, 2018)

Qualification Remarks

Non- reconciliation/non-conrmation of certain receivables, payables (including certain staff related accounts) and statutory dues. Refer Note No.39.

Refer Note No.40(a)

Refer Para 9 (a) of this report.


Note No. 37 regarding negative balance of

Inventories aggregating to Rs. 425.11 million.

Refer Note No.42(d)

Refer Para 9 (a) and (b) of this report.

th B. In respect of Air India Express Limited (Subsidiary) vide its Auditors' Report dated 12 November, 2018)


Non reconciliation /conrmation of statutory dues

such as TDS. PF, PT, GST, ESIC, etc. Refer Note 34.

Refer Note No.40 (c)

Refer Para 9 (a) of this report.

C. In respect of Air India Air Transport Services Limited (Subsidiary) vide its Auditors' Report thdated 6 November, 2018)

The impact of the above qualications on the Consolidated Ind AS nancial statements is not ascertainable.

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5. Qualified Opinion

In our opinion and to the best of our information and according to the explanations given to us and based on the consideration of reports of other auditors on separate nancial statements and on the other nancial information of the subsidiaries and Joint Venture, the aforesaid consolidated Ind AS nancial statements give the information required by the Act (other than matter stated in para 7A(iii) of 'Emphasis of Matter') in the manner so required and except for the possible effects of the matter referred to in the Para 4 'Basis for Qualied Opinion' above, give a true and fair view in conformity with the accounting principles generally accepted in India, of the consolidated state of affairs (nancial position) of the Group and its Joint Venture as at 31st March, 2018, and their consolidated loss(nancial performance, including Other Comprehensive Income), their consolidated cash ows and consolidated statement of changes in equity for the year ended on that date.

6. Material Uncertainty in relation to Going Concern

We draw attention to the following comments in relation to going concern in the audit opinion of the Ind AS Financial Statements of Air India Limited (Holding Company), and its subsidiaries issued by Independent rm of Chartered Accountants, reproduced by us;

A. In respect of Air India Limited (Holding Company)- vide our report on Standalone Ind AS thFinancial Statements dated 20 Nov, 2018)

The Company has incurred a net loss of Rs. 53481.7 Million during the year ended March 31, 2018 and, as of that date, the Company's current liabilities exceeded its Current assets by Rs 381613.1 Million and it has accumulated losses of Rs. 535839.2 Million which has resulted in complete erosion of the net worth of the company. In spite of these events or conditions which may cast a doubt on the ability of the company to continue as a going concern, the management is of the opinion that going concern basis of accounting is appropriate in view of the continued support of the Government of India and having regard to the other facts mentioned in Note No. 55.(Refer Note No.52(a) in Consolidated Ind AS Financial Statements).

th B. In respect of Hotel Corporation of India (Subsidiary) vide its Auditors' Report dated 6 November, 2018)

Net worth of the Company continues to be completely eroded. Company continues to be under severe nancial stress as reected by

a. Trade Receivables Rs. 3632.78 lakhs

b. Trade Payables Rs. 643.71 lakhs

c. Statutory dues Rs. 924.27 lakhs

Despite the above facts, these nancial statements have been prepared on a “Going Concern” basis as stated in Note no. 53. in view of the Management being committed to the revival of the Company through various initiatives such as:

i. Equity infusion of Rs 27 crores upto 31st March 2018 by Government of India.

ii. The renovation of 80 guest rooms and other allied works at Centaur Delhi was completed in the quarter ended June 2017 which augmented the revenue during the year.

iii. The Company has appointed a consultant for upgradation and refurbishment of 75 guest rooms and allied works at Centaur Srinagar.

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iv. The holding company Air India Limited converted Rs 70 crores of advance to the Company into Share Capital.

v. The Government of India has reduced the retirement age of employees of the Company from 60 years to 58 years.

(Refer Note No.52(b) in Consolidated Ind AS Financial Statements).

th C. In respect of Airline Allied Services Limited (Subsidiary) vide its Auditors' Report dated 6 November, 2018)

Financial statement of the Company indicates that the Company has accumulated losses of Rs 20783.97 Millions and its net worth has been fully eroded, the company has incurred net loss during the year and in previous years and the Company liabilities exceeded its assets as at the balance sheet date . These condition along with other matters set out in notes on accounts, indicated the existence of material uncertainty that may cast signicant doubt about the Company's ability to continue as a going concern. However, the nancial statement of the company has been prepared on a going concern basis. As stated in the Note no. 47, Air India Limited (Parent Company) had formulated a Turn Around Plan applicable to group Companies in order to improve its operational and nancial performance, which have been approved by the Government of India with the intention to turn around AIL and its subsidiaries . Management is of the view that with the support of Air India Limited and with other measures taken towards improving Company's operational and nancial activities, it is expected that nancial position of the Company would improve in future.(Refer Note No.52(c.) in Consolidated Ind AS Financial Statements).

Our opinion is not modied in respect of this matter.

7. Emphasis of Matter

We draw your attention to the following matter of emphasis on the Ind AS nancial statements of Air India Ltd, and its subsidiary companies issued by Independent rm of Chartered Accountants, reproduced by us except for the matters eliminated on Consolidation or considered not material at group level, as under;

A. In respect of Air India Limited (Holding Company)-, Vide our Report on Standalone Ind AS thFinancial Statements dated20 Nov, 2018)

Emphasis of Matter Remarks

I) Note No. 28 A(a) regarding interest claims from airport operators amounting to Rs. 5566.5 Million pending determination of actual liability and Note No. 28 A(b) regarding waiver of Differential Guarantee Fee in respect of Working Capital Loans, including additional guarantee fee Rs. 17023.5 Million, in respect of which approval from Government of India is yet to be received; and hence disclosed as Contingent Liability;

ii) Note No. 51 regarding Deferred Tax Asset of Rs. 28425.2 Million carried in the books in view of the reasons stated therein.

Refer Note No.28 A (a)&(b)

Refer Note No. 50(b)

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I) Revenue from operations consists of revenue from passenger, cargo & baggage etc. has been accounted for on the basis of data processed by an outsourced agency, provided by the parent Company M/s Air India Limited ( AIL) through FTP server generally on monthly basis, which as per information provided to us is segregated on the basis of code assigned to the Airline Allied Services Limited ( AASL). Source record of processed data uploaded on FTP server has been maintained with AIL and has not been veried by us, therefore we are unable to comment on the accuracy and authenticity of the same.

ii) Purchases, consumption and closing stock (quantity as well as value) of Aircraft Inventory has been accounted for on the basis of data/advices received from M/s AIL and are not veried by us. Further as per information provided, inventory has been procured by the

Refer Para 9 (a) of this report


th B. In respect of Airline Allied Services Limited (Subsidiary)(vide its Auditors' report dated 6 November, 2018)


iii) Non-Disclosure of certain requirements

1. As required by Schedule-II I of the Companies Act 2013 due to the reasons stated therein:

- Terms of repayment of Loans (Refer Note No.13.2(a) and Note No. 18)

- Nature of Security separately for each case of Loans (Refer Note No. 13.2(a) & 18)

- Period and amount of continuing default in repayment of Loans and Interest thereon in respect of each case. (Refer Note No.13.2(a) of Note No. 18)

- Disclosure of Foreign Currency Fluctuation under Finance Cost. Refer Note No. 23(a)

2. As per Ind AS:

- Non-disclosure of Fair Value of Investment Properties as required in IND AS 40; Refer Note no. 32 b (iii)

Refer Note No.13.2 (a), 18 & 32(b)(iii)

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AIL's centralized procurement department (MMD) and all documents relating to purchase procedures are maintained at their end, therefore not veried by us.

iii) Reconciliation of account with Airport Authority of India (AAI) is pending since previous years, therefore impact on expenditure and results of the Company on account of above is not ascertain-able at this stage.

iv) Balances of Trade Payables, Other Current Liabilities, Long Term Loans & Advances, Other Noncurrent Assets, Trade Receivables and Other Current Assets except accounts with oil com-panies and Airport Operators were unconrmed as on 31-03-2018. We are unable to comment on the impact of adjustments arising out of non-conrmation of such balances as on the standalone Ind As nancial statement.



Emphasis of Matter

Emphasis of Matter

Remarks

Remarks

Penal interest for delayed payment of Guarantee

Commission to Government of India aggregating to

Rs. 791.20 million (Refer Note no. 42)

i) During the year, certain Income and Expenditure have been transferred from Air India Limited (AIL) to the Company. Details of such Income and Expenditure transferred from AIL are mentioned in Note no. 31. forming part of accounts.

ii) Conrmation of certain receivables, payables (including debtors, creditors, staff related accounts) are under reconciliation. Refer Note No. 34. Impact of the same on the accounts is not ascertainable.

Refer Note No.28 A (b)

Refer Note No.58 (I) (c).

Refer Note No.40 (c.)Refer Para 9 (a) of this report

th C. In respect of Air India Express Limited (Subsidiary) vide its Auditors' report dated 12 November, 2018)

D. In respect of Air India Air Transport Services Limited (Subsidiary) vide its Auditors' Report thdated 6 November 2018)

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i) Loans and Advances and Other advances receivable are considered good for recovery though the same are in the process of being reconciled, referred to in Note Nos. 31 and 37

ii) The Company has not made any provision for Impairment of Assets as referred to in Note no. 47.

iii) The Company has reconciled the balances from Trade Receivables, and Payables from the Holding Company and is in the process of obtaining conrmation of balances from other Trade Receivables, Trade Payables, Loan and Advances, Deposits and Other liabilities, as referred to in Note no. 37

Refer Note No.40(b)

Refer Note No. 58 (I) (B)

Refer Note No.40(b)(i)&(ii)Refer Para 9 (a) of this report

th E. In respect of Hotel Corporation of India (Subsidiary) vide its Auditors' Report dated 6 November, 2018)

� Our Opinion is not modied in respect of the above matters.

8. Other Matters

1. We did not audit the nancial statements/ nancial information of the following subsidiaries whose nancial statements/ nancial information reect the total assets and net assets as at March 31, 2018, total revenues and net cash ows for the year ended on that date to the extent to which they are reected in the Consolidated Ind AS Financial Statements.

(Rs in Million)

Name of the Company Total Assets Net Assets Total Revenue Net cash Flows

Airline Allied Services Limited 3,776.91 (16,960.28) 6,017.74 268.01 (AASL)

Air India Engineering 12,315.65 (17,782.04) 7,944.33 (102.76) Services Limited (AIESL)

Hotel Corporation of 1,304.78 (2,770.33) 532.33 (15.78) India Limited (HCI)

Air India Express Limited 36,641.30 (9,135.40) 36,196.77 (566.43) (AIEL) [formerly known as Air India Charters Limited]

Air India Air Transport 7,436.58 2,055.34 6,679.58 54.65 Services Limited (AIATSL)

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The Consolidated Ind AS Financial Statements also include the group's share of Net Prot including Other Comprehensive Income of Rs.257.12 Million for the year ended 31-03-2018, as considered in the Consolidated Ind AS nancial Statements, in respect of a Joint Venture, whose Financial Statements/ Financial information have not been audited by us.

These nancial statements / nancial information, have been audited by other auditors whose reports have been furnished to us by the Management and our opinion on the Consolidated Ind AS Financial Statements, in so far as it relates to the amounts and disclosures included in respect of these subsidiaries and Joint Venture, and our report on the Consolidated Ind AS Financial Statements in terms of sub-section (3) of Section 143 of the Act in so far as it relates to the aforesaid subsidiaries and Joint Venture is based solely on the reports of the said other auditors.

2. The comparative nancial information of the Group and the Joint Venture for the year ended March 31, 2017 and the transition date opening balance sheet as at April 1, 2016 included in these Consolidated Ind AS nancial statements, are based on the previously issued statutory consolidated nancial statements prepared in accordance with the applicable relevant rules, audited by us and

thour report for the year ended March 31, 2017 and March 31, 2016 dated 29 December, 2017 and th25 April, 2017 respectively expressed a modied opinion on those consolidated audited nancial

statements, which have been restated to comply with Ind AS. Adjustments to the said comparative nancial information for the differences in Accounting Principles adopted by the Holding Company on transition to Ind AS have been audited by us based on the separate Audited Standalone Ind AS nancial statements of the holding company, its subsidiaries and the Joint Venture.

Our opinion on the consolidated Ind AS nancial statements, and our report on Other Legal and Regulatory Requirements below, is not modied in respect of the above matters, including our reliance on the work done and the reports of the other auditors and the nancial statements / nancial information certied by the Management.

9. Report on other Legal and Regulatory Requirements

As required by Section 143 (3) of the Act, based on our audit and on the consideration of report of the other auditors on separate nancial statements and the other nancial information of subsidiaries and Joint Venture, as noted in the Para No 8 'Other matter' paragraph, we report, to the extent applicable, that:

(a) We have sought and obtained all the information and explanations which to the best of our knowledge and belief were necessary for the purposes of our audit, except for the matters stated in Para No.4 'Basis of Qualied Opinion' and Para 7B, 7 D(ii), 7 E(iii)of 'Emphasis Matter';

(b) In our opinion, proper Books of Account as required by law have been kept by the group and its Joint Venture so far as appears from our examination of those books and returns adequate for the purposes of our audit and as per the audit reports of subsidiaries and Joint Venture, except for the matter stated in Para No 4B of 'Basis of Qualied Opinion', as reported by the respective Auditor;

(c) With respect to those foreign stations not visited by us, we have relied upon the summary reports made available to us for the verication of transactions related to such foreign stations, which have been properly dealt by us in preparing this report;

(d) The Consolidated Ind AS Balance Sheet, the Consolidated Ind AS Statement of Prot and Loss (including Other Comprehensive Income), the Consolidated Ind AS Statement of Cash Flows and Consolidated Statement of Changes in Equity dealt with by this Report are in agreement with the books of account;

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For and on Behalf of For and on Behalf of For and on Behalf ofThakur, Vaidyanath Aiyar & Co Sarda and Pareek Varma & VarmaChartered Accountants Chartered Accountants Chartered AccountantsFRN: 000038N FRN: 109262W FRN: 004532S

Sd/- Sd/- Sd/-V. Rajaraman Gaurav Sarda P.R. Prasanna VarmaPartner Partner Partner M.No.2705 M.No.110208 M.No.025854

Place: New Delhi Date : 20th November 2018

(e) In our opinion, the aforesaid Consolidated Ind AS Financial Statements comply with the Accounting Standards specied under Section 133 of the Act;

(f) The Going Concern matter described in Para No. 6 'Material Uncertainity in relation to going Concern' above, in our opinion, may have an adverse effect on the functioning of the respective companies;

(g) On the basis of the Auditors' Report of the Joint Venture, none of the directors of that company is disqualied as on March 31, 2018 from being appointed as directors in terms of Section 164(2) of Companies Act, 2013. The Provisions of Section 164(2) of the Act are not applicable to the Holding Company and its subsidiary companies being Government Companies;

(h) The qualication relating to the maintenance of accounts and other matters connected therewith are as stated in the 'Basis for Qualied Opinion' paragraph above;

(i) With respect to the adequacy of the internal nancial controls over nancial reporting of the group and its Joint Venture and the operating effectiveness of such controls, refer to our separate reports in Annexure-1; and

(j) 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, (as amended) in our opinion and to the best of our information and according to the explanations given to us:

a) The Group and its Joint Venture has disclosed the impact of pending litigations on its Financial position in its Financial Statements – Refer Note No.28. to the Consolidated Ind AS Financial Statements, except in case of a subsidiary company, AIATSL, where such disclosures are not made as reported by the Auditor of the said company;

b) The group and its Joint Venture has made provisions, as required under the applicable laws or Accounting Standards, for material foreseeable losses, wherever applicable, if any, on long-term contracts, including derivative contracts entered into by the Company; and

c) There were no amounts which were required to be transferred to the Investor Education and Protection Fund by the group and its Joint Venture.

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“Annexure- 1” to the Independent Auditor's Report of even date on the Consolidated Financial Statements of Air India Limited

Report on the Internal Financial Controls under Clause (i) of Sub-section 3 of Section 143 of the Companies Act, 2013 (“the Act”)

We have audited the internal nancial controls over nancial reporting of Air India Limited (“the Holding Company”) and its subsidiary companies and Joint Venture (which are companies incorporated in India, as of that date) as of March 31, 2018 in conjunction with our audit of the consolidated Ind AS nancial statements of the Company for the year ended on that date.

Management's Responsibility for Internal Financial Controls;

The respective Management of the Holding company, its subsidiary companies and Joint Venture, is responsible for establishing and maintaining internal nancial controls based on “the internal control over nancial reporting criteria established by the respective Companies considering the essential components of internal control stated in the Guidance Note on Audit of Internal Financial Controls over Financial Reporting issued by the Institute of Chartered Accountants of India”. These responsibilities include the design, implementation and maintenance of adequate internal nancial controls that were operating effectively for ensuring the orderly and efcient conduct of its business, including adherence to respective company's policies, the safeguarding of its assets, the prevention and detection of frauds and errors, the accuracy and completeness of the accounting records, and the timely preparation of reliable nancial information, as required under the Companies Act, 2013.

Auditor's Responsibility;

Our responsibility is to express an opinion on the Company's internal nancial controls over nancial reporting based on our audit. We conducted our audit in accordance with the Guidance Note on Audit of Internal Financial Controls Over Financial Reporting (the “Guidance Note”) and the standards on Auditing, issued by ICAI and deemed to be prescribed under section 143(10) of the Companies Act, 2013, to the extent applicable to an audit of internal nancial controls, and both issued by the Institute of Chartered Accountants of India. Those Standards and the Guidance Note require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether adequate internal nancial controls over nancial reporting was established and maintained and if such controls operated effectively in all material respects.

Our audit involves performing procedures to obtain audit evidence about the adequacy of the internal nancial controls system over nancial reporting and their operating effectiveness. Our audit of internal nancial controls over nancial reporting included obtaining an understanding of internal nancial over nancial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the nancial statements, whether due to fraud or error.

We believe that the audit evidence we have obtained and the audit evidence obtained by the other Auditors' in terms of their reports referred to in the Other Matters paragraph below, is sufcient and appropriate to provide a basis for our audit opinion on the Company's internal nancial controls system over nancial reporting.

Meaning of Internal Financial Controls over Financial Reporting:

A company's internal nancial control over nancial reporting is a process designed to provide reasonable assurance regarding the reliability of nancial reporting and the preparation of Ind AS nancial statements for external purposes in accordance with generally accepted accounting principles. A company's internal nancial control over nancial reporting includes those policies and procedures that

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(1) � pertains to the maintenance of records that, in reasonable detail, accurately and fairly reect the transactions and dispositions of the assets of the company;

(2) � provide reasonable assurance that transactions are recorded as necessary to permit preparation of nancial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and

(3) � provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company's assets that could have a material effect on the nancial statements.

Inherent Limitations of Internal Financial Controls over Financial Reporting :

Because of the inherent limitations of internal nancial controls over nancial reporting, including the possibility of collusion or improper management override of controls, material misstatements due to error or fraud may occur and not be detected. Also, projections of any evaluation of the internal nancial controls over nancial reporting to future periods are subject to the risk that the internal nancial control over nancial reporting may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Qualified Opinion

According to the information and explanations given to us and based on our audit, the following material weaknesses have been identied as at March 31, 2018 in respect of the holding company:

1. In respect of Air India Limited (Holding Company)(Vide our Report on Standalone Ind AS Financial thStatements dated 20 Nov, 2018)

(i) The company did not have an effective interface between various functional software relating to Sales/Revenue and Inventory Management with the accounting software resulting in accounting entries being made manually on periodical basis.

(ii) The company did not have an appropriate internal control system for reconciliation of Control Accounts in relation to the Sales / Revenue, Inventory and Payroll.

(iii) The company did not have an appropriate internal control system for deduction, timely deposit and reconciliation of statutory dues. �

� (iv) The company did not have an effective internal audit system commensurate with the size, nature and complexities of the business.

(v) The company did not have an appropriate internal control system for obtaining conrmation of balances on a periodic basis and reconciliation of unmatched Receivables and Payables.

(vi) The Company did not have an effective Information system audit to evaluate and test the IT general controls, which may affect the completeness, accuracy and reliability of the reports generated from IT System.

(vii) The company did not have an effective system for timely accounting of entries & approval thereof in IT System.

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We also draw your attention to the following qualied opinion on adequacy (and therefore operating effectiveness) of Internal Financial Control over Financial Reporting of below mentioned subsidiary companies of the Holding Company issued by Independent rm of Chartered Accountants reproduced by us as under;

th2. In Respect of Air India Express Limited (Subsidiary) vide its Auditors' report dated 12 November, 2018)

(i) The Company does not have documentary evidence in respect of consumption and inventory balances.

(ii) Controls over planning and monitoring of nancial closing process.

(iii) Controls over spreadsheets used in nancial closing process.

(iv) Procedural compliances in respect of statutory dues/liabilities in respect of Indirect Tax and Direct Tax.

(v) Controls related to entries in migration accounts.

(vi) Lack of controls to prevent duplicate accounting.

(vii) Lack Controls related to review of Accounts Payable and Accounts Receivable.

(viii) Lack of Controls relating to maker-checker process.

th3. In respect of Air India Air Transport Services Limited (Subsidiary) vide its Auditors' report dated 6 November, 2018)

According to the information and explanations given us and based on our audit, the following material weaknesses have been identied as at March 31, 2018:

(a) The Company's internal nancial control system over nancial report does not adequately consider risk assessment, which is one of the essential components of internal control, with regard to the potential for fraud when performing risk assessment.

(b) Standard Operating Procedures (SOP) for all the department/process have not been drafted and documented except the Brief Process Notes based on which the work ow is carried out.

(c) In the Master updation by personnel department there is weakness observed due to manual controls, so there are high chances of error, omission, excess, short payments.

(d) The Company has not dened it's Organization Structure and documented the Job description for the employees.

(e) The Delegation of powers is not reviewed frequently by the company.

(f) The Company does not have an effective information system audit to evaluate and test the IT general controls, which may affect the completeness, accuracy and reliability of the reports generated from the IT system. As explained to us the department of IT – Air India (the Holding Company) controls all the IT related activities.

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(g) The backup of local systems are not taken regularly and data is not stored on servers. The LAN concept is not in use. The USB drives are open. The SAP data is maintained at Air India Servers. The Network Diagram is not available. The IT controls are weak.

(h) The SAP logins are shared by the users. The maker checker process is not followed. The person who is entering the transaction only posts the transaction.

(i) As per the Policy of the Company Physical Verication of Fixed Assets should be done once in a two year but since the hiving off the Business from AIL to AIATSL no such Physical verication has happened.

(j) Based on our testing of identied controls by management the following deciencies were observed in processes as mentioned below:

1) REVENUE

(a) MBS software which is used for billing to Airlines does not have the Maker Checker controls for creation of masters. However, for raising of Invoices, the Maker - Checker controls is not being followed by Western Region.

(b) Issue and maintenance of RA Form is decentralized as a result of which the format of RA form used is different across all the regions, also printing and serial number of the same is not standard.

(c) No standard time limit is dened for sending the accepted RA Forms by duty manager to Billing department nor has any responsibility been dened for the task. Consequently considerable time gap between the services provided and invoices raised was observed.

(d) Though invoicing cycle is dened by management the same is not followed by billing department due to delay in receipt of RA forms.

(e) Reconciliation of RA forms issued with ights scheduled is not done in Western regions for tracking revenue leakages.

(f) Arithmetical inaccuracy was observed in various invoices issued from MBS software. Consequently instances of Excess/Short Billing were observed showing material weakness in the process of Invoicing.

(g) All the invoices are not raised through MBS. Regions are following the separate set of practices. Manual invoice raising is also observed. Invoice format is also not unique. Also some of the Mandatory elds are missing in the Invoice format. Invoicing system needs strong Automated Control.

(h) The Logins in the MBS are shared inappropriately. The Appropriate Logs are also not available.

(i) In case of Group Company RA forms are not prepared and the invoices are raised based on IOCC data (IOCC maintained by Parent Company).

(j) Rates decided in MOU with AIL is not supported by any basis of working.

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(k) Though interface from MBS to SAP is automated in certain cases missing elds are observed as a result of which bills are not automatically booked in the SAP.

(l) Galaxy system used for creating TSP Receipts in cargo complex is not automated, certain details in the same are always to be entered manually.

(m) TSP receipts can be created by any ofcer in the department the same is not segregated based on authority.

(n) Since there is shortage of staff in the department, there are chances of custom penalties to be levied on AIATSL due to non-compliance of procedures on timely basis.

(o) Transferring of data from galaxy into SAP is not automated for booking of revenue related to Import/Export.

2) HUMAN RESOURCES

(a) Company does not have the detail Policy / Standard Operating Procedure for HRD. Notes are issued with the approvals of management as and when required for policies.

(b) Company does not have an Automated Control for Attendance and payroll, in spite of the large employee strength. Also the standard manual attendance process is not followed across the departments.

(c) Company does not maintains the records for late mark, early going, so consequently non deduction from salary.

(d) Process of payroll is not automated and involves manual inputs from all the departments.

(e) Insertion / Updation of Master data base in the SAP is not having the checker-maker tool leads to wrong/excess/short payments of Salaries.

3) ACCOUNTS AND FINANCE

(a) List of users in the SAP and their rights are not available.

(b) Maker-Checker tool is not followed in the SAP.

(c) There is no process to identify dormant/inactive GL accounts and no review of the same is done by appropriate authority.

(d) Reversals of journal entries are not supported by appropriate documented approvals.

(e) Posting of Journal Vouchers are supported by appropriate documented approvals in many cases.

(f) Some of the cases it is also noted Direct Bank entry is passed instead of Rotating through the Party/Vender Ledger. Control cannot be established.

(g) The company does not have an appropriate internal control system for obtaining conrmation of balances on a periodic basis and reconciliation of unmatched Receivables and Payables.

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(h) Air India Limited (Parent Company) has been debiting expenses and crediting some revenue without any supporting documents. There is no way by which this expenses/revenue can be veried by the Company.

(i) Reconciliation of transactions with group companies is done only on year end instead the same should at least be done monthly/quarterly with review of appropriate authority.

(j) Policy of petty cash is not standard across all the regions, the same should be standardized.

(k) Cut off procedures are followed only on year end. However due to the implementation of GST the same should be done on monthly basis and proper review of the same should be done by appropriate authority.

(l) Provisioning process is followed on year end basis instead of month to month basis.

(m) There is no standard process for identifying contingent liabilities and quantifying the same for proper disclosure in nancial statements.

(n) The working capital cycle of receipts from services provided to the Subsidiary companies the billing is regular but the receipts are not on timely manner.

(o) In case of Insurance only premium amount is debited to the Company by Air India Limited (AIL), no proper justication of the same is available with the Company for the assets insured.

(p) Scrap Sales are there but the same is not removed from the Fixed Asset Register in lack of proper records.

(q) No documented process of scrutiny of general ledgers by appropriate authority is in place.

(r) Tax Audit for the FY 2016-17 is not yet completed.

(s) Statutory Returns (GST, TDS, PF, PT, ESIC, etc.) and Books under reconciliation.

4) PROCUREMENTS

(a) Purchase orders are issued manually instead of using SAP.

(b) GRN is not issued for any procurement in any department.

(c) There is no process of reviewing credit period offered to AIATSL by various vendors.

(d) Process of forwarding procurement invoices to nance department is not dened.

(e) Cost of Asset derived by Manager Finance is capitalized without being approved by appropriate authority.

(f) SAP code and details of xed assets procured punched in by manager nance is not approved by appropriate authority.

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(g) Depreciation run in SAP is automated since the master is not updated w.r.t. rates the same is re-run for accounting the difference between the old and new rates.

5) OTHERS

(a) The Company has not documented and approved Business Continuity Plan/Disaster Recovery Plan.

th4. Airline Allied Services Limited (Subsidiary) vide its Auditors' report dated 6 November, 2018)

(i) The Company did not have an interface between various functional software relating to Sales/Revenue and Inventory Management with the accounting software resulting in accounting entries made manually. Further consistent delay has been observed in the accounting of revenue instead of real time basis/regular periodic interval. System of verication of data provided by outsource agency relating to revenue needs to be strengthen. Reconciliation with regard to revenue accounted for in the Company's account with the parent Company (AIL) is after the year end only. Revenue has been accounted for on the basis of data uploaded on FTP Server. Control on ticket price applicable for ights on RCS sector is inadequate.

(ii) Internal control system is decient in respect of payment on account of remuneration to Expat Pilots (refer note no. 53 of notes on accounts). (Refer Note No.58 (II)(A)

(iii) Internal control system is decient in respect of salary payment of Indian pilots (refer note no. 54 of notes forming part of the nancial statement).(Refer Note No.58 (II)(A)

(iv) Internal control system is decient in respect of utilization of services of pilots as services of some of the pilots are utilized over and above their normal working hours by buying their leaves and services of other pilots remain unutilized/underutilized below than the minimum hours. ( refer note no 55) (Refer Note No.58 (II)(A)

(v) Internal control system is decient in respect of reconciliation with parent Company and Associates Companies as it takes place only at the year end. Signicant impact on the Company's books of account has been observed on reconciliation of account with the Parent Company and Associate Companies. Reconciliation of account with AAI is pending since past many years.

(vi) The Company did not have an appropriate internal control system for reconciliation of statutory dues.

(vii) The Company did not have an appropriate internal audit control system for obtaining conrmation of balances on a periodic basis and reconciliation of unmatched Receivables and Payables.

(viii) The Company did not have an effective Information system audit to evaluate and test the IT general controls, which may affect the completeness, accuracy and reliability of the reports generated from IT System.

(ix) Internal Control System is decient that maker checker concept is missing in SAP accounting.

(x) The Company does not have proper internal control for procuring goods and process of invoice/expenses in respect of aircraft inventory.

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rd5. Air India Engineering Services Limited (Subsidiary) vide its Auditors' Report dated 3 October, 2018)

i. The company did not have an effective interface between various functional software relating to Sales/Revenue with the accounting software resulting in accounting entries being made manually on periodical basis.

ii. The company uses the information systems partially for maintenance and processing of payroll. We nd that the leave records are not updated timely resulting in unwanted recoveries of excess salary.

iii. The company did not have an effective internal control system for timely ling and reconciliation of statutory dues.

iv. The company has not followed the MOU's with the group companies for transfer of employees, as per the MOU's the companies were supposed to have a separate agreement for transfer of employees. No such agreement has been executed till date.

Disclaimer of Opinion

th6. Hotel Corporation of India Limited (Subsidiary) vide its Auditors Report dated 6 November, 2018)

According to the information and explanation given to us, the Company has not established its internal nancial controls over nancial reporting on criteria based on or considering the essential components of internal controls stated in the Guidance Note on Audit of Internal Financial Controls Over Financial Reporting issued by the Institute of Chartered Accountants of India. Because of this reason, we are unable to obtain sufcient appropriate audit evidence to provide a basis for our opinion whether the Company had adequate internal nancial controls over nancial reporting and whether such internal

stnancial controls were operating effectively as at 31 March, 2018.

However, the auditor, in their Audit report under Emphasis of Matter para have stated the following;

“The Company has internal control system for management of inventory which need strengthening as referred to in Note no. 49 and the company has internal control system which need strengthening as referred to in Note no. 50” (Refer Note No. 58 (II) (B) in consolidated Ind AS Financial Statements)

th7. The auditor of the Joint Venture, AI-SATS, vide their report dated 10 November, 2018 has issued an un-qualied opinion on the adequacy and operating effectiveness of the internal nancial control over nancial reporting as on 31.03.2018.

A 'material weakness' is a deciency, or a combination of deciencies, in internal nancial control over nancial reporting, such that there is a reasonable possibility that a material misstatement of the company's annual or interim nancial statements will not be prevented or detected on a timely basis.

In our opinion, except for the effects/possible effects of the material weakness described above on the achievement of the objectives of the control criteria, the Company has maintained, in all material respects, adequate internal nancial controls over nancial reporting and such internal nancial controls over nancial reporting were operating effectively as of March 31, 2018, based on the internal control over nancial reporting criteria established by the Company considering the essential components of internal control stated in the Guidance Note on Audit of Internal Financial Controls Over Financial Reporting issued by the Institute of Chartered Accountants of India.

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We have, to the extent possible, considered the material weakness identied and reported above in determining the nature, timing, and extent of audit tests applied in our audit of the March 31, 2018consolidatedInd AS nancial statements of the Company, and as also the material weakness identied and reported by the Independent Auditors of subsidiary companies and these material weaknesses are not likely to affect our opinion on the Consolidated Ind AS nancial statements.

Other Matters

Our aforesaid reports under section 143(I) of the Act on the adequacy and operating effectiveness of the internal nancial control over nancial reporting insofar as it relates to ve subsidiaries and a Joint Venture, which are companies incorporated in India, is based on the corresponding reports of the auditors of such companies.

For and on Behalf of For and on Behalf of For and on Behalf ofThakur, Vaidyanath Aiyar & Co Sarda and Pareek Varma & VarmaChartered Accountants Chartered Accountants Chartered AccountantsFRN: 000038N FRN: 109262W FRN: 004532S

Sd/- Sd/- Sd/-V. Rajaraman Gaurav Sarda P.R. Prasanna VarmaPartner Partner Partner M.No.2705 M.No.110208 M.No.025854

Place: New Delhi Date : 20th November 2018

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MANAGEMENT REPLIES TO THE INDEPENDENT AUDITORS' REPORT ON THE CONSOLIDATED

IND-AS FINANCIAL STATEMENTS OF AIR INDIA GROUP COMPANIES FOR THE FINANCIAL

YEAR 2017-18

Sr.No. AUDIT OBSERVATIONS MANAGEMENT COMMENTS

1 Report on the Consolidated Financial Statements

We have audited the accompanying consolidated Ind AS nancial statements of Air India Limited(“Holding Company”), its subsidiaries, (together referred to as “the Group”) and a Joint venture, comprising the Consolidated Balance Sheet as at March 31, 2018, the Consolidated Statement of Prot & Loss(including Other Comprehensive Income), Consolidated Statement of Cash Flows and the consolidated Statement of Changes in equity for the year then ended and a summary of the Signicant Accounting Policies and other explanatory information (hereinafter referred to as “Consolidated Ind AS Financial Statements”).

2 Management's Responsibility for the Con-solidated Financial Statements

The Holding Company's Board of Directors is responsible for the preparation of these consolidated Ind AS nancial 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 nancial position, consolidated nancial performance (including Other Comprehensive Income) consolidated cash ows and consolidated Changes in equity of the Group including its Joint Venture in accordance with the accounting principles generally accepted in India, including the Indian Accounting Standards (Ind AS) specied under Section 133 of the Act, read with relevant rules issued there under.

The respective Board of Directors of the companies included in the Group and of its Joint Venture are responsible for maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding the assets of the Group and its Joint Venture 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 nancial controls, that were

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operating effectively for ensuring the accuracy and completeness of the accounting records, relevant to the preparation and presentation of the nancial 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 Ind AS nancial statements by the Directors of the Holding Company, as aforesaid.

3 Auditors' Responsibility

Our responsibility is to express an opinion on these consolidated Ind AS nancial 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 specied 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 Ind AS nancial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and the disclosures in the consolidated Ind AS Financial Statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the consolidated Ind AS nancial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal nancial control relevant to the Holding Company's preparation of the consolidated Ind AS nancial statements that give a true and fair view in order to design the audit procedures that are appropriate in the circumstances. 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 Ind AS nancial statements.

We believe that the audit evidence obtained by us in respect of the company audited by us and the audit

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evidence obtained by the other auditors in terms of their reports, referred to in the table in Para 8 “Other Matters”, is sufcient and appropriate to provide a basis for our audit opinion on the Consolidated Ind AS Financial Statements.

4 Basis for Qualified Opinion

We draw your attention to the following qualications in the audit opinion of the Ind AS nancial statements of Air India Ltd.(Holding Company), and its subsidiary companies issued by Independent rm of Chartered Accountants, reproduced by us, except for the matters eliminated on Consolidation or not considered material at group level, along with our remarks wherever necessary, as under;

A In respect of Air India Limited (Holding Company) - vide our report on Standalone Ind AS Financial Statements dated 20th November 2018)

QUALIFICATION

i) Non- reconciliation/non-conrmation of certain receivables, payables (including certain staff related accounts) and statutory dues. Refer Note No.39.

Refer Note No 40 (a)

Refer Para 9 (a) below.

B In respect of Air India Express Limited th(Subsidiary) vide its Auditors' report dated 12

November 2018)

QUALIFICATION

Note No. 37 regarding negative balance of Inventories aggregating to Rs. 425.11 million.

Refer Note No 42 (d) Refer Para 9 (a) and (b) below.

The company has reconciled a substantial percentage of receivables and payables in SAP. However, in respect of the remaining accounts necessary action will be taken to reconcile the unmatched receivables and payables including Statutory Dues, in SAP in FY 2018-19. The Company is also in the process of seeking professional help to reconcile and conrm all the receivables/ payables.

The valuation methodology adopted by RAMCO is “Weighted Average method” as covered vide note 37. Further, the overall balance of the inventory as on 31.03.2018 is positive and entity wise balances are drawn as per RAMCO. The observation of the Audit regarding the negative closing balances are primarily on account Part wise / location wise identication instead of overall basis, work orders

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C In respect of Air India Air Transport Services Limited (Subsidiary)vide its Auditors' Report dated 6th November 2018)

QUALIFICATION

� Non reconciliation /conrmation of statutory dues such as TDS. PF, PT, GST, ESIC, etc. Refer Note 34.

Refer Note No 40(c)

Refer Para 9 (a) below.

The impact of the above qualications on the Consolidated Ind AS nancial statements is not ascertainable.

5 Qualified Opinion

In our opinion and to the best of our information and according to the explanations given to us and based on the consideration of reports of other auditors on separate nancial statements and on the other nancial information of the subsidiaries and Joint Venture, the aforesaid consolidated Ind AS nancial statements give the information required by the Act (other than matter stated in para7A(iii) of 'Emphasis of Matter')in the manner so required and except for the possible effects of the matter referred to in the Para 4 'Basis for Qualied Opinion' above, give a true and fair view in conformity with the accounting principles generally accepted in India, of the consolidated state of affairs (nancial position) of the Group and its Joint Venture as at 31st March, 2018, and their consolidated loss (nancial performance, including Other Comprehensive Income), their consolidated cash ows and consolidated statement of changes in equity for the year ended on that date.

which are open as at the year end, Unplanned issues & receipts, items sent for repairs, etc.

The RAMCO system is being integrated with Enterprise module during the Current nancial year and the issues as above would be addressed.

Reconciliation of Statutory Dues is under process.

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6 Material Uncertainty in relation to Going Concern

We draw attention to the following comments in relation to going concern in the audit opinion of the Ind AS Financial Statements of Air India Limited (Holding Company), and i ts subsidiar ies issued by Independent rm of Chartered Accountants, reproduced by us.

A In respect of Air India Limited (Holding Company) - vide our report on Standalone Ind AS Financial Statements dated 20th November 2018)

� The Company has incurred a net loss of Rs. 53481.7 Million during the year ended March 31, 2018 and, as of that date, the Company's current liabilities exceeded its Current assets by Rs 381613.1 Million and it has accumulated losses of Rs. 535839.2 Million which has resulted in complete erosion of the net worth of the company. In spite of these events or conditions which may cast a doubt on the ability of the company to continue as a going concern, the management is of the opinion that going concern basis of accounting is appropriate in view of the continued support of the Government of India and having regard to the other facts mentioned in Note No. 55.(Refer Note No.52(a) in Consolidated Ind AS Financial Statements).

In this regard a detailed disclosure had been given in the Notes to Accounts vide Note No 55.

It may be stated that the company has received continuous support from the Government of India (GoI) though the implementation of Turnaround Plan/ Financial Restructuring Plan (TAP/FRP) approved in 2012 which has helped the company to improve its operating and nancial parameters. As per the TAP/FRP the GoI has during FY 2017-18 infused Equity to the tune of Rs 18000.0 million. The total Equity Infusion under TAP/FRP as on 31st March 2018 aggregated to Rs 265452.1 million. During the FY 2018-19 a further amount of Rs.16300.0 million has been infused upto end of August 2018.

As stated in Note No 27 on Disinvestment of Air thIndia Ltd, the AISAM in its meeting on 18 June

2018 decided to:

l Improve performance of Air Indial Monetize Assetsl Consider disinvestment after global

indicators like oil prices and forex rates stabilize.

A Strategic Plan was prepared by AI and submitted to the Govt. The objective of the Strategic revival plan was to establish a strong competitive and self sustaining airline which can be strategically divested or listed in the next few years. Focus was on increasing the operational efciencies whereby substantial increase in revenue or cost saving can be achieved.

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The revival plan had the following components

l Organizational Reformsl Financial Packagel Disinvestment of Subsidiariesl Sale of non-core Assetsl Improving Internal Efcienciesl Tapping the human resource potential to

the fullest

This Strategic Plan was discussed with the GoI and the following in-principle decisions were taken to give nancial support to AI in FY 2018-19 to implement the decision of AISAM of improving the nancial performance of Air India:

Financial Support to Air India and SPV

l A total debt amounting to Rs 294,640 million would be transferred from Air India Ltd to the SPV viz Air India Assets Holding

stCo Ltd forthwith w.e.f. 1 October 2018.

l A Cash Support of Rs 39,750.0 million to Air India, inclusive of Rs 16,300.0 million already infused in AI in the current nancial year.

l Provide a Govt Guarantee of Rs 76000.0 million, inclusive of Rs 30000.0 million already provided to AI in FY 2018-19, to raise new debt for payment of stretched liabilities.

l An additional amount of Rs 13000.0 million to be provided to the SPV to meet the interest liability on the transferred debt.

l From FY 2019-20 the entire interest on the debt of Rs 294,640.0 million transferred to the SPV, would be serviced by the Govt.

Deliverables by Air India

Monetization of assets, Sale/disinvestment of AIATSL, sale of other immovable assets and other subsidiaries the proceeds of which will be utilised towards servicing of debts transferred to the SPV.

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B In respect of Hotel Corporation of India th(Subsidiary) vide its Auditors' Report dated 6

November 2018)

Net worth of the Company continues to be completely eroded. Company continues to be under severe nancial stress as reected by

a. Trade Receivables Rs. 3632.78 lakhs b. Trade Payables Rs. 643.71 lakhs c. Statutory dues Rs. 924.27 lakhs

Despite the above facts, these nancial statements have been prepared on a “Going Concern” basis as stated in Note no. 53. in view of the Management being committed to the revival of the Company through various initiatives such as:

Performance Improvement measures for operational efciencies such as improvement in Aircraft Utilisation, enhancement of cargo revenue, rationalisation of costs including fuel and distribution costs etc.

In view of the above nancial support from the Govt of India and various measures taken by the company to improve the operational efciencies, various revenue enhancing measures, cost control measures undertaken etc. the company expects a substantial improvement in its performance, operational and nancial, in the near future and hence, the Accounts have been prepared on the 'Going Concern' basis.

Further, it may also be noted that the company has shown considerable improvement in FY 2017-18 when compared to FY 2016-17 in both Operational as well as Financial Parameters. This has resulted in not only a reduction in the Net Loss over the previous year but also an improvement in both EBITDA and EBITDAR as compared to 2016-17.

In view of the above, in the opinion of the management, there does not exist any material uncertainty that may cast signicant doubt on the Company's ability to continue as a Going Concern.

This is a statement of fact

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i) Equity infusion of Rs 27 crores upto 31 st March 2018 by Government of India.

ii) The renovation of 80 guest rooms and other allied works at Centaur Delhi was completed in the quarter ended June 2017 which augmented the revenue during the year.

iii) The Company has appointed a consultant for upgradation and refurbishment of 75 guest rooms and allied works at Centaur Srinagar.

iv) The holding company Air India Limited converted Rs 70 crores of advance to the Company into Share Capital.

v) The Government of India has reduced the retirement age of employees of the Company from 60 years to 58 years.

(Refer Note No 52 (b) in Consolidated Ind AS Financial Statements)


C In respect of Airline Allied Services Limited th(Subsidiary) vide its Auditors' Report dated 6

November 2018)

Financial statement of the Company indicates that the Company has accumulated losses of Rs 20783.97 Millions and its net worth has been fully eroded, the company has incurred net loss during the year and in previous years and the Company liabilities exceeded its assets as at the balance sheet date . These condition along with other matters set out in notes on accounts, indicated the existence of material uncertainty that may cast signicant doubt about the Company's ability to continue as a going concern. However, the nancial statement of the company has been prepared on a going concern basis. As stated in the Note no. 47, Air India Limited (Parent Company) had formulated a Turn Around Plan applicable to group Companies in order to improve its operational and nancial performance, which have been approved by the Government of India with the intention to turn around AIL and its subsidiaries . Management is of the view that with the support of Air India Limited and with other measures taken towards improving Company's operational and nancial activities, it is expected that nancial position of the

This is a statement of fact.

Adequate disclosure for the same has been made vide Note no. 47.

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Company would improve in future.(Refer Note No.52(c.) in Consolidated Ind AS Financial Statements).


7 Emphasis of Matter

We draw your attention to the following matter of emphasis on the Ind AS nancial statements of Air India Ltd, and its subsidiary companies issued by Independent rm of Chartered Accountants, reproduced by us except for the matters eliminated on Consolidation or considered not material at group level, as under;

A In respect of Air India Limited (Holding Company)-, Vide our Report on Standalone Ind AS Financial Statements dated 20th November 2018)

EMPHASIS OF MATTER

i) Note No. 28 A(a) regarding interest claims from airport operators amounting to Rs. 5566.5 Million pending determination of actual liability and Note No. 28 A(b) regarding waiver of Differential Guarantee Fee in respect of Working Capital Loans, including additional guarantee fee Rs. 17023.5 Million, in respect of which approval from Government of India is yet to be received; and hence disclosed as Contingent Liability;

Refer note No 28 A (a) & (b)

REMARKS

i) Interest Claims from Airport Operators

The company has not accepted the claims of Airport Operators on account of charging of interest on delayed payments by AI. These claims are being contested by the company. However, Contingent Liability for the same has been disclosed in the Accounts of the company.

The status of interest demand of individual Airport Operator Companies is as under:

DIAL: The major claim towards interest is from stDIAL amounting to Rs 213.38 crores as on 31

March 2018 and their claim is being veried by the company. For this purpose a professional agency has been appointed by the company to look into the issue and verify their interest claim on AI.

However, payment against such claims cannot be made by the company as DIAL has also overcharged from airlines on Landing and Parking Rates for which a Contingent Asset has been disclosed by the company in its accounts of 2017-18.

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MIAL: Similarly, MIAL has also claimed an amount of Rs 172.16 crores as interest on delayed payments for which contingent liability has been disclosed in the accounts. In this regard it may be noted that in respect of MIAL also there are various receivables which are to be cleared by them pending reconciliation of the accounts statement with them. On such items action is likely to be rmed up in FY 2018-19 after due checking/verication.

AAI: AAI has raised a demand of Rs 760.0 stmillion (Previous Year Rs.760.0million, 1 April

2016 Rs 760.0 million) towards interest on delayed payments for the year 2012-13 but the same has not been accepted by AI in terms of the MOU and subsequent correspondence made with AAI in this regard. After that period there has neither been any follow up on this claim of interest made in 2013 and nor has AAI demanded any further interest on delayed payments subsequently. However, the same has not been provided for and disclosed as contingent liability.

ii) Govt of India Guarantee Fee

The company has provided for Guarantee Fee @ 0.5% on all aircraft loans and working capital loans guaranteed by the Govt. The company has taken up the issue for waiver of Guarantee Fees over and above 0.5% in respect of working capital and ECB loans with the Ministry of Civil Aviation/Finance.

Accordingly, the Guarantee Fee over and above 0.5% amounting to Rs 3066.1 million has been disclosed as Contingent. Further, the additional liability on account of the delayed payment amounting to Rs 13957.4 million has also been shown as Contingent.

This issue has been taken up with the Ministry of Finance through the Ministry of Civil Aviation. The Air India request is pending consideration of the Department of Economic Affairs, Ministry of Finance, for applying uniform rate of 0.5% for the arrears of the GoI fees. For the period FY 2017-18 also similar requests have been communicated to the Govt, in view of the

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ii) Note No. 51 regarding Deferred Tax Asset of Rs. 28425.2 Million carried in the books in view of the reasons stated therein.

Refer Note No 50 (b)

iii) Non-Disclosure of certain requirements

1. As required by Schedule-III of the Companies Act 2013 due to the reasons stated therein:

- Terms of repayment of Loans (Refer Note No.13.2(a) and Note No. 18)

- Nature of Security separately for each case of Loans (Refer Note No. 13.2(a) & 18)

- Period and amount of continuing default in repayment of Loans and Interest thereon in respect of each case. (Refer Note No.13.2(a) of Note No. 18)

- Disclosure of Foreign Currency Fluctuation under Finance Cost. Refer Note No. 23(a)

(Refer Note No.13.2 (a), 18 & 32(b)(iii))

2. As per Ind AS:

- Non-disclosure of Fair Value of Investment Properties as required in IND AS 40; Refer Note no. 32 b (iii)

(Refer Note No.13.2 (a), 18 & 32(b)(iii))

liquidity situation of the company. The company is condent that the Ministry of Finance will favorably consider the proposal of the AI/MOCA

Moreover, the entire facts relating to the Govt Guarantees has been duly disclosed vide Note No 28 (A) (b).

In view of the facts disclosed in Note No 51 regarding Going Concern, the company is hopeful of showing improved performance in the future and accordingly, the deferred tax assets available will be realized against future taxable prots.

Further, the Deferred Tax Assets have been created against carry forward Depreciation only which are available to the Company indenitely as per the provisions of the Income Tax Act.

This is a statement of fact. Due to the condential 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 specied, it has not been disclosed. However, the same is available with the company, the important extracts of which are already disclosed in the accounts.

As stated in Note No 32 (b) (iii) of the Notes to Accounts, under TAP/FRP, monetization of these properties is in the process, hence fair value of the investment properties could not be disclosed as a condentiality measure.

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REMARKS

Air India being the marketing carrier of AASL, provides sales, market ing, booking / reservation facilities and other support services for the AASL operations through its reservation software maintained by SITA. However, the revenue accounting work is being entrusted by the parent company, AIL to M/s Acceleya Kale, a leading multinational company handling revenue accounting of major airlines of the world.

In airlines industry sales are booked as a liability and gets converted to revenue only on the completion of the travel by the pax. The sales processing and revenue processing are two independent activities.

While, the sales processing for tickets pertaining to Alliance Air sectors is being accounted in Air India books, the revenue accounting is being done in the Alliance Air Books of Accounts based on the uplifted / own passengers. The revenue earnings for passenger revenue, excess baggage & freight are therefore segregated and credited by AIL to AASL on the basis of ight wise monthly revenue reports generated electronically. The ight-wise uplift coupons are matched electronically with the manifest reports. The deployed system of Revenue Accounting is considered adequate and inline with Airline Industry practice.

It is submitted that the company has duly made available the FTP server reports for all the months of nancial year 2017-18 for the audit verication as to the SAP entries incorporated in the Books of Accounts to account for the Passenger Revenue.

Air India provides administrative support in procurement & stocking of the aircraft inventory through a centralized inventory management system, named “RAMCO”, for its AIL along with its subsidiaries through separate “Inventory

B In respect of Airline Allied Services Limited th(Subsidiary) (vide its Auditors' report dated 6

November, 2018)

EMPHASIS OF MATTER

i) Revenue from operations consists of revenue from passenger, cargo & baggage etc. has been accounted for on the basis of data processed by an outsourced agency, provided by the parent Company M/s Air India Limited (AIL) through FTP server generally on monthly basis, which as per information provided to us is segregated on the basis of code assigned to the Airline Allied Services Limited (AASL). Source record of processed data uploaded on FTP server has been maintained with AIL and has not been veried by us, therefore we are unable to comment on the accuracy and authenticity of the same.

Refer Point 9 (a)

ii) Purchases, consumption and closing stock (quantity as well as value) of Aircraft Inventory has been accounted for on the basis of data/advices received from M/s AIL and are not veried by us. Further as per information

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provided, inventory has been procured by the AIL's centralized procurement department (MMD) and all documents relating to purchase procedures are maintained at their end, therefore not veried by us.

Refer Point 9 (a)

iii) Reconciliation of account with Airport Authority of India (AAI) is pending since previous years, therefore impact on expenditure and results of the Company on account of above is not ascertainable at this stage.

Refer Point 9 (a)

iv) Balances of Trade Payables, Other Current Liabilities, Long Term Loans & Advances, Other Noncurrent Assets, Trade Receivables and Other Current Assets except accounts with oil companies and Airport Operators were unconrmed as on 31-03-2018. We are unable to comment on the impact of adjustments arising out of non-conrmation of such balances as on the standalone Ind As nancial statement.

Refer Point 9 (a)

Series” .

Requisitions are made by the concerned subsidiary, however, for the procurement and to garner the benets of best available rates, the orders are placed to the specied vendors listed by the parent company. The laid down procedure of acceptance of goods, binning and issuance for consumptions are accounted for in the centralized software as stated above. Accounting thereafter is being carried out on the basis of generated reports by the system.

Suitable disclosure has been made in the Notes to Accounts vide No. 37.

Under the aegis of ministry of Civil Aviation, a Memorandum of Understanding (MoU) with Airports Authority of India (AAI) was signed by Headquarters on 26.08.2013 whereby the dues of AAI vis-a-vis Air India as on 31.03.2012 were adjudicated by the ministry.

The company has been making adequate provisions as to the expenditure involved in accordance with the operations carried out in each of the previous year.

Reconciliation with AAI is under process and the same is likely to be completed in the year 2018-19 for entire past period. The suitable disclosure in this regard is made in notes to Accounts 38.

The reconciliation is a continuous process. The reconciliation with major parties such as AIL, AIATSL, AISATS, AIESL, AIEXP, all ATF suppliers, Private Airport operators has been completed upto 31st March 2018. Even majority of the suppliers/ service providers has been reconciled. The outstanding balances of trade receivables mainly pertaining to Govt. and State Organizations have been realized in 2018-19. Con-certed efforts are being made to reconcile account with all remaining parties. The amount involved with the remaining parties is not signicant considering the scale of operations of the company.


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Further, as directed by the Board, the balance conrmation of the payables and receivables and that of the contingent liabilities as on 31.03.2018 are in the process of being authenticated by an independent agency.

REMARKS

Liability provision has been created in the books o f account fo r the Guarantee commission (@ 0.5 % on the outstanding dues as at the end of the FY) due in the respective years. Company has also disclosed the difference in the Contingent liability.

REMARKS

The transfers have been done by Stations / Regions and all the supporting and related documents are available at the respective stations for verication

Reconciliation with nancial records have been completed and the Company has already sought the conrmation of balances from Vendors.

REMARKS

Conrmations for the advances are in the

C. In respect of Air India Express Limited th

(Subsidiary) vide its Auditors' report dated 12 November, 2018)

EMPHASIS OF MATTER

Penal interest for delayed payment of Guarantee Commission to Government of India aggregating to Rs. 791.20 million (Refer note no. 42)

Refer Note No 28 A (b)

D. In respect of Air India Air Transport Services Limited (Subsidiary) vide its Auditors' Report

thdated 6 November 2018)

EMPHASIS OF MATTER

i) Dur ing the year , cer ta in Income and Expenditure have been transferred from Air India Limited (AIL) to the Company. Details of such Income and Expenditure transferred from AIL are mentioned in Note No. 31 forming part of accounts.

Refer Note No 58(I)©

ii) Conrmation of certain receivables, payables (including debtors, creditors, staff related accounts) are under reconciliation. Refer Note No. 34. Impact of the same on the accounts is not ascertainable.

Refer Note No 40©

Refer 9 (a) of this report

E In respect of Hotel Corporation of India th(Subsidiary) vide its Auditors' Report dated 6

November 2018)

EMPHASIS OF MATTER

i) Loans and Advances and Other advances


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process of being obtained in the year 2018-19


The Company is in the process of obtaining conrmations in the year 2018-19

receivable are considered good for recovery though the same are in the process of being reconciled, referred to in Note Nos. 31 and 37.

Refer Note No 40(b)

ii) The Company has not made any provision for Impairment of Assets as referred to in Note no. 47.

Refer Note No. 58 (I) (B)

iii) The Company has reconciled the balances from Trade Receivables, and Payables from the Holding Company and is in the process of obtaining conrmation of balances from other Trade Receivables, Trade Payables, Loan and Advances, Deposits and Other liabilities, as referred to in Note no. 37

Refer Note No.40(b)(i)&(ii)


Our Opinion is not modied in respect of above matters.

8 Other Matters

1. We did not audit the nancial statements/ nanc ia l in format ion o f the fo l lowing subsidiaries whose nancial statements/ nancial information reect the total assets and net assets as at March 31, 2018, total revenues and net cash ows for the year ended on that date to the extent to which they are reected in the Consolidated Ind AS Financial Statements

(Rs in Millions)

Name of the Total Net Total Net cash Company Assets Assets Revenue Flows

Airline Allied 3,776.91 (16,960.28) 6,017.74 268.01 Services Limited (AASL)

Air India 12,315.65 (17,782.04) 7,944.33 (102.76) Engineering Services Limited (AIESL)


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Name of the Total Net Total Net cash Company Assets Assets Revenue Flows

Hotel 1,304.78 (2,770.33) 532.33 (15.78)Corporation of India Limited (HCI)

Air India 36,641.30 (9,135.40) 36,196.77 (566.43) Express Limited (AIEL) [formerly known as Air India Charters Limited]

Air India 7,436.58 2,055.34 6,679.58 54.65 Air Transport Services Limited (AIATSL)

The Consolidated Ind AS Financial Statements also include the group's share of Net Prot including Other Comprehensive Income of Rs.257.12 Million for the year ended 31-03-2018, as considered in the Consolidated Ind AS nancial Statements, in respect of a Joint Venture, whose Financial Statements/ Financial information have not been audited by us.

These nancial statements / nancial information, have been audited by other auditors whose reports have been furnished to us by the Management and our opinion on the Consolidated Ind AS Financial Statements, in so far as it relates to the amounts and disclosures included in respect of these subsidiaries and Joint Venture, and our report on the Consolidated Ind AS Financial Statements in terms of sub-section (3) of Section 143 of the Act in so far as it relates to the aforesaid subsidiaries and Joint Venture is based solely on the reports of the said other auditors.

2. The comparative nancial information of the Group and the Joint Venture for the year ended March 31, 2017 and the transition date opening balance sheet as at April 1, 2016 included in these Consolidated Ind AS nancial statements, are based on the previously issued statutory consolidated nancial statements prepared in accordance with the applicable relevant Rules, audited by us and our report for the year ended March 31, 2017 and March 31, 2016 dated 29th


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December, 2017 and 25th April, 2017 respectively expressed a modied opinion on those consolidated audited nancial statements, which have been restated to comply with Ind AS. Adjustments to the said comparative nancial information for the differences in Accounting Principles adopted by the Holding Company on transition to Ind AS have been audited by us based on the separate Audited Standalone Ind AS nancial statements of the holding company, its subsidiaries and the Joint Venture.

Our opinion on the consolidated Ind AS nancial statements, and our report on Other Legal and Regulatory Requirements below, is not modied in respect of the above matters, including our reliance on the work done and the reports of the other auditors and the nancial statements / nancial information certied by the Management.

9 Report on other Legal and Regulatory Requirements

As required by Section 143 (3) of the Act, based on our audit and on the consideration of report of the other auditors on separate nancial statements and the other nancial information of subsidiaries and Joint Venture, as noted in the Para No 8 'Other matter' paragraph, we report, to the extent applicable, that:

(a) We have sought and obtained all the information and explanations which to the best of our knowledge and belief were necessary for the purposes of our audit, except for the matters stated in Para No.4 'Basis of Qualied Opinion' and Para 7B, 7 D(ii), 7 E(iii)of 'Emphasis Matter';

(b) In our opinion, proper Books of Account as required by law have been kept by the group and its Joint Venture so far as appears from our examination of those books and returns adequate for the purposes of our audit and as per the audit reports of subsidiaries and Joint Venture, except for the matter stated in Para No 4B of 'Basis of Qualied Opinion', as reported by the respective Auditor.

(c) With respect to those foreign stations not visited by us, we have relied upon the summary reports made available to us for the verication of transactions related to such foreign stations,


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which have been properly dealt by us in preparing this report;

(d) The Consolidated Ind AS Balance Sheet, the Consolidated Ind AS Statement of Prot and Loss (including Other Comprehensive Income), the Consolidated Ind AS Statement of Cash Flows and Consolidated Statement of Changes in Equity dealt with by this Report are in agreement with the books of account;

(e) In our opinion, the aforesaid Consolidated Ind AS Financial Statements comply with the Accounting Standards specied under Section 133 of the Act;

(f) The Going Concern matter described in Para No. 6' Material Uncertainty in relation to going Concern' above, in our opinion, may have an adverse effect on the functioning of the respective companies;

(g) On the basis of the Auditors' Report of the Joint Venture, none of the directors of that company is disqualied as on March 31, 2018 from being appointed as directors in terms of Section 164(2) of Companies Act, 2013. The Provisions of Section 164(2) of the Act are not applicable to the Holding Company and its subsidiary companies being Government Companies;

(h) The qualication relating to the maintenance of accounts and other matters connected therewith are as stated in the 'Basis for Qualied Opinion' paragraph above;

(i) With respect to the adequacy of the internal nancial controls over nancial reporting of the group and its Joint Venture and the operating effectiveness of such controls, refer to our separate reports in Annexure-1; and

(j) 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, (as amended) in our opinion and to the best of our information and according to the explanations given to us:


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i) The Group and its Joint Venture has disclosed the impact of pending litigations on its Financial position in its Financial Statements – Refer Note No.28. to the Consolidated Ind AS Financial Statements, except in case of a subsidiary company, AIATSL, where such disclosures are not made as reported by the Auditor of the said company;

ii) The group and its Joint Venture has made provisions, as required under the applicable laws or Accounting Standards, for material foreseeable losses, wherever applicable, if any, on long-term contracts, including derivative contracts entered into by the Company; and

iii) There were no amounts which were required to be transferred to the Investor Education and Protection Fund by the group and its Joint Venture.

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“Annexure- 1” to the Independent Auditor's Report of even date on the Consolidated Financial Statements of Air India Limited


Report on the Internal Financial Controls under Clause (i) of Sub-section 3 of Section 143 of the Companies Act, 2013 (“the Act”)

We have audited the internal nancial controls over nancial reporting of Air India Limited (“the Holding Company”) and its subsidiary companies and Joint Venture (which are companies incorporated in India, as of that date) as of March 31, 2018 in conjunction with our audit of the consolidated Ind AS nancial statements of the Company for the year ended on that date.

Management's Responsibility for Internal Financial Controls;

The respective Management of the Holding company, its subsidiary companies and Joint Venture, is responsible for establishing and maintaining internal nancial controls based on “the internal control over nancial reporting criteria established by the respective Companies considering the essential components of internal control stated in the Guidance Note on Audit of Internal Financial Controls over Financial Reporting issued by the Institute of Chartered Accountants of India”. These responsi-bilities include the design, implementation and maintenance of adequate internal nancial controls that were operating effectively for ensuring the orderly and efcient conduct of its business, including adherence to respective company's policies, the safeguarding of its assets, the prevention and detection of frauds and errors, the accuracy and completeness of the accounting records, and the timely preparation of reliable nancial information, as required under the Companies Act, 2013.

Auditor's Responsibility

Our responsibility is to express an opinion on the Company's internal nancial controls over nancial reporting based on our audit. We conducted our audit in accordance with the Guidance Note on Audit of Internal Financial Controls Over Financial Reporting (the “Guidance Note”) and the standards on Auditing, issued by ICAI and deemed to be prescribed under section 143(10) of the Companies Act, 2013, to the




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extent applicable to an audit of internal nancial controls, and both issued by the Institute of Chartered Accountants of India. Those Standards and the Guidance Note require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether adequate internal nancial controls over nancial reporting was established and maintained and if such controls operated effectively in all material respects.

Our audit involves performing procedures to obtain audit evidence about the adequacy of the internal nancial controls system over nancial reporting and their operating effectiveness. Our audit of internal nancial controls over nancial reporting included obtaining an understanding of internal nancial over nancial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the nancial statements, whether due to fraud or error.

We believe that the audit evidence we have obtained and the audit evidence obtained by the other Auditors' in terms of their reports referred to in the Other Matters paragraph below, is sufcient and appropriate to provide a basis for our audit opinion on the Company's internal nancial controls system over nancial reporting.

Meaning of Internal Financial Controls over Financial Reporting:

A company's internal nancial control over nancial reporting is a process designed to provide reasonable assurance regarding the reliability of nancial reporting and the preparation of Ind AS nancial statements for external purposes in accordance with generally accepted accounting principles. A company's internal nancial control over nancial reporting includes those policies and procedures that

(1) � pertains to the maintenance of records that, in reasonable detail, accurately and fairly reect the transactions and dispositions of the assets of the company;



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(2) � provide reasonable assurance that transactions are recorded as necessary to permit preparation of nancial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and

(3) � provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company's assets that could have a material effect on the nancial statements.

Inherent Limitations of Internal Financial Controls over Financial Reporting

Because of the inherent limitations of internal nancial controls over nancial reporting, including the possibility of collusion or improper management override of controls, material misstatements due to error or fraud may occur and not be detected. Also, projections of any evaluation of the internal nancial controls over nancial reporting to future periods are subject to the risk that the internal nancial control over nancial reporting may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

� Qualified Opinion

� According to the information and explanations given to us and based on our audit, the following material weaknesses have been identied as at March 31, 2018 in respect of the holding company:

1 In respect of Air India Limited (Holding Company) (Vide our Report on Standalone Ind AS Financial Statements dated 20th November 2018)

(I) The company did not have an effective interface between various functional software relating to Sales/Revenue and Inventory Management with the accounting software resulting in accounting entries being made manually on periodical basis.

Answer to (i) and (ii)

In airline industry, sales are booked as a liability and get converted to revenue only on the completion of travel by the pax. Hence, sales processing and revenue processing are two independent activities.


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(ii) The company did not have an appropriate internal control system for reconciliation of Control Accounts in relation to the Sales / Revenue, Inventory and Payroll.

Regarding sales, 85-90% of sales are generated through BSP (ARC in USA) and data in respect of these sales are received electronically, on a daily basis directly from IATA. Only the balance 15% (sales made at airport/booking ofce/GSA ofce and through Web) are received from SITA, in a similar manner. For all sales made at a particular station, there are BSP reports available for sales through agents, and SOR, that is, sales report from SITA for booking ofce sales. The station records the cash sales or receivables based on these reports. The same data is processed by the third part vendor (Accelya) to create the liability. The receivables booked by the station and the liability created by Accelya should normally be the same. Rather than one party booking the receivables and creating the liability, this two way process is mainly for internal nancial controls, through the intermediary accounts, to ensure that they match. There is a reconciliation statement which is generated for every ofce, on a monthly basis, which also gives the reasons for discrepancies.

It is observed that the differences arise, mainly due to time overlap, incorrect reection of currency, incorrect form of payment (mostly due to ticketing errors), which are subsequently investigated and rectied. The stations do check these reports, after which, either a receivable is created, if they have made any error, or Accelya is informed, if they need to make any correction. It may be pointed out that differences if any, do not affect the P and L account and remain in assets/liabilities.

A substantial amount has been identied, reconciled from the balances outstanding in the intermediary accounts as on 31.03.2018. These reconciliations have been shown to auditors, and adjustment entries have already been passed in 2017-18. Revenue processing is a separate activity. This liability created through sales processing, then gets converted to revenue, based on the own data received from SITA system, again on a daily basis, for all uplifts made at all airports.


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(iii) The company did not have an appropriate internal control system for deduction, timely deposit and reconciliation of statutory dues.

(iv) The company did not have an effective internal audit system commensurate with the size, nature and complexities of the business.

(v) The company did not have an appropriate internal control system for obtaining conrmation of balances on a periodic basis and reconciliation of unmatched Receivables and Payables.

It is relevant to point out that any ticket which is uplifted, for which there is no sale that is processed, is immediately captured as unreported sales, and debits are raised on the agents instantly.

Further, the Revenue Reports generated by the outside agency have been linked to SAP System during the current year 2017-18.

As regards, Inventory Issues it may be noted that the company has procured an enhanced version of RAMCO System which has been interfaced with SAP System also during 2018-19.

The company has hired an external rm of Chartered Accountants to reconcile the statutory dues with the deductions/ returns led/statutory records maintained. The company would give effect to any adjustments as and when the reconciliations are completed.

However the Company has taken all steps to ensure that TDS provisions has been properly captured and remitted.

In respect of GST, all the relevant payments have been led in time with the related authorities. In respect of the reconciliation, the same is a continuous progress and will be completed in due course.

External Internal Auditors were appointed during the year 2017-18 to strengthen and enhance the scope of Internal audit in several areas of the company's business. With the assistance of these auditors and strengthening of the in house internal audit team the company intends to strengthen the scope and coverage of internal audit commensurate with the size and nature of the company's business.

The company has conrmed the balances with the major vendors, banks and nancial institutions to whom the company owes the money. This constitutes a majority of creditors of the company. Similarly, in respect of receivables/payables from the Agents/ GSA/Vendors the company will strengthen the


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(vi) The Company did not have an effective Information system audit to evaluate and test the IT general controls, which may affect the completeness, accuracy and reliability of the reports generated from IT System.

(vii) The company did not have an effective system for timely accounting of entries & approval thereof in IT System.

We also draw your attention to the following qualied opinion on adequacy (and therefore operating effectiveness) of Internal Financial Control over Financial Reporting of below mentioned subsidiary companies of the Holding Company issued by Independent rm of Chartered Accountants reproduced by us as under;

2 In Respect of Air India Express Limited (Subsidiary) vide its Auditors' report dated 12th November, 2018)

I) The Company does not have documentary evidence in respect of consumption and inventory balances.

system of obtaining balance conrmation on periodic basis.

Further, in respect of reconciliation of unmatched receivables and payables it is stated that the company has reconciled a substantial percentage of receivables and payables in SAP. However, in respect of the remaining accounts necessary action will be taken to reconcile the unmatched receivables and payables in SAP in FY 2018-19

The Management is of the view that considering the multitude of vendors with which it has to deal with in the ordinary course of its business, it may not be possible to obtain a complete conrmation of balances from the all the vendors. Based on the conrmation received from the banks, nancial institutions and other major vendors the Management is of the view that the balances reected in the nancial statement reect a true and fair view of the amount owed/owing to/from various vendors/ parties.

The Company has an effective ERP-SAP System in place and IBM has been appointed to implement and hand hold AI upto 2023. Several Computer related applications are checked for accuracy and control by the Service Providers. The reliability of Reports are also checked.

ERP-SAP has been i n t r oduced and implemented at all online stations and an effective system has been put in place for the timely accounting and approval of entries.

All the information relating to procurement, consumption and inventory balances are


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ii) Controls over planning and monitoring of nancial closing process.

iii) Controls over spreadsheets used in nancial closing process.

iv) Procedural compliances in respect of statutory dues/liabilities in respect of Indirect Tax and Direct Tax.

v) Controls related to entries in migration accounts.

vi) Lack of controls to prevent duplicate accounting.

vii) Lack Controls related to review of Accounts Payable and Accounts Receivable.

viii) Lack of Controls relating to maker-checker process.

3 In respect of Air India Air Transport Services Limited (Subsidiary) vide its Auditors' report dated 6th November, 2018)

According to the information and explanations given us and based on our audit, the following material weaknesses have been identied as at March 31, 2018:

a) The Company's internal nancial control system over nancial report does not adequately consider risk assessment, which is one of the essential components of internal control, with regard to the potential for fraud when performing risk assessment.

b) Standard Operating Procedures (SOP) for all the department/process have not been drafted and

available in the RAMCO system and the Company exercises adequate control.

The Company is preparing the draft Quarterly nancials and submits the same to the Board and for other MIS.

The Company processes all the transactions in SAP and based on the TB generated from the system, the Company prepares the nancial statements as required under Companies Act.

The Company has correctly deducted and paid the Tax dues during the FY 2017-18 and also the TDS and Service Tax / GST as on 31.03.2018 has been discharged in full and there is no outstanding liability in this regard.

The Company has already initiated necessary procedures to address the migrated entries and the exercise would be completed in FY 2018-19.

Checks and balances are in place to verify and prevent duplicate accounting.

The Company has initiated steps to obtain 100 % balance conrmation from Vendors / Customers to comply with full controls.

Checks and balances are in place to verify and prevent duplicate accounting.

The company is in continuous process of strengthening its internal control process and the Company is in process of dening the appropriate internal Financial Control System.

Standard Operating Procedures for different departments/process is under preparation


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documented except the Brief Process Notes based on which the work ow is carried out.

c) In the Master updation by personnel department there is weakness observed due to manual controls, so there are high chances of error, omission, excess, short payments.

d) The Company has not dened it's Organization Structure and documented the Job description for the employees.

e) The Delegation of powers is not reviewed frequently by the company

f) The Company does not have an effective information system audit to evaluate and test the IT general controls, which may affect the completeness, accuracy and reliability of the reports generated from the IT system. As explained to us the department of IT – Air India (the Holding Company) controls all the IT related activities.

g) The backup of local systems are not taken regularly and data is not stored on servers. The LAN concept is not in use. The USB drives are open. The SAP data is maintained at Air India Servers. The Network Diagram is not available. The IT controls are weak.

h) The SAP logins are shared by the users. The maker checker process is not followed. The person who is entering the transaction only posts the transaction.

I) As per the Policy of the Company Physical Verication of Fixed Assets should be done once in a two year but since the hiving off the Business from AIL to AIATSL no such Physical verication has happened.

j) Based on our testing of identied controls by management the following deciencies were observed in processes as mentioned below:

The Company is in process of streamlining the process.

The job description with designation of permanent employees of AIATSL is available with Air India. For FTC Staff, there are separate job description with designation is available with HR-AIATSL.

The Delegation of power is under review.

This is a statement of fact. Noted for future compliance.

The mail IT system used by the company are SAP and Email, which are maintained by the Holding company under its IT Policy and used by the company on cost sharing basis. The back up and security of data stored in servers are also maintained by the holding company.

Due to shortage of adequate staff, the mater and checker system could not be used efciently, however process to identify and implement maker/checker system is in progress.

During the nancial year 2017-18, an external chartered accountant rm had been appointed to conduct the physical verication. Report of the same is under nalization.


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1 REVENUE

a) MBS software which is used for billing to Airlines does not have the Maker Checker controls for creation of masters. However, for raising of Invoices, the Maker - Checker controls is not being followed by Western Region.

b) Issue and maintenance of RA Form is decentralized as a result of which the format of RA form used is different across all the regions, also printing and serial number of the same is not standard.

c) No standard time limit is dened for sending the accepted RA Forms by duty manager to Billing department nor has any responsibility been dened for the task. Consequently considerable time gap between the services provided and invoices raised was observed.

d) Though invo ic ing cyc le is dened by management the same is not followed by billing department due to delay in receipt of RA forms

e) Reconciliation of RA forms issued with ights scheduled is not done in Western regions for tracking revenue leakages.

f) Arithmetical inaccuracy was observed in various invo ices i ssued f rom MBS so f tware . Consequently instances of Excess/Short Billing were observed showing material weakness in the process of Invoicing.

g) All the invoices are not raised through MBS. Regions are following the separate set of practices. Manual invoice raising is also observed. Invoice format is also not unique. Also some of the Mandatory elds are missing in the Invoice format. Invoicing system needs strong Automated Control.

h) T h e L o g i n s i n t h e M B S a r e s h a r e d inappropriately. The Appropriate Logs are also not available.

Due to shortage of adequate staff, the mater and checker system could not be used efciently, however process to identify and implement maker/checker system is in progress.

Standard format of RA Form (has been developed) is being developed and distributed to all the Regions with serial number printed on it.

Necessary steps have been taken to issue suitable direction to all concerned to forward RA forms on timely basis to Billing Section. The company is also exploring the automation of the Billing System.




Automated Control for invoicing with standard set of practice is being adopted and is in progress.

Providing appropriate Logins to all concerned is in progress


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i) In case of Group Company RA forms are not prepared and the invoices are raised based on IOCC data (IOCC maintained by Parent Company).

j) Rates decided in MOU with AIL is not supported by any basis of working.

k) Though interface from MBS to SAP is automated in certain cases missing elds are observed as a result of which bills are not automatically booked in the SAP.

l) Galaxy system used for creating TSP Receipts in cargo complex is not automated, certain details in the same are always to be entered manually.

m) TSP receipts can be created by any ofcer in the department the same is not segregated based on authority.

n) Since there is shortage of staff in the department, there are chances of custom penalties to be levied on AIATSL due to non-compliance of procedures on timely basis.

o) Transferring of data from galaxy into SAP is not automated for booking of revenue related to Import/Export.

2. HUMAN RESOURCES

a) Company does not have the detail Policy / Standard Operating Procedure for HRD. Notes are issued with the approvals of management as and when required for policies.

b) Company does not have an Automated Control for Attendance and payroll, in spite of the large employee strength. Also the standard manual attendance process is not followed across the departments.

This is a statement of Fact. Once Automated system is adopted which is in progress, even billing to Group Companies will be done based on automated system

The Rates agreed in MOU with AIL are based on internal working and mutual understanding with commercial consideration.

System is being modied to book all invoices of MBS into SAP system.

System is being modied to correct and automated TSP Receipts.

This is a statement of fact. Comments noted for compliance

Company is in process of augmenting the staff strength. However with the available staff strength, all care is taken to ensure timely compliance of procedure and as a result, till date no such penalties have been levied.

The option is being looked into as the system modication is involved. Alternate solutions are also being looked into.

The policy of Holding Company is applicable for permanent employees of AIATSL As regards FTC, notes are issued with the approval of management.

Strict control for Attendance is maintained by the respective Divisional Heads by maintaining Muster Register and Punching cards in various sections. As regards Automated Control for Attendance (Bio-metric system), Air India has purchased a system for all the employees of AIATSL including FTC Staff. However, considering delay in implementation of bio-metric machine by Air India at all locations, AIATSL has installed Bio-metric system at


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c) Company does not maintains the records for late mark, early going, so consequently non deduction from salary.

d) Process of payroll is not automated and involves manual inputs from all the departments.

e) Insertion / Updation of Master data base in the SAP is not having the checker-maker tool leads to wrong/excess/short payments of Salaries.

3. ACCOUNTS AND FINANCE

a) List of users in the SAP and their rights are not available.

b) Maker-Checker tool is not followed in the SAP.

c) There is no process to identify dormant/inactive GL accounts and no review of the same is done by appropriate authority.

d) Reversals of journal entries are not supported by appropriate documented approvals.

e) Posting of Journal Vouchers are supported by appropriate documented approvals in many cases.

f) Some of the cases it is also noted Direct Bank entry is passed instead of Rotating through the Party/Vender Ledger. Control cannot be established.

g) The company does not have an appropriate internal control system for obtaining con-rmation of balances on a periodic basis and reconciliation of unmatched Receivables and Payables.

h) Air India Limited (Parent Company) has been debiting expenses and crediting some revenue without any supporting documents. There is no way by which this expenses/revenue can be veried by the Company.

BOM GSD Complex. Based on performance, same will be implemented at all locations.

Once the bio-metric system is installed at all locations, these issues will be taken care by the system.

Linking of the bio-metric system with SAP will automate the process until such time manual inputs will have to be carried out.

Master updation for checker-maker concept will be implemented.

Dening rights of SAP users is in progress.

Process to identify and implement maker/ checker system is in progress.

The GL accounts are dened based on the requirement of Parent Company

Approvals are always there, however, will ensure to document the same


Corrective action is being initiated.

This is a statement of fact. However, conrmation from all vendors and customers are in progress.

The transfers have been done by Stations / Regions and all the supporting and related documents are available at the respective stations for verication


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i) Reconciliation of transactions with group companies is done only on year end instead the same should at least be done monthly/quarterly with review of appropriate authority.

j) Policy of petty cash is not standard across all the regions, the same should be standardized.

k) Cut off procedures are followed only on year end. However due to the implementation of GST the same should be done on monthly basis and proper review of the same should be done by appropriate authority.

l) Provisioning process is followed on year end basis instead of month to month basis.

m) There is no standard process for identifying contingent liabilities and quantifying the same for proper disclosure in nancial statements.

n) The working capital cycle of receipts from services provided to the Subsidiary companies the billing is regular but the receipts are not on timely manner.

o) In case of Insurance only premium amount is debited to the Company by Air India Limited (AIL), no proper justication of the same is available with the Company for the assets insured.

p) Scrap Sales are there but the same is not removed from the Fixed Asset Register in lack of proper records.

q) No documented process of scrutiny of general ledgers by appropriate authority is in place.

r) Tax Audit for the FY 2016-17 is not yet completed.

s) Statutory Returns (GST, TDS, PF, PT, ESIC, etc.) and Books under reconciliation.

4) PROCUREMENTS

a) Purchase orders are issued manually instead of using SAP.

This is a statement of fact and comments noted for compliance.





Have taken up with Group Companies for timely settlement

Details are available with our Parent Company

The same has been carried out


Tax Audit for FY 2016-17 has been completed.




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b) GRN is not issued for any procurement in any department.

c) There is no process of reviewing credit period offered to AIATSL by various vendors.

d) Process of forwarding procurement invoices to nance department is not dened.

e) Cost of Asset derived by Manager Finance is capital ized without being approved by appropriate authority.

f) SAP code and details of xed assets procured punched in by manager nance is not approved by appropriate authority.

g) Depreciation run in SAP is automated since the master is not updated w.r.t. rates the same is re-run for accounting the difference between the old and new rates.

5) OTHERS

a) The Company has not documented and approved Business Continuity Plan/Disaster Recovery Plan.

4) Airline Allied Services Limited (Subsidiary) vide its Auditors' report dated 6th November, 2018)

(i) The Company did not have an interface between various functional software relating to Sales/Revenue and Inventory Management with the accounting software resulting in accounting entries made manually. Further consistent delay has been observed in the accounting of revenue instead of real time basis/regular periodic interval. System of verication of data provided by outsource agency relating to revenue needs to be strengthen. Reconciliation with regard to revenue accounted for in the Company's account with the parent Company (AIL) is after the year end only. Revenue has been accounted for on the basis of data uploaded on FTP Server.

Although GRN is not issued, payments are effected on the basis of certication of quantity received.

The payments are effected after considering the credit period.

Although no specic process is dened, the invoices are forwarded to Finance duly certied by User Department and approved for payment action.


Capital procurement for any asset to be capitalized, the SAP codes have to be requested by Finance and the procurement of assets are all approved by Competent Authority

This is a statement of fact and necessary steps have been taken to update the masters in SAP.

This is a statement of Fact

Since AASL does not have any exclusive Ticketing and Reservation System of its own, the ticketing of the AASL sectors are also through numeric code 098 of its parent company AIL. The reservation is handled through a dynamic software provided by M/S SITA under a long term contract. All the reservation and ticket data are pushed by SITA to the Revenue Accounting software system of outsourced agency of AIL, M/s Acelya Kale for necessary segregation of the respective sale and uplift data through a AI code separator (9I) for AASL. Air India's inventory (Ticket stock) is being used under numeric code 098 for sales and refunds of passenger tickets on

Control on ticket price applicable for ights on RCS sector is inadequate.

(ii) Internal control system is decient in respect of payment on account of remuneration to Expat Pilots (refer note no. 53 of notes on accounts). (Refer Note No.58 (II)(A)

(iii) Internal control system is decient in respect of salary payment of Indian pilots (refer note no. 54 of notes forming part of the nancial statement) (Refer Note No.58 (II)(A)

(iv) Internal control system is decient in respect of utilization of services of pilots as services of some of the pilots are utilized over and above their normal working hours by buying their leaves and services of other pilots remain unutilized/underutilized below than the minimum hours. (Refer note no 55) (Refer Note No.58 (II)(A)

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AASL ights/sectors. The revenue collected on AASL sectors are reported and uploaded on FTV server online along with ight wise, passenger wise/ ticket wise/coupon wise on monthly basis by which the necessary entries are passed in AIL and as well as AASL books.

Since the tickets are electronically generated, the data are seamlessly processed in the system. There are several validations/ checks/controls as regards to authority of DATA right from capturing till it is reported and accounted with audit trail. The errors are negligible.

Reconciliation of revenue credit between its parent company AIL and AASL takes place on monthly basis.

The company is in process of implementing its own revenue system RADIXX in the year 2018-19, which will have an interface with the SAP accounting package.

Similarly, the inventory of AASL maintained in RAMCO system is reconciled in the group level with separate reports generated and provided for AASL inventories. Further, the RAMCO system is under upgradation, whereby it will be interfaced with SAP.

Suitable disclosure has been made in Notes to Accounts No. 53.

Suitable disclosure has been made in Notes to Accounts No. 54.

Due to the severe scarc i t y o f ATR Commanders, the company has employed expatriate pilots as Commanders on Fixed Term Employment Agreement (FTEA). To meet the operational requirements. The Board of Directors of the company in their 146th meeting held on 21st March 2017 noted and conveyed the encouragement of buying leaves of expatriate pilots.

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63


(v) Internal control system is decient in respect of reconciliation with parent Company and Associates Companies as it takes place only at the year end. Signicant impact on the Company's books of account has been observed on reconciliation of account with the Parent Company and Associate Companies. Reconciliation of account with AAI is pending since past many years.

(vi) The Company did not have an appropriate internal control system for reconciliation of statutory dues.

(vii) The Company did not have an appropriate internal audit control system for obtaining conrmation of balances on a periodic basis and reconciliation of unmatched Receivables and Payables.

(viii) The Company did not have an effective Information system audit to evaluate and test the IT general controls, which may affect the completeness, accuracy and reliability of the reports generated from IT System.

During the year 2017-18, half yearly reconciliation was carried out with parent company. As on 31.03.2018, reconciliation with parent company and all associated companies were done.

Regarding reconciliation with AIL and subsidiaries, suitable disclosure has been made in Notes to Accounts No.40.

Regarding AAI reconciliation, suitable disclosure is made in Note no 38.

Accounting entries for all the statutory deductions based on the invoices received from various vendors including payroll, are duly accounted through SAP system of accounting under various tax slabs. The monthly statements are downloaded, cross checked with the invoices and paid to respective authorities on due dates and accordingly returns are led periodically as per due dates, which are audited by Internal Auditors, Statutory Auditors, Tax Auditors and Govt.. Auditors.

The company has reconciled a substantial percentage of receivables and payables in SAP for all major customers and vendors such as OIL companies, Airport operators, Handling Service providers, related parties etc. However, in respect of remaining small Vendor's accounts necessary reconciliation is in process.

The company has h i red an external I ndependen t Agency to ce r t i f y and authenticate the balances which will facilitate the reconciliation and necessary accounting action thereof.

An effective SAP system has been installed and all the accounts were migrated in 2013-14. This system is being supported by IBM team. Several Computer related applications are checked for accuracy and control by the service providers. The reliability reports are also checked. There has been no irregularities detected in the System so far.

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(ix) Internal Control System is decient that maker checker concept is missing in SAP accounting.

(x) The Company does not have proper internal control for procuring goods and process of invoice/expenses in respect of aircraft inventory.

5. Air India Engineering Services Limited (Subsidiary) vide its Auditors' Report dated 3rd October, 2018)

(i) The company did not have an effective interface between various functional software relating to Sales/Revenue with the accounting software resulting in accounting entries being made manually on periodical basis.

(ii) The company uses the information systems partially for maintenance and processing of payroll. We nd that the leave records are not updated timely resulting in unwanted recoveries of excess salary.

AASL has an also a functional IT department to additionally co-ordinate with IBM for control and ensuring accuracy.

T h e c o m p a n y i s i n t h e p r o c e s s o f implementation of maker checker concept in SAP.

The company has an advanced inventory management software called “RAMCO” used in group level for AIL and its subsidiaries.

Monthly computerized statements of inventory showing opening stock, closing stock and consumptions i.r.o. AASL eet are received from AIL periodically, as reected in RAMCO system after the procurement, receipt, custom clearance etc. which are used for accounting of inventory and consumption in AASL books. The details are sent to AASL Finance for payment and accounting are supported with purchase orders along with Invoices from respective vendors duly certied by the user department.

AIL systems have elaborate and adequate control and internal check procedures for procurement, issue, stocking, segregation etc. for all inventories. Such controls are also exercised for AASL inventories.

The company uses the RAMCO system for raising the work orders for carrying outside party jobs. The company has successfully created the interface between RAMCO System and SAP in August-2018 and are making efforts to start raising the invoices to its customers through RAMCO system in respect of the outside party jobs carried out in its hangers.

T h e c o m p a n y i s i n t h e p r o c e s s o f strengthening the HR Module of SAP for its effective use.

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65


(iii) The company did not have an effective internal control system for timely ling and reconciliation of statutory dues.

(iv) The company has not followed the MOU's with the group companies for transfer of employees, as per the MOU's the companies were supposed to have a separate agreement for transfer of employees. No such agreement has been executed till date.

Disclaimer of Opinion

6 Hotel Corporation of India Limited (Subsidiary) th vide its Auditors Report dated 6 November 2018)

According to the information and explanation given to us, the Company has not established its internal nancial controls over nancial reporting on criteria based on or considering the essential components of internal controls stated in the Guidance Note on Audit of Internal Financial Controls Over Financial Reporting issued by the Institute of Chartered Accountants of India. Because of this reason, we are unable to obtain sufcient appropriate audit evidence to provide a basis for our opinion whether the Company had adequate internal nancial controls over nancial reporting and whether such internal

stnancial controls were operating effectively as at 31 March, 2018.

However, the auditor, in their Audit report under Emphasis of Matter para have stated the following;

“The Company has internal control system for management of inventory which need strengthening as referred to in Note no. 49 and the company has internal control system which need strengthening as referred to in Note no. 50” (Refer Note No. 58 (II) (B) in consolidated Ind AS Financial Statements).

7 The auditor of the Joint Venture, AI-SATS, vide their report dated 10th November, 2018 has issued an un-qualied opinion on the adequacy and operating effectiveness of the internal nancial control over nancial reporting as on 31.03.2018.

The company is in process of strengthening the process of timely ling of statutory returns and reconciliation thereof and for this purpose the company is recruiting adequate number of manpower.



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� A 'material weakness' is a deciency, or a combination of deciencies, in internal nancial control over nancial reporting, such that there is a reasonable possibility that a material misstatement of the company's annual or interim nancial statements will not be prevented or detected on a timely basis.

In our opinion, except for the effects/possible effects of the material weakness described above on the achievement of the objectives of the control criteria, the Company has maintained, in all material respects, adequate internal nancial controls over nancial reporting and such internal nancial controls over nancial reporting were operating effectively as of March 31, 2018, based on the internal control over nancial reporting criteria established by the Company considering the essential components of internal control stated in the Guidance Note on Audit of Internal Financial Controls Over Financial Reporting issued by the Institute of Chartered Accountants of India.

We have, to the extent possible, considered the material weakness identied and reported above in determining the nature, timing, and extent of audit tests applied in our audit of the March 31, 2018 consolidated Ind AS nancial statements of the Company, and as also the material weakness identied and reported by the Independent Auditors of subsidiary companies and these material weaknesses are not likely to affect our opinion on the Consolidated Ind AS nancial statements.

� Other Matters

� Our aforesaid reports under section 143(I) of the Act on the adequacy and operating effectiveness of the internal nancial control over nancial reporting insofar as it relates to ve subsidiaries and a Joint Venture, which are companies incorporated in India, is based on the corresponding reports of the auditors of such companies.

67

CONSOLIDATED BALANCE SHEET AS AT 31 MARCH 2018(Rupees in Million)

Particulars Note As at 31st March 2018 As at 31st March 2017 As at 1st April 2016

ASSETS :1 Non-current Assets (i) Property, Plant & Equipment 1 298,170.9 315,144.3 303,571.0 (ii) Capital Work-in-Progress 814.9 2,774.2 6,618.8 (iii) Investment Property 9,919.6 15,112.4 15,551.8 (iv) Intangible Assets 3,115.4 3,343.2 3,938.1

(v) Intangible Assets under

development 82.9 13.5 13.5

312,103.7 336,387.6 329,693.2

(vi) Financial Assets :

a) Investments 2 3,061.7 2,782.4 2,489.5

b) Trade Receivables 3 57.3 61.6 47.4

c) Loans 4 3,196.8 2,819.3 2,583.1

d) Others 5 1,534.1 661.4 506.7

(vii) Income Tax Assets (Net) 7 3,301.1 3,693.3 4,284.2

(viii) Deferred Tax Assets (net) 50 28,431.0 28,450.5 28,540.3

(ix) Other Non-Current Assets 6 6,261.9 21,941.1 19,016.4

357,947.6 396,797.2 387,160.8

2. Current Assets

(i) Inventories 8 12,675,2 13,112.1 15,702.3

(ii) Financial Assets :

a) Trade Receivables 3 21,064.9 19,242.9 18,933.8

b) Cash and Cash Equivalents 9 3,300.9 4,029.7 5,768.5

c) Bank Balances other than

(b) above 10 5,739.1 5,336.8 4,420.6

d) Loans 4 230.3 475.2 509.8

e) Others 5 3,232.6 2,280.3 1,964.8

33,567.8 31,364.9 31,597.5

(iii) Income Tax Assets (Net) 7 1,129.7 731.9 550.1

(iv) Other Current Assets 6 21,299.2 22,729.6 22,653.9

68,671.9 67,938.5 70,503.8

3 Assets held for Sale 87,918.3 597.3 63,271.9

TOTAL 514,537.8 465,333.0 520,936.5

The accompanying notes are an integral part of the Financial Statements

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

For and on Behalf of For and on Behalf of For and on behalf of the BoardThakur, Vaidyanath Aiyar & Co. Sarda and PareekChartered Accountants Chartered Accountants FRN : 000038N FRN : 109262W

Sd/-(Pradeep Singh Kharola)

Sd/- Sd/-

Chairman & Managing DirectorDIN : 05347746

(V. Rajaraman) (Gaurav Sarda)Partner PartnerM.No. 02705 M.No. 110208

Sd/-(V.S. Hejmadi)Director-FinanceDIN : 07346490

Sd/-(Kalpana Rao)Company Secretary

For and on Behalf of Varma and VarmaChartered Accountants FRN : 004532S

Sd/-

(P. R. Prasanna Varma)PartnerM.No. 025854

Place : New DelhiDate : 20 November 2018

Significant Accounting Policies A

Notes forming part of the Financial Statements 1 - 62

Particulars Note As at 31st March 2018 As at 31st March 2017 As at 1st April 2016

EQUITY AND LIABILITIES :

1 Equity

(i) Equity Share Capital 11 286,902.1 267,530.0 214,960.0

(ii) Other Equity 12 (594,831.8) (535,706.1) (439,364.7)

(307,929.7) (268,176.1) (224,404.7)

2 Liabilities

Non-current Liabilities

a) Financial Liabilities

(i) Borrowings 13 306,875.1 343,752.1 372,885.7

(ii) Trade Payables 14 - - -

(iii) Other Financial Liabilities 15 169.3 173.4 240.3

307,044.4 343,925.5 373,126.0

b) Provisions 16 35,227.7 32,144.2 29,792.2

c) Other Non Current Liabilities 17 - - 50.3

342,272.1 376,069.7 402,968.5

Current Liabilities

a) Financial Liabilities

(i) Borrowings 18 233,055.7 143,412.7 161,539.2

(ii) Trade Payables 14 93,446.9 101,028.8 86,084.1

(iii) Other Financial Liabilities 15 89,741.9 76,888.9 62,676.5

416,244.5 321,330.4 310,299.8

b) Other Current Liabilities 17 60,384.5 32,938.6 28,781.1

c) Provisions 16 3,566.4 3,170.4 3,291.8

480,195.4 357,439.4 342,372.7

TOTAL 514,537.8 465,330.0 520,936.5

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CONSOLIDATED BALANCE SHEET AS AT 31 MARCH 2018(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.


Notes forming part of the Financial Statements 1 - 62



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CONSOLIDATED STATEMENT OF PROFIT AND LOSS FOR THE YEAR ENDED 31ST MARCH 2018

(Rupees in Million)

Note No. 2017-18 2016-17


Notes forming part of the Financial Statement 1-62

The accompanying notes are an integral part of the Financial Statements.

This is the statement of Prot and Loss referred to in our report of even date.

Particulars

I Revenue 1. Revenue from Operations 19 i) Scheduled Trafc Services 230,740.4 208,234.3 ii) Non-Scheduled Trafc Services 13,863.6 12,730.5 iii) Other Operating Revenue 26,375.1 33,486.2 Revenue from Operation 270,979.1 254,451.0II 2. Other Income 20 5,941.0 1,427.5III Total Revenue (I+II) 276,920.1 255,878.5IV Expenses 1. Aircraft Fuel & Oil 85,361.0 72,723.9 2. Other Operating Expenses 21 114,052.0 102,242.6 3. Employee Benet Expenses 22 47,523.2 43,832.9 4. Finance Costs 23 46,721.9 45,081.5 5. Depreciation and Amortization 24 19,630.3 19,549.8 6. Other Expenses 25 20,253.0 19,477.6 Total Expenses 333,541.4 302,908.3V Profit/(Loss) before Exceptional and Tax (III-IV) (56,621.3) (47,029.8)VI a. Exceptional Items (Net) 26 (1,123.9) (21,492.1) b. Prot Share of Joint Venture 257.1 346.1VII (Loss) before Tax (V+VI) (57,488.1) (68,175.8)VIII Tax Expenses : i) Current Tax 491.5 192.5 ii) Deferred Tax 19.5 89.8IX Profit/(Loss) after Tax for the year (VII-VIII) (57,999.1) (68,458.1)X Other Comprehensive Income Items that will not be reclassied to Prot & Loss and its related income tax effect : i) Re-measurements of Dened Benet Plans 342.3 (1,867.0) ii) Fair value changes on Equity Instruments through 46.6 (16.7) other comprehensive income Other Comprehensive Income for the year 388.9 (1,883.7)XI Total Comprehensive Income for the period (IX+X) (57,610.2) (70,341.8)XII Earning per equity share of face value of Rs. 10 each 51 Basic & Diluted (Rs.2.14) (Rs.3.16)



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CONSOLIDATED STATEMENT OF CHANGE IN EQUITY FOR THE YEAR ENDED 31ST MARCH 2018

(Figures in Million)

A. Equity Share Capital As at 31.03.2018 As at 31.03.2017 As at 01.04.2016

No. of Shares Amount in

Rupees

No. of Shares Amount in Rupees

No. of Shares

Amount in Rupees

Balance at the beginning of the reporting period 26,753.00 267,530.0 21,496 214,960.0 17,178 171,780.0

Changes in the Equity Share Capital during the

Add : Equity Shares Allotted during the year 1,937.21 19,372.1 5,257 52,570.0 4,318 43,180.0

Balance at the end of reporting period 28,690.21 286,902.1 26,753 267,530.0 21,496 214,960.0

(Rupees in Million)

B. Other Equity Share

Application

Money

Capital

Reserve

General

Reserve

FCMITDA Retained

Earnings

Equity

Instruments

through

Total

Balance as at 31.03.2017 1,372.1

7,475.6

(1,436.7) (2,349.1) (529,972,9) 697.3

(524,213.7)

Changes in accounting policy or prior period errors -

-

-

-

(11,492.4)

(11,492.4)

(Loss) for the year -

-

-

-

(58,023.4)

(58,023.4)

Other Comprehensive Income for the year -

-

-

-

342.4

46.6

389.0

Additions during the year -

147.4

-

(126.5)

-

20.9

Amortization during the year -

(478.4)

-

338.3

-

(140.1)

Shares allotted during the year 1,372.1

-

-

-

-

1,372.1

Balance as at 31.03.2018 -

7,144.6

(1,436.7)

(2,137.3)

(599,146.3)

743.9

(594,831.8)

Balance as at 31.03.2016 29,290.0

6,980.3

(1,436.7)

(3,758.2)

(467,080.5)

714.0

(435,291.4)

Changes in accounting policy or prior period errors -

-

-

-

(4,073.2)

(4,073.2)

(Loss) for the year -

-

-

-

(68,494.6)

(68,494.6)

Other comprehensive income for the year -

-

-

-

(1,867.0)

(16.7)

(1,883.7)

Additions during the year -

825.3

-

703.7

-

1,529.0

Amortization during the year -

(329.7)

-

705.4

-

375.7

Shares allotted during the year 27,917.9

-

-

50.0

27,967.9

Balance as at 31.03.2017 1,372.1

7,475.6

(1,436.7)

(2,349.1)

(541,465.3)

697.3

(535,706.1)

The accompanying notes are an integral part of the Financial Statements.

This is the statement of Change in Equity referred to in our report of even date.



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CONSOLIDATED CASH FLOW STATEMENT FOR THE YEAR ENDED 31ST MARCH 2018(Rupees in Million)

Particulars

Notes :

2017-18 2016-17

A. CASH FLOW FROM OPERATING ACTIVITIES (Loss) before Exceptional Items and Tax (56,621.3) (47,029.8) Adjustment for :� Exceptional Items (Net) (1,123.9) (21,492.5) Unrealised Foreign Exchange (Gain)/Loss 552.1 (2,334.2) Depreciation and amortisation 20,108.7 19,879.5 Provision/ Unclaimed Liabilities Written Back (23.5) (99.9) Provision for Obsolescence / Inventory Reconciliation* 1,067.2 2,111.9 Provision for Bad & Doubtful Receivables and Advances* (1,419.3) 1,765.5 Provision for Employee Benets* 1,377.2 (457.4) Provision for Redelivery of Aircrafts * 2,454.0 926.5 Provision for Frequent Flyer Programme 12.8 (207.3)� (Prot)/Loss on sale of xed assets (961.4) 1,154.5� Dividend income (69.5) (75.2) Interest income (on Bank Deposits, advances to subsidiary companies & others) (4,000.8) (3,158.6) Interest and Finance Charges 50,238.0 47,528.4 68,211.6 45,541.2 Operating (Loss) / Profit Before Working Capital Changes 11,590.3 (1,488.6) Adjustments for : (Increase) / Decrease in Inventories (77.9) 478.2 (Increase) / Decrease in Trade and Other Receivables 32,287.4 32,046.9 Increase / (Decrease) in Trade and Other Payables (13,867.2) 34,923.6 18,342.3 67,448.7 Cash Generated from Operations 29,932.6 65,960.1 Direct Taxes paid (811.7) (963.8) Net Cash Flow (used in)/ from Operating Activities 29,120.9 64,996.3 B. CASH FLOW FROM INVESTING ACTIVITIES Acquisition of Property, Plant & Equipment (39,532.1) (39,220.2) Proceeds from sale of Property, Plant & Equipment (including Assets Held for Sale) 3,103.6 61,770.9 (Increase) / Decrease in Investments (net) 15,189.9 14,584.2 (Increase) / Decrease in Bank Deposits (Maturity of more than 3 months) (468.9) (988.0) Interest received (on Bank Deposits, advances to subsidiary companies & others) 3,063.9 3,122.1 Dividend Received 69.5 75.2 Net Cash Flow used in Investing Activities (18,574.1) 39,344.2 C. CASH FLOW FROM FINANCING ACTIVITIES Issue of Shares / Share application money received 2,020.6 9,707.0 Proceeds from Long Term Borrowings 275.7 (1,479.6) Repayment of Long Term Borrowings (29,411.7) (27,721.4) Proceeds from Short Term Borrowings 109,228.7 40,132.9 Repayment of Short Term Borrowings (44,026.2) (79,502.6) Increase/(Decrease) in Capital Reserve (316.1) 516.4 Interest Paid (49,161.9) (47,710.1) Net Cash Flow from/(used in) Financing Activities (11,390.9) (106,057.4) Net increase/ (Decrease) in Cash and Cash equivalents (844.1) (1,716.9) Unrealised Foreign Exchange Gain/(Loss) in Cash & Bank Balances 115.3 (21.9) Cash and Cash equivalents (Opening balance) 4,029.7 5,768.5 Cash and Cash equivalents (Closing balance) 3,300.9 4,029.7

*These gures have been taken from Balance Sheet movements.1. For details of components of Cash and Cash equivalents, see Note No.2. Reconciliation of Liabilities arising from Financing Activities:

Particulars As at 31.03.2017 Financing Cash Flows Non Cash As at Flows 31.03.2018 Proceeds Repayment -Exchange Loss/(Gain)

Long Term Borrowings 358,759.5 275.7 (25,619.5) 114.6 333,503.3Short Term Borrowings 129,513.1 134,214.9 (44,026.2) (146.9) 219,554.9



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NOTE: A

Accounting Policies forming part of the Consolidated Financial Statements for the year ended 31 March 2018

(Rupees in millions except otherwise stated)

1. Company Information / Overview

Background

The Consolidated Financial statements comprise nancial statements of “Air India Ltd“(the holding

company) and its subsidiaries (collectively, referred hereunder as the Group) and interest in Joint

Venture Company.

Air India Ltd, (a Government of India Company) is a company incorporated under the provisions of

Companies Act applicable in India. The registered ofce of the company is situated at Airlines House,

113, Gurudwara Rakabganj Road, New Delhi -110001.

The group and its Joint Venture Company provides domestic and international air transport services

which include passenger and cargo services and other related services namely, ground handling,

engineering and hotel services. The aircraft eet of the group consists of a wide range of aircrafts.

2. Basis of Preparation/Consolidation

(i) Statement of Compliance

The Group has adopted Indian Accounting Standards (Ind AS) with effect from 1 April 2017, with

transition date of 1 April 2016, pursuant to notication issued by Ministry of Corporate Affairs

dated 16 February 2015, notifying the Companies (Indian Accounting Standards) Rules, 2015.

Accordingly, the nancial statements comply with Ind AS as prescribed under section 133 of the

Companies Act, 2013 (the “Act”), read together with Rule 3 of the Companies (Indian

Accounting Standards) Rules, 2015, relevant provisions of the Act and other accounting

principles generally accepted in India. The Consolidated Financial Statements of Air India

Limited (“the Holding Company”), its Subsidiaries (together “the Company / Group”) and its

Joint Venture upto and for the year ended 31 March 2017 were prepared in accordance with the

accounting standards notied under Companies (Accounting Standards) Rules, 2006 (as

amended), as notied under section 133 of the Act (“Previous GAAP”) and other relevant

provision of the Act. The Consolidated nancial statements for the year ended 31 March 2018

are the rst consolidated nancial statements of the Group prepared under Ind AS. A detailed

reconciliation on the impact of transition to Ind AS to the previously reported consolidated

nancial position, consolidated nancial performance and consolidated cash ows of the Group

is included in Note 27.

(ii) Principles of Consolidation

(a) The Consolidated Financial Statements present the consolidated audited accounts of

Air India Limited with the following Subsidiaries and interest in Joint Venture:

73

Name of the Subsidiary / Joint Venture Extent of Holding Extent of Holding Company as on 31st March as on 31st March 2018 2017

Subsidiaries incorporated in India

Airline Allied Services Ltd. (AASL) 100% 100%

Air India Air Transport Services Ltd. (AIATSL) 100% 100%

Air India Express Ltd. (AIEL) 100% 100%

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

Hotel Corporation of India Ltd (HCI) 80.38% 80.38%

Joint Venture Incorporated in India

Air India SATS Airport Services Pvt. Ltd.(AI-SATS) 50% 50%

(b) Investment in Subsidiaries

(i) The Company consolidates entity which it owns or controls. The consolidated nancial statements comprise the standalone nancial statements of the Company and its subsidiaries as disclosed. Control exists when the parent has power over the entity, is exposed, or has rights, to variable returns from its involvement with the entity and has the ability to affect those returns by using its power over the entity. Power is demonstrated through existing rights that give the ability to direct relevant activities, those which signicantly affect the entity's returns. Subsidiaries are consolidated from the date control commences until the date control ceases.

(ii) The nancial statements of the Group Companies are consolidated on a line-by-line basis and intra-group balances, intra-group transactions and unrealized prots & losses are eliminated upon consolidation. These consolidated nancial statements 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 except as otherwise stated.

(iii) The excess of the Equity of the Subsidiary over the cost of investment in the Subsidiary Company at the date on which investment is made is recognized as Capital Reserve in the Consolidated Financial Statement. Similarly, the excess of cost of investment in Subsidiary Companies over the equity of the Subsidiary Companies at the date on which investment is made is recognized as Goodwill in the Consolidated Financial statement.

(c) Investments in Associates/Joint Venture

Investment in Joint Venture is accounted for on Equity Method as stated in IND AS-28 “Investments in Associates and Joint Ventures”.

(d) Minority Shareholder

Government of India is the only Minority Shareholder in one of the Subsidiary of Air India Ltd. Since the Govt of India is the sole shareholder of Air India Ltd also, the Govt of India

74

is not considered as a Minority Shareholder and hence the minority interest is not segregated and disclosed separately.

(iii) Basis of Measurement

The Consolidated Financial Statements have been prepared under the historical cost convention on accrual basis except for certain nancial assets and liabilities which are measured at fair value or amortized cost at the end of each nancial year.

(iv) Critical Accounting Estimates /Judgments

In preparing these Consolidated nancial statements, management has made judgments, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses and actual results may differ from these estimates.

Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates where necessary are recognized prospectively.

Signicant areas of estimation and judgments (as stated in the respective Accounting Policies) that have the most signicant effect on the Financial Statements are as follows:

a) Impairment of Assets

b) Estimate of revenue recognition from “Forward Sales Account”

c) Measurement of useful life and residual values of property, plant and equipment and the assessment as to which components of the cost may be capitalized.

d) Basis of classication of a Property as Investment Property.

e) Basis of classication of Non-Current Assets held for sale.

f) Estimation of Costs of Re-delivery.

g) Recognition of Deferred Tax Assets.

h) Recognition and measurement of dened benet obligations.

i) Judgment required to ascertain lease classication.

j) Measurement of Fair Values and Expected Credit Loss (ECL).

k) Judgment is required to ascertain whether it is probable or not that an outow of resources embodying economic benets will be required to settle the taxation disputes and legal claim.

(v) Operating cycle & Classification of Current & Non Current

Presentation of assets and liabilities in the Consolidated Financial Statements has been made based on current / non-current classication provided under the Company Act 2013. The Company being in service sector, there is no specic operating cycle; however, 12 months period has been adopted as “the Operating Cycle” in-terms of the provisions of Schedule III to the Companies Act 2013. Accordingly, current liabilities and current assets include the current portion of non-current nancial liabilities and assets.

75

3. Significant Accounting Policies

The accounting policies set out below have been applied consistently to all periods presented in these consolidated nancial statements and in preparing the opening Ind AS Consolidated Balance Sheet as at 1 April 2016 for the purposes of the transition to Ind AS.

I. Property, Plant and Equipment (PPE)

a) Property, Plant and Equipment are stated at cost including incidental costs incurred pertaining to the acquisition and bringing them to the location for use and interest on loans borrowed where ever applicable, upto the date of putting the concerned asset to its working condition for its intended use.

b) Signicant parts which meet the denition of property, plant and equipment (i.e. Aircraft Rotables, Repairables (with Serialized Control) including the major cost incurred on modernization / modication / conversion of aircraft and engines) have been capitalized as a separate component.

c) 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.

d) All Revenue expenses directly attributable to ongoing projects are set apart as expenses during construction and capitalized on the basis of value of work completed during the year in which the assets are put to use.

e) Physical Verication of Assets is done on a rotational basis so that every asset is veried in every two years and the discrepancies observed in the course of the verication adjusted in the year in which report is submitted and nalized.

II. Depreciation / Amortization

a) Depreciation is provided on straight-line method over the useful life of the Property, plant and equipment as prescribed in the Schedule II of the Companies Act 2013 (except as otherwise stated), keeping a residual value of 5% of the original cost. Depreciation method, useful lives and residual value are reviewed by the management at each year end.

b) On the basis of technical assessment, the useful life of B-777 and A-320 family aircraft(procured from 2006-07 onwards) are considered as25 years (instead of the life of 20 years as prescribed under Schedule II of the Companies Act 2013) keeping a residual value of 5% of the original cost.

c) In the case where life of the Property, plant and equipment, has not been prescribed under Schedule II of the Companies Act 2013 the same have been determined by technically qualied persons and approved by the Board of Directors keeping a residual value of 5% of the original cost as under :

1. Rotables:

(i) Aircraft Rotables relating to Airbus family are depreciated over the residual average useful life of the aircraft eet relating to the respective family and of the respective engineering base, from the relevant year of purchase.

(ii) Aircraft Rotables relating to Boeing are depreciated over the residual average useful life of the related aircraft eet from the relevant year of purchase.

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2. Aircraft Repairables:

Repairables which are serially controlled, are treated as Property, Plant & Equipment and accordingly are amortized over a period of 10 years (in case of post migration) and 5 years (in case of pre-migration) from the date of its purchase unless scrapped earlier.

d) In respect of operating leases of aircraft/engines in which the company acquires, a residual right in the aircraft by paying a termination/release sum, such amount is treated as PPE and amortized over the remaining useful life of the aircraft/engines determined by ying hours.

e) Major overhaul costs relating to engine and airframe are identied as separate components for owned aircrafts and aircrafts under nance lease and are depreciated over the expected lives between major overhauls.

f) Cost incurred on major modications/refurbishment, modernization/conversion carried to owned and leased assets are depreciated over the useful life/period of lease of the asset.

g) In the case of AIATSL, assets of small value not exceeding INR 5,000/- in each case, are fully provided for in the year of purchase.

h) Leasehold property, plant and equipment (including land other than perpetual lease) is amortized over the period of lease.

i) Kitchen utensils purchased for the rst time for a new unit are written off equally in four years. Any additions in the subsequent years are written off in the year of purchase.

j) Carpets purchased initially for a new unit/major renovation are capitalized as Fixed Assets in the year of purchase and depreciated on the Straight Line Method as specied in Para d above. Carpets purchased in the subsequent years are being written off as Soft furnishings in the year of purchase.

k) Heavy curtains are written off in the year of issue.

l) Physical Verication of PPE is done on a rotational basis so that every asset is veried in every two years and the discrepancies observed in the course of the verication adjusted in the year in which report is submitted and nalized.

III. Non- Current Assets held for Sale

Assets are classied as held for sale if it is highly probable that they will be recovered primarily through sale in its present condition rather than through continuing use. The net book value of such assets, are transferred from the block of xed assets to “Assets held for Sale” at lower of the carrying value or Fair Value less cost to sell. No depreciation is provided, once the asset is transferred to Assets Held for Sale.

IV. Investment Properties

Investment Properties are properties held to earn rentals and / or for capital appreciation. Investment properties are measured initially at cost including transaction cost, Subsequently, Investment property are stated at cost less accumulated depreciation and impairment losses, if any. Depreciation is provided as per Note No II. Any gain or loss on disposal is recognized in Statement of Prot & Loss.

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V. Intangible Assets

(i) Intangible assets are recorded at cost of acquisition including incidental costs related to acquisition and installation and are carried at cost less accumulated amortization and impairment losses, if any.

Intangible assets which have nite useful lives are amortized on straight line method over the estimated useful life, which is reviewed by the management every year i.e.

a) Software of Passenger Services System, over 10 years, and

b) Other software/website, over 5 years.

(ii) DGCA License- all expenses incurred including man power cost prior to three months from the date of obtaining license and directly attributable to DGCA License for CAR- 145 MRO with certication has been capitalized.

VI. Leases

(i) Finance Lease

a) A lease is classied as nance lease or operating lease at the inception date. Leases of property, plant and equipment that transfer to the Company substantially all of the risks and rewards of ownership are classied as nance lease.

b) Assets held under nance lease are initially capitalized at the fair value at the inception of lease or at the present value of the minimum lease payments whichever is lower.

c) Minimum lease payments made under nance lease are apportioned between the nance costs and the reduction of the outstanding liability treated as loan. The nance cost is allocated to each period during the lease term. However, if they are directly attributable to qualifying assets, then they are capitalized in accordance with the company's general policy on borrowing cost.

(ii) Operating Lease

a) Leases where the lessor effectively retains substantially all the risks and rewards of ownership of the leased assets are classied as Operating Lease.

b) Lease payments in respect of assets taken on operating lease are charged to the Statement of Prot and Loss on a straight line basis over the period of the lease unless the payments are structured to increase in line with the expected general ination to compensate the lessors expected inationary cost increases. Any change in the lease terms are accounted prospectively over the remaining term of lease.

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

d) The Company has in its eet, aircrafts on operating lease. As contractually agreed under the lease contracts, the aircraft have to be redelivered to the lessors at the end of the lease term under stipulated contractual return conditions. The redelivery costs are estimated by management based on historical trends and data, and are charged to Statement of Prot & Loss in proportion to the expired lease period. These are recorded at the discounted value, where effect of the time value of money is material.

(iii) Sale and Lease Back (SLB)Transactions

Prot or losses arise on sale at fair value and leaseback transactions of asset resulting in an operating lease of such assets, are recognized immediately in the statement of Prot and Loss. Where the sale price is below fair value, any prots/ losses are immediately recognized in the Statement of Prot and Loss except where the loss is compensated by future lease payments at below market price. In such cases loss is deferred and amortized in proportion to the lease payments over the initial period for which the asset is expected to be used. In the case where the sale price is above fair value of the asset, the excess over fair value is amortized over the initial period of the lease period for which the asset is expected to be used.

VII. INVENTORIES

a) Inventories primarily (include) consists of stores and spares and loose tools (other than those which meet the criteria of property, plant and equipment). Cost of inventories comprise all costs of purchase after deducting non refundable rebates and discounts and all other costs incurred in bringing the inventories to their present location and condition and is determined on weighted average basis.

b) Inventories are valued at lower of cost and Net Realizable Value ('NRV'). NRV for stores and spares, loose tools and fuel used in rendering of services are not written down below cost except in cases where the price of such materials have declined and it is estimated that the cost of rendering of services will exceed their selling price.

c) Expendables/consumables are charged off at the time of initial issue, except those meant for repairs of repairable items which are expensed off when the work order is closed on the completion of repair work.

d) Obsolescence provision for aircraft stores and spare parts

(i) Provision is made for the non-moving inventory exceeding a period of ve years (net of realizable value of 5%) except for (ii) & (iii) below and netted off from the value of inventory.

(ii) Inventory of Aircraft Fleet which has been phased out, is shown at estimated realizable value unless the same can be used in other Aircrafts.

(iii) 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.

e) Full Obsolescence Provision for non-aircraft stores and spares is made for non-moving inventory exceeding a period of ve years.

f) Spares retrieved from the cannibalization of the scrapped aircraft are accounted for at Rupee One.

VIII. IMPAIRMENT OF NON FINANCIAL ASSETS

The Group assesses at each Balance Sheet date whether there is any indication that carrying amount of its non- nancial asset has been impaired. If any such indication exists, the provision for impairment is made in accordance with IND AS-36.

IX. GOVERNMENT GRANTS

Government Grants are recognized where there is reasonable assurance that the grant will be received and all attached conditions will be complied with.

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Government Grants are recognized in prot or loss on a systematic basis over the periods in which the Company recognizes as expenses the related costs for which the grants are intended to compensate.

Government Grants that become receivable as compensation for expenses or losses incurred in a previous period are recognized in prot or loss of the period in which it becomes receivable.

Government Grants related to assets are presented in the balance sheet as deferred income and are recognized in prot or loss on a systematic basis over the expected useful life of the related assets.

X. REVENUE RECOGNITION

Revenue is recognized to the extent that it is probable that the economic benets will ow to the Company and the revenue can be reliably measured, regardless of when the payment is being made. Revenue is measured at fair value of the consideration received or receivable, net of discounts. Revenue is recorded when the recovery of consideration is probable and determinable.

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

b) Loss or gain on reissue/refund/ involuntary transfer of passengers to other carriers is also deducted or included, as the case may be, in the transport revenue.

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, if any, required are carried out at the time of availability of such information.

d) Income from Interest is recognized using the effective interest method on a time proportion basis. Income from Rentals is recognized on a time proportion basis.

e) Dividend is recognized as, income, if the right to receive is established before the close of the year.

f) The claims receivable from Insurance Company are accounted for on the acceptance by the Insurance Company of such claims.

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

h) Other Operating Revenue is recognized when goods are delivered or services are rendered.

i) Gain or loss arising out of sale/scrap of PPE including aircraft over the net depreciated value is taken to Statement of Prot & Loss as Non-Operating Revenue or Expenses.

j) Other Items :

i) Scrap sales, reimbursement from employees availing medical, educational and other leave without pay, claims of interest from suppliers, other staff claims and lost baggage claims, are recognized on cash basis.

ii) Liability/ Claims for amounts payable towards IATA dues are recognized to the extent of claims/ invoices received.

k) Revenue comprises sale of rooms, food and beverages and allied services relating to hotels operations, and ight kitchen revenues. Revenue is recognized upon rendering of the service,

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provided pervasive evidence of an arrangement exists, tariff/ rates are xed or are determinable and collectability is reasonably certain. Revenue from sales of foods or rendering of services is net of taxes, returns and discounts.

l) Revenue is recognized only when it can be reliably measured and it is reasonable to expect ultimate collection. Revenue from operations includes technical handling revenue, MRO services revenue, & other servicing revenue.

m) Other servicing revenue is recognized on the basis of budgeted rate per block hours multiplied by actual block hours. MRO services revenue & Technical Handling Revenue are recognized as shared by Holding company & other group companies and in some of the cases bills are raised directly by AIESL after completion of services as agreed.

n) Other operating revenue is related to training charges recovered from trainees and recognized as and when right to receive arises.

o) Ground Handling and other related services are recognized when the services are provided. Un-billed services at the end of each nancial year, based on available data, are estimated and are recognized as Revenue.

p) Viability Gap Funding (VGF) and Regional Connectivity Scheme (RCS) are accounted for on the basis of difference between revenue and cost of operations on accrual basis and the same is treated as Operating Income.

XI. MANUFACTURER'S CREDIT (CASH & NON CASH INCENTIVES)

Manufacturer's credit entitlements are accounted for on accrual basis and credited to 'Incidental Revenue' by contra debit to 'Advances'; when the credit entitlement are used, the 'advances' are adjusted against the liability created for either acquiring an asset or incurring an expenditure.

XII. BORROWING COST

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

b) Interest incurred on borrowed funds or other temporary borrowings in anticipation of the receipt of long term borrowings that are used 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 the time of acquisition.

XIII. FOREIGN CURRENCY TRANSACTIONS

The management has determined the currency of the primary economic environment in which the company operates i.e. functional currency, to be Indian Rupees. The nancial statements are presented in Indian Rupees, which is company's functional and presentation currency.

a) Foreign Currency Monetary Items:

i) .Foreign currency Revenue and Expenditure transactions relating to Foreign Stations are recorded at established monthly rates (based on published IATA rates). Interline settlement with Airlines for transportation is carried out at the exchange rate published by IATA for respective month.

ii) Foreign currency monetary items are translated using the exchange rate circulated by Foreign Exchange Dealers Association of India (FEDAI). Gains/ (losses) arising on account of realization/settlement of foreign exchange transactions and on translation of

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monetary foreign currency assets and liabilities are recognized in the Statement of Prot and Loss.

st iii) In respect of long term foreign currency monetary items originating before 1 April, 2016, 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 nancial 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 useful 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 such long term Assets or Liability.

b) Exchange variation is not considered at the year-end in respect of Debts and Loans & A� dvances for which doubtful provision exists since they are not e� xpected to be r�ealized.

XIV. EMPLOYEE BENEFITS

The Retirement Benets to the employees comprise of Dened Contribution Plans and Dened Benet Plans.

a) Defined Contribution Plans consist of contributions to Employees Provident Fund and Employees State Insurance Scheme. The Company has created separate Trusts to administer Provident Fund contributions to which contributions are made regularly. ESI dues are regularly deposited with government authorities.

b) Defined Benefit Plans which are not funded, consist of Gratuity, and Post Retirement Medical Benets and other benets. The liability for these benets except for (i) below is actuarially determined under the Projected Unit Credit Method at the year end as per Indian Laws.

The obligation is measured at the present value of estimated future cash ows. The discount rates used for determining the present value of obligation under dened benet plans, is based on the market yields on Government securities as at the balance sheet date, having maturity periods approximating to the terms of related obligations. Re-measurements gains and losses arising from experience adjustments and changes in actuarial assumptions are recognized in the period in which they occur, directly in Other Comprehensive Income. They are included in “Other Equity” in the Statement of Changes in Equity and in the Balance Sheet.

Changes in the present value of the dened benet obligation resulting from settlement or curtailments are recognized immediately in Statement of Prot and Loss as past service cost.

Liability for Gratuity, Pension and other retirement Benets 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.

c) Other Long-Term Employee Benefits

Benets in the form of Leave Encashment are accounted as other long-term employee benets. The Company's net obligation in respect of Leave Encashment is the amount of benet to be settled in future, that employees have earned in return for their service in the current and previous years. The benet is discounted to determine its present value. The obligation is measured on the basis of an actuarial valuation using the projected unit credit method. Re-measurements are recognized in Statement of Prot and Loss in the period in which they arise.

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XV. TAXES ON INCOME

(i) Current Tax

Current tax comprises the expected tax payable or receivable on the taxable income or loss for the year and any adjustment to the tax payable or receivable in respect of previous years. The amount of current tax reects the best estimate of the tax amount expected to be paid or received after considering the uncertainty, if any, related to income taxes. It is measured using tax rates (and tax laws) enacted or substantively enacted by the reporting date. Current tax assets and current tax liabilities are offset only if there is a legally enforceable right to set off the recognized amounts, and it is intended to realize the asset and settle the liability on a net basis or simultaneously.

(ii) Deferred Tax

Deferred tax is recognized in respect of temporary differences between the carrying amounts of assets and liabilities for nancial reporting purposes and the corresponding amounts used for taxation purposes.

Deferred tax liabilities are recognized for all taxable temporary differences. Deferred tax assets are recognized for unused tax losses, unused tax credits and deductable temporary differences to the extent that is probable that future taxable prots will be available against which they can be used. The carrying amount of deferred tax assets is reviewed at the end of each reporting period and reduced to the extent that it is no longer probable that sufcient taxable prots will be available to allow all or part of the asset to be recovered.

Deferred tax is measured at the tax rates that are expected to apply to the period when the assets are realized or liability is settled, based on the laws that have been enacted or substantively enacted by the reporting date.

The measurement of deferred tax reects the tax consequences that would follow from the manner in which the Company expects, at the reporting date, to recover or settle the carrying amount of its assets and liabilities.

Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset current tax liabilities and assets, and they relate to income taxes levied by the same tax authority, but they intend to settle current tax liabilities and assets on a net basis or their tax assets and liabilities will be realized simultaneously.

XVI. PROVISIONS, CONTINGENT LIABILITIES / CAPITAL COMMITMENTS & CONTINGENT ASSETS

a) Provisions involving a substantial degree of estimation in measurement are recognized when there is a present obligation (legal or constructive)as a result of past events and it is probable that there will be an outow of resources. If the effect of the time value of money is material, provisions are discounted using a current pre-tax rate that reects, when appropriate, the risks specic to the liability. These estimates are reviewed at each reporting date and adjusted to reect the current best estimates. The expense relating to a provision is presented in the statement of prot and loss.

b) Contingent liabilities are disclosed by way of a note in respect of possible obligations that may arise from past events but their existence is conrmed by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the Company.

c) Contingent assets are possible assets that arises from past events and whose existence will be conrmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the Company. A contingent asset is disclosed, when an inow of economic benets is probable.

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XVII. FREQUENT FLYER PROGRAMME

The Company operates Frequent Flyer Programme that provides loyalty points based on accumulated mileage points to those who have joined this facility.

The revenue recognized when the transportation service is provided is reduced by the estimated fair value of the mileage points issued in the year such loyalty points are earned. The fair value attributed to the awarded loyalty points is treated as a deferred liability and recognized as revenue on redemption of the points and provision of service to the participants to whom the points were issued.

XVIII. CASH AND CASH EQUIVALENTS

Cash and cash equivalents consist of cash at bank and in hand and short-term deposits with an original maturity of three months or less, which are subject to an insignicant risk of changes in value.

XIX. EARNINGS PER SHARE

The Company presents basic and diluted earnings/ (loss) per share (EPS) data for its equity shares. Basic earnings per equity share are computed by dividing the net prot after tax attributable to the equity shareholders by the weighted average number of equity shares outstanding during the year. Diluted earnings per equity share is computed by dividing adjusted net prot after tax by the aggregate of weighted average number of equity shares and dilutive potential equity shares during the year.

XX. FAIR VALUE MEASUREMENT

The Company measures nancial instruments and specic investments (other than subsidiary, joint venture and associates), at fair value at each balance sheet date.

All assets and liabilities for which fair value is measured or disclosed in the nancial statements are categorized within the fair value hierarchy, described as below, based on the lowest level input that is signicant to the fair value measurement as a whole:

Level 1 :� Quoted (unadjusted) market prices in active markets for identical assets or ��liabilities

Level 2 : Valuation techniques for which the lowest level input that is signicant to the fair value measurement is directly or indirectly observable

Level 3 : Valuation techniques for which the lowest level input that is signicant to the fair value measurement is unobservable.

For assets and liabilities that are recognized in the balance sheet on a recurring basis, the Company determines whether transfers have occurred between levels in the hierarchy by re-assessing categorization (based on the lowest level input that is signicant to the fair value measurement as a whole) at the end of each reporting period.

For the purpose of fair value disclosures, the Company has determined classes of assets and liabilities on the basis of the nature, characteristics and risks of the asset or liability and the level of the fair value hierarchy as explained above.

FINANCIAL INSTRUMENTS

A nancial instrument is any contract that gives rise to a nancial asset of one entity and a nancial liability or equity instrument of another entity.

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A. Financial Assets

(i) Classification

The Company classies nancial assets as subsequently measured at amortized cost, fair value through other comprehensive income or fair value through Statement of Prot and Loss on the basis of its business model for managing the nancial assets and the contractual cash ows characteristics of the nancial asset.

(ii) Initial recognition and measurement

All nancial assets are recognized initially at fair value plus, in the case of nancial assets not recorded at fair value through Statement of Prot and Loss, transaction costs that are attributable to the acquisition of the nancial asset.

(iii) Subsequent measurement

For purposes of subsequent measurement nancial assets are classied in below categories:

(a) Financial assets carried at amortized cost: A nancial asset other than derivatives and specic investments, is subsequently measured at amortized cost if it is held within a business model whose objective is to hold the asset in order to collect contractual cash ows and the contractual terms of the nancial asset give rise on specied dates to cash ows that are solely payments of principal and interest on the principal amount outstanding.

(b) Financial assets at fair value through other comprehensive income: A nancial asset comprising specic investment is subsequently measured at fair value through other comprehensive income if it is held within a business model whose objective is achieved by both collecting contractual cash ows and selling nancial assets and the contractual terms of the nancial asset give rise on specied dates to cash ows that are solely payments of principal and interest on the principal amount outstanding. The Company has made an irrevocable election for its investments which are classied as equity instruments to present the subsequent changes in fair value in other comprehensive income based on its business model.

(c) Financial assets at fair value through Statement of Profit and Loss :A nancial asset comprising derivatives which is not classied in any of the above categories are subsequently fair valued through prot or loss.

(iv) De-recognition

A nancial asset is primarily derecognized when the rights to receive cash ows from the asset have expired or the Company has transferred its rights to receive cash ows from the asset.

(v) Investment in subsidiaries, joint ventures and associates

The company has accounted for its investment in subsidiaries, joint ventures and associates at cost. The company assesses whether there is any indication that these investments may be impaired. If any such indication exists, the investment is considered for impairment based on the fair value thereof.

(vi) Impairment of other financial assets

The Company assesses impairment based on expected credit losses (ECL) model for measurement and recognition of impairment loss on the nancial assets that are trade receivables or contract revenue receivables and all lease receivables etc.

(vii) Write-off

The gross carrying amount of a nancial asset is written off (either partially or in full) to the extent that there is no realistic prospect of recovery. This is generally the case when the Company determines that the counterparty does not have assets or sources of income that could generate sufcient cash ows to repay the amounts subject to the write-off. However, nancial assets that are written off could still be subject to enforcement activities in order to comply with the Company's procedures for recovery of amounts due.

B. Financial Liabilities

(i) Initial recognition and measurement

All nancial liabilities are recognized initially at fair value and, in the case of loans and borrowings and payables, net of directly attributable transaction costs. The Company's nancial liabilities include trade and other payables, loans and borrowings including bank overdrafts, and derivative nancial instruments.

(ii) Classification

The Company classies all nancial liabilities as subsequently measured at amortized cost, except for nancial liabilities at fair value through Statement of Prot and Loss. Such liabilities, including derivatives shall be subsequently measured at fair value.

(iii) Subsequent measurement

The measurement of nancial liabilities depends on their classication, as described below.

a) Financial Liabilities at amortized cost: After initial recognition, interest-bearing loans and borrowings are subsequently measured at amortized cost using the Effective Interest Rate (EIR) method. Gains and losses are recognized in Statement of Prot and Loss when the liabilities are derecognized as well as through the EIR amortization process. Amortized cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral part of the EIR. The EIR amortization is included as nance costs in the Statement of Prot and Loss.

b) Financial liabilities at fair value through Statement of Profit and Loss: Financial liabilities at fair value through Statement of Prot and Loss include nancial liabilities held for trading and nancial liabilities designated upon initial recognition as at fair value through Statement of Prot and Loss. Financial liabilities are classied as held for trading if they are incurred for the purpose of repurchasing in the near term. This category comprises derivative nancial instruments entered into by the Company that are not designated as hedging instruments in hedge relationships as dened by Ind AS 109. Separated embedded derivatives are also classied as held for trading unless they are designated as effective hedging instruments. Gains or losses on liabilities held for trading are recognized in the Statement of Prot and Loss.

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(iv) De-recognition

A nancial liability is derecognized when the obligation under the liability is discharged or cancelled or expires.

(v) Offsetting of financial instruments

Financial assets and nancial liabilities are offset and the net amount is reported in the balance sheet if there is a currently enforceable legal right to offset the recognized amounts and there is an intention to sell on a net basis, to realize the assets and sell the liabilities simultaneously.

XXI. THRESHOLD LIMITS

The Company has adopted following materiality threshold limits in the classication of expenses/incomes and disclosure:

(Rs in Millions)

No Threshold Items Threshold Value

(i) Prepaid Expenses

a) Foreign Stations 0.05

b) Domestic Stations 0.01

(ii) Contingent Liability & Capital Commitments 0.10

(iii) Fair Valuation of Financial Instruments 50.00

Note:- For AIATSL, Contingent Liability limit is Rs. 1.0 million

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NOTE "1" : (Rupees in Million)

Particulars GROSS BLOCK

As atApril 01, 2017

Additions Deductions/Reclassi-fication

Deductions/Reclassi-fication

UptoMarch 31, 2018

As atMarch 31, 2018

As atMarch 31, 2017

As atMarch 31, 2018

UptoApril 01, 2017

For theYear

DEPRECIATION NET BLOCKSl.No.

PROPERTY, PLANT & EQUIPMENT

A. LAND & BUILDINGS

1. Land-Freehold 6,986.3 - 1,260.9 5,725.4 - - - - 5,725.4 6,986.3

2. Land-Leasehold 54,523.8 - 52,684.0 1,839.8 75.6 - 75.6 - 1,839.8 54,448.2

3. Buildings 10,145.6 306.0 652.6 9,799.0 262.3 737.5 693.9 305.9 9,493.1 9,883.3

SUB TOTAL "A" 71,655.7 306.0 54,597.5 17,364.2 337.9 737.5 769.5 305.9 17,058.3 71,317.8

B. AIRCRAFT FLEET, ROTABLES & REPAIRABLES

1. Airframes

Owned 157,437.9 32,908.7 151.0 190,195.6 8,328.4 9,012.9 - 17,341.3 172,854.3 149,109.5

2. Aero Engines & Power Plants

(a) Owned-Fixed Cost 57,785.6 14,452.5 65.7 72,172.4 2,736.5 3,163.8 - 5,900.3 66,272.1 55,049.1

(b) Owned-Variable Cost (Component) 6,704.2 1,495.1 1,395.5 6,803.8 1,753.8 1,628.7 596.8 2,785.7 4,018.1 4,950.4

(c) Owned-Repair Cost 9,114.1 1,755.2 - 10,869.3 1,241.8 1,645.4 - 2,887.2 7,982.1 7,872.3

3. Simulators & Link Trainers 2,553.3 658.9 178.1 3,034.1 152.9 161.3 163.6 150.6 2,883.5 2,400.4

4. Airframe Rotables 8,977.1 1,552.3 - 10,529.4 520.2 544.0 2.4 1,061.8 9,467.6 8,456.9

5. Aero-Engine Rotables 882.3 - - 882.3 69.5 66.9 - 136.4 745.9 812.8

6. Aircraft Repairables 8,846.1 1,957.1 384.1 10,419.1 1,124.4 1,324.8 310.4 2,138.8 8,280.3 7,721.7

SUB TOTAL "B" 252,300.6 54,779.8 2,174.4 304,906.0 15,927.5 17,547.8 1,073.2 32,402.1 272,503.9 236,373.1

C. OTHER- FIXED ASSETS

1. Workshop Equipment, Instruments, 5,068.8 835.4 3.0 5,901.2 684.5 603.0 99.4 1,188.1 4,713.1 4,384.3 Machinery and Plants -

2. Ground Support & Ramp Equipment 2,389.9 1,171.8 84.6 3,477.1 411.8 342.5 78.3 676.0 2,801.1 1,978.1

3. Furniture & Fixtures 220.4 23.3 1.6 242.1 39.0 28.5 0.5 67.0 175.1 181.4

4. Vehicles 76.0 15.2 23.2 68.0 (8.7) 12.3 22.0 (18.4) 86.4 84.7

5. Ofce Appliances & Equipment 173.4 44.7 5.6 212.5 27.9 32.8 0.1 60.6 151.9 145.5

6. Computer System 265.2 89.1 1.9 352.4 39.9 48.2 1.5 86.6 265.8 225.3

7. Electrical Fittings & Installations 518.3 2.4 24.8 495.9 64.3 66.6 50.3 80.6 415.3 454.0

8. Object D'art (Net Block Rs.39,969.43) 0.6 - - 0.6 0.6 - - 0.6 - -

SUB TOTAL "C" 8,712.6 2,181.9 144.7 10,749.8 1,259.3 1,133.9 252.1 2,141.1 8,608.7 7,453.3

TOTAL PROPERTY, PLANT &

EQUIPMENT 332,668.9 57,267.7 56,916.6 333,020.0 17,524.7 19,419.2 2,094.8 34,849.1 298,170.9 315,144.2

INVESTMENT PROPERTY

1. Investment Property Land -

Leasehold 8,983.7 - 4,770.7 4,213.0 - - - - 4,213.0 8,983.7

2. Investment Property - Buildings 6,568.1 23.3 - 6,591.4 439.4 445.4 - 884.8 5,706.6 6,128.7

TOTAL FOR INVESTMENT PROPERTY 15,551.8 23.3 4,770.7 10,804.4 439.4 445.4 - 884.8 9,919.6 15,112.4

INTANGIBLE ASSETS :

A. COMPUTER SOFTWARE 870.2 16.2 - 886.4 496.5 116.2 - 612.7 273.7 373.7

B. OTHERS 3,097.5 - - 3,097.5 127.9 127.9 - 255.8 2,841.7 2,969.6

TOTAL FOR INTANGIBLE ASSETS 3,967.7 16.2 - 3,983.9 624.4 244.1 - 868.5 3,115.4 3,343.3

TOTAL ASSETS 352,188.4 57,307.2 61,687.3 347,808.3 18,588.5 20,108.7 2,094.8 36,602.4 311,205.9

Previous Year 323,060.9 31,421.7 2,294.2 352,188.4 - 19,879.5 1,291.0 18,588.5 333,599.9 Capital Work-in-Progress 814.9 2,774.2 Intangible Assets under Development 82.9 13.5

GRAND TOTAL 312,103.7 336,387.6

1. During the year, the Company has capitalized translation difference of Rs.244.4 Million (Previous Year : Rs.1,620.0 Million) arising on settlement and reporting of long term monetary items. Additions to "Aircraft Fleet, Rotables & Repairables" includes Exchange Rate Fluctuations (Net of Debit & Credit) on underlying loans in foreign currency : Rs. 263.8 Million (Previous Year: Rs. (2,307.1) Million).

2. "Aircraft Fleet, Rotables & Repairables" includes 39 Aircraft (One B777-300 ER, Six B787-800, Five B747-400, Nine A-319, Ten A320 & Eight A-321), 20 Spare Engines & 4 Spare APUs owned by Air India Ltd.

3. "Aircraft Fleet, Rotables & Repairables" includes 54 Aircraft (Three B777-200LR, Twelve B777-300 ER, Ten A-319, Twelve A-321 & Seventeen B737-800) (Previous Year : 54 Aircraft - {Three B777-200LR, Twelve B777-300ER, Ten A-319, Twelve A-321 & Seventeen B737-800}) & 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 benecial ownership is with Group Companies (Refer Note 46(I)).

4. Borrowing costs capitalized during the year are Rs.1,636.8 Million (Previous Year : Rs.82.5 Million)

5. Depreciation includes debit of Rs.478.4 Million (Previous Year : Debit of Rs.329.7 Million) to Capital Reserve.

6. "Intangible Asset - Others" represents Membership Fees for joining Star Alliance.

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

8. Three Old Classic A320 Aircraft(VT-EPO,VT-EPL and VT- EPD) , two Boeing 737 (VT-EGJ and VT-EGI),18 V2500 Engines, one Boeing JT8D Engine and 10 A320 Classic APU with WDV of Rs. 149.7 million removed from Surplus Assets on sale and a loss of Rs.4.99 million booked during the year.

9. As per IND AS 16, Rs. NIL Million (Previous Year 382.4 Million) has been transferred from Engine xed cost to Engine Variable Cost. The depreciation charged on the Engine Variable Component is Rs. 969.5 Million (previous year- Rs.1478.3 million.)

88

NOTE "1" : (Rupees in Million)

Particulars GROSS BLOCK

As atApril 01, 2016

Additions Deductions/Reclassi-fication

Deductions/Reclassi-fication

UptoMarch 31, 2017

As atMarch 31, 2017

As atMarch 31, 2016

As atMarch 31, 2017

UptoApril 01, 2016

For theYear

DEPRECIATION NET BLOCKSl.No.

PROPERTY, PLANT & EQUIPMENT

A. LAND & BUILDINGS

1. Land-Freehold 6,986.3 - - 6,986.3 - - - - 6,986.3 6,986.3

2. Land-Leasehold 54,495.7 29.6 1.5 54,523.8 - 75.6 - 75.6 54,448.2 54,495.7

3. Buildings 8,282.5 1,851.5 (11.6) 10,145.6 - 262.3 - 262.3 9,883.3 8,282.5

SUB TOTAL "A" 69,764.5 1,881.1 (10.1) 71,655.7 - 337.9 - 337.9 71,317.8 69,764.5

B. AIRCRAFT FLEET, ROTABLES

& REPAIRABLES1. Airframes Owned 147,069.0 10,859.4 490.5 157,437.9 - 8,730.8 402.4 8,328.4 149,109.5 147,069.02. Aero Engines & Power Plants (a) Owned-Fixed Cost 50,463.6 7,230.9 (91.1) 57,785.6 - 2,778.9 42.4 2,736.5 55,049.1 50,463.6

(b) Owned-Variable Cost

(Component) 6,175.3 1,596.6 1,067.7 6,704.2 - 2,122.3 368.5 1,753.8 4,950.4 6,175.3

(c) Owned-Repair Cost 7,225.1 1,946.4 57.4 9,114.1 - 1,241.8 - 1,241.8 7,872.3 7,225.1

3. Simulators & Link Trainers 1,919.7 633.6 - 2,553.3 - 152.9 - 152.9 2,400.4 1,919.7

4. Airframe Rotables 6,505.3 2,471.8 - 8,977.1 - 519.4 (0.8) 520.2 8,456.9 6,505.3

5. Aero-Engine Rotables 882.3 - - 882.3 - 69.5 - 69.5 812.8 882.3

6. Aircraft Repairables 7,444.9 2,022.9 621.7 8,846.1 - 1,480.5 356.1 1,124.4 7,721.7 7,444.9

SUB TOTAL "B" 227,685.2 26,761.6 2,146.2 252,300.6 - 17,096.1 1,168.6 15,927.5 236,373.1 227,685.2

C. OTHER- FIXED ASSETS

1. Workshop Equipment, Instruments, 3,246.1 1,824.8 2.1 5,068.8 - 729.8 45.3 684.5 4,384.3 3,246.1 Machinery and Plants -

2. Ground Support & Ramp Equipment 1,957.3 547.3 114.7 2,389.9 - 439.3 27.5 411.8 1,978.1 1,957.3

3. Furniture & Fixtures 110.4 111.1 1.1 220.4 - 41.1 2.1 39.0 181.4 110.4

4. Vehicles 42.7 48.3 15.0 76.0 - 5.9 14.6 (8.7) 84.7 42.7

5. Ofce Appliances & Equipment 140.6 48.5 15.7 173.4 - 47.8 19.9 27.9 145.5 140.6

6. Computer System 176.8 95.9 7.5 265.2 - 53.1 13.2 39.9 225.3 176.8

7. Electrical Fittings & Installations 447.4 73.5 2.6 518.3 - 64.7 0.4 64.3 454.0 447.4

8. Object D'art (Net Block Rs.39,969.43) - - (0.6) 0.6 - - (0.6) 0.6 - -

SUB TOTAL "C" 6,121.3 2,749.4 158.1 8,712.6 - 1,381.7 122.4 1,259.3 7,453.3 6,121.3

TOTAL PROPERTY, PLANT &

EQUIPMENT 303,571.0 31,392.1 2,294.2 332,668.9 - 18,815.7 1,291.0 17,524.7 315,144.2 303,571.0

INVESTMENT PROPERTY

1. Investment Property Land-Leasehold 8,983.7 - - 8,983.7 - - - - 8,983.7 8,983.7

2. Investment Property - Buildings 6,568.1 - - 6,568.1 - 439.4 - 439.4 6,128.7 6,568.1

TOTAL FOR INVESTMENT PROPERTY 15,551.8 - - 15,551.8 - 439.4 - 439.4 15,112.4 15,551.8

INTANGIBLE ASSETS :

A. COMPUTER SOFTWARE 840.6 29.6 - 870.2 - 496.5 - 496.5 373.7 840.6

B. OTHERS 3,097.5 - - 3,097.5 - 127.9 - 127.9 2,969.6 3,097.5

TOTAL FOR INTANGIBLE ASSETS 3,938.1 29.6 - 3,967.7 - 624.4 - 624.4 3,343.3 3,938.1

TOTAL ASSETS 323,060.9 31,421.7 2,294.2 352,188.4 - 19,879.5 1,291.0 18,588.5 333,599.9

Previous Year 323,060.9

Capital Work-in-Progress 2,774.2 6,618.8

Intangible Assets under Development 13.5 13.5

GRAND TOTAL 336,387.6 329,693.2

89

NOTE "2" : NON-CURRENT INVESTMENTS (Rupees in Million)

Particulars As atMarch 31, 2016

As atMarch 31, 2017

As atMarch 31, 2018

Sl.No.

1 INVESTMENT at cost1.1 EQUITY INSTRUMENTS- UNQUOTED A IN JOINT VENTURE

40,424,975 Equity Shares of Rs.10 each fully paid up in Air India SATS 2,015.7 1,782.9 1,473.3 Airport Services Private Ltd. (40,424,975 Equity Shares of Rs.10 each issued at a premium of Rs.0.79 per share) Sub Total 2,015.7 1,782.9 1,473.3B WITH OTHERS/ STRUCTURED ENTITIES TRADE INVESTMENTS I) 271,945 Equity Shares (Previous Year : 271,933 Equity Shares) 13.9 13.9 13.9 of EUR 5.00 each fully paid up in SITA (Societe Internationale de Telecommunications Aeronautiques). (12 Shares allotted during the year) ii) 618,460 Depository Certicates of SITA Information Network 28.8 28.8 28.8 Computing N.V. (Previous Year : 618,460) iii) 1,270 class B Shares (Previous Year : 1,280 Shares) of BHT 100 0.2 0.2 0.3 each fully paid up in Aeronautical Radio of Thailand Ltd. (10 Shares redeemed during the year) iv) 50 Equity Shares of EUR 152.45 each fully paid up in Association 0.4 0.4 0.4 Sportive Du Golf Isabella. Sub Total 43.3 43.3 43.41.2 DEBENTURES 6% Debenture Bonds of Banco De Roma face value EUR 15.49 - - - guaranteed by the Government of Italy (Deposited with Civil Aviation Department, Italy). * (Rs. 3,057.69). Sub Total - - - TOTAL INVESTMENT at Cost (A) 2,059.0 1,826.2 1,516.72 INVESTMENT AT FAIR VALUE THROUGH OTHER COMPREHNSIVE INCOME (FVTOCI)2.1 EQUITY INSTRUMENTS (QUOTED ) 375,407 Equity Shares of EUR 0.48 each fully paid up in France Telecom 418.2 378.9 435.7 (Market Value Rs.418.2 Million, Equivalent to EUR 5.2 Million). (Previous Year: Rs. 378.9 Million, Equivalent to EUR 5.5 Million) Sub Total 418.2 378.9 435.72.2 WITH OTHERS/STRUCTURED ENTITIES TRADE INVESTMENTSi) 2,617,098 Equity Shares of MAR 10 each fully paid up in Air Mauritius Ltd. 105.4 104.8 96.9 ii) 2,301,244 Equity Shares of MAR 10 each fully paid up in

Air Mauritius Holding Ltd. 44.8 51.5 44.0 iii) 12,500,000 Equity Shares of Rs. 10 each fully paid up in Cochin 434.3 421.0 396.2 International Airport Limited. (12,500,000 Equity Shares of Rs.10 issued and subscribed at a premium of Rs.40 per share) Sub Total 584.5 577.3 537.1 TOTAL INVESTMENT AT FAIR VALUE THROUGH OTHER COMPREHNSIVE INCOME (FVTOCI) (B) 1,002.7 956.2 972.8 TOTAL (1+2) 3,061.7 2,782.4 2,489.5 Aggregate amount of unquoted investments 2,643.5 2,403.5 2,053.8 Aggregate amount of quoted investments (Market value : Rs.418.2 Million 418.2 378.9 435.7 (Previous Year : Rs.378.9 Million)) (Equivalent to EUR 5.2 Million Previous Year : EUR 5.5 Million))

90

NOTE "3" : TRADE RECEIVABLES (Rupees in Million)

Particulars NON-CURRENT

As atApril 01, 2016

As atMarch 31, 2018

As atMarch 31, 2017

As atApril 01, 2016

As atMarch 31, 2018

As atMarch 31, 2017

CURRENTSl.No.

Unsecured, Considered Good * 57.3 61.6 47.4 21,064.9 19,242.9 18,933.8

Doubtful 10,435.1 10,904.6 9,311.2 - - -

10,492.4 10,966.2 9,358.6 21,064.9 19,242.9 18,933.8

Less : Allowance for Doubtful Receivables 10,435.1 10,904.6 9,311.2 - - -

(A) 57.3 61.6 47.4 21,064.9 19,242.9 18,933.8

*Trade Receivables amounting to Rs.70.0 Million (Previous Year Rs.86.7 Million ) are backed by Bank Guarantees.

NOTE "4" : LOANS(Rupees in Million)


As atApril 01, 2016

As atMarch 31, 2018

As atMarch 31, 2017

As atApril 01, 2016

As atMarch 31, 2018

As atMarch 31, 2017

CURRENTSl.No.

A Security Deposits

Unsecured Considered Good 3,196.8 2,819.1 2,582.9 230.3 448.2 505.2

Doubtful 42.9 43.4 43.4 - - -

3,239.7 2,862.5 2,626.3 230.3 448.2 505.2

Less : Allowance for Doubtful Deposits 42.9 43.4 43.4 - - -

(A) 3,196.8 2,819.1 2,582.9 230.3 448.2 505.2

B Loans to Employees

Secured Loan - 0.2 0.2 - - -

Unsecured Advances Considered Good - - - - 27.0 4.6

Doubtful - - - - - -

- 0.2 0.2 - 27.0 4.6

Less : Allowance for Doubtful Advances - - - -

(B) - 0.2 0.2 - 27.0 4.6

TOTAL (A + B) 3,196.8 2,819.3 2,583.1 230.3 475.2 509.8

91

NOTE "5" : OTHER FINANCIAL ASSETS(Rupees in Million)


As atApril 01, 2016

As atMarch 31, 2018

As atMarch 31, 2017

As atApril 01, 2016

As atMarch 31, 2018

As atMarch 31, 2017

CURRENTSl.No.

A. Advance Recoverable from Parties

Unsecured Considered Good - - - 2,487.0 1,330.6 1,119.5

Unsecured Considered Doubtful 201.1 138.7 135.6 - - -

201.1 138.7 135.6 2,487.0 1,330.6 1,119.5

Less : Allowance for Doubtful Advances 201.1 138.7 135.6 - - -

(A) - - - 2,487.0 1,330.6 1,119.5

B Advance Recoverable from Employees - - - - - -

Unsecured Advances Considered Good 73.3 24.5 30.1 484.2 522.7 403.0

Unsecured Considered Doubtful 16.0 23.1 22.3 - - -

89.3 47.6 52.4 484.2 522.7 403.0


(B) 73.3 24.5 30.1 484.2 522.7 403.0

C Deposits-Others (having maturity of more

than 12 months) 1,415.9 632.8 473.4 - - -

Less : Allowance for Doubtful Deposits 0.1 0.1 0.1 - - -

(C) 1,415.8 632.7 473.3 - - -

D Interest Accrued on

i) Fixed Deposits 42.4 - - 26.7 72.0 47.2

ii) Loan to Employees 2.6 4.2 3.3 5.5 8.7 13.5

(D) 45.0 4.2 3.3 32.2 80.7 60.7

E Other Non-Trade Receivables

Unsecured Advances Considered Good - - - 229.2 346.3 381.6

Unsecured Considered Doubtful 2,043.1 2,814.9 2,667.1 - - -

2,043.1 2,814.9 2,667.1 229.2 346.3 381.6

Less : Allowance for Doubtful Receivables 2,043.1 2,814.9 2,667.1 - - -

(E) - - - 229.2 346.3 381.6

TOTAL 1,534.1 661.4 506.7 3,232.6 2,280.3 1,964.8

92

NOTE "6" : OTHER NON-FINANCIAL ASSETS(Rupees in Million)


As atApril 01, 2016

As atMarch 31, 2018

As atMarch 31, 2017

As atApril 01, 2016

As atMarch 31, 2018

As atMarch 31, 2017

CURRENT

Capital Advances

Unsecured Considered Good 199.1 15,904.2 3,527.9 - - -

Doubtful 7.6 7.6 7.6 - - -

206.7 15,911.8 3,535.5 - - -


(A) 199.1 15,904.2 3,527.9 - - -

Advances other than Capital Advance

Unsecured Considered Good 195.1 2,323.6 12,463.3 5,328.5 5,363.6 4,998.7

Doubtful 215.3 457.1 436.7 - - -

410.4 2,780.7 12,900.0 5,328.5 5,363.6 4,998.7


(B) 195.1 2,323.6 12,463.3 5,328.5 5,363.6 4,998.7

Non-Trade Receivable

Unsecured Considered Good 65.2 63.1 25.6 9,058.6 11,648.5 12,137.6

Doubtful 135.1 135.1 135.1 - - -

200.3 198.2 160.7 9,058.6 11,648.5 12,137.6

Less: Allowance for Doubtful

Non-Trade Receivables 135.1 135.1 135.1 - - -

(C) 65.2 63.1 25.6 9,058.6 11,648.5 12,137.6

Other Advances

Unsecured Considered Good

Prepaid Expenses 5,794.6 3,650.4 2,987.5 1,458.8 1,632.1 1,853.7

Balances with Statutory / Government Authorities 7.9 (0.2) 12.1 5,453.3 4,085.4 3,663.9

(D) 5,802.5 3,650.2 2,999.6 6,912.1 5,717.5 5,517.6

TOTAL (A + B + C + D ) 6,261.9 21,941.1 19,016.4 21,299.2 22,729.6 22,653.9

NOTE "7" : INCOME TAX ASSETS NET OF PROVISION(Rupees in Million)


As atApril 01, 2016

As atMarch 31, 2018

As atMarch 31, 2017

As atApril 01, 2016

As atMarch 31, 2018

As atMarch 31, 2017

CURRENTSl.No.

Advance Payment of Income Tax and TDS

(net of provision for taxation) 3,301.1 3,693.3 4,284.2 1,129.7 731.9 550.1

TOTAL 3,301.1 3,693.3 4,284.2 1,129.7 731.9 550.1

93

Particulars As at As at As at March 31, 2018 March 31, 2017 March 31, 2016

NOTE "8" : INVENTORIES (As taken, valued & certified by the Management)(Rupees in Million)

Stores and Spare Parts 19,960.2 20,200.5 19,787.2

Loose Tools 492.9 396.8 806.6

20,453.1 20,597.3 20,593.8

Less : Provision for Obsolescence / Inventory Reconciliation 9,345.5 8,468.8 6,176.1

11,107.6 12,128.5 14,417.7

Goods-in-Transit 1,567.6 983.6 1,284.6

TOTAL 12,675.2 13,112.1 15,702.3


NOTE "9" : CASH AND CASH EQUIVALENTS(Rupees in Million)

1. Balances with Banks :

a) In Current Accounts 2,409.7 2,999.4 4,782.6

b) In Deposit Accounts (Maturity less than 3 months) 797.7 993.5 820.2

2. Cheques, Drafts on Hand 56.3 10.7 122.8

3. Cash on Hand (as certied) 37.2 26.1 42.9

TOTAL 3,300.9 4,029.7 5,768.5


NOTE "10" : BANK BALANCES OTHER THAN CASH AND CASH EQUIVALENTS(Rupees in Million)

1. Margin money deposits 4,221.3 3,696.5 2,689.8

2 Fixed Deposits - Others (More than 3 months but Less than 12 Months) 1,517.8 1,582.3 1,664.8

3 Remittances in Transit - 58.0 66.0

TOTAL 5,739.1 5,336.8 4,420.6

94


NOTE "11" : SHARE CAPITAL(Rupees in Million)

A. AUTHORISED

30,000.0 Million Equity Shares of Rs.10 each 300,000.0 300,000.0 250,000.0

(Previous Year : 25,000.0 Million Equity Shares

of Rs.10 each)

300,000.0 300,000.0 250,000.0

B. ISSUED, SUBSCRIBED AND FULLY PAID-UP SHARES

28,690.21 Million Equity Shares of Rs. 10 each 286,902.1 267,530.0 214,960.0

(Previous Year : 26,753.0 Million Equity Shares

of Rs.10 each)

TOTAL 286,902.1 267,530.0 214,960.0

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

Particulars 2015-16 2017-18 2016-17 2015-162017-18 2016-17

Equity Shares at the beginning of the year 26,753.00 21,496.0 17,178.0 267,530.0 214,960.0 171,780.0

Add : Equity Shares Allotted during the year 1,937.21 5,257.0 4,318.0 19,372.1 52,570.0 43,180.0

Equity Shares at the end of the year 28,690.21 26,753.0 21,496.0 286,902.1 267,530.0 214,960.0

B. i) Reconciliation of number of shares :

ii) Term/rights attached to equity 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 share is entitled to one vote per share.

In the event of liquidation of the Company, the holders of equity shares will be entitled to receive remaining assets of

the Company, after all the creditors have been paid. The distribution will be in proportion to the number of equity

shares held by the shareholders.

iii) Share Holding Pattern :

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

through administrative control of Ministry of Civil Aviation.

95

Particulars As at As at As at March 31, 2018 March 31, 2017 April 01, 2016

NOTE "12" : OTHER EQUITY(Rupees in Million)

1. Share Application money pending allotment *

Balance as per Last Balance Sheet 1,372.1 29,290.0 39,470.0

Add : Additions during the year - -

1,372.1 29,290.0 39,470.0

Less : Share Alloted during the year 1,372.1 27,917.9 10,180.0

- 1,372.1 29,290.0

2. CAPITAL RESERVE

Balance as per Last Balance Sheet 7,475.6 6,980.0 6,808.0

Add : Additions during the year ** 147.4 825.3 494.1

7,623.0 7,805.3 7,302.1

Less : Transfer to the Statement of Prot and Loss to offset 478.4 329.7 322.1

Depreciation (Refer Note 20)

Closing Balance 7,144.6 7,475.6 6,980.0

3. GENERAL RESERVE

Balance as per Last Balance Sheet (1,436.7) (1,436.7) (1,436.7)

Closing Balance (1,436.7) (1,436.7) (1,436.7)

4. OTHER RESERVES

a) Foreign Currency Monetary Item

Translation Difference Account (FCMITDA)

Balance as per last Balance Sheet (2,349.1) (3,758.2) (3,516.6)

Add : Exchange gain/(loss) during the year (126.5) 703.7 (527.4)

(2,475.6) (3,054.5) (4,044.0)

Less : Amortization during the year 338.3 705.4 285.8

Closing Balance (2,137.3) (2,349.1) (3,758.2)

5. Surplus / (Deficit)

Balance at the beginning of the reporting period (529,972.9) (467,080.5) (415,859.6)

Changes in accounting policy or prior period errors (11,492.4) (4,073.2) (13,626.0)

Restated Balance at the beginning of the reporting period (541,465.3) (471,153.7) (429,485.6)

(Loss) for the year (58,023.4) (68,494.6) (41,668.1)

Re-mesurements of Dened Benets Plans through

Other Comprehensive Income 342.4 (1,867.0) -

Equity Infused by Govt. of India - 50.0 -

Less :Proposed Dividend - - -

Net deficit (599,146.3) (541,465.3) (471,153.7)

6. Fair Value Changes on Equity Instruments through

Other Comprehensive Income

Balance as per last Balance Sheet 697.3 714.0 -

For the year 46.6 (16.7) 714.0

743.9 697.3 714.0

TOTAL (1+2+3+4+5+6) (594,831.8) (535,706.1) (439,364.6)

* Share Application Money : Share application money amounting to Rs. NIL Million (Previous Year: Rs.1,372.1 Million) represents money paid by the

Government of India towards capital infusion during the year, but allotment of shares not yet made.

** Represents MRO Allowance received from GE towards construction of Test Cell Facility at Nagpur.

96

NOTE "13" : BORROWINGS - NON CURRENT(Rupees in Million)


As atApril 01, 2016

As atMarch 31, 2018

As atMarch 31, 2017

As atApril 01, 2016

As atMarch 31, 2018

As atMarch 31, 2017

CURRENTSl.No.

I Debentures 136,950.0 136,950.0 136,950.0 - - -

II Term Loans

a) from Banks (Secured) 111,911.1 116,289.5 121,249.6 5,072.1 5,065.0 2,506.8

b) from Banks (Unsecured) 14,703.6 25,067.4 26,628.9 7,104.0 1,652.1 5,693.0

c) from Other Parties (Unsecured) 209.5 218.7 233.8 10.3 10.2 10.5

III Long Term Maturities of Finance

Lease Obligations 43,100.9 65,226.5 87,823.4 22,759.2 20,362.5 20,144.3

TOTAL 306,875.1 343,752.1 372,885.7 34,945.6 27,089.8 28,354.6

13.1 Debentures

a) 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 Prole and Rate of interest are as set out below :

(Rupees in Million)

Month of Redemption Amount to be Rate of Interest Redeemed

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 b) Debenture Redemption Reserve as required under Section 71(4) of the Companies Act, 2013 has not been

created in the absence of earned prots by the Company.

97

13.2 (a) Details of Secured Term Loans from Banks are as under : (Rupees in Million)

Sr No. Restructuring Lender As at As at As at March 31, 2018 March 31, 2017 April 01, 2016

1 Allahabad Bank 2,690.3 2,793.9 2,841.7 2 Andhra Bank 3,225.8 3,361.7 3,434.8 3 Bank of Baroda 12,023.0 12,551.8 12,768.1 4 Bank of India 15,841.6 16,337.9 16,795.8 5 Canara Bank 7,908.6 8,071.8 8,340.3 6 Central Bank of India 8,591.2 8,939.6 9,082.8 7 Corporation Bank 6,993.7 7,258.2 7,384.2 8 Dena Bank 1,263.3 1,315.2 1,313.7 9 The Federal Bank Limited 1,899.0 1,974.7 2,040.2 10 IDBI Bank Limited 4,021.1 4,183.8 4,256.3 11 Indian Bank 4,024.4 4,177.0 4,247.5 12 Indian Overseas Bank 6,618.6 6,824.1 6,974.2 13 Oriental Bank of Commerce 8,207.6 8,528.8 8,680.3 14 Punjab National Bank 11,333.8 11,772.4 11,971.9 15 Punjab & Sind Bank 2,554.2 2,653.1 2,696.3 16 State Bank of India 6,056.1 6,360.7 6,461.8 17 Syndicate Bank 5,926.3 6,145.6 6,231.6 18 UCO Bank 5,378.3 5,587.3 5,675.1 19 United Bank of India 2,426.3 2,516.9 2,559.8 TOTAL 116,983.2 121,354.5 123,756.4

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 Installments starting from 31st December 2013 and ending in 30th September 2026. Disclosure as regards amount of repayment installment and rate of interest are not made due to complexity of repayment schedules and condentiality clause with the banks as regards interest rate.

All Term Loans from above Banks are secured by Hypothecation of 25 aircraft and 11 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.

13.2 (b) Total Unsecured Term Loan from Banks of Rs.21,807.6 Million (Previous Year Rs.26,719.5 Million) has been guaranteed by the Government of India.

(Rupees in Million)

Equal Number Amount of Rate of Interest Starting Month of of Loan Loan as at Month of Maturity Installments March 31, 2018 Repayment Bullet 4,500.7 Libor + 1.45 /2.5 Sep-2016 Sep-2021

14 689.4 Libor + 2.13455 Apr-2015 Apr-2021

14 758.7 Libor + 2.15 Mar-2015 Mar-2021

13 901.2 Libor + 1.55 Mar-2016 Mar-2021

13 997.1 Libor + 1.55 Mar-2016 Mar-2021

17 13,960.5 Libor + 1.80 Jun-2016 Mar-2020

TOTAL 21,807.6

98

13.2 (c) Unsecured Term Loan from Others of Rs.219.8 Million (Previous Year Rs.228.9 Million) are guaranteed by the Government of India.

(Rupees in Million)

Equal Number Amount of Rate of Interest Starting Month of of Loan Loan as at Month of Maturity Installments March 31, 2018 Repayment

44 151.8 Interest Free Oct-1990 Oct-2039

37 68.0 Interest Free Oct-1987 Mar-2037

TOTAL 219.8

13.3 Long Term Maturities of Finance Lease Obligations of Rs.65,860.1 Million (Previous Year Rs.85,589.0 Million) are guaranteed by the Government of India to the extent of Rs.54,866.0 Million (Previous Year Rs.71,697.6 Million)

(Rupees in Million)

Number of Amount of Rate of Interest Starting Month of Equated Loan Loan as at Month of Maturity Installments March 31, 2018 Repayment 34 10,168.1 Libor + 0.24 Aug-2011 Jul-2022 41 18,413.0 Libor + 0.93 Mar-2010 Sep-2021 8 9,083.1 Libor + 0.75 Feb-2008 Feb-2021 17 3,148.0 Libor - 0.05+0.55 Jan-2009 May-2020 21 4,523.0 2.46% to 2.89% Fixed Oct-2007 Dec-2019 12 13,184.6 Libor + 0.75 Mar-2007 Dec-2019 26 2,520.0 2.46% to 2.73% Fixed Dec-2007 Oct-19 21 2,303.9 Libor + 0.50 Feb-2009 Mar-2021 15 2,516.4 Libor + 0.93 Ápr-2010 Óct-2021 TOTAL 65,860.1

*Current maturities of long term borrowings have been grouped under the head Other Current Financial Liabilities (Refer Note No.15)

NOTE "14" : TRADE PAYABLES(Rupees in Million)


As atApril 01, 2016

As atMarch 31, 2018

As atMarch 31, 2017

As atApril 01, 2016

As atMarch 31, 2018

As atMarch 31, 2017

CURRENTSl.No.

Trade Payable * - - - 93,446.9 101,028.8 86,084.1

- - - 93,446.9 101,028.8 86,084.1

99

NOTE "15" : OTHER FINANCIAL LIABILITIES(Rupees in Million)


As atApril 01, 2016

As atMarch 31, 2018

As atMarch 31, 2017

As atApril 01, 2016

As atMarch 31, 2018

As atMarch 31, 2017

CURRENTSl.No.

Other Liabilities

a) Current maturities of long-term debts * - - - 12,186.4 6,727.3 8,210.3

b) Current maturities of nance lease obligations* - - - 22,759.2 20,362.5 20,144.3

c) Interest accrued but not due on borrowings - - - 6,393.4 6,562.2 6,797.1

d) Interest accrued and due on borrowings ** - - - 1,648.1 403.1 349.9

e) Others Liabilities (Net) *** 169.3 173.4 240.3 46,736.6 42,833.8 27,174.9

f) Book Overdraft - - - 18.2 - -

TOTAL 169.3 173.4 240.3 89,741.9 76,888.9 62,676.5

NOTE "16" : PROVISIONS(Rupees in Million)


As atApril 01, 2016

As atMarch 31, 2018

As atMarch 31, 2017

As atApril 01, 2016

As atMarch 31, 2018

As atMarch 31, 2017

CURRENTSl.No.

Provision for Employee Benefits

a) Gratuity 9,999.4 9,161.8 9,113.4 1,788.1 1,535.8 1,608.2

b) Leave Encashment 5,628.4 5,737.4 5,736.1 1,024.9 1,038.0 1,161.6

c) Post Employment Medical and Other Benets 14,106.7 14,247.6 12,926.3 645.2 548.5 397.6

(A) 29,734.5 29,146.8 27,775.8 3,458.2 3,122.3 3,167.4

Other Provisions

a) Provision for Tax on Dividend - 3.0 - - - -

b) Re-delivery of Aircrafts 5,493.2 2,994.4 2,016.4 108.2 48.1 124.4

(B) 5,493.2 2,997.4 2,016.4 108.2 48.1 124.4

TOTAL (A + B) 35,227.7 32,144.2 29,792.2 3,566.4 3,170.4 3,291.8

* For details of Current maturities of long term debts / Finance Lease Obligation Refer Note No.13.

** Interest accrued and due includes :

Rs.529.4 Million being interest on Secured Loans repayable on demand from Banks (Previous Year : Rs. 243.4 Million), paid subsequently (Refer Note 18).

Rs.1,063.5 Million being interest on Unsecured Loans repayable on demand from Banks (Previous Year : Rs. 159.7 Million), paid subsequently (Refer Note 18).

Rs.55.1 Million being interest on Future Lease Obligation (Previous Year : Rs. NIL), paid subsequently (Refer Note 13)

*** Other Liabilities (Net) includes :

Rs.8,391.5 Million towards Guarantee Fee Liability (Previous Year : Rs.7,419.1) Rs.19,154.4 Million towards Provision for Employees including JDC impact (Previous Year : Rs.18,711.9 Million)

0 Rs.7,590.6 Million towards Delayed Payment Interest to Oil Marketing Companies (Previous Year : Rs.5,865.0)

100

NOTE "17" : OTHER NON FINANCIAL LIABILITIES(Rupees in Million)


As atApril 01, 2016

As atMarch 31, 2018

As atMarch 31, 2017

As atApril 01, 2016

As atMarch 31, 2018

As atMarch 31, 2017

CURRENTSl.No.

Other Liabilities

a) Forward Sales (Net) [Passenger / Cargo] - - - 25,585.9 23,775.7 20,468.8

b) Advance from customers (Net) - - 50.3 31,329.1 795.1 543.0

c) Others Liabilities (Net) * - - - 2,832.6 7,743.7 6,937.9

d) Frequent Flyer Programme - - 636.9 624.1 831.4

TOTAL (A + B) - - 50.3 60,384.5 32,938.6 28,781.1

*Other Liabilities (Net) includes Govt. Taxes / Statutory Dues amounting to Rs.1,827.8 Million (Previous Year : Rs.2,386.1 Million)

Particulars As at As at As at March 31, 2018 March 31, 2017 April 01, 2016

NOTE "18" : SHORT TERM BORROWINGS(Rupees in Million)

I Loans repayable on demand :

a) from Banks (Secured) 1 / 2 / # 110,465.7 76,904.0 119,653.2

b) from Banks (Unsecured) # 122,590.0 66,508.7 41,886.0

c) from Other Parties (Unsecured) - - -

II Loans and Advances from Related Parties - - -

TOTAL 233,055.7 143,412.7 161,539.2

1. Secured loans repayable on demand from Banks are to the tune of Rs.66,032.2 Million (Previous Year Rs.63,123.4 Million). Details are as under :

(Rupees in Million)

Sr.No. Name of Banks As at As at As at

March 31, 2018 March 31, 2017 April 01, 2016

1 Allahabad Bank 3,350.0 3,850.0 3,850.0 2 Andhra Bank 1,010.0 1,010.0 1,002.9 3 Bank of Baroda 13,985.4 3,975.2 4,009.9 4 Bank of India 4,891.8 4,825.9 5,596.2 5 Canara Bank 4,794.2 5,395.6 4,810.4 6 Central Bank of India 2,716.5 2,716.5 2,716.5 7 Corporation Bank 2,186.6 2,182.1 2,185.7 8 Dena Bank 407.3 3,512.0 3,641.2 9 HDFC Bank Ltd. 50.0 - 166.8 10 The Federal Bank Limited 651.9 649.0 662.6 11 IDBI Bank Limited 1,273.4 1,256.8 1,262.6 12 Indian Bank 1,280.0 1,280.0 1,280.0 13 Indian Overseas Bank 1,613.9 2,082.5 2,041.2 14 Oriental Bank of Commerce 2,597.7 2,597.7 2,597.7 15 Punjab National Bank 3,761.0 3,770.2 3,813.8 16 Punjab & Sind Bank 786.8 784.9 789.9 17 Standard Chartered Bank 11,955.3 16,873.4 18,390.6 18 State Bank of India 1,640.9 2,032.1 2,443.7 19 Syndicate Bank 1,867.7 1,867.7 1,867.7 20 UCO Bank 4,447.8 1,697.8 1,697.8 21 United Bank of India 764.0 764.0 - TOTAL (1) 66,032.2 63,123.4 64,827.2

101

The loans to the tune of Rs.66,032.2 Million are secured by Hypothecation of 29 aircraft, 11 immovable properties at market value and all Current Assets (Previous Year : 34 aircraft, 12 immovable properties and all Current Assets). However equitable mortgage for 7 immovable properties with banks are yet to be created.

2. Secured loan repayable on demand from Bank is to the tune of Rs.44,433.5 Million (Previous Year Rs.13,780.6 Million). Details of Secured Loans from Banks are as under :

(Rupees in Million)

Sr.No. Name of the Lender As at As at As at March 31, 2018 March 31, 2017 April 01, 2016

1 Bank of India - - 13,118.5 2 Deutsche Bank / Standard Chartered Bank - - 41,707.5 3 Investec Bank 30,893.0 - - 4 First Gulf Bank 13,686.7 13,780.6 - 44,579.7 13,780.6 54,826.0

Less : Deferred amount of upfront fees 146.2 - -

TOTAL (2) 44,433.5 13,780.6 54,826.0

TOTAL (1 + 2) 110,465.7 76,904.0 119,653.2

The loans to the tune of Rs.44,433.5 Million (Previous Year Rs.13,780.6 Million) are secured by Hypothecation of 6 aircraft at market value (Previous Year : 2 aircraft).

# Disclosure as regards Bank wise rate of interest and period of default is not made due to complexity of data & condentiality clause with the banks. (Also refer Note 13 & 15)

NOTE "19" : REVENUE FROM OPERATION(Rupees in Million)

Particulars 2017-18 2016-17

I) Scheduled Traffic Services

1 Passenger 215,596.0 195,189.8

2 Excess Baggage 1,784.2 1,664.7

3 Mail 713.4 679.7

4 Cargo 12,646.8 10,700.1

(A) 230,740.4 208,234.3

ii) Non-Scheduled Traffic Services

1 Charter 12,462.0 11,770.9

2 Block Seat Arrangement 516.8 273.4

3 Subsidy for Operation from Government 884.8 686.2

(B) 13,863.6 12,730.5

iii) Other Operating Revenue

1 Handling and Servicing 6,827.0 7,512.5

2 Manufacturers Credit 1,363.3 3,364.1

3 Incidental 18,184.8 22,609.6

(C) 26,375.1 33,486.2

TOTAL (A + B + C) 270,979.1 254,451.0

102

NOTE "20" : OTHER INCOME(Rupees in Million)


1 Interest Income on :

a) Bank Deposits 495.2 373.3

b) Others 285.9 382.1

2 Dividend from Long Term Investments (Trade) 69.5 75.2

3 Rent from Air India Building 886.4 809.7

4 Prot / (Loss) on Sale of Assets (Net) 961.3 (1,154.6)

5 Other Income 548.8 211.4

6 Provisions No Longer Required written back 2,693.9 730.4

TOTAL 5,941.0 1,427.5

NOTE "21" : OTHER OPERATING EXPENSES(Rupees in Million)


1 Insurance 1,174.7 1,353.9

2 Material Consumed - Aircraft 7,218.2 7,560.2

3 Outside Repairs - Aircraft 16,449.0 14,009.4

4 Navigation, Landing, Housing and Parking 20,639.6 19,007.9

5 Hire of Aircraft 27,901.3 21,991.5

6 Handling Charges 13,301.1 12,459.9

7 Passenger Amenities 9,259.5 9,170.2

8 Booking Agency Commission (Net) 5,249.8 5,367.7

9 Communication Charges

i) Reservation System 10,409.8 9,016.3

ii) Others 2,175.0 2,090.5

10 Cost of Material Consumed 274.0 215.1

TOTAL 114,052.0 102,242.6

NOTE "22" : EMPLOYEE BENEFIT EXPENSES(Rupees in Million)


1 Salaries, Wages and Bonus 28,476.9 26,705.1

2 Crew Allowances 11,735.8 10,879.6

3 Contribution to Provident and Other Funds 1,665.0 1,615.2

4 Staff Welfare Expenses 1,290.7 1,747.1

5 Provision for Gratuity 2,703.1 975.5

6 Provision for Leave Encashment 752.2 911.7

7 Provision for Retirement Benet 899.5 998.7

TOTAL 47,523.2 43,832.9

103

AIR INDIA LIMITED

a) Exchange rate difference in the nature of interest cost on foreign currency borrowing has not been reclassied due to

complexity of transactions.

NOTE "23": FINANCE COST(Rupees in Million)


1 Interest on :

a) Debentures 12,890.9 12,875.1

b) Short Term and Long Term Loans 27,217.6 25,855.0

40,108.5 38,730.1

2 Other Borrowing Costs * 3,338.7 3,183.4

3 Interest on Delayed Payment other than borrowings 3,274.7 3,168.0

TOTAL 46,721.9 45,081.5

NOTE "24" : DEPRECIATION AND AMORTIZATION EXPENSE(Rupees in Million)


1 Depreciation of Tangible Assets 19,853.9 19,179.5

2 Amortization of Intangible Assets 254.8 624.4

3 Impairment of Assets - 75.6

(A) 20,108.7 19,879.5

Less : Recoupment from Capital Reserve (Refer Note 12) 478.4 329.7

(B) 478.4 329.7

TOTAL (A- B) 19,630.3 19,549.8

104

NOTE "25": OTHER EXPENSES(Rupees in Million)


1 Travelling Expenses

i) Crew 2,601.8 2,477.3

ii) Others 1,240.0 1,382.0

2 Rent 1,431.5 1,160.2

3 Rates and Taxes 279.1 314.4

4 Repairs to :

i) Buildings 445.4 518.9

ii) Others 1,042.6 1,500.2

5 Hire of Transport 935.8 871.4

6 Electricity & Heating Charges 1,266.5 1,091.9

7 Water Charges 36.3 21.3

8 Directors' Sitting Fees 0.2 0.1

9 Publicity and Sales Promotion 1,186.9 1,006.5

10 Printing and Stationery 133.0 143.0

11 Legal Charges 187.4 180.0

12 Payments to the Auditors’

i) Audit Fees 13.4 12.7

ii) Other Expenses 1.7 1.8

13 Provision for Bad & Doubtful Receivables and Advances 889.1 2,031.8

14 Write-off / Write back of Obsolete Inventory 1,487.1 2,208.6

15 Expenses on Block Seat Arrangements 176.1 191.7

16 Exchange Variation (Net) 585.1 (131.0)

17 Bank Charges 2,200.7 1,819.3

18 Miscellaneous Expenses 4,113.3 2,675.5

TOTAL 20,253.0 19,477.6

NOTE "26" : EXCEPTIONAL ITEMS (NET)(Rupees in Million)


1 Allowance for balance 25% payable to Employees as per JDC (337.5) (13,019.8) (Refer Note 29)

2 Duty Credit Entitlement under SFIS (786.4) (8,472.3)

TOTAL (1,123.9) (21,492.1)

105

Notes forming part of the Consolidated Financial Statements for the year ended 31st March 2018

(Rupees in Millions except for share data and if otherwise stated) �27. Transitions to Ind AS:

st These Consolidated Financial Statements of the Group for the year ended 31 March 2018 is the rst nancial statement of the company prepared on the basis of Ind AS. The Group has adopted all applicable Ind AS in accordance with Ind AS 101- First Time Adoption of Indian Accounting Standards. The transition was carried out from Indian GAAP as prescribed under section 133 of the Companies Act, 2013, read with Rule 7 of the Companies (Account) Rules, 2014 which was the previous GAAP.

The Consolidated Signicant Accounting Policies set out in Note No. – 1 have been applied in preparing st stthe Consolidated Financial Statements for the year ended 31 March 2018, 31 March 2017 and the

stopening Ind AS Consolidated Balance Sheet on the date of transition i.e. 1 April 2016.

st In preparing opening Ind AS Consolidated Balance Sheet as on 1 April 2016 and in presenting the

stcomparative information for the year ended 31 March 2017, the Company has adjusted amounts reported previously in the consolidated nancial statements prepared in accordance with the previous GAAP. This note explains the principal adjustment made by the company in restating its consolidated nancial statement prepared in accordance with previous GAAP, and how the transition from Indian GAAP to Ind AS has affected Group's consolidated nancial position, nancial performance and cash ows.

(a) Exemptions and Exceptions availed:

Ind AS 101 allows rst-time adopters certain optional exemptions and mandatory exception from the retrospective application of certain requirements under Ind AS. The Group has applied the following exemptions/exceptions:

(i) Ind AS Optional Exemptions:

1. Property, Plant and Equipment, Investment Property and Intangible Assets as Deemed Cost

The company has opted to avail the exemption made available under Ind AS 101 to continue the carrying value of all property, plant and equipment, Investment properties and intangible assets as recognized in the nancial statements as at the date of transition to Ind AS, measured as per the previous Indian GAAP and use that as deemed cost as at

stthe date of transition i.e. 1 April 2016.

2. Exchange differences arising from translation of long-term foreign currency monetary items:

The Group has opted to avail the exemption under Ind AS 101 to continue the policy adopted for accounting for exchange differences arising from translation of long-term foreign currency monetary items recognized in nancial statements for period ending immediately before beginning of rst Ind AS nancial reporting period as per Indian GAAP (i.e. till March 31, 2016). Consequent to which:

106

Exchange differences arising on long-term foreign currency monetary items outstanding stas on 1 April 2016 related to acquisition of Depreciable Assets are capitalized and

depreciated over the remaining useful life of the asset.

Exchange differences arising on other long-term foreign currency monetary items stoutstanding as on 1 April 2016 are accumulated in the “Foreign Currency Monetary Item

Translation Difference Account” and amortized over the remaining life of the concerned monetary item.

3. Business Combination

The Group has elected not to apply Ind AS 103- Business Combinations, retrospectively to past business combinations that occurred before 1st April, 2016.

(ii) Ind AS Mandatory Exceptions:

1. Estimates

The estimates at April 01, 2016 and at March 31, 2017 are consistent with those made for the same dates in accordance with Indian GAAP apart from the following items where application of Indian GAAP did not require estimation:

a) Impairment of nancial assets based on expected credit loss model

b) Fair valuation of nancial instruments carried at FVTPL / FVOCI.

c) Determination of the discounted values is carried out for (i) Financial instruments at amortized cost and (ii) Provisions.

d) Fair Valuation of Frequent Flyer Programme

2. De-recognition of financial assets and financial liabilities

The Group has elected to use the exemption for de-recognition of nancial assets and liabilities prospectively i.e. after 1 April 2016.

3. Classification and measurement of Financial Assets:

As required under Ind AS 101, the Group has classied and measured the nancial assets in accordance with the Ind AS 109 on the basis of the facts and circumstances that exists at the date of transition to Ind AS.

107

4. Reconciliations between Previous Indian GAAP and Ind AS:

(i) Reconciliation of Total Equity as at 31 March 2017 and 1 April 2016

(Rs in Millions)

Particulars As at 31st March, 2017 As at 1st April, 2016

Equity Under Previous Indian GAAP (2,48,578.8) (2,12,248.7)

Adjustments due to IND-AS

i) Prior Period Expenses (Net) (16,883.6) (8,848.8)

ii) Additional Provision as per ECL (1,999.1) (2,099.8)

iii) Impact of measurement of Security Deposits at amortized cost (Net) (240.8) (218.2)

iv) Impact of recognition of Re-Delivery Provision (Net) (1,423.5) (1,141.4)

v) Impact of recognition of Customer Loyalty Program (FFP) under IND-AS 18 (411.5) (561.8)

vi) Fair Valuation of Investments 697.4 714.0

vii) Exchange Differences on Long Term Foreign Currency Monetary Items (Net) 742.3 -

viii) Impact of recognition of borrowing cost at effective Interest Rate (Upfront Fee) (Net) (78.5) -

Equity Under Ind As (2,68,176.1) (2,24,404.7)

st (ii) Reconciliation of Profit or Loss for the year ended 31 March 2017

(Rs in Millions)

Particulars 2016-17

Net Prot for the year as per Previous GAAP (62,885.2)

Prior Period Expenses (Net) identied in 2017-18 relating to 2016-17 (4,240.6)

st Prior Period Income (Net) for 2016-17 restated in the Opening Balance at 1 April, 2016 (3,809.5)

Adjustment for Provision as per ECL 100.7

Impact of recognition of Re-Delivery Provision (Net) (282.1)

Impact of measurement of Security Deposits at amortized cost (Net) (22.7)

Impact of recognition of Customer Loyalty Program (FFP) under IND-AS 18 150.3

Actuarial Valuation of Dened benet plan reclassied in Other Comprehensive Income 1,867.0

Exchange Differences on Long Term Foreign Currency Monetary Items (Net) 742.3

108

Particulars 2016-17

Impact of recognition of borrowing cost at effective Interest Rate (Upfront Fee) (Net) (78.5)

Net Profit for the year as per Ind AS (68,458.1)

Other Comprehensive Income (1,883.7)

Total Comprehensive Income as per Ind AS (70,341.8)

(b) Notes to Reconciliation

A. Prior Period

As per Ind AS - 8, errors have been corrected by retrospective restatement. Prior period income of Rs 3,809.5 million (Net) which was recognized in the Statement of Prot & Loss for F.Y. 2016-17 has been restated by adjusting the retained earnings as at 1 April, 2016 with corresponding effect in the respective assets/ liabilities.

Prior period expenses of Rs16,883.6 million (Net) were identied during the FY 2017-18, stout of which expense of Rs 12,643.0 million (net), relating to the periods prior to 1 April

2016, has been restated by adjusting the retained earnings in the opening balance sheet with corresponding effect in the respective assets / liabilities. Further expenses of Rs 4,240.6 (Net), relating to the FY 16-17, have been restated in the comparable gures with corresponding effect in the respective assets/ liabilities.

Details of major items of Prior Period Errors are as under:

st st No Particulars As on 1 April For the Year As at 31 March 2016 2016-17 2017

i) Medical Benets 7187.0 737.0 7924.0

ii) Nerul Property 1089.0 0 1089.0

iii) MIAL Compensation 2794.0 0 2794.0

B. Trade/Non-Trade Receivables

Under previous GAAP the Group had recognized provision for trade/non-trade receivables as per the internal policy of the Group based on ageing of trade receivables. Under Ind AS the Group has provided for loss allowance on receivables based on a provision matrix computed under the expected credit loss model following IND-AS 109.

As a result of the above, the net carrying value of Trade receivables as at the transition stdate and 31 March 2017 has decreased by Rs 1,866.6 million and Rs 1,544.5 million

respectively with a corresponding decrease in retained earnings and decrease in 'Other stExpenses' for the year 31 March 2017 by Rs 322.1 million.

Further, as a result of the above, the net carrying value of Non-Trade receivables as at the sttransition date and 31 March 2017 has decreased by Rs 233.2 million and Rs 454.6

million respectively with a corresponding decrease in retained earnings and increase in st'Other Expenses' for the year 31 March 2017 by Rs 221.4.million.

109

C. Financial Assets

Under Indian GAAP, the Group measured interest free security deposits at transaction value. Under Ind AS, these deposits are required to be initially recognized, wherever the effect of time value of money is material (Refer Policy No. XXII for Threshold Limits), at fair value and subsequently measured at amortized cost, the difference between the fair value and the transaction cost has been recorded as prepaid lease rent.

st As a result of the above, the amount of security deposit as on 1 April 2016 has decreased by Rs 2,849.5 million with a corresponding increase to prepaid lease rent by Rs 2,631.3 million and decrease to retained earnings by Rs 218.2 million.

st Further as at 31 March 2017, security deposit has decreased by Rs. 2,998.8 million with a corresponding effect to prepaid lease rent by Rs. 2,757.9 million. The prot for the year ended 31 March 2017 decreased by Rs. 22.7 million due to amortization of deferred rent by Rs. 287.7 million (included in aircraft Lease rentals), increase in foreign exchange gain by Rs. 69.1 million due to restatement of security deposit as at reporting date (included in other expenses) and increase in notional interest income of Rs. 195.9 million recognized on security deposits (included in other income).

D. Long Term Provisions and Trade Payables

Under Indian GAAP, the Group had accounted for trade payables and provisions, including long-term provision, at the undiscounted amount. Also, Under Indian GAAP Group had not accounted for re-delivery provision for leased aircraft. Under Ind AS, the same has been accounted for and also where the effect of time value of money is material, the amount of provision and trade payables has been recorded at the present value of the expected outow required to settle the obligation. Accordingly, the impact due to above

stadjustments in balance sheet is Rs. 1,829.9 million and Rs. 2,756.3 million as on 1 April st2016 and 31 March 2017 respectively with a corresponding increase in pre-paid lease

rent as on the said dates by Rs 688.4 million andRs 1332.8 million respectively and also sthas the effect of decrease in retained earnings as on the transition date and 31 March

2017 by Rs. 1,141.4million andRs 1423.5 million respectively and decrease in Statement of Prot and Loss for the year 2016-17 by Rs. 282.1 million.

E. Investments

Investments other than subsidiaries and joint venture have been measured at fair value through OCI. The difference between fair value and Indian GAAP carrying amount (Net

stGain) of Rs. 714.0 million has been recognized in retained earnings as at 1 April, 2016 and during 2016-17 the decrease in Fair value of Rs. 16.7 million has been recognised in Other Comprehensive Income.

F. Re-measurement of Post-Employment Benefit Plans

Under Ind AS, re-measurements i.e. actuarial gains and losses on the net dened benet obligation are recognized in Other Comprehensive Income instead of Statement of Prot and Loss as per the previous Indian GAAP. As a result of this change, the employee benet expense to the extent of actuarial losses amounting to Rs. 1,867.0 million for the year ended 31 March 2017 has been reclassied to Other Comprehensive Income. There is no impact on the other equity due to this as at 31 March 2017.

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G. Investment Property:

Items of PPE have been classied as Investment Property if held, either to earn rental income or capital appreciation or for both, but not for sale in the ordinary course of business or use in supply of goods or services or for administrative purposes.

stAccordingly, PPE has decreased by Rs 15112.4 million as on 31 March 2017 and Rs st15551.8 million as on 1 April 2016 and with a corresponding increase in Investment

Property.

H. Frequent Flyer Program

Under Indian GAAP, the Group had provided for liability for frequent Flyer Program on the basis of estimated cost of accumulated mileage points. However, under Ind AS the loyalty points have been calculated on the basis of past experience of utilization of such points the fair value of which is recognized as Deferred Revenue. Further, the same is recognized as revenue in the year in which the points are redeemed. Accordingly, the liability in respect of FFP Loyalty Program has increased by Rs. 561.8 million as at 1st

stApril 2016 with a corresponding effect in retained earnings. Further, the liability as at 31 March 2017 has increased by Rs. 411.5 million with a Net Impact (Gain) on the Statement of Prot and Loss for FY 2016-17 by Rs 150.3 million.

I. Foreign Exchange Translation Difference on Long Term Loans

Under Indian GAAP, the Group had been amortizing the Exchange differences on loans over the remaining useful life of the respective assets. Under Ind AS, Exchange

stdifferences on loans taken after 1 April, 2016 has been charged in the prot and loss in the year to which it pertains. As a result of this the net carrying amount of assets (including Assets Held for Sale) has increased by a Net amount of Rs. 940.6 million for the year

stended 31 March, 2017 with a corresponding Net effect to Statement of Prot and loss amounting to Rs 935.5 million after adjusting depreciation amount of Rs. 5.1 million.

J. Borrowing Cost (Upfront fee)

Under Ind AS, Upfront Fees on loans taken after 1st April, 2016 has been recognized based on the effective interest rate. However, for FY 2016-17 the de-capitalization impact of the same is Rs 297.5 million, with corresponding effect in borrowings and the net impact on the P&L is Rs 78.5 million.

K. Retained Earnings

st st Retained earnings as on 1 April 2016 and 31 March 2017 have been appropriately adjusted consequent to the above Ind AS transition adjustments.

L. Reconciliation/Inter-Co Elimination

st Inter-Co balances have been reconciled as on 31 March 2018. Head-wise elimination of Inter-Co transactions has also been made to the extent identied. Certain balances in the earlier years for which identication were not possible are carried under “Advance to Related Parties”. However, the same has been identied, reconciled and adjusted in the year 2017-18.

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28. Contingent Liabilities & Contingent Assets:

A. Contingent Liabilities:

Claims against Group not acknowledged as debts (excluding interest and penalty, in certain

cases) and the required information, in compliance of Ind AS 37, are as under:

(Rs in Millions)

No Description Balance as on Balance as on Balance as on 31st March 2018 31st March 2017 1st April 2016

(i) Pax Claims on account of Misc Commercial Reasons. 396.9 390.6 373.1

(ii) Income Tax Demand Notices received by the Company which are under Appeal 582.6 3800.1 4541.7

(iii) Customs Duty and Service Tax demanded by the Tax Authorities 8595.6 8258.6 8107.9

(iv) Property Taxes/House Tax demanded by the Municipal Authorities 132.5 225.6 298.4

(v) Claims of Airport Operators/Others (*) 6614.4 6576.0 5675.8

(vi) (a) Other Claims on account of Staff/ 3354.8 2768.8 2054.7 Civil/Arbitration/Labour Cases pending in Courts (b) Claim for Vasant Vihar Colony 0.0 0.0 3736.0

(vii) Government Guarantee Fee (**)

a) Difference between Applicable 3066.1 3594.4 1526.7 Rate & the rate of 0.5% at which Guarantee Fee has been provided b) Additional Guarantee Fee 14748.6 10656.0 8014.9

(viii) Others 50.6 50.6 50.6

Total 37542.1 36320.7 34379.8

Explanatory Statement in respect of Other Contingent Liabilities

a) Claims of Airport Operators includes (*)

st (i) AAI has raised a demand of Rs 955.0 million (Previous Year Rs.945.4 million, 1 April 2016 Rs 760.0 million) towards interest on delayed payments for the year 2012-13 but the same has not been accepted.

(ii) In the case of Other Airport Operators, claims of Rs 5104.0 million (Previous Year Rs. st5179.1 million, 1 April 2016 Rs 4122.2 million) for interest on delayed payments has also

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not been accepted and pending determination of actual liability for the same, the amounts demanded by the parties have been shown as Contingent Liability.

b) Govt Guarantee Fee (**): The Group has provided for Guarantee Fee @ 0.5% on all aircraft loans and working capital loans guaranteed by the Govt. The company has taken up the issue for waiver of Guarantee Fees over and above 0.5% in respect of Working Capital and External Commercial Borrowings (ECB) loans with the Ministry of Civil Aviation/Finance. Accordingly, the Guarantee Fee over and above 0.5% amounting to Rs 3066.1 million (PY: Rs.3594.4

stmillion, 1 April 2016 Rs 1526.7 million) for which waiver has been requested has been disclosed as Contingent Liability. Further, the additional liability on account of the delayed payments of Guarantee Fee amounting to Rs 14748.6 million (Rs 791.2 million in respect of

stAIXL and Rs 13957.4 million in respect of AIL) (PY: Rs.10656.0 million, 1 April 2016 Rs 8014.9 million) has also been shown as Contingent Liability. The Company has taken up the issue of reduction/waiver of Guarantee Fee and the waiver of Penal Charges with the Ministry of Civil Aviation which is still under process.

c) In case of AIATSL, No provision or disclosure of contingent liabilities have been made in respect of pending legal cases.

B. Contingent Assets:

During the year the year (2017-18), the Honorable Supreme Court of India has vacated the stay granted by the Honorable High Court of Delhi in respect of implementation of tariff xed by AERA applicable with effect from 01/01/2016. In this regard the tariff xed for the 2nd control period (i.e.

stfrom 1.1.2016), was lower than the tariff xed for the 1 control period (tariff prior to 1.1.2016).In view of this judgment, DGCA issued AIC (Aeronautical Information Circular) for the implementation of 2nd control period tariff with immediate effect, however, the same is still to be implemented. In the intervening period DIAL has collected from Air India and AASL, an excess amount to the tune of Rs 2043.48 million approx. on account of Landing & Parking Charges. The company has requested AERA that while xing the tariff, the airlines who have shouldered the burden of excess amount collected may be compensated by way of discount in tariff in proportion to the excess amount collected by DIAL from respective airlines.

During the normal course of business, certain unresolved claims are outstanding. The inow of economic benets in respect of such claims cannot be measured due to uncertainties that surround the related events/circumstances.

29. Revised Basic Pay on the basis of Justice Dharamadhikari Committee Report

Based on Justice Dharamadhikari Committee (JDC) recommendations, the Revised Basic Pay (RBP) had been implemented for all the categories of the employees from different dates. In FY 2016-17 a provision Rs 12981.6 million was provided, an additional provision of Rs 337.5 million has been made on the nalization of the agreements with the remaining categories of employees. As a result the total

stprovision on account of JDC recommendations as on 31 March 2018 is now Rs 13319.1 million.

30. Commitments:

(i) Capital Commitments

Estimated amount of contracts remaining to be executed on Capital Account are given here under:

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(Rupees in Millions)

Particulars As at 31 March, As at 31 March, As at 1st April, 2018 2017 2016

For Aircraft Project/Engines 3051.4 55809.2 111401.3

Others 1550.7 2070.9 2240.3

4602.1 57880.1 113641.6

(ii) Other Long-Term Commitments

a) Corporate Guarantees, Letters of Comfort given by the Group on behalf of its Subsidiary Companies:

(Rupees in Million)

Particulars As at 31 March, As at 31 March, As at 1st April, 2018 2017 2016

Letters of Comfort 11508.1 10214.7 6635.2

st b) Commitment in respect of non-cancellable Operating Leases in respect of aircraft as at 31 March st2018 is Rs 270488.4 million (PY: Rs 266250.0 million and 1 April 2016 Rs 248093.3 million)

31. Disinvestment of Air India Ltd

(i) In view of the NITI Aayog recommendations on the disinvestment of AI and followed by the recommendations of the Core Group of Secretaries on disinvestment (CGD), the Cabinet Committee on Economic Affairs (CCEA) has given an 'In-Principle' approval for considering the strategic disinvestment of the group in it's meeting held on 28th June 2017. CCEA also constituted the Air India Specic Alternative Mechanism (AISAM) to guide the process of strategic disinvestment. The Transaction Advisor, Legal Advisor and Asset Valuer had also been appointed to guide the Govt and to carry forward the process of Disinvestment.

In the AISAM Meeting held on 18th June 2018 it was decided that:

a) In view of the volatile crude prices and adverse uctuation in exchange rates, the present environment is not conducive to stimulate interest amongst investors for strategic disinvestment of Air India in the near future.

b) To undertake near and medium-term efforts to capture operational efciencies and to improve the performance of Air India.

c) To monetize non-core land and building assets

d) To separately decide the contours of the mode of disposal of the subsidiaries viz. Air India Engineering Services Ltd (AIESL), Air India Transport Services Ltd (AIATSL) and Airline Allied Services Ltd (AASL)

e) Once the global economic indicators including oil prices and the forex regime stabilizes, the option of strategic disinvestment of Air India should be brought before AISAM, for deliberating the future course of action.

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th (ii) In line with the directives issued by the Ministry of Finance, Govt of India dated 7 September 2018, in connection with the nancial and operational restructuring of Air India Ltd, the Board of Directors in

thits meeting held on 16 October 2018 has decided to transfer 100% share holding of its Subsidiary AIATSL to Air India Asset Holding Co Ltd (AIAHL, the SPV), subject to necessary approvals and authorized the Company to initiate the talks with AIATSL/AIAHL to nalize the detailed terms and conditions of the transfer.

32. Plant, Property and Equipment

a) Land and Buildings include certain properties for which title deeds are not available. Details of the same are as under:

(Rs in Millions)

st Particulars 31.03.2018 31.03.2017 As on 1 April 2016 Area Gross Net Area Gross Net Area Gross Net (Sq Mtrs) Block Block (Sq Mtrs) Block Block (Sq Mtrs) Block Block

Land/Buildings Freehold 23904.26 387.1 387.1 23904.26 387.1 387.1 23904.26 387.1 387.1

Land/Buildings Leasehold 93551.52 412.7 412.7 93551.52 412.7 412.7 93551.52 412.7 412.7

Total 117455.78 799.8 799.8 117455.78 799.8 799.8 117455.78 799.8 799.8

b) Investment Properties:

Investment properties include certain properties for which title deeds are not available. Details for the same areas under:

(Rs in Millions)

st Particulars 31.03.2018 31.03.2017 As on 1 April 2016 Area Gross Net Area Gross Net Area Gross Net (Sq Mtrs) Block Block (Sq Mtrs) Block Block (Sq Mtrs) Block Block

Land/Buildings Freehold - - - - - - - - -

Land/Buildings Leasehold - - - 14326.38 4770.7 4770.7 14326.38 4770.7 4770.7

Total - - - 14326.38 4770.7 4770.7 14326.38 4770.7 4770.7

i) In terms of decision taken, as per the records of the discussions held in the Ministry of Finance ston 1 June 2017 for the development of assets of AI located at Vasant Vihar Housing Colony

121410 sqmtrs (Rs 51295.1 million) and Baba Kharag Singh Marg Land 14326.38 sqmtrs (Rs 4770.7 million), the physical possession of these unregistered properties has been handed over to the Ministry of Urban Development (MoUD). The MoUD has been entrusted with the overall responsibility of development and sale of these two properties by the Govt. The sale proceeds from these two properties shall be utilized in liquidating Air India debts. These properties are under charge against working capital loans taken from various banks. Till the above process is completed, the said properties have been classied as Investment Properties

stupto 31 March 2017 and thereafter as “Assets held for Sale”

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ii) AI had 508 ats constructed in Nerul on a portion of land admeasuring 28,626 sqmtrs and it has been decided to sell these ats 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 ats constructed and physical possession of 280 ats has also been handed over in the earlier years. 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. Pending conveyance of title of land in favor of the registered societies and completion of all legal formalities necessary adjustments have been made as at the Transition Date (01/04/2016) and the value of this property is being carried as under:

a) Net Value of 330 ats (including cost of land) amounting to Rs 1468.0 million allotted in stearlier years were transferred to Assets held for Sale at the estimated sale value as on 1

April 2016 after adjusting an amount of Rs 1077.9 million (Loss) as impairment loss through Retained Earnings.

b) Carrying Value of the balance 178 ats and the vacant land amounting to Rs 4198.1 million being depreciated cost has been shown under Investment Property.

Necessary entries for the sale of the ats will be made on the completion of the legal formalities.

iii) Under TAP/FRP of AI, monetization of these properties is in the process, hence fair value of the investment properties could not be disclosed as a condentiality measure.

iv) Disclosure under IND-AS 40 (Rs in Millions)

No Particulars 2017-18 2016-17

Properties Properties Properties Properties Earning Rent not Earning Earning not Earning Rent Rent Rent

A Rent Earned 923.7 Nil 840.3 Nil

B Operating Expenses

i) Repair & Maintenance 59.8 36.4 41.1 35.3

ii) Electricity 58.7 24.5 66.9 20.3

iii) Property Taxes 23.1 2.5 38.0 6.4

iv) AMC Expenses 21.3 11.2

33. Advance against Land at Nerul

Long Term Loans & Advances of AI include a sum of Rs 24.6 million (PY: Rs 24.6 million) being the advance paid by the company to CIDCO for the purchase of another plot of Leasehold Land at Nerul for the purpose of construction of staff quarters. However, the possession of the plot allotted by CIDCO in this regard has not been handed over to the company and no agreement/lease deed has been executed so far.

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34. Assets Held for Sale

Assets held for sale mainly includes

a) Immovable Properties in respect of which the Board has accorded its approval for sale/monetization. Hence, these properties have been transferred to “Assets Held for Sale A/c” at lower of their carrying value and fair value less cost to sell. “Assets held for Sale” include certain properties for which title deeds are not available. Details for the same areas under:

(Rs in Millions)

st Particulars 31.03.2018 31.03.2017 As on 1 April 2016 Area Gross Net Area Gross Net Area Gross Net (Sq Mtrs) Block Block (SqMtrs) Block Block (Sq Mtrs) Block Block

Land/Buildings Freehold - - - - - - - - -

Land/Buildings Leasehold 135736.36 56191.0 56191.0 - - - - - -

Total 135736.36 56191.0 56191.0 - - - - - -

b) Two B-777-300ER aircraft have been procured on behalf of Govt of India has been classied as Assets held for Sale. The entire cost of these aircrafts including the cost of modication will be borne by the Govt of India.

35. Compensation

In terms of the agreement between MIAL and Air India Ltd, MIAL has agreed for compensation for relocating Air India facilities against handing over of the existing locations (i.e. land which was on operating lease and hangar constructed thereon) as the said area was needed by MIAL for the development of the Mumbai Airport and its runway.

As a result of the said agreement, the company has received from MIAL a part of the compensation in the form of assets in a phased manner. The total value of compensation for these assets has been determined during the current year at Rs 2952.4 million. Out of this amount of Rs 2952.4 million, an

stamount of Rs 2794.3 million has been accounted for through Retained Earnings as on 1 April 2016 and the balance amount of Rs 158.1 million has been recognized in the current year statement of Prot & Loss.

Further, the additional compensation receivable from MIAL is to be accounted for on the completion of the entire process i.e. after comprehensive review of total leased areas/premises ultimately held once the expansion work is completed/certied and handing/taking over is completed.

36. Grants Receivable by AASL

i) The grant receivable from NEC for ATR North East operations was accounted for as income taking into accounts, the operations of ATR for the year ending 31st December 2012 amounting to Rs. 495.44 Million. 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 for Rs. 609.10 Million based on actual decit that MOCA may provide budgetary support to meet the VGF for the year 2012. In terms of the above, AASL is entitled to receive a claim of Rs. 609.10 Million. Out of above

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Rs. 184.57 Million has been received in the year 2017-18. However the company as prudence, continues to account for Rs. 495.44 Million as was originally accounted for.

ii) AASL is operating following sectors under VGF Arrangements with respective Govt. authorities:

No VGF Signed With Sectors Period Operated From

I North-East Council North-East August 2014

II UT-Lakshadweep Agatti 2017-18

III UT-Daman & Diu Diu 2017-18

IV Govt. of Punjab Delhi-Bathinda-Delhi December 2016

37. Vayudoot

After carrying out all disbursements as per the directions of the Ministry of Civil Aviation pertaining to the merger of Vayudoot with Air India Ltd, a balance amount of Rs.38.5 million remains which has been reected in the books of accounts of AI as “Liability” under “Vayudoot Settlement Account” However, necessary decision regarding the adjustment of this outstanding amount can be taken only when certain Contingent Liabilities relating to Vayudoot Ltd which continue to be disclosed in the Accounts of the AI are settled. This is mainly because these may lead to future liabilities for AI as they mainly pertain to Legal Cases pending against Vayudoot. AIL has already written to the Ministry of Civil Aviation Govt of India with regard to the unspent balance of Rs 38.5 million out of the amounts sanctioned and released towards liquidating the dues of creditors/parties of erstwhile Vayudoot Ltd.

38. Physical Verification & Reconciliation

a) Fixed Assets:

i) Physical Verication and Reconciliation of major assets viz. Airframes, Aero-engines, APUs and Simulators was carried out at the year end and reconciliation of the same has also been completed. Further, in the case of land and building (including Investment Properties) reconciliation of number of properties as per xed assets register vis-à-vis records of holding departments was done for all major assets. These assets together constitute a substantial portion of the Gross Block of Assets. No major discrepancies were found on the same.

ii) However, physical verication and reconciliation of assets other than above, including assets migrated in Fixed Assets Register at block level as one item for which line item identication is yet to be done are to be covered in the biennial physical verication exercise of 2016-18 which is in progress.

b) Inventory:

Physical Verication of aircraft/non-aircraft inventory (except inventory relating to phased out eet and lying with third parties) for the biennial period 2016-18 has been completed. Pending nalization/approval of the Physical Verication Report, by the competent authority, the net of excess/shortages found on reconciliation amounting to Rs 114.0 million has been provided for.

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c) In case of HCI, The Company proposes to conduct physical verication of each xed asset once in two years i.e. for the block period 2017-18 to 2018-19. However, during the year all the Fixed Assets have not been physically veried. Hence the extent of discrepancies if any, cannot be ascertained . The resultant impact of the same on the accounts will be dealt with in the year in which nality is reached.

d) In case of AIXL, during the migration process in 2012-13, no physical verication of the inventory was conducted, and the migration was done based on sign off reports related to legacy systems/manual records or data compiled at different locations. The documented bases for quantities and values migrated to RAMCO software were not readily available. Further, as conrmed by Material Management Department of Holding Company, physical verication of inventories since F.Y. 2014-15 has not been conducted. Therefore, on 28th July, 2018 Company had appointed external CA rm for Physical Verication of inventory. The verication was completed, and the report was submitted by the external CA rm on 6th Oct 2018 that revealed an inventory shortfall as compared to books aggregating to Rs. 21.96 million which has since been rectied by adjusting the consumption in like sum for F.Y. 2018-19.

e) In case of AIATSL, No physical verication of Fixed Assets and inventory has been conducted during the current Financial Year. The Company has appointed an external rm of Chartered Accountants to carry out the physical verication of xed assets and the same is in process.

f) In case of AASL,

(i) The physical verication of PPE for the biennial period ended 2017-18 had been completed for Delhi and Chennai stations and assets amounting to Rs.8.41 million (Gross value) (PY:Rs.10.14 million) reported as obsolete/unserviceable/untraceable, were written off during the year with the approval from the appropriate authority. The accumulated depreciation of said assets amounts to Rs. 7.24 Million. The physical verication of PPE of Kolkata ofce was carried in 2016-17. The Mumbai ofce PPE detail has been obtained from In-charge Mumbai ofce.

(ii) No physical verication of aircraft/non-aircraft inventory is carried during 2017-18.

39. Effect of changes in Exchange rates (IndAS-21)

Transactions 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 with the provisions of IND AS due to complexity of transactions. The impact of translation of the same is not ascertained; however, the same is not likely to be material.

40. Confirmations/Reconciliations

a) Air India Ltd

i) The reconciliation and matching of certain unmatched receivables and payables including, suspense/ control ledgers and staff related accounts is under process. Impact, if any, of consequential adjustment arising out of reconciliation will be dealt with in the year of completion of reconciliation.

ii) The Group has sought the conrmation of balances for major receivables, payables and inventory lying with third parties. However, only some of the parties have responded. Wherever the balances conrmed by the parties are not in agreement with the books, reconciliation of difference is under process.

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iii) GST, Tax Deducted at source (TDS), Refunds in respect of Income Tax, are still pending to be reconciled with the Returns led/ statutory records maintained.

b) HCI

i) In case of HCI, during 2002-03, the Company 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 1.88 crores plus legal costs Rs 4.0 million. The accounts have been suitably adjusted to the extent of award amount of Rs 1.88 crores 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 18.8 million are considered good for recovery and the shortfall, if any, will be adjusted in the year in which nality is reached based on the award of the High Court of Bombay. (Refer note no. 29 (a) (v) above relating to Counter Claim of Rs 23.6 million by M/s Sahara Hospitality Limited) (Amount involved Rs 18.8 million (PY: Rs. 18.8 million). (Note No 37 (iii))

ii) In the case of HCI, the Company has not sought conrmation of balances in respect of other Trade Receivables, Trade Payables, Loans and Advances, Deposits and Other Liabilities as on 31st March, 2018. Accordingly, such accounts reect the balances as per their respective ledger accounts and are subject to conrmation, and adjustments, if any on reconciliation of accounts. Since the extent to which these balances are subject to conrmation is not ascertainable, the resultant impact of the same on the accounts cannot be ascertained. The difference, if any, will be adjusted in the accounts as and when reconciliation is completed (Note No 37 ii).

iii) In the case of HCI, The matters relating to cost of construction of Centaur Lake View Hotel Srinagar and the cost sharing arrangement between the hotel and Sher-e-Kashmir Convention Centre (SKICC) between the Company and Government of Jammu & Kashmir (J&K) had been agreed by both the parties in a joint meeting held on 15 October 2004 and all the matters of divergent views were settled.

a) Amount receivable from J & K government in respect of cost sharing arrangements with SKICC is Rs 105.1 million (PY: Rs 98.2 million).

b) The amount payable to J & K government on account of joint construction is Rs. 45.0 million and amount receivable on account of joint construction is Rs. 41.8 million.

These balances are subject to reconciliation and conrmation. Adjustment, if any will be accounted in the year in which nality is reached. (Note No: 31)

c) AIATSL

i) The Reconciliation and matching of certain unmatched receivables and payables including, control ledgers and staff related accounts is under process. Impact, if any, of consequential adjustments arising out of reconciliation will be dealt with in the year of completion of reconciliation.

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ii) The Company has sought the conrmation of balances of major receivables, payables. However, only some of the parties have responded. Wherever the balances conrm by the parties are not in agreement with the books, reconciliation of difference is under process.

iii) GST, Tax Deducted at Source (TDS), Refunds in respect of Income Tax, are still pending to be reconciled with the returns led/statutory records maintained.

iv) Group Company related (including Holding Company) accounts have been completed and the balance conrmation have been obtained.

41. Internal Control

The Company is 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 ofces, user departments and Central Accounts Ofce. To comply with the same, Independent Chartered Accountants rms have been appointed by the company. System for uniform and timely accounting entries of transactions in SAP as well as other software, including interface with each other, is under process of being strengthened.

42. Inventories

a) The policy for valuation of inventory has been changed from weighted average to lower of weighted average cost or NRV.As a result of such change, the value of closing stock is reduced by Rs 125.0

st stmillion. The impact of such change in the value of closing stock as on 31 March 2017 and 1 April 2016 is not ascertainable due to practical difculties. However, the same is not likely to be material.

b) The Work Order Suspense account (except aircraft engines) includes items other than repairables of Rs 2699.9 million out of which Rs 1346.3 million provision has been made for the items upto Sep '17 and heavy checks/transit checks/express checks upto Feb'18.

c) Pending reconciliation/rectication, provision of Rs. 317.6 million has been made towards the inventory balances lying under various intermediary/suspense heads under RAMCO system for which consumption/issue/scrappage has not been updated until 31.03.2018. Amount lying in such account as at 31.03.2018 is Rs. 519.5 million.

d) In case of AIXL

i) Material discrepancy such as negative balance aggregating to Rs. 425.11 million as on 31st March, 2018 were noticed. The Company is in the process of reviewing the status of such negative balances and hence the same will be adjusted in the year in which the review is completed. (Note No 37 b).

ii) The data relating to the last ve years' movement of inventory is not available in RAMCO software. On the basis of information provided by MMD department and veried / accepted by the Company in relation to non-moving items of Inventory, the Company has revised provision for inventory obsolescence downward as on 31st March, 2018 to Rs.226.9 Million from Rs. 417.6 Million as on 31st March, 2017, resulting in write back of Rs. 190.6 Million. (Note No 37 c).

iii) The Control over inventory management for maintaining optimum level including ABC analysis and interface with SAP is being streamlined hence Currently stores accounting data as received from RAMCO software is being entered at summary level entries in SAP. The difference of closing balance as per SAP and RAMCO amounting to Rs.96.6 million. Accordingly, inventory in SAP was enhanced by Rs.96.6 Million. (Note No 37 e).

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43. Status of Reconciliation with Airport Operators

(i) The reconciliation of AI with various Airport Operators such as AAI, MIAL, DIAL, CIAL and GHAIL sthas been carried out during the year and the status of the same as on 31 March 2018 is given

hereunder:(Rupees in Million)

No Name of Airport Balance Balance Difference Operator Payable Receivable as on 31.3.18 as per Air as per India Ltd Airport as on 31.3.18 Operators as on 31.3.18

1 Airport Authority of India (AAI) 12266.1 17841.1 (5575.0) 2 Mumbai International Airport Ltd (MIAL) 1306.8 2445.1 (1138.3)

3 Delhi International Airport Ltd (DIAL) 2418.1 2588.8 (170.7)

4 Cochin International Airport Ltd (CIAL) 209.6 216.3 (6.7)

5 Greater Hyderabad International Airport Ltd (GHIAL) 280.7 1281.2 (1000.5)

Note: The balances as per Airport Operators includes interest on delayed payments in respect of MIAL Rs 1721.6 million) and GHIAL (Rs 951.1 million) for which Contingent Liability has been disclosed. In respect of the others namely AAI, DIAL and CIAL, their balances do not include the interest on delayed payments but for w� hich also Contingent Liability has been disclosed in the accounts.

(ii) The major reasons for the difference are due to payments/credits given by AI up to 31.3.2018 for which accounting effect by the Airport Operators is yet to be given. Further, some other reasons for the difference are disputes in rates applied for landing & parking charges, ground handling royalty, space rentals, etc. which are not as per terms & condition of agreements. Moreover, interest claims on delayed payments and other disputed items have been separately disclosed as Contingent Liability as stated in Note No 28.

(iii) In case of AASL, The accounts with BIAL, DIAL, HIAL and MIAL have been reconciled upto 31.03.2018.

Reconciliation with Airports Authority of India (AAI) is under process. Under Regional Connectivity Scheme that was introduced in April' 2017 by Government of India, AASL was awarded fteen routes through bidding process. As per understanding of the agreement (with AAI), AASL has raised invoices based on parameter / clauses applicable to RCS operator (i.e. AASL). The amount is duly paid by AAI based on invoice submitted. However, AASL is in the process of reconciling claimed amount based on the parameter and other related criteria applicable as per agreement. (Note No 48)

(iv) In case of HCI, Airports Authority of India (AAI) had served a 12 month notice dated 8 November 2016 for early termination of lease of land (where Centaur Hotel Delhi and Chefair Delhi is located) at IGI airport, Delhi effective November 2017 as the land is required by them for airsight development works. However based on the intervention of Ministry of Civil Aviation, an extension up to 31 March

122

2019 for vacating the said leasehold land has been granted. Thus, in view of the above, the Company will have to vacate the building in which Centaur Hotel and Chefair Delhi is situated so as to surrender the said leasehold land to AAI by 31 March 2019. As per the Agreement between AAI and the Company the lease period is valid till 31.3.2031 and there is a signicant unexpired portion of lease still left. However, the revised and reduced useful life of the building and all assets has not been considered. As of date the compensation issues between the Company and AAI has not yet been determined. The vacation/handing over the premises would entail a lot of issues including employee retrenchment, compensation/ relocation to an alternate premises, etc. These issues would be discussed with AAI in consultation with Ministry of Civil Aviation. A Committee consisting of senior ofcials of Air India Limited has been formed to negotiate the issues with AAI. Consequently, no provision has been made for additional depreciation based on revised useful life of assets for such an eventuality at this stage. The same would be considered in the year in which nality is reached.(Note No 52)

44. Segment Reporting:

a) The Group is engaged in airline related business which is the only reportable segment. The details of geographical area wise revenue earned (derived by allocating revenue to the area in which the sales were made) are given hereunder:

(Rupees in Millions)

� � Particulars 2017-18 2016-17

a) USA/Canada 24578.7 20,801.2

b) UK/Europe 18986.9 15,916.4

c) Asia (excluding India), Africa and Australia 40256.4 41,633.5

d) India 187157.1 176,099.9

Total 270979.1 254,451.0

b) Major revenue-earning asset of the Company is the aircraft eet, which is exibly deployed across its worldwide route network. Other non-current assets (other than nancial instruments) located outside India are not material hence not disclosed.

45. Related Party Transactions:

Disclosure of the names and designations of the Related Parties as required under IND AS-24 are as under:

A. Key Management Personnel & Relatives:

Transactions with Key Managerial Personnel

i) There are no transactions with key managerial personnel other than Remuneration and Perquisites to Chairman & Managing Director and Functional Directors.

123

ii) Key Management Personnel &Relatives: (During FY 2017-18 and upto 1st September 2018)

(a) List of Board of Director of Air India Limited (AIL)

Name Designation

(a) Whole-Time Directors

Shri Pradeep Singh Kharola Chairman & Managing Director (Appointed as CMD effective 12.12. 2017)

Shri Rajiv Bansal Chairman & Managing Director (Appointed as CMD effective 24.08.2017 and Ceased to be CMD on 12.12.2017)

Shri Ashwani Lohani Chairman & Managing Director (Appointed as st CMD effective 31 August 2015 and ceased to

be CMD w.e.f. 23.08. 2017)

Shri Pankaj Srivastava Director-Commercial (Upon superannuation, ceased to be on Board w.e.f. 1.05 2018)

Shri Vinod Hejmadi Director- Finance

Shri Arvind Kathpalia Director Operations (Appointed on the Board w.e.f 27.06.2017)

(b) Government Nominee Directors

Ms.Gargi Kaul Additional Secretary & Financial Advisor, Ministry of Civil Aviation.

Shri Satyendra Kumar Mishra Joint Secretary, Ministry of Civil Aviation.

(c) Independent Directors

(Dr) Shri Ravinder Kumar Tyagi Appointed on the Board w.e.f 31.05.2017

Shri Syed Zafar Islam Appointed on the Board w.e.f 31.05.2017

Shri Y.C. Deveshwar Appointed on the Board w.e.f 08.08.2018

Shri Kumar Mangalam Birla Appointed on the Board w.e.f 08.08.2018

124

b) List of Board of Directors of Air India Express Limited (AIXL), formerly known as Air India Charters Ltd. (AICL) During 2017-18 and upto 1 September 2018

Sr.No Name Designation

1 Shri Pradeep Singh Kharola Part-time Chairman (Appointed w.e.f. 12.12.2017)

2 Shri Rajiv Bansal Part-time Chairman (Appointed w.e.f. 23.08.2017 and ceased w.e.f. 12.12.2017)

3 Shri Ashwani Lohani Part-time Chairman (Ceased w.e.f. 23.08.2017)

4 Shri Vinod Hejmadi Nominee Director of Air India

5 Smt (Dr.) Shefali Juneja Government Nominee Director (Ceased w.e.f. 31.08.2018)

6 Shri K V Unnikrishnan Government Nominee Director (Appointed w.e.f. 12.05.2017 and ceased w.e.f. 18.12.2017)

7 Shri Angshumali Rastogi Government Nominee Director (Appointed w.e.f. 12.05.2017)

8 Shri Pranjol Chandra Government Nominee Director (Appointed w.e.f. 31.08.2018)

c) List of Board of Directors of Airlines Allied Services Ltd. (AASL) During 2017-18 and upto 1 September 2018

Name Designation





5 Shri Pankaj Srivastava Nominee Director of Air India (Ceased w.e.f. 30.04.2018 )

6 Smt Meenakshi Dua Nominee Director of Air India (Ceased w.e.f. 29.09.2017 )

7 Shri S S Uberoi Nominee Director of Air India (Appointed w.e.f 29.09.2017 and ceased w.e.f. 1.05.2018

125

Name Designation

8 Capt. A K Govil Nominee Director of Air India (Ceased w.e.f. 31.05.2018)

9 Smt. (Dr.) Shefali Juneja Government Nominee Director (Ceased w.e.f. 12.05.2017 and re-appointed w.e.f. 18.12.2017)

10 Shri K V Unnikrishnan Government Nominee Director (Appointed w.e.f. 12.05.2017 and ceased w.e.f. 18.12.2017)

11 Shri Angshumali Rastogi Government Nominee Director (Appointed on the Board w.e.f. 12.05.2017 )

12. Shri Pankaj Kumar Nominee Director of Air India (Appointed w.e.f. 30.08.2018)

13. Shri Pranjol Chandra Government Nominee Director (Appointed w.e.f. 31.08.2018)

d) List of Board of Directors of Air India Air Transport Services Ltd.(AIATSL) During 2017-18 and upto 1 September 2018

Name Designation





5 Ms Gargi Kaul Government Nominee Director

6 Shri Satyendra Kumar Mishra Government Nominee Director

e) List of Board of Directors of Air India Engineering Services Limited (AIESL) During 2017-18 and upto 1 September 2018

Name Designation







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f) List of Board of Directors of Hotel Corporation of India Limited (HCI) During 2017-18 and upto 1 September 2018

Name Designation



3 Shri Ashwani Lohani Part-time Chairman (Ceased w.e.f. 23.08.2017 )


5 Shri Pankaj Kumar Part-time Managing Director



g) List of Board of Directors of AI-SATS During 2017-18 and upto 1 September 2018

Name Designation

th 1. Mr. Pradeep Singh Kharola Chairman (with effect from January 12 , 2018)

rd 2. Mr. Ashwani Lohani Ceased w.e.f. August 23 , 2017

3. Mr. Rajiv Bansal Ceased w.e.f. November 28, 2017 4. Mr.Alexander Charles Hungate Director

5. Mr. Yacoob Bin Ahmed Piperdi Director

6. Mr. Sarabjot Singh Uberoi Director

7. Mr. Vinod Hejmadi Director

8. Mr. Chew Teck Chye (Mike Chew) Director and Chief Executive Ofcer

iii) Key Managerial Remuneration

(a) Salary and Allowances(Rupees in Millions)

Sl.No. Particulars 2017-18 2016-17

(a) Chairman and Managing Director Salaries and Allowances (Including value of 2.3 2.9 perquisites 2017-18: Rs 0.02 million (PY:Rs. 0.03 million and As on 1.4.16 : Rs 0.02 million)

127

Sl. No. Particulars 2017-18 2016-17

(b) Functional Directors

i) Salaries and Allowances (Including value of 16.2 7.9 perquisites 2017-18: Rs 0.08 million (PY:Rs. 0.08 million and As on 1.4.16 : Rs 0.14 million)

ii) Contribution to Provident Fund 0.6 0.6

(c) Indepdenent Directors

Sitting Fees Paid to one Independent Director 0.16 0.04

Note: Transactions such as providing airline related services in the normal course of business are not included above.

(b) Employee Benefits Payable and Paid to KMP of AI(Rs in Million)

No Particulars 2017-18 2016-17

i) Gratuity Provision 5.1 1.7

ii) Leave Encashment Provision 6.0 4.5

iii) Salary Outstanding at year end 1.3 1.2

B. Transactions with Joint Venture M/s Singapore Airport Terminal Services (AI-SATS), Singapore

i) Entities and Nature of Transactions (Rs in Millions)

No Name of Entities and Nature of Transactions 2017-18 2016-17

1 AI-SATS

a) Expenditure

i) Handling Charges 2564.1 2133.8

ii) Others - 36.0

b) Revenue

i) Loan of Equipment - Lease Charges 186.1 140.8

ii) Others 655.1 712.4

iii) Dividend 20.2 –

c) Payables 1005.7 454.4

d) Transactions of JV with Subsidiary Cos

i) AASL 53.1 8.9 ii) AIESL 162.7 - iii) AIXL 154.5 121.7 iv) AIATSL

v) HCI

Total 370.3 130.6

128

The company has entered into Joint Venture (JV) agreement with SATS, Singapore in the equity ratio of 50:50 to provide ground handling services to airlines at certain airports this was in pursuance of GOI notication on the ground handling policy.

As per the books of AI, the net balance payable to AI-SATS as on 31/03/2018 is Rs 1005.7 million (PY:Rs.454.4 Million) and as per the books of AI-SATS the net balance receivable from AI is Rs 1005.7 million (PY: Rs 1575.0 million).

ii) Summarized Financial Information Assets/Liabilities of Group's Joint Venture(Rs. In Millions)

Particulars Air India SATS Airport Services Private Limited

As at March, As at March, As at March, 31,2018 31,2017 31,2016

Non-Current Assets 4,177.2 3,764.5 3,032.7

Current Assets 2,369.6 2,422.5 1,847.1

Non-Current Liabilities 655.6 488.3 333.8

Current Liabilities 2,150.6 2,397.1 2,177.6

Cash and cash equivalents 290.8 264.2 578.2

Current nancials Liabilities (Excluding

trade payables and provisions) 1,753.3 2,077.8 1,892.3

Non-Current nancials Liabilities (Excluding

trade payables and provisions) 534.5 387.5 243.0

iii) Summarized Financial Information Revenue/Expenditure of Group's Joint Venture

(Rs. In Millions)


As at March, As at March,

31,2018 31,2017

Revenue 6724.1 6144.3

Prot or Loss from Continuing Operations 509.7 699.6

Other Comprehensive Income for the Year 4.5 (7.4)

Total Comprehensive Income for the Year 514.2 692.2

The Above Prot/Loss for the year include

the following:

Depreciation and Amortization 298.2 420.9

Other Income 137.9 115.3

Income Tax Expenses/Income 24.9 (156.0)

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iv) Reconciliation of the above Summarized Financial Information to the carrying amount of the interest in JV recognized in the Consolidated Financial Statements

(Rs. In Millions)


As at March, As at March, As at March,

31, 2018 31, 2017 31,2016

Net Assets of Joint Venture

Total Assets 6837.5 6451.2 5458.0

Current Liabilities and Non Current Liabilities 2806.2 2885.4 2511.4

Net Assets of Joint Venture 4031.3 3565.8 2946.6

Proportion of Group's ownership interest in JV (%) 50% 50% 50%

Group's share in Net Assets of the Joint Venture 50% 50% 50%

Carrying Amount of the Group's Interest in JVs 2015.7 1782.9 1473.3

C. Transactions with Provident Fund Trusts of AI


PF Contribution Outstanding PF Contribution Outstanding during the Year as on 31.3.18 during the as on 31.3.17 Year

PF Trusts Dues 666.7 424.8 640.3 496.5

D. Major Transactions with Govt Related Entities

The details of the major transactions of revenue and expenditure of the holding company AI with Govt Related Entities are given hereunder:

(Rs in Millions)

Nos. Name of Entity 2017-18 2016-17

Expenditure

i) Airport Authority of India 7560.0 6840.0

ii) Oil Companies

Indian Oil Co Ltd 31599.5 23734.1

Hindustan Petroleum Co Ltd 10144.5 10503.8

Bharat Petroleum Co Ltd 6481.8 7246.4

Revenue

i) SESF Flights Revenue

Govt of India 7554.3 6591.7

ii) Charter Revenue - Others

Govt of India 1378.4 2479.8

Note: The above transactions with the Govt/Govt Related entities cover transactions that are signicant individually and collectively. The company also entered into other transactions with

130

various other Govt related entities, however, these transactions are insignicant either individually or collectively and hence not disclosed.

46. Leases

i) Finance Lease

a) Aircraft Fleet and Equipment acquired under nance leases are treated as if they had been purchased outright. As required under Ind AS - 17, the cost of these assets taken on lease is Rs

st182,888.8 million (2016-17: Rs.182,738.0 million and as on 1 April 2016 is Rs.183,687.3 million). The future lease obligation in respect of the aircraft on nance lease is Rs 68354.2

stmillion as at March 31, 2018(2016-17: Rs. 88152.9 million and as on 1 April 2016 Rs 111501.0 million). The Finance leases are guaranteed by the Govt. of India.

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

Particulars As at As at As at 31.3.2018 31.3.2017 01.04.2016

a) Outstanding balance of Minimum Lease Payments including interest thereon

i) Not later than one year and 23729.9 22009.3 22016.1 ii) Later than one year and not later than ve years 44877.6 66007.0 84281.1 iii) Later than ve years 0.0 464.4 5800.0 Total 68607.5 88480.7 112097.2

b) Present Value of (a) above i) Not later than one year 22259.8 20749.4 20524.6 ii) Later than one year and not later than ve years 43600.3 64376.5 81673.9 iii) Later than ve years 0.0 463.1 5769.3

Total 65860.1 85589.0 107967.8

c) Finance Charges 2747.4 2891.7 4129.4

ii) Operating Lease:

a) The Group has taken 57 Nos of Aircraft namely 24 of Airbus Family, 27 of Boeing Family and 6 st st stATR Family as at the end of 31 March 2018 (as on 31 March 2017: 34 aircraft and as on 1

April 2016: 23 aircraft) on non-cancelable operating lease. Liability on account of future minimum lease rentals in respect of leases acquired is as under:

(Rs in Millions)

No Particulars As at 31 As at 31 As at 1 March, 2018 March, 2017 April, 2016

i) Not later than one year 30735.4 23860.2 13480.4

ii) Later than one year and not later than ve years 118500.7 93182.5 51357.9

iii) Later than ve years 107768.4 90116.3 54733.5

Total 257004.5 207159.0 119571.8

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b) In the case of premature termination of the Lease Agreement by company i.e. lessee is required to pay compensation to the lessors of the. Aircraft as per the terms of the agreement. However, such compensation may differ from Lessor to Lessor.

c) The Group has taken various residential/commercial premises under cancellable operating lease/rental basis the amount of which is unascertainable.

d) The Group has also taken Vehicles and Ofce Equipment on operating lease with option to purchase/renew but title may or may not eventually be transferred. These assets are scattered at various stations and cumulatively not signicant. Complete details of future obligation in this respect could not be compiled; amount thereof is not material.

e) In the case of AASL, one aircraft ATR-42, MSN 406 (VT-ABO) taken on lease from M/s Abric was involved in an incident on 22.12.2015 at Kolkata. Since the aircraft was damaged extensively, the settlement agreement was signed with the lessor with the payable amount of US$ 3.3635 Million in lieu of the damage and release of aircraft. The claim under Hull insurance was lodged with the insurers company and an amount of US$ 1.4726 Million was accepted by Insurers after a deductible of US$ 100,000 and was received in the year 2016-17. �Since the aircraft was damaged due to the negligence of Jet Airways, the claim was l�odged with the Jet Airways for consequential damages / losses suffered by the Company. An amount of US$ 1.7989 Million equivalent to INR 120.5 Million at the exchange rate of Rs. 67 per US$ was lodged. Out of the above claim, after negotiation with Jet Airways an amount of US $ 1.2129 Million was agreed and the same amount was accepted by AASL after obtaining the internal approval. This claim was settled and paid by Jet Airways in 2017-18. The scrap value of the non-operational damaged Aircraft is being ascertained through internal and external sources and appropriate accounting action will be taken accordingly after disposal. (Note No 50)

47. Re-Delivery Charges

Provision for re-delivery charges is made by the Group to meet the contractual maintenance and return conditions on aircraft held under operating leases. Such provisions are made based on management estimate of number of hours or cycles each engine will have own at the return date, the cost of performing the required restoration work at that future date and discount rates commensurate with the expected obligation maturity schedules. Judgment is exercised by management given the long-term nature of assumptions that go into the determination of the provision. The assumptions made in relation to the current year are consistent with those in the previous year. Expected timing of resulting outow of economic benet is FY2020 to 2030.

The movement in provision made is as given below:

Particulars FY 2017-18 FY 2016-17

Opening Balance 3042.5 2140.8 Add: Additional Provisions during the year 2146.7 857.0 Add: Interest accretion on Provisions 420.7 250.8

Add/(less) Foreign Exchange Impact 39.6 (81.7)

Less: Amount used during the year (48.1) (124.4) Closing balance 5,601.4 3042.5

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48. Payments to and Provisions for Employees:

a) Liability for wage arrears includes Rs 2075.3 million (Net), (Previous Year: Rs. 2106.4 million Net) starrived on ad-hoc basis towards wage settlement up to period 31 December 2006 pending

nalization of actual liability.

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. The Company has been making losses since

1st January 2007 hence no provision has been made towards wage revision/settlement.

c) In the case of HCI, the Management announced an interim relief of Rs 3,000/- per month per

employee for unionized category and Rs 5,000/- per month per employee for ofcers effective

1.1.2017 which has been accounted for upto 31st March 2018.

49. Employee Benefits

(A) General description of Defined Benefit Plan

a) Gratuity: Gratuity is payable to all eligible employees of the Group on superannuation, death,

or permanent disablement, in terms of the provisions of the Payment of Gratuity Act.

b) Post-Retirement Medical Benefits: The Group has a Post-Retirement Medical Benet

Scheme under which medical benets are provided to retired employees and their spouse.

(B) Defined Contribution Plan

Employees Provident Fund: The Group 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.

(C) Other Long Term Employee Benefits

i) Privilege Leave Encashment: Privilege Leave Encashment is payable to all eligible

employees at the time of retirement upto a maximum of 300 days.

ii) 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. However, the company had decided to

freeze the encashment of sick leave standing to the credit of all existing employees as on

01.07.2012. Accordingly, provision for sick leave has also been computed at these frozen sick

leave numbers.

133

(D) Defined Benefit Plans – Gratuity & Post-Retirement Medical Benefits (Unfunded)(Rs in Millions)

� Particulars Gratuity

As at 31.03.2018 As at 31.03.2017 As at31.03.2018 As at 31.03.2017

(a) Table for Change in Benefit Obligation:

Liability at the beginning of the year 10609.77 10528.23 14715.80 13025.30

Less: Liability transferred out/disinvestment -25.62 0.00 0.00 0.00

Net Liability at the beginning of the year 10584.14 10528.23 14715.80 13025.30

Interest Cost 734.66 805.96 1096.40 1049.90

Current service cost 268.27 239.84 158.50 141.70

Past Service Cost (Vested Benet) 1796.11 0.00 2.70 0.00

Benet paid -1351.45 -1366.45 -1245.50 -1441.30

Actuarial (gain)/loss on obligations -4.09 -13.50 0.00 0.00

Actuarial (gain)/loss on obligations- Due to Change

in Demographic Assumption -3.68 0.00 0.00 0.00

Actuarial (gain)/loss on obligations- Due to Change

in Financial Assumption -465.35 361.38 -520.80 974.00

Actuarial (gain)/loss on obligations- Due to

Experience 154.82 54.31 501.90 762.80

Liability at the end of the year 11713.43 10609.76 14709.00 14512.40

(b) Table for Fair Value of Plan Assets: 0.00 0.00 0.00 0.00

Value of Plan Assets at beginning of the year 0.00 0.00 0.00 0.00

Expected return on Plan Assets 0.00 0.00 0.00 0.00

Contributions 0.00 0.00 0.00 0.00

Benet paid -754.60 -797.40 0.00 0.00

Actuarial (gain)/loss on Plan Assets -343.50 234.60 0.00 0.0

(c) Amount Recognized in the Balance Sheet: 0.00 0.00 0.00 0.00

Liability at the end of the year -11713.43 -10609.76 -14709.00 -14512.40

Fair value of Plan Assets at the end of the year 0.00 0.00 0.00 0.00

Amount Recognized in the Balance Sheet -11713.43 -10609.76 -14709.00 -14512.40

(d) Expense recognized in the P & L Account: 0.00 0.00 0.00 0.00

Current service cost 268.27 239.84 158.50 863.00

Interest cost 734.66 805.96 1096.40 1049.90

Past Service Cost 1796.11 0.00 2.70 0.00

Gains/Loss on curtailment and settlements

Net Effect of changes in Foreign Exchange Rate 0.00 0.00 0.00 0.00

Expense recognized in the P & L Account 2799.04 1045.80 1257.60 1191.60

(e) Expense recognized in the Other Compre-

hensive Income ( OCI) for Current Period 0.00 0.00 0.00 0.00

Actuarial (Gains)/Losses on obligation for the period -318.40 402.20 -18.90 1736.80

Return on Plan Assets, Excluding Intrest Income 0.00 0.00 0.00 0.00

Change in Asset Ceiling 0.00 0.00 0.00 0.00

NET ( Income )/Expense For the period

recognized in OCI -318.40 402.20 -18.90 1736.80

(f) Balance Sheet Reconciliation: 0.00 0.00 0.00 0.00

Opening Net Liability 10584.14 10528.23 14715.80 13025.30

Expense Recognized in Statement of Prot or Loss 2799.04 1045.80 1257.60 1191.60

Expense Recognized in OCI -318.40 402.20 -18.90 1736.80

Benet Paid -1351.45 -1366.45 -1245.50 -1441.30

Net Liability/(Asset) Recognized in Balance Sheet 11713.43 10609.76 14709.00 14512.40

Post Retirement Medical Benefits

134

50. DEFERRED TAX ASSETS / (LIABILITY)

(a) Deferred Tax Assets/Liabilities (Rs in Million)

S. Particulars As at 31st As at 31st As at 1st No. March 2018 March 2017 April 2016

(A) Deferred Tax Liability

(i) Related to Fixed Assets 77661.0 77162.5 59942.2

(ii) Related to Foreign Currency Monetary Items (FCMI) 660.4 725.9 1161.3

Sub-Total (A) 78321.4 77888.4 61103.5

(B) Deferred Tax Assets

(i) Unabsorbed Depreciation 106752.4 106338.9 89643.8

Sub-Total (B) 106752.4 106338.9 89643.8

Net Deferred Tax Asset/(Liability) 28431.0 28450.5 28540.3

(b) Details of Unused Tax Losses and other Deductible Temporary Differences on which Deferred Tax Assets have not been recognized (To the extent of DTA thereon):

(Rs in Millions)

st st st Particulars As at 31 As at 31 As at 1 March, 2018 March, 2017 April, 2016

Unabsorbed Depreciation 10,740.72 5,886.92 22,519.46

Brought Forward Business Losses 105,909.64 118,824.31 125,436.40

Other Temporary Differences 15,511.60 14,586.40 12,829.70

TOTAL 132,161.96 139,297.63 160,785.56

Note: The above table does not include unused tax losses/other deductible temporary differences with respect to AIESL, AASL, AIATSL and HCI.

The unused tax losses and unabsorbed depreciation considered above are based on the tax records and returns of the Group and does not consider the potential effect of matters under dispute/litigation with the tax authorities which are currently sub-judice at various levels.

In view of the facts disclosed in Note No 52 regarding Going Concern the company is hopeful of showing improved performance in the future and accordingly, the deferred tax assets available will be realized against future taxable prots. Further, the Deferred Tax Assets have been created against carry forward Depreciation only which are available to the Company indenitely as per the provisions of the Income Tax Act.

135

(c) Reconciliation of Effective Tax Rate

Reconciliation of tax expense and the accounting prot / (loss) multiplied by India's domestic tax rate for the year ended 31st March 2017 and 31 March 2018:

(Rs in Millions)

Particulars For the year ended For the year ended 31st March 2018 31st March 2017 Rate (%) Amount Rate (%) Amount

Prot/(Loss) Before Tax 30.90% (57488.1) 30.90% (68175.8)

Effective Tax Rate 0% NIL 0% NIL

(d) DTA on losses incurred has not been recognized by the Subsidiaries as a matter of abundant caution.

51. Earnings Per Share (Rupees in Millions)

Particulars As at 31.03.2018 As at 31.3.2017

Prot/(Loss) After Tax & Extra-Ordinary Items (57,999.1) (68,458.1)

Weighted Average No. of Equity Shares 27,108,597,452 21,640,027,397 EPS After Tax (Rs per Share) (2.14) (3.16)

52. Going Concern

a) Air India Ltd (AIL)

The company has received continuous support from the Government of India (GoI) though the implementation of Turnaround Plan/ Financial Restructuring Plan (TAP/FRP) approved in 2012 which has helped the company to improve its operating and nancial parameters. As per the TAP/FRP the GoI has during FY 2017-18 infused Equity to the tune of Rs 18000.0 million. The total Equity Infusion under TAP/FRP as on 31st March 2018 aggregated to Rs 265452.1 million. During the FY 2018-19 a further amount of Rs.16300.0 million has been infused upto end of August 2018.

th As stated in Note No 31 on Disinvestment of Air India Ltd, the AISAM in its meeting on 18 June 2018 decided to:

l Improve performance of Air India

l Monetize Assets

l Consider disinvestment after global indicators like oil prices and forex rates stabilize.

A Strategic Plan was prepared by AI and submitted to the Govt. The objective of the Strategic revival plan was to establish a strong competitive and self sustaining airline which can be strategically divested or listed in the next few years. Focus was on increasing the operational efciencies whereby substantial increase in revenue or cost saving can be achieved.

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The revival plan had the following components

l Organizational Reforms

l Financial Package

l Disinvestment of Subsidiaries

l Sale of non-core Assets

l Improving Internal Efciencies

l Tapping the human resource potential to the fullest

This Strategic Plan was discussed with the GoI and the following in-principle decisions were taken to give nancial support to AI in FY 2018-19 to implement the decision of AISAM of improving the nancial performance of Air India:

Financial Support to Air India and SPV

l A total debt amounting to Rs 294,640 million would be transferred from Air India Ltd to the SPV stviz Air India Assets Holding Co Ltd forthwith w.e.f. 1 October 2018.

l A Cash Support of Rs 39,750.0 million to Air India, inclusive of Rs 16,300.0 million already infused in AI in the current nancial year.

l Provide a Govt Guarantee of Rs 76000.0 million, inclusive of Rs 30000.0 million already provided to AI in FY 2018-19, to raise new debt for payment of stretched liabilities.

l An additional amount of Rs 13000.0 million to be provided to the SPV to meet the interest liability on the transferred debt.

l From FY 2019-20 the entire interest on the debt of Rs 294,640.0 million transferred to the SPV, would be serviced by the Govt.

Deliverables by Air India

l Monetization of assets, Sale/disinvestment of AIATSL, sale of other immovable assets and other subsidiaries the proceeds of which will be utilised towards servicing of debts transferred to the SPV.

l Performance Improvement measures for operational efciencies such as improvement in Aircraft Utilisation, enhancement of cargo revenue, rationalisation of costs including fuel and distribution costs etc.

In view of the above nancial support from the Govt of India and various measures taken by the company to improve the operational efciencies, various revenue enhancing measures, cost control measures undertaken etc. the company expects a substantial improvement in its performance, operational and nancial, in the near future and hence, the Accounts have been prepared on the 'Going Concern' basis.

b) Hotel Corporation of India Ltd (HCI)

The company has been facing severe liquidity crunch due to various factors like operational losses and its nancial and operating performance has been affected in recent years due to a number of external and internal factors. However, the Company has prepared its accounts on a "going concern" basis in view of the following:

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Various initiatives have been taken by the management for improving the operational performance of the company and increasing the revenues leading to improved nancial performance/Net Worth such as:

i) Equity infusion of Rs 27 crores upto 31 st March 2018 by Government of India.

ii) The renovation of 80 guest rooms and other allied works at Centaur Delhi was completed in the quarter ended June 2017 which augmented the revenue during the year.

iii) The Company has appointed a consultant for upgradation and refurbishment of 75 guest rooms and allied works at Centaur Srinagar.

iv) The holding company Air India Limited converted Rs 70 crores of advance to the Company into Share Capital in 2016-17.

v) The Company had reduced the retirement age for its employees from 60 to 58.

c) Airline Allied Services Ltd (AASL)

Air India Limited had formulated a Turn Around Plan (TAP) applicable to its group companies in order to improve their operational and nancial performance. The Government of India had approved the Turn Around Plan (TAP) in February 2012 with the intention to turn around Air India Limited and its subsidiaries.

Alliance Air, with the induction of 10 new ATR-72-600 aircraft will have a eet of 16 aircraft in 2017-18 and 20 aircraft in 2018-19.

Alliance Air is presently operating to 51 destinations with 110 departures per day and 602 ights per week. It is projected to carry approximately 1.6 million passengers in Financial Year 2018-19, which is a 22% growth year on year over Financial Year 2017-18. The projected capacity increase for Financial Year 2018-19 is 30 % over Financial Year 2017-18. The aircraft utilization has increased close to 75% in rst half of 2018-19 as compared to 2017-18.

Alliance Air is budgeting revenue of around Rs. 8766 Million in 2018-19 compared to the actual operating revenue of Rs. 5931 Million and Rs. 3676 Million in 2017-18 and 2016-17 respectively. This is principally due increase in effective utilization of aircraft from the average 6.4 hours to 8.52 hours per day and 10.09 per day in September'2018 apart from increase in ASKM. The Revenue PER Kilometer (RPK), Performance (OTP) and Passenger Load Factor (PLF) had shown upward trend and is par or higher than industry standard, which has led to reduction in operating loss compared to the last year.

The company has continued to operate to the North Eastern region like Guwahati, Lilabari, Tezpur in Assam, Shillong in Meghalaya and Agatti and Diu on request from NEC and MHA under Viability Gap Funding (VGF) arrangements. These routes are operationally protable.

The company has emerged as a major player in the Government of India's premier scheme UDAN, which connects to various Tier II and Tier III cities with the development of unserved / underserved airports. The growth in Tier II and Tier III cities is still largely untapped and Alliance Air is likely to emerge as a largest player with its ATR 72-600 eet suitable for serving these smaller airports.

The company has strategized itself to invest major resources in Government of India's UDAN stscheme and presently it is operating 19 routes and is expected to increase it to 23 routes by 1 of

November'2018. The airline is poised to launch another 10 routes under UDAN scheme in the next

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2-3 months thereby increasing our presence to 33 routes under UDAN scheme. This is 23.74% of the total routes Alliance Air is operating presently and which shows that Alliance air is fully committed towards increasing its presence under UDAN. The performance of the airline under UDAN has been excellent wherein the company has been operationally positive.

The company has also earmarked specic routes, which were loss making and have consciously shifted the operations from these routes to potentially higher revenue earning routes. The airline is

rdalso planning to participate heavily in the coming UDAN 3 round, so that majority of the routes are able to meet total cost of operation thereby enabling the airline to turnaround and declare operating prot.

The airline is consciously increasing the yield and as on date the average yield at Rs. 9.05 per Kilometre, which is about 13% higher than the previous year. With the increase of additional two aircraft by December' 2018,more routes are being deployed under UDAN. The airline also has the Board approval to further lease 15 aircraft in the near future and expand under UDAN, which will add substantially to the bottom line.

With the support of Air India Limited in providing corporate guarantee for aircraft leases, reservation systems, inventory management, SAP etc. and other various measures taken towards improving company's operational and nancial activities, it is expected that the nancial position of the company would improve in future.

With all the above measures and the Tier II & III market growing at a fast pace, Alliance Air is in the threshold of becoming one of the top regional airline in India and become a protable airline operationally in near future.

d) Air India Express Ltd (AIXL)

Primary mandate of Air India Express is to operate low-cost, direct, international services to Middle East / South East Asian destinations to serve expat population / migrant workers at competitive fares. The company has been posting Net Prots in the last few years and the net prot (after tax and comprehensive Income) for FY 17-18 and FY 16-17 is Rs.2620.5 Million and Rs.2354.2 Million respectively. The net worth was eroded because of the past accumulated losses and the company is continuously showing improvement in operational and nancial performance and it is expected that due to its improved performance its net worth will become positive in the near future.

e) Air India Engineering Services Ltd (AIESL)

AIESL is the largest MRO set up in India that can serve as an one-stop-shop for all aircraft engineering requirements. At present, in India, major checks of every commercial wide body aircraft of Indian Operators is done by AIESL. The company has got hangar facilities available in all major airports in Mumbai, Delhi, Chennai, Hyderabad, Kolkata, Trivandrum and Nagpur. AIESL commenced its operations from January 2015 after receiving its DGCA Licence.MRO business is a highly capital intensive industry and it generally has a gestation period of 4-5 years for consolidation of operations.

However, AIESL has taken various initiatives to improve its overall revenues such as signing of activity based SLA with Air India Ltd, starting MRO facility in Sharjah and plans to expand the same to Dubai, developing dedicated marketing teams to capture MRO business, offering training services, handling VVIP ights to generate additional revenue.

Although, AIESL is in losses in the current year it is showing improvement in its performance on a year to year basis. With the above measures and the Make in India thrust of the Govt. of India which

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will ensure that maintenance of aircraft is within the country, the rapid growth of Aviation in the country and large number of aircraft orders by Indian carriers, AIESL is best poised for taking advantage of the growth in maintenance activities and MRO business within India. In view of this AIESL is likely to earn enhanced revenues and be protable in the near future.

53. Capital Management:

The objective of the company is to maximize the shareholders' value by maintaining an optimum capital structure. Management monitors the return on capital as well as the debt equity ratio and makes necessary adjustments in the capital structure for the development of the business.

During the nancial year ended 31 March 2018, no signicant changes were made in the objectives, policies or processes relating to the management of the Company's capital structure.

Debt-Equity Ratio:

st st st Particulars As at 31 March As at 31 March As at 1 April 2018 2017 2016

Long term Borrowings 3,06,875.1 3,43,752.1 3,72,885.7

Short term borrowings 2,33,055.7 1,43,412.7 1,61,539.2

Current maturity of Long-term Borrowings 12,186.3 6,727.3 8,210.3

Current maturities of nance lease obligations 22,759.2 20,362.5 20,144.3

Total Debt (A) 5,74,876.3 5,14,254.6 5,62,779.5

Equity Share Capital 2,86,902.1 2,67,530.0 2,14,960.0

Other Equity (5,94,831.8) (5,35,706.1) (4,39,364.7)

Total Equity (B) (3,07,929.7) (2,68,176.1) (2,24,404.7)

Debt Equity Ratio (A/B) (1.9) (1.9) (2.5)

Note: The company is highly leveraged due to negative Net Worth and the nature of the business due to which the Debt Equity Ratio is negative.

54. Fair Value Measurement and Financial Instruments

(a) Financial instruments – by category and fair value hierarchy

The following table shows the carrying amounts and fair value of nancial assets and nancial liabilities, including their levels in the fair value hierarchy.

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(a) As on 1 April, 2016(Rs in Millions)

Particulars Carrying Value Fair value measurement using

FVTPL FVTOCI Amortized Total Level 1 Level 2 Level 3 Cost Financial Assets

Non-Current

a) Investments 2,489.5 2489.5 435.7 537.1 1,516.7

b) Trade Receivables* 47.4 47.4 - - -

c) Loans 2,583.1 2,583.1 - - 2,583.1

d) Others Financial Assets 1,239.3 1,239.3 - - - Current

a) Trade Receivables* 18,933.8 18,933.8 - - -

b) Cash and Cash 5,768.5 5,768.5 - - -

Equivalents*

c) Bank Balance other 4,420.6 4,420.6 - - -

than (b) above*

d) Loans* 509.8 509.8 - - -

e) Others Financial Assets 1,964.8 1,964.8 - - - Total 2,489.5 35,467.3 37,956.8

Financial liabilities

Non-Current

i) Borrowings# 372,885.7 372,885.7 - - 372,885.7

ii) Others* 240.3 240.3 - - -

Current

i) Borrowings# 161,539.2 161,539.2 - - 161,539.2

ii) Trade Payables* 86,084.0 86,084.0 - - -

iii) Others* 62,676.5 62,676.5 - - -

Total 683,425.7 683,425.7

(b) As on 31 March, 2017

(Rs in Millions) Particulars Carrying Value Fair value measurement using

FVTPL FVTOCI Amortized Total Level 1 Level 2 Level 3

Cost Financial Assets

Non-Current

a) Investments 2,782.4 2.782.4 378.9 577.3 1,826.2


c) Loans 2,819.3 2,819.3 - - 2,819.3

d) Others Financial Assets 1,458.7 1,458.7 - - - Current


b) Cash and Cash Equivalents* 4,029.7 4,029.7 - - -

c) Bank Balance other than

(b) above* 5,336.8 5,336.8 - - -

d) Loans* 475.2 475.2 - - -

e) Others Financial Assets 2,280.3 2,280.3 - - - Total 2,782.4 35,704.5 38,486.9

ReferenceNote No.

ReferenceNote No.

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Particulars Carrying Value Fair value measurement using


Cost


Non-Current

i) Borrowings# 343,752.1 343,752.1 - - 343,752.1

ii) Others* 173.4 173.4 - - -

Current

i) Borrowings# 143,412.7 143,412.7 - - 143,412.7


iii) Others* 76,888.9 76,888.9 - - -

Total 665,255.9 665,255.9

(c) As on 31 March 2018

(Rs in Millions) Particulars Carrying Value Fair value measurement using


Cost Financial Assets

Non-Current

a) Investments 3,061.7 3,061.7 418.2 584.5 2059.0


c) Loans 3,196.8 3,196.8 - - 3,196.8

d) Others Financial Assets 1,534.1 1,534.1 - - -

Current


b) Cash and Cash Equivalents* 3,300.9 3,300.9 - - -

c) Bank Balance other than

(b) above* 5,739.1 5,739.1 - - -

d) Loans* 230.3 230.3 - - -

e) Others Financial Assets 3,232.6 3,232.6 - - -

Total 3,061.7 38,356.0 41,417.7


Non-Current

i) Borrowings# 306,875.1 306,875.1 - - 306,875.1

ii) Others* 169.3 169.3 - - -

Current

i) Borrowings# 233,055.7 233,055.7 - - 233,055.7


iii) Others* 89,741.9 89,741.9 - - -

Total 723,288.7 723,288.7

Notes: (#) The companies' borrowings and loans to subsidiaries have been contracted at market rate of

interest, which resets at regular intervals. Accordingly, the carrying value of such borrowings (including interest accrued) approximates fair value.

(*) The carrying amount of trade receivables, trade payables, cash and cash equivalents, bank balance other than cash and cash equivalents and other nancial assets and liabilities approximates the fair values, due to their short-term nature.

ReferenceNote No.

ReferenceNote No.

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- The fair values for loan were calculated based on discounted cash ow using a current lending rate. They are classied as level 3 fair values in the fair value hierarchy due to the inclusion of unobservable.

st - There have been no transfers between level 1, level 2 and level 3 for the year ended 31 March 2018

stand 31 March 2017.

(b) Valuation Technique used to determine Fair Value:

Specic valuation techniques used to value nancial instruments include:

l The use of NAV for unquoted Equity Shares.

l The Fair Value of remaining nancial instruments is determined using Discounted Cash Flow method.

55. Financial Risk Management Objective and Policies

The company has exposure to following risks arising from its business and nancial instruments:

a) Credit Risk

b) Liquidity Risk

c) Market Risk – (i) Foreign Currency and (ii) Interest Rate

The Company operates to 43 international destinations in multi-currency, dynamic and challenging environment The Company's principal nancial liabilities comprise of loan and borrowings, trade and other payables. The Long term borrowing for the aircraft purchase is mainly dollar related. A part of the borrowings for the working capital are dollar denominated. Nearly 70% of the Company's expenses are related to the dollar. The main purpose of these nancial liabilities is to nance aircraft acquisition, receivable, and cash and cash equivalents that derive directly from its operations.

The Company is exposed to credit risk, liquidity risk, market risk and Commodity risk. The Company's senior management oversees the management of these risks. The Company's senior management is supported by a treasury team. The Treasury Team provides assurance to the Company's senior management that the company's nancial risk activities are governed by appropriate policies and procedure and that nancial risks are identied, measured and managed in accordance with the Company's policies and risk objective. All hedging activities for fuel risk management purposes are carried out by specialist teams that have the appropriate skills, experience and supervision. It is the Company's policy that no trading in derivative for speculative purpose may be undertaken. The Board of Directors reviews and agrees policies for managing each of these risks, which summarized below:

a) Credit Risk

Credit risk is the risk of nancial loss to the company if a customer or counterparty to a nancial instrument fails to meet its contractual obligation.

The Company is exposed to credit risk from its operating activities (primarily trade receivables) and from its investing activities, including deposits with banks and nancial institutions, foreign exchange transactions and other nancial instruments.

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The maximum exposure to the credit at the reporting date is primarily from trade receivables. Trade receivables are mostly from travel agents, Government Parties and Credit Card Companies which are typically unsecured as no coverage is held by the Company and are derived from revenue earned from customers. Trade Receivables includes receivables from IATA Agency Dues, General Sales Agents, Credit Card Companies which are realizable within a period of 30 working days. General Sales Agents dues are recovered by Bank Guarantees by Airline and Agency Dues are covered by BG/Insurance cover held by IATA. Similarly, for Cargo Agents, dues are covered by BG/Advance Payments and GSA Dues are covered by BG. Mail Dues are GoI Dues. The Company does monitor the economic environment in which it operates. The Company manages its credit risk through credit approvals, establishing credit limits and continuously monitoring credit worthiness of agents to which the Company brands credit terms in the normal course of the business.

The company sells majority of its passenger/cargo services against credit worthiness and nancial guarantees made by agents (customers) to IATA though individual guarantees are also taken in certain cases. The Company also extends credit to the Government on ights operated and which are realized over a period of time depending on budgetary provisions made by the Govt to the respective departments

On adoption of IND-AS 109, the company uses expected credit loss model to assess the impairment loss or gain. The Company uses a provision matrix to compute the expected credit loss allowance for trade receivable. The provision matrix considers available internal credit risk factors such as the Company's historical experience for customers. Based on the business environment in which the company operates, management considers that the trade receivable (other than receivables from government departments) are in default (credit impaired) if the payments are more than 36 months past due.

The Companies exposure to credit risk for trade receivables is as follows: (Rs in Millions)

Particulars As at 31/03/2018 As at 31/03/2017 As at 01/04/2016 Gross Loss Gross Loss Gross Loss Carrying Allowance Carrying Allowance Carrying Allowance Amount Amount Amount

Debts not due 21,122.2 - 19,304.5 - 18,981.2 -

Debts over due 10,435.1 10,435.1 10,904.6 10,904.60 9,311.2 9,311.2

Movement in the allowance for impairment in respect of trade receivables:

Particulars For the year ended For the year endedst st 31 March 2018 31 March 2017

Balance at the beginning of the Year 10,904.60 9,311.20

Movement during the year (469.50) 1,593.40

Balance at the end of the Year 10,435.10 10,904.60

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b) Liquidity Risk

Liquidity risk is the risk that the Company will encounter difculty in meeting the obligation associated with its Financial Liabilities that are settled by delivering cash or another Financial Assets.

The Company's approach to manage Liquidity is to have sufcient liquidity to meet its liabilities when they are due, under both normal and stressed circumstances, without incurring unacceptable losses or risking damage to the Company's reputation.

The Company has been experiencing liquidity problems due to delayed equity infusion by the Govt and the high debt burden.

The Company believes that its liquidity position, including total cash and cash equivalent and bank stbalances other than cash and cash equivalent of Rs. 9040.0 million as at 31 March 2018 (31st

March 2017: Rs. 9366.5 & 1st April 2016: Rs. 10189.1) anticipated future internally generated funds from operations, and its fully available, revolving undrawn credit facility will enable it to meet its future known obligation in the ordinary course of business provided there is equity infusion and assistance from the Government. However, if liquidity needs were to arise, the company believes it has access to nancing arrangement, value of unencumbered assets, which should enable it to meet its ongoing capital, operating, and liquidity requirement. The Company will continue to consider various borrowing or leasing options to maximize liquidity and supplement cash requirement as necessary. However, the Company relies on Government support to conserve its liquidity position.

The Company's liquidity management process as monitored by management includes the following:-

a) Day to day funding, managed by monitoring future cash ows to ensure that requirement can be met.

b) Maintaining rolling forecast of the Company's liquidity position on the basis of expected cash ows.

c) Maintaining diversied credit lines.

Exposure to Liquidity Risk

The following are the remaining contractual maturities of nancial liabilities at the reporting data. The contractual cash ow amount are gross and undiscounted, and includes interest accrued.

As at 1st April, 2016 Carrying Contractual Cash Out Flows (Rs in Millions) Amount as per Trial Upto 1 1-2 2-3 3-4 4-5 More Total Balance year Years Years Years Years than 5 years Borrowings

a) Non Convertible Debentures (Note - 13) 136,950 7,950 129,000 136,950

b) Long Term Borrowings (Note - 13)

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As at 1st April, 2016 Carrying Contractual Cash Out Flows (Rs in Millions) Amount as per Trial Upto 1 1-2 2-3 3-4 4-5 More Total Balance year Years Years Years Years than 5 years

- From Banks (Secured) 123,756 2,507 5,065 5,065 11,401 11,401 88,317 123,756

- From Banks (Unsecured) 32,322 2,707 8,214 7,104 7,338 2,933 4,028 32,322

- From Other Parties 244 10 10 10 10 10 192 244

c) Short Term Borrowings (Note - 18)

- From Banks (Secured) 119,653 119,653 119,653

- From Banks (Unsecured) 41,886 41,886 41,886

- From Other Parties (Unsecured) - - -

d) Long Term Maturities of Finance Lease Obligation (Note - 13) 107,968 22,012 20,936 21,572 22,547 15,685 5,217 107,968

Trade Payables (Note - 14)

a) Trade Payables 86,084 86,084 - 86,084

Other Financial Liabilities (Note - 15)

a) Interest Accrued but not due on borrowings 6,797 6,797 - 6,797

b) Interest Accrued and due on borrowings 350 350 - 350

c) Other Liabilities 27,175 27,175 240 27,415

Totals 683,185 309,181 34,225 33,751 49,246 30,029 226,995 683,426

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As at 31st March 2017 Carrying Contractual Cash Out Flows (Rs in Millions) Amount as per Trial Upto 1 1-2 2-3 3-4 4-5 More Total Balance year Years Years Years Years than 5 years Borrowings




- From Banks (Unsecured) 26,720 4,981 7,104 7,338 2,540 4,758 26,720






d) Long Term Maturities of Finance Lease Obligation (Note - 13) 85,589 20,569 15,210 13,196 9,475 26,674 465 85,589


a) Trade Payables 101,029 101,029 - 101,029



b) Interest Accrued and due on borrowings 403 403 - 403


Totals 665,082 324,865 27,391 39,895 23,426 46,644 203,035 665,256

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As at 31st March 2018 Carrying Contractual Cash Out Flows (Rs in Millions) Amount as per Trial Upto 1 1-2 2-3 3-4 4-5 More Total Balance year Years Years Years Years than 5 years Borrowings




- From Banks (Unsecured) 21,808 7,104 7,338 2,607 4,759 21,808






d) Long Term Maturities of Finance Lease Obligation (Note - 13) 65,860 22,260 22,335 15,590 5,209 466 65,860


a) Trade Payables 93,447 93,447 - 93,447



b) Interest Accrued and due on borrowings 1,648 1,648 - 1,648


d) Book Overdraft 18 18 18

Totals 723,120 415,740 49,033 43,858 35,630 15,677 163,351 723,289

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c) Market risk Market risk is that the fair value and future cash ows of nancial instrument will uctuate because of

changes in market prices. Market risk comprises two type of risk namely: currency risk and interest rate risk. The objective of market risk management is to manage and control market risk exposure within acceptable parameters, while optimizing the return.

(i) Interest Rate Risk

� � � Interest rate risk is the risk that the future cash ows of a nancial instrument will uctuate because of changes in market interest rates. The Company's exposure to the risk of changes in market interest rates relates primarily to the Company's borrowings with oating interest rates.

� � � The Company's interest rate risk arises majorly from the foreign currency term loan and nance lease carrying oating rate of interest which is linked to LIBOR. These obligations expose the company to cash ow interest rate risk. The exposure the company's borrowings to interest rate changes as reported to the management at the end of the reporting period are as follows:

(Rs in Millions)

Variable-rate instruments As at 31st As at 31 As at 1 April March 2018 March 2017 2016 Long Term Borrowings from Bank 30,734.3 36,323.5 42,084.2 (Secured & Unsecured, including current maturities)

Short term borrowings 92,628.5 73,919.0 1,02,674.5

Finance lease obligation 61,337.1 78,637.9 98,477.6 (including current maturities)

Total 1,84,699.9 1,88,880.5 2,43,236.2

Interest Rate Sensitivity Analysis

A reasonably possible change of 0.50 % in interest rates at the reporting date would have affected the prot or loss by the amounts shown below. This analysis assumes that all other variables, in particulars foreign currency exchange rates, remains constant.

Increase / (decrease) in the interest Statement of Profit and losses. on foreign currency term loans-from others and on finance lease Increase by 0.50 % Decrease by 0.50 % obligation.

- For the year ended 31 March 2018 923.5 (923.5)

- For the year ended 31 March 2017 944.4 (944.4)

(ii) Currency Risk

Currency risk is the risk that the future cash ows of a nancial instrument will uctuate because of changes in foreign exchange rates. The Company is exposed to multi currencies on

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its operations and hence is exposed to the effects of uctuation in the prevailing foreign currency rates on its nancial position and cash ows. Exposure arises primarily due to exchange rate uctuation between the functional currency and other currencies from the company's operating, investing and nancing activities. Nearly 70% of the Company's expenses are dollar denominated.

Exposure to Foreign Currency Risk

The summary of quantitative data about the Company's exposure to currency risk, as expressed in Indian Rupees, as at 31 March 2018, 31 March 2017 and 1 April 2016 are as below:

st a) As at 31 March 2018

(Rs. In Millions)

Particulars USD EUR GBP AED OMR SGD THB CHF QAR AUD OTHERS

Financial Assets

Trade Receivables 6,216.12 1,077.10 1,167.10 618.6 146.1 107.0 59.8 61.6 14.2 88.6 1,689.80

Cash and Cash equivalents 365.8 421.2 5.8 7.8 - 27.9 20.3 7.6 - 137.4 346.9

Bank Balances other than above 732.0 - 523.1 - - - - - - 52.1 33.1

Loans 5,272.70 59.1 3.5 13.1 - 5.8 1.1 0.1 0.4 0.2 47.4

Other Financial Assets 5,270.90 9.7 15.1 - - - 0.6 - - 6.7 25.3

Total Financial Assets 17,857.52 1,567.10 1,714.60 639.5 146.1 140.7 81.8 69.3 14.6 285.0 3,958.40

Financial Liabilities

Borrowings 1,68,440 - 161.6 - - - - - - - -

Other Financial Liabilities 3,342.80 58.6 17.3 22.3 2.2 4.2 0.8 8.0 1.0 9.9 61.3

Trade Payables 6,407.40 765.2 642.1 572.3 75.7 289.5 30.6 - - 190.4 1,062.00

Total Financial Liabilities 1,78,190.20 823.8 821.0 594.6 77.9 293.7 31.4 8.0 1.0 200.3 1,123.30

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st b) As at 31 March 2017(Rs. In Millions)


Financial Assets

Trade Receivables 3,759.99 2,515.40 1,045.50 757.5 252.3 68.9 66.8 99.8 16.1 146.3 1,155.3

Cash and Cash equivalents 419.0 543.5 67.1 10.5 - 25.8 21.9 2.7 - 95.1 278.2


Loans 5,259.90 50.0 2.9 13.1 - 5.8 0.9 0.1 0.4 - 40.0

Other Financial Assets 8524.4 8.0 28.0 - - - 0.6 - - 6.0 21.1



Borrowings 1,70,887.0 - 141.4 - - - - - - - -

Other Financial Liabilities 3,086.60 31.0 7.5 78.2 1.7 6.2 2.1 - 1.0 9.9 34.1

Trade Payables 933.7 675.2 429.8 641.7 18.4 195.2 36.0 2.0 - 103.5 543.9

Total Financial Liabilities 1,74,907.3 706.2 578.7 719.9 20.1 201.4 38.1 2.0 1.0 113.4 578.0

st c) As at 1 April 2016(Rs. In Millions)


Financial Assets

Trade Receivables 4660.66 1,773.40 869.3 714.4 185.6 90.2 67.1 88.7 7.7 129.7 1,509.7

Cash and Cash equivalents 1,557.0 569.0 143.0 14.1 - 97.1 31.5 43.9 - 54.2 551.5


Loans 5,113.30 36.8 1.0 13.5 - 6.7 1.3 0.1 0.4 0.6 41.3

Other Financial Assets 10,612.10 10.0 66.6 - - - 0.6 - - 18.8 28.5


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Borrowings 2,24,521.30 - 143.2 - - - - - - - -

Other Financial Liabilities 3,109.70 33.3 6.8 20.2 2.7 2.1 0.6 - 0.2 9.5 10.2

Trade Payables 10,865.30 715.7 242.4 608.2 7.4 309.2 40.4 - - 130.3 568.5

Total Financial Liabilities 2,38,496.30 749.0 392.4 628.4 10.1 311.3 41.0 - 0.2 139.8 578.7

Foreign Currency Sensitivity Analysis

A reasonably possible strengthening (weakening) of the Indian Rupee against below currencies at 31 March 2018 and 31 March 2017 would have affected the measurement of nancial instruments denominated in foreign currency and affected Statement of Prot and Loss by the amounts shown below. This analysis is performed on foreign currency denominated monetary nancial assets and nancial liabilities outstanding as at the year end. This analysis assumes that all other variables, in particular interest rates, remain constant and ignores any impact of forecast sales and purchases.

(Rs in Millions)

0.5% Depreciation / Statement of Profit and Statement of Profit and Loss Appreciation in Indian Loss for the year ended for the year ended Rupees against 31 March 2018 31 March 2017 following foreign currencies: Gain/ (loss) on Gain/ (loss) on Gain/ (loss) on Gain/ (loss) on Appreciation Depreciation Appreciation Depreciation

USD (801.7) 801.7 (781.1) 781.1

EUR 3.7 (3.7) 12.1 (12.1)

GBP 4.5 (4.5) 4.5 (4.5)

AED 0.2 (0.2) 0.3 (0.3)

OMR 0.3 (0.3) 1.2 (1.2)

SGD (0.8) 0.8 (0.5) 0.5

THB 0.3 (0.3) 0.3 (0.3)

CHF 0.3 (0.3) 0.5 (0.5)

QAR 0.1 (0.1) 0.1 (0.1)

AUD 0.4 (0.4) 0.9 (0.9)

Other 14.2 (14.2) 4.7 (4.7)

Note: USD: United States Dollar, GBP: Great British Pound, AED: Arab Emirates Dirhams, OMR: Omani Riyal, THB: Thai Baht, CHF: Swiss Franc, SGD: Singapore Dollar, EUR: Euro, AUD: Australian Dollar, QAR: Qatari Riyal.

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56. An instance of fraud involving payment to a third party has been reported in New York ofce amounting to USD 300,250 (Rs 193.7 million). The matter is under investigation company has initiated action for recovery; however as a matter of prudence full provision has been made towards the same.

57. The Accounting Policies of the Holding Company and the Subsidiary Companies are identical in all respects except for the matters given below:

I) Depreciation:

st a) As against the actual installation date, of Fixed Assets acquired prior to 1 April 2014, HCI has stassumed 1 April of each nancial year as the date of installation for all Fixed Assets during the

relevant nancial years. (Note No 48 c)

b) Assets of Small Value not exceeding Rs 5000 are being fully provided and charged off by AIATSL instead of providing depreciation as laid down in Schedule II of the Companies Act. Since, the value of such items are negligible, the impact of such difference in treatment is not material.

ii) Inventory Valuation: In case of AIXL, AIESL and AIATSL inventory is valued at weighted average basis as against the Group policy of valuing inventory at lower of cost and Net Realizable Value ('NRV').

Since the impact of the above is not material, no effect has been given in the consolidated nancial statements.

58. The following notes on Subsidiary Company's (respective Note No in the Subsidiary Cos Notes to Accounts given in brackets) although not material but Qualification/Emphasis of Matter/Other Matter on the same has been drawn upon the component Auditors are reproduced below:

(I) Emphasis of Matter

(A) AASL

(i) AASL has accounted revenue on own coupons basis. AASL does not have its own reservation/ booking system. Air India's inventory (Ticket stock) is being used under numeric code 098 for sales and refunds of passenger tickets on AASL ights/sectors. Besides, tickets may be issued on their respective inventories for AASL sectors by any IATA/ applicable NCH (non clearing house) airlines before or on 31st March 2018 for travel on after 1st April 2018. Therefore, any collection on this account is retained by respective carriers and accordingly no Advance Pax Receipt is ascertainable and recorded in the books. (Note No: 56)

(ii) In respect of the Inventories:

(a) The inventories mainly include Aircraft spares, consumables and tools of ATR and CRJ aircrafts. The procurement is made by AIL on behalf of the company. Inventory of the company are maintained by AIL. The consumption and closing stock therefore is on the basis of records and details derived from the store records maintained by Air India Ltd. at Kolkata, Delhi and Hyderabad. (Note No: 37 (I))

(b) Goods in transit amounting to Rs.1.85 Million (Rs. 6.61 Million ) include items at High Seas, items lying with Customs and items under inspection based on certication by Air India Ltd. (Note No: 37 (ii))

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(c) Custom Duties, Freight & Incidentals have been allocated on pro-rata basis on year end value of closing Aircraft spares and consumption. Unallocated custom duty paid on aircraft spares is shown under inventory. (Note No: 37 (iii))

(d) As per accounting policy adopted till the year 2016-17, rotables and non rotables spares relating to the aircraft were treated as Inventory and provision for the obsolescence were provided according to the lease period of the aircraft. However, management is of the view that rotables, spares relating to aircraft should be capitalized and should be depreciated over the lease period of the aircraft as the same shall provide reliable and more relevant information. Accordingly, during the year 2017-18 accounting policy has been changed according to the which the rotables spares of the aircraft has been capitalized and depreciation has been provided according to the lease period of the Aircraft. Above has resulted into write back of obsolescence provision amounting to Rs. 124.99 Million, increase in accumulated depreciation amounting to Rs. 64.06 Million and increase in current year depreciation amounting to Rs. 8.30 Million. (Note No: 37 (v))

(B) HCI

The Company has not conducted an assessment as to whether there is any indication that an asset may be impaired as envisaged under Indian Accounting Standards (Ind AS 36) 'Impairment of Assets'. If the assessment, as and when conducted, indicates any such existence, impairment loss will be recognized in the year in which nality is reached. (Note No: 47).

© AIATSL

During the year, Air India transferred revenue amounting to INR 3,227 Lakh (Previous year INR 4129.19 lakhs) and expenditure to the tune of INR 15,357 Lakhs (Previous year INR 22903 lakhs). All such revenue and expenditure transferred by AIL has been accepted by the Company.

The statutory dues such as GST, Service Tax, VAT, TDS and Airport Royalties have not been transferred (Note No 31)

(II) Internal Financial Control Reporting

(A) AASL

(i) Due to the severe scarcity of ATR Commanders, the company has employed expatriate pilots as Commanders on Fixed Term Employment Agreement (FTEA). As per agreement these pilots are initially being provided hotel accommodation since application to DGCA, training, Foreigner Air Temporary Authorization (FATA) license etc. takes time before they are released online for ying duty. Till such time the cost of Hotel is being borne by the Company. After FATA, Expat Pilots are shifted to designated base station where such pilots arrange their own accommodation. Thereafter, they are paid living allowance, and are not eligible for Hotel accommodation. In some of the cases, hotel accommodation has been allowed after FATA. Company is in the process to review all such cases and shall initiate recovery proceedings wherever it is found unreasonable.

(ii) As per contract of employment for Indian pilots, it is being stated that guaranteed 70 hours will be payable to pilots if actual ying is more than 40 hours. Due to unavoidable circumstances ying allowance for guaranteed 70 hours were paid towards pilots despite their actual ying hours are less then 40 hours or even nil. Company is in the process to review all such cases and shall initiate for approval of such appropriate authority for relaxation or recovery proceeding after completion of review process.

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(iii) The company can buy the rotational leave from expatriate pilots subject to the consent of the pilot to meet the operational requirements. The Board of Directors of the company in their 146th meeting held on 21st March 2017 noted and conveyed the encouragement of buying leaves of expatriate pilots. The procedural deviation in some cases regarding approvals of payments is being regularized.

(B) HCI

The company is in the process of :

(a) Streamlining the inventory reporting system in terms of generation of reports towards movement of item-wise store records and conguring of the stores ledger during the year. At the year-end consumption as per the stores records is reconciled with the nancial records and adjustments are duly accounted for. (Note No: 49)

(b) Instituting a maker checker process in order that a system of checks and balances is in place to prevent revenue leakage through Purchase and misuse and to ensure proper control over the Procurement and Consumption Cycles. (Note No: 49)

(c) Strengthening the internal audit process so as to ensure adequate coverage of all the areas and ensure effective internal controls at all units of the Company(Note No: 50)

(d) Reviewing the frequency of verication of cash, cheques, drafts etc., in hand through internal audit/ofcers other than cashiers. (Note No: 50)

(e) Laying down Standard Operating Procedures with regard to timely accounting of all transactions to ensure that proper books of accounts are maintained. (Note No: 50)

59. Standards Issued but not Effective

a) Appendix B to Ind AS 21, Foreign Currency transactions and advance considerations: On March 28, 2018, The Ministry of Corporate Affairs notied the Companies (Indian Accounting Standards) Rules, 2018 containing appendix B to IND AS 21, Foreign currency transactions and advance consideration which claries the date of transaction for the purpose of determining the exchange rates to use on initial recognition of related asset, expense or income, when an entity has received or paid advance consideration in a foreign currency. The amendment will come into force from April 1, 2018. The company has evaluated the effect of this on the nancial statements and the impact is not material.

b) IND AS 115, Revenue from Contract with Customers: On March 28, 2018, The Ministry of Corporate Affairs notied the IND AS 115. The core principal of new standard is that an entity should recognize revenue to depict the transfer of promised goods or services to customer in an amount that reects the consideration to which the entity expects to be entitled in exchange for those goods or services. Further the new standard requires enhanced disclosures about the nature, amount, timing and uncertainty of revenue and cash ows arising from the company's contracts with customers. The effective date of adoption of Ind AS 115 is a nancial period beginning on or after April 1, 2018. The Company is in the process of evaluating the impact of adoption of IND-AS 115 on the Financial Statements.

60. The disclosures in these Consolidated Notes has been compiled from the Notes to Accounts of Subsidiary Co's to the extent data/ information available in the audited Standalone Financial Statements of the respective Subsidiary Cos.

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61. Additional Information as required under Schedule III of the Companies Act 2013 of enterprises consolidated as Subsidiary/Associates/Joint Ventures.

(Rs. in Millions)

Name of Net Assets i.e. Total Share in Profit Share in Other Share in Total Entity Assets minus Total or Loss Comprehensive Income Comprehensive Income in the Liabilities Group As % of Amount As % of Amount As % of Amount As % of Amount Consolidated Consolidated Consolidated Total Net Profit/ Other Compre- Assets Loss Comprehensive hensive Income Income

Air India Ltd 85.99 (248937.1) 92.03 (53377.4) (26.66) (104.3) 92.83 (53481.7) Sub Cos

a) AASL 5.86 (16960.3) 4.55 (2641.7) 1.02 4.0 4.58 (2637.7) b) AIATSL (0.71) 2055.5 (1.22) 710.5 (20.81) (81.4) (1.09) 629.1 c) AIXL 3.16 (9135.4) (4.50) 2607.5 3.30 12.9 (4.55) 2620.4 d) AIESL 6.14 (17782.0) 8.55 (4956.6) 130.93 512.2 7.71 (4.444.4) e) HCI 0.96 (2770.3) 1.03 (598.4) 11.63 45.5 0.96 (552.9)

Non- Controlling Interest in all Sub Cos

JV (Invest- ment as per Equity Method)

a) AI-SATS (1.39) 4031.4 (0.44) 254.85 0.59 2.3 (0.45) 257.15

Total 100.00 (289498.2) 100.00 (58001.3) 100.00 391.2 100.00 (57610.1)

62. Previous Year gures have been retested/re-arranged in line with IND-AS requirements.

Signatures to the Schedules forming part of the Balance Sheet and Statement of Prot and Loss and to the above notes.



Sd/- Sd/-






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consolidated financial statements of air india group · 2019-02-21 · (i) as per para 19 of ind as...

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