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Reliance Communications Ltd.

BSE: 532712 Sector: Telecom
NSE: RCOM ISIN Code: INE330H01018
BSE 00:00 | 24 May 2.12 0.05
(2.42%)
OPEN

2.10

HIGH

2.14

LOW

2.01

NSE 00:00 | 24 May 2.10 0.05
(2.44%)
OPEN

2.05

HIGH

2.15

LOW

2.00

OPEN 2.10
PREVIOUS CLOSE 2.07
VOLUME 4827933
52-Week high 21.65
52-Week low 1.66
P/E
Mkt Cap.(Rs cr) 586
Buy Price 2.12
Buy Qty 36780.00
Sell Price 2.14
Sell Qty 95840.00
OPEN 2.10
CLOSE 2.07
VOLUME 4827933
52-Week high 21.65
52-Week low 1.66
P/E
Mkt Cap.(Rs cr) 586
Buy Price 2.12
Buy Qty 36780.00
Sell Price 2.14
Sell Qty 95840.00

Reliance Communications Ltd. (RCOM) - Auditors Report

Company auditors report

TO THE MEMBERS OF RELIANCE COMMUNICATIONS LIMITED

1. Report on the Standalone Ind AS Financial Statements We have audited theaccompanying standalone Ind AS financial statements of Reliance Communications Limited(‘the Company') which comprise the Balance Sheet as at 31 March 2018 the Statementof Profit and Loss (including other comprehensive income) the Statement of Cash Flows andthe Statement of changes in Equity for the year then ended and a summary of significantaccounting policies and other explanatory information (hereinafter referred to as‘standalone Ind AS financial statements').

2. Management's Responsibility for the Standalone Ind AS Financial Statements TheCompany's Board of Directors is responsible for the matters stated in sub-section 5 ofSection 134 of the Companies Act 2013 (‘the Act') with respect to the preparation ofthese standalone Ind AS financial statements that give a true and fair view of thefinancial position financial performance including other comprehensive income cash flowsand changes in equity of the Company in accordance with the accounting principlesgenerally accepted in India including the Indian Accounting Standards (Ind AS) specifiedunder Section 133 of the Act read with relevant rules issued there under.

This responsibility also includes the maintenance of adequate accounting records inaccordance with the provisions of the Act for safeguarding the assets of the Company andfor preventing and detecting frauds and other irregularities; selection and application ofappropriate accounting policies making judgments and estimates that are reasonable andprudent; and design implementation and maintenance of adequate internal financialcontrols that were operating effectively for ensuring the accuracy and completeness ofthe accounting records relevant to the preparation and presentation of the standalone IndAS financial statements that give a true and fair view and are free from materialmisstatement whether due to fraud or error.

3. Auditor's Responsibility

Our responsibility is to express an opinion on these standalone Ind AS financialstatements based on our audit. We have taken into account the provisions of the Act theaccounting and auditing standards and matters which are required to be included in theaudit report under the provisions of the Act and the Rules made thereunder. We conductedour audit of the standalone Ind AS financial statements in accordance with the Standardson Auditing specified under Section 143(10) of the Act. Those Standards require that wecomply with ethical requirements and plan and perform the audit to obtain reasonableassurance about whether the standalone Ind AS financial statements are free from materialmisstatement. An audit involves performing procedures to obtain audit evidence about theamounts and the disclosures in the standalone Ind AS financial statements. The proceduresselected depend on the auditor's judgement including the assessment of the risks ofmaterial misstatement of the standalone Ind AS financial statements whether due to fraudor error. In making those risk assessments the auditor considers internal financialcontrol relevant to the Company's preparation of the standalone Ind AS financialstatements that give a true and fair view in order to design audit procedures that areappropriate in the circumstances.

An audit also includes evaluating the appropriateness of the accounting policies usedand the reasonableness of the accounting estimates made by the Company's Directors aswell as evaluating the overall presentation of the standalone Ind AS financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate toprovide a basis for our audit opinion on the standalone Ind AS financial statements.

4. Basis for Qualified Opinion

We draw attention to note 2.50 of the standalone Ind AS financial statements regardingnon provision of interest on borrowings amounting to ` 3055 crore for the year ended 31March 2018 for the reason provided by the management therein. Had such interest beenprovided then the reported loss for the year ended 31st March 2018 would have been `12925 crore and networth of the Company would have been ` 6261 crore.

5. Qualified Opinion

In our opinion and to the best of our information and according to the explanationsgiven to us except for the matters described in Basis for Qualified Opinion paragraphabove the aforesaid standalone Ind AS financial statements give the information requiredby the Act in the manner so required and give a true and fair view in conformity with theaccounting principles generally accepted in India including the Ind AS of the state ofaffairs (financial position) of the Company as at 31 March 2018 and it's loss (financialperformance including other comprehensive income) its cash flows and the changes inequity for the year ended on that date.

6. Emphasis of Matters a. We draw your attention to Note 2.34.1 (vi) of the standaloneInd AS financial statements regarding the Scheme of Arrangement (‘the Scheme')sanctioned on 03 July 2009 by the Hon'ble High Court of Judicature at Mumbai. The Companyis permitted to adjust additional depreciation and amortisation expenses and/or losseswhich have been or are required to be debited to the Statement of profit and loss by acorresponding withdrawal or credit from/to General Reserve as determined by the Board ofDirectors. During the year ended the company has withdrawn ` 280 crore (previous year `1205 crore) to offset additional depreciation/ amortisation on account of fair valuationof certain assets which may be considered to override the relevant provisions of ScheduleII of the Act and Ind AS 8 ‘Accounting Policies Changes in Accounting Estimates andErrors'. Our opinion is not qualified in respect of this matter b. We further drawattention to Note 2.41 of the standalone Ind AS financial statements regarding the Schemeof Arrangements (‘the Scheme') sanctioned by the Hon'ble High Court of Judicature atMumbai and Gujarat. These schemes permit the Company to adjust expenses and/or lossesidentified by the Board of Directors which are required to be debited to the Statement ofprofit and loss by a corresponding withdrawal from General Reserve and Reserve forBusiness Restructuring which is considered to be an override to the relevant provisionsof Ind AS 8. The Company has identified net foreign exchange gain of ` 25 crore (previousyear net foreign exchange ` 8 crore) amortisation of Foreign Currency Monetary ItemsTranslation Account (FCMITDA) ` 252 crore (previous year ` 238 crore) depreciation onexchange losses capitalised of ` 221 crore (previous year ` 433 crore) and impairmentcharge arising on account of asset held for sale and dimunition in the value ofinvestments ` 5948 crore (previous year ` Nil crore) as in the opinion of the Boardsuch exchange variations are considered to be of an exceptional nature and accordinglythese expenses have been met by corresponding withdrawal from General Reserve and Reservefor Business Restructuring. Our opinion is not qualified in respect of this matter Had theeffect of paragraphs (a) and (b) above not been met from General Reserve and Reserve forBusiness Restructuring the Company would have reflected a loss after tax for the year of` 16546 crore (previous year ` 3680 crore). c. We draw attention to Note 2.50 of theStandalone Ind AS financial statement regarding the Definitive Binding Agreement formonetization of assets of the company and its subsidiaries and National Company LawAppellate Tribunal (NCLAT) order dated 30 May 2018 staying NCLT order dated 15 May 2018admitting the Company under Insolvency and Bankruptcy Code (IBC) 2016. The Company isconfident that suitable resolution plan would be formulated by lenders in view of orderadmitting the Company under IBC proceedings is vacated/stayed accordingly financialstatements of the Company have been prepared on going concern basis.

Our opinion is not modified in respect of above matters.

7. Report on Other Legal and Regulatory Requirements

1. As required by the Companies (Auditor's Report) Order 2016 (‘the Order')issued by the Central Government of India in terms of sub-section (11) of Section 143 ofthe Act we enclose in ‘Annexure A' a statement on the matters specified inparagraphs 3 and 4 of the Order to the extent applicable.

2. As required by sub-section 3 of Section 143 of the Act we report that:

(a) we have sought and obtained all the information and explanations which to the bestof our knowledge and belief were necessary for the purposes of our audit;

(b) except for the possible effects of the matters described in the Basis of Qualifiedopinion paragraph above in our opinion proper books of account as required by law havebeen kept by the Company so far as it appears from our examination of those books;

(c) the Balance Sheet the Statement of Profit and Loss the Statement of Cash Flowsand Statement of Changes in Equity dealt with by this Report are in agreement with thebooks of account;

(d) in our opinion the aforesaid standalone Ind AS financial statements comply withthe Indian Accounting Standards prescribed under Section 133 of the Act read with relevantrules issued thereunder except requirement of Ind AS 23 on Borrowing Cost with regard tomatters described in the Basis of Qualified Opinion paragraph above and read with Emphasisof Matter paragraph above regarding exercise of option available as per the Court Orderwhich overrides the requirement of Ind AS 8;

(e) The going concern matter described in paragraph 6 (c) under Emphasis of Matterparagraph above in our opinion may have an adverse effect on the functioning of theCompany;

(f) on the basis of the written representations received from the directors as on 31March 2018 taken on record by the Board of Directors none of the directors isdisqualified as on 31 March 2018 from being appointed as a director in terms of subsection2 of Section 164 of the Act;

(g) With respect to the adequacy of the internal financial controls over financialreporting of the Company and the operating effectiveness of such controls refer to ourseparate report in "Annexure B"; and

(h) with respect to the other matters to be included in the Auditor's Report inaccordance with Rule 11 of the Companies (Audit and Auditors) Rules 2014 in our opinionand to the best of our information and according to the explanations given to us:

i. The Company has disclosed the impact of pending litigations on its financialposition in its standalone Ind AS financial statements – Refer Note 2.37 to thestandalone Ind AS financial statements;

ii. The Company did not have any long-term contracts including derivative contracts forwhich there were any material foreseeable losses; and

iii. There has been no delay in transferring amounts required to be transferred tothe Investor Education and Protection Fund by the Company.

For Pathak H.D. & Associates

Chartered Accountants

Firm's Registration No: 107783W

Parimal Kumar Jha

Partner

Membership No: 124262

Mumbai

30 May 2018

‘Annexure A' to the Independent Auditor's Report - 31 March 2018

With reference to the Annexure A referred to in the Independent Auditors' Report to theMembers of Reliance Communications Limited (‘the Company') on the standalone Ind ASfinancial statements for the year ended 31 March 2018 we report the following: (i) (a)The Company has maintained proper records showing full particulars including quantitativedetails and situation of fixed assets.

(b) We are informed that the Company physically verifies its assets over a three yearperiod. In our opinion this periodicity of physical verification is reasonable havingregard to the size of the Company and the nature of its assets. In accordance with thispolicy the Company has physically verified certain fixed assets during the year and nomaterial discrepancies were identified on such physical verification. (c) According to theinformation and explanations given to us the title deeds of immovable properties asdisclosed in Note 2.01 to the standalone Ind AS financial statements are held in the nameof the Company except for the following where the Company is in the process oftransferring the title deeds in it's name as these were acquired through various schemesof arrangement entered in the earlier years:

Particulars Freehold land Building
Gross block as at 31 March 2018 ` ( in crores) 3 4
Net block as at 31 March 2018 ` ( in crores) 3 3

(ii) The inventory has been physically verified by the management during the year. Inour opinion the frequency of such verification is reasonable. The discrepancies noticedon verification between the physical stocks and the book records were not material andhave been dealt with in books of account.

(iii) The Company has not granted any loans secured or unsecured to companies firmsLimited liability Partnerships or other parties covered in the register maintained underSection 189 of the Act. Accordingly paragraph (iii) of the Order is not applicable to theCompany.

(iv) The Company has not granted any loans or provided any guarantees or security tothe parties covered under Section 185 of the Act. The Company has complied with theapplicable provisions of Section 186 of the Act. (v) In our opinion and according to theinformation and explanations given to us the Company has not accepted any deposits fromthe public in accordance with relevant provisions of Sections 73 to 76 or any otherrelevant provisions of the Act and the rules framed there under. Accordingly paragraph(v) of the Order is not applicable to the Company.

(vi) We have broadly reviewed the books of account maintained by the Company pursuantto the rules prescribed by the Central Government for maintenance of cost records undersub-section 1 of Section 148 of the Act in respect of telecommunication activities andare of the opinion that prima facie the prescribed accounts and records have been madeand maintained. However we have not made a detailed examination of the records. (vii) (a)According to the information and explanations given to us and on the basis of ourexamination of the records of the Company amounts deducted/ accrued in the books ofaccount in respect of undisputed statutory dues including provident fund income taxservice tax goods and services tax duty of customs sales tax value added tax (VAT)entry tax employees' state insurance cess and other material statutory dues have beengenerally regularly deposited during the year by the Company with the appropriateauthorities though there has been delay in certain cases. As explained to us the Companydid not have any dues on account of duty of excise. According to the information andexplanations given to us undisputed amounts payable in respect of provident fund incometax service tax goods and services tax duty of customs sales tax value added taxentry tax employees' state insurance cess and other material statutory dues which werein arrears as at 31 March 2018 for a period of more than six months from the date theybecame payable are as under:

Name of Statute Nature of Dues Amount (` In Crore) Period to which the amount relates Due Date Date of Payment
Goods and Service Tax Act 2017 Goods and Service Tax Payable 78.59 Jul-17 20-Aug-17 Unpaid
Goods and Service Tax Act 2017 Goods and Service Tax Payable 62.41 Aug-17 20-Sep-17 Unpaid
Maharastra Value Added Tax Act 2002 Value Added Tax Payable 0.36 FY 2017-18 Various Dates Unpaid
Delhi Value Added Tax Act 2004 Value Added Tax Payable 0.04 FY 2017-18 Various Dates Unpaid
Karnataka Value Added Tax Act 2003 Value Added Tax Payable 0.05 FY 2017-18 Various Dates Unpaid
Orissa Value Added Tax Act 2004 Value Added Tax Payable 0.00 FY 2017-18 Various Dates Unpaid
West Bengal 2003 Added Tax Act Value Added Tax Payable 0.01 FY 2017-18 Various Dates Unpaid
Maharastra Value Added Contract Tax 2002 Tax Act Works Payable 0.01 FY 2017-18 Various Dates Unpaid
Rajasthan Value Added Contract Tax 2003 Tax Act Works Payable 0.03 FY 2017-18 Various Dates Unpaid
Income Tax Act 1961 Tax Deducted at source 18.88 Jul-17 7-Aug-17 Unpaid
Income Tax Act 1961 Tax Deducted at source 0.03 Aug-17 7-Sep-17 Unpaid

(b) According to the information and explanations given to us there are no dues ofcess which have not been deposited on account of any dispute. The dues of income tax dutyof customs service tax sales tax value added tax and entry tax as disclosed below havenot been deposited by the Company on account of disputes:

Name of Statue Nature of Dues Amount* Period Forum
(` In Crore)
Central Sales Tax Bihar Central Sales Tax 0.04 2005-06 Appellate Tribunal
0.43 2011-12 Asst. Commissioner of Commercial Taxes
Central Sales Tax Chattisgarh Central Sales Tax 0.00 2011-12 Dy. Commissioner (Appeals)
Central Sales Tax Madhya Pradesh Central Sales Tax 0.03 2011-12 to 2013-14 Dy. Commissioner (Appeals)
Central Sales Tax Maharashtra Central Sales Tax 0.27 2011-12 Dy. Commissioner of Sales Tax
0.35 2013-14 Dy. Commissioner of Sales Tax
Central Sales Tax Orissa Central Sales Tax 0.00 2009-10 Addl. Commisoner (Appeals)
0.02 Oct '06 to March '09 Sales Tax Appellate Tribunal
Central Sales Tax Uttar Pradesh Central Sales Tax 0.07 2006-07 High Court
0.08 2010-11 Additional Commissioner (Appeals)
0.50 2013-14 Dy. Commisioner of Commercial Taxes
1.25 2014-15 Dy. Commisioner of Commercial Taxes
Central Sales Tax Uttarakhand Central Sales Tax 0.12 2009-10 to 2010-11 Dy. Commissioner of Commercial Taxes
0.14 2012-13 Jt. Commisioner of Commercial Taxes (Appeals)
Central Sales Tax West Bengal Central Sales Tax 0.34 2007-08 Tax Revision Board
0.36 2014-15 Jt.Commisioner Commercial Taxes
Central Sales Tax Punjab Central Sales Tax 0.05 2010-11 Dy. Excise and Taxation Commissioner (Appeals)
Entry Tax Bihar Entry Tax 0.38 2007-08 to 2008-09 Commercial Tax Tribunal
0.25 2011-12 Asst. Commissioner of Commercial Taxes
Entry Tax Chattisgarh Entry Tax 0.63 2006-07 to 2007-08 Dy. Commissioner (Appeals)
0.25 2010-11 to 2011-12 Dy. Commissioner (Appeals)
Entry Tax Himachal Pradesh Entry Tax 1.01 2011-11 to 2013-14 High Court
Entry Tax Madhya Pradesh Entry Tax 0.48 2002-03 to 2003-04 Asst. Commissioner of Commercial Taxes
2008-09 & 2010-11
0.21 2011-12 Dy. Commissioner (Appeals)
Entry Tax Orissa Entry Tax 0.08 2009-10 Addl. Commisoner (Appeals)
0.05 Oct 06-March 09 Sales Tax Appellate Tribunal
Entry Tax Uttar Pradesh Entry Tax 0.13 2003-04 Commercial Tax Tribunal
0.02 2013-14 Dy. Commisioner of Commercial Taxes
0.02 2014-15 Dy. Commisioner of Commercial Taxes
Entry Tax West Bengal Entry Tax 0.17 2014-15 Jt.Commisioner Commercial Taxes
Entry Tax Rajasthan Entry Tax 1.70 2013-14 to 2014-15 Appellate Authority
14.73 2005-06 2007-08 to 2012-13 Supreme Court
Entry Tax Jammu & Kashmir Entry Tax 9.69 2008-09 to 2011-12 High Court
Entry Tax Punjab Entry Tax 0.01 Oct 2012 to High Court
Dec 2012
VAT Bihar VAT 0.24 2005-06 Commercial Tax Tribunal
8.33 2011-12 High Court
VAT Haryana VAT 1.15 2011-12 Commercial Tax Tribunal
VAT Kerala VAT 0.01 2006-07 Deputy Commisoner (Appeals)
2.79 2010-11 High Court
0.02 2011-12 Deputy Commisoner (Appeals)
0.32 2012-13 High Court
2.80 2013-14 High Court
2.15 2014-15 High Court
VAT Punjab VAT 0.05 2010-11 Deputy Commisoner (Appeals)
VAT Uttarakhand VAT 0.78 2009-10 to 2010-11 Dy. Commissoner of Commercial Taxes
0.03 2007-08 Jt. Commisioner (Appeals)
0.41 2012-13 Jt. Commissioner of Commercial Taxes (Appeals)
VAT West Bengal VAT 4.17 2005- 062007-08 to 2008-09 Tax Revision Board
0.03 2012-13 Jt. Commisioner of Commercial Taxes (Appeals)
0.02 2014-15 Jt. Commisioner Commercial Taxes
VAT/Sales Tax Uttar Pradesh VAT/Sales Tax 0.24 2003-04 UP Trade Tax Tribunal
0.93 2004-05 High Court
0.52 2005-06 Jan 08 to March 08 Dy. Commissioner of Commercial Taxes
0.20 2010-11 Addl. Commisoner (Appeals)
2.38 2013-14 Dy. Commissioner of Commercial Taxes
1.83 2014-15 Dy. Commisioner of Commercial Taxes
VAT Chattisgarh VAT 0.02 2011-12 Dy. Commisooner (Appeals)
Finance Act 1994 CENVAT Credit 2.60 01.04.2004 to 31.03.2015 Commisoner CGST & Central Excise
3.33 01.4.2010 to 31.03.2014 Commisoner CGST & Central Excise
1.32 2014-15 CESTAT
Income Tax Act 1961 Income Tax 2.76 2009-10 Commissioner of Income Tax (Appeals)
Income Tax Act 1961 Income Tax 2.52 2010-11 Commissioner of Income Tax (Appeals)
Income Tax Act 1961 Income Tax 1.34 2011-12 Joint Commissioner of Income Tax

*Net of amounts paid under protest.

(viii) (a) The Company has defaulted in repayment of following dues to the financialinstitution banks and debentures which were paid on or before the Balance Sheet date:

Name of Lender Amount Amount Period Period
(` in crore) (` in crore) (Maximum days) (Maximum days)
Borrowings Interest Borrowings Interest
Loan from Banks
Axis Bank 100 5 87 80
Bank of Baroda - 24 - 87
Bank of India - 16 - 87
Bank of Maharashtra 27 - 85 -
Canara Bank 59 8 25 25
Central Bank of India - 6 - 87
Corporation Bank - 5 - 87
Credit Agricole Corporate & Investment Bank - 1 - 14
DBS Bank 112 4 60 7
Deutsche Bank 180 4 82 7
HDFC Bank 56 18 -
China Development Bank 768 7 305 197
Industrial and Commercial Bank of China 130 7 305 197
Export Import Bank of China 264 7 305 197
IDBI Bank - 18 - 87
Indian Overeseas Bank - 3 - 87
IndusInd Bank 1500 26 59 61
Oriental Bank of Commerce - 4 - 87
Punjab National Bank 70 - 169 -
Standard Chartered Bank 293 3 111 56
State Bank of India - 40 - 87
Syndicate Bank - 9 - 87
UCO Bank - 17 - 87
Union Bank of India - 5 - 3
United Bank of India 13 4 147 87
Yes Bank 71 6 92 112
Debenture
Life Insurance Corporation of India 375 72 62 40
Other Loans
India Infrastructure Finance Corporation Limited - 2 - 88
Reliance Cleangen Limited 9 21
Total 4018 312

(b) The Company has defaulted in repayment of following dues to the financialsinstitution banks and debenture holders during the year which were not paid as atBalance Sheet date:

Name of Lender Amount Amount Period Period
(` in crore) (` in crore) (Maximum days) (Maximum days)
Borrowings Interest Borrowings Interest
Loan from Banks
Ahli United Bank B.S.C. 98 - 111 -
Bank of Baroda 802 11 389 366
Bank of India 280 9 366 366
Bank of Maharashtra 473 - 318 -
Canara Bank 237 - 275 -
Central Bank of India 112 3 366 366
Corporation Bank 266 8 388 366
Credit Agricole Corporate & Investment Bank 192 - 377 -
DBS Bank 300 - 185 -
Dena Bank 250 - 53 -
Deutsche Bank 391 1 111 284
China Development Bank 2185 128 398 398
Industrial and Commercial Bank of China 551 33 398 398
Export Import Bank of China 814 47 398 398
IDBI Bank 331 9 370 366
Indian Overeseas Bank 52 1 366 366
Oriental Bank of Commerce 91 2 366 366
Punjab National Bank 593 - 367 -
Standard Chartered Bank 1072 - 355 -
State Bank of India 1258 21 366 366
Syndicate Bank 423 5 389 366
UCO Bank 296 9 366 366
Union Bank of India 599 3 366 366
United Bank of India 341 2 366 366
Debenture
Life Insurance Corporation of India 375 - 53 -
Other Loans
Industrial Finance Corporation of India 125 4 382 382
Limited
India Infrastructure Finance 4 4 183 397
Corporation Limited
Reliance Capital Limited - 3 - 366
Reliance Unicorn Enterprise Private Limited - 53 - 366
Reliance Cleangen Limited - 14 - 366
Kunjbihari Developers Private Limited - 1 - 366
Total 12511 371

)c) During the year there was a delay of 11days in case of installment payment of ` 22crore to Department of Telecommunications. Further as at March 31 2018 ` 281 crore wasoutstanding delayed by 10 days which was subsequently paid.

(ix) During the year the Company has not raised any money by way of initial publicoffer or further public offer (including debt instruments). The term loans prima faciehave been utilized for the purpose for which these were raised.

(x) According to the information and explanations given to us no material fraud by theCompany or on the Company by its officers or employees has been noticed or reported duringthe course of our audit.

(xi) According to the information and explanations given to us and based on ourexamination of the records the Company has paid/provided total managerial remunerationamounting to ` 2 crore to the managerial person of the company for which the company is inthe process of getting requisite approval of shareholders in ensuing annual generalmeeting.

(xii) In our opinion and according to the information and explanations given to us theCompany is not a nidhi company. Accordingly paragraph (xii) of the Order is notapplicable to the Company.

(xiii) According to the information and explanations given to us and based on ourexamination of the records of the Company transactions with the related parties are incompliance with Sections 177 and 188 of the Act where applicable. The details of suchrelated party transactions have been disclosed in the standalone Ind AS financialstatements as required by the applicable accounting standards.

(xiv) According to the information and explanations given to us and based on ourexamination of the records the Company has not made any preferential allotment or privateplacement of shares or fully or partly convertible debentures during the year however thecompany has issued equity shares to Sistema Shyam Teleservices Limited in terms of Schemeof Demerger sanctioned by the Hon'ble High Court of Judicature of Bombay and Jaipur.

(xv) According to the information and explanations given to us and based on ourexamination of the records the Company has not entered into non-cash transactions withdirectors or persons connected with him. Accordingly paragraph (xv) of the Order is notapplicable to the Company.

(xvi) The Company is not required to be registered under Section 45-IA of the ReserveBank of India Act 1934. Accordingly the provisions of Clause (xvi) of the Order are notapplicable to the Company.

For Pathak H.D. & Associates

Chartered Accountants

Firm's Registration No: 107783W

Parimal Kumar Jha

Partner

Membership No: 124262

Mumbai

30 May 2018

‘Annexure B' to the Independent Auditor's Report - 31 March 2018

Report on the Internal Financial Controls under Clause (i) of Subsection 3 of Section143 of the Companies Act 2013 ("the Act").

We have audited the internal financial controls over financial reporting of RelianceCommunications Limited ("the Company") as of 31 March 2018 in conjunction withour audit of the standalone Ind AS financial statements of the Company for the year endedon that date.

Management's Responsibility for Internal Financial Controls The Company's management isresponsible for establishing and maintaining internal financial controls based on theinternal control over financial reporting criteria established by the Company consideringthe essential components of internal control stated in the Guidance Note on Audit ofInternal Financial Controls Over Financial Reporting issued by the Institute of CharteredAccountants of India (ICAI). These responsibilities include the design implementation andmaintenance of adequate internal financial controls that were operating effectively forensuring the orderly and efficient conduct of its business including adherence tocompany's policies the safeguarding of its assets the prevention and detection of fraudsand errors the accuracy and completeness of the accounting records and the timelypreparation of reliable financial information as required under the Act.

Auditor's Responsibility

Our responsibility is to express an opinion on the Company's internal financialcontrols over financial reporting based on our audit. We conducted our audit in accordancewith 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 tobe prescribed under Section 143 (10) of the Act to the extent applicable to an audit ofinternal financial controls both applicable to an audit of Internal Financial Controlsand both issued by the ICAI. Those Standards and the Guidance Note require that we complywith ethical requirements and plan and perform the audit to obtain reasonable assuranceabout whether adequate internal financial controls over financial reporting wasestablished and maintained and if such controls operated effectively in all materialrespects.

Our audit involves performing procedures to obtain audit evidence about the adequacy ofthe internal financial controls system over financial reporting and their operatingeffectiveness. Our audit of internal financial controls over financial reporting includedobtaining an understanding of internal financial controls over financial reportingassessing the risk that a material weakness exists and testing and evaluating the designand operating effectiveness of internal control based on the assessed risk. The proceduresselected depend on the auditor's judgement including the assessment of the risks ofmaterial misstatement of the standalone Ind AS financial statements whether due to fraudor error.

We believe that the audit evidence we have obtained is sufficient and appropriate toprovide a basis for our audit opinion on the Company's internal financial controls systemover financial reporting.

A company's internal financial control over financial reporting is a process designedto provide reasonable assurance regarding the reliability of financial reporting and thepreparation of financial statements for external purposes in accordance with generallyaccepted accounting principles. A company's internal financial control over financialreporting includes those policies and procedures that (1) pertain to the maintenance ofrecords that in reasonable detail accurately and fairly reflect the transactions anddispositions of the assets of the company; (2) provide reasonable assurance thattransactions are recorded as necessary to permit preparation of financial statements inaccordance with generally accepted accounting principles and that receipts andexpenditures of the company are being made only in accordance with authorisations ofmanagement and directors of the company; and (3) provide reasonable assurance regardingprevention or timely detection of unauthorised acquisition use or disposition of thecompany's assets that could have a material effect on the financial statements.

Inherent Limitations of Internal Financial Controls Over Financial Reporting Because ofthe inherent limitations of internal financial controls over financial reportingincluding the possibility of collusion or improper management override of controlsmaterial misstatements due to error or fraud may occur and not be detected. Alsoprojections of any evaluation of the internal financial controls over financial reportingto future periods are subject to the risk that the internal financial control overfinancial reporting may become inadequate because of changes in conditions or that thedegree of compliance with the policies or procedures may deteriorate.

Opinion

In our opinion the Company has in all material respects an adequate internalfinancial controls system over financial reporting and such internal financial controlsover financial reporting were operating effectively as at 31 March 2018 based on theinternal control over financial reporting criteria established by the Company consideringthe essential components of internal control stated in the Guidance Note on Audit ofInternal Financial Controls Over Financial Reporting issued by the ICAI.

For Pathak H.D. & Associates

Chartered Accountants

Firm's Registration No: 107783W

Parimal Kumar Jha

Partner

Membership No: 124262

Mumbai

30 May 2018