Den Networks Ltd Auditors Report.

TO THE MEMBERS OF DEN NETWORKS LIMITED

Report on the Audit of Consolidated Financial Statements

Opinion

We have audited the accompanying consolidated financial statements of DEN NETWORKS Limited (hereinafter referred to as the ‘Holding Company") and its subsidiaries (Holding Company and its subsidiaries together referred to as "the Group"), and its associates, which comprise the consolidated Balance Sheet as at 31st March, 2019, and the consolidated statement of Profit and Loss, the consolidated statement of changes in equity and the consolidated cash flows Statement for the year then ended, and notes to the consolidated financial statements, including a summary of significant accounting policies (hereinafter referred to as "the consolidated financial statements") In our opinion and to the best of our information and according to the explanations given to us, the aforesaid consolidated financial statements give the information required by the Act in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India, of the consolidated state of affairs of the Company as at 31st March, 2019, of consolidated loss, consolidated changes in equity and its consolidated cash flows for the year then ended.

Basis for Opinion

We conducted our audit in accordance with the Standards on Auditing (SAs) specified under section 143(10) of the Companies act, 2013 ("the Act"). Our responsibilities under those Standards are further described in the Auditors Responsibilities for the Audit of the Consolidated Financial Statements section of our report. We are independent of the Group in accordance with the Code of Ethics issued by ICAI together with the ethical requirements that are relevant to our audit of the financial statements under the provision of the act and rules thereunder, and we have fulfilled our other ethical responsibilities in accordance with the provisions of the Act. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion on the consolidated financial statements.

Key Audit Matters

Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the consolidated financial statements for the year ended 31st March, 2019. These matters were addressed in the context of our audit of the consolidated financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters

Key Audit Matters How our audit addressed the key audit matter
(i) Impairment of Property, Plant & Equipment
As at 31st March, 2019 value of property, plant and equipment is Rs.7,588.83 million. Managements assessment of the valuation of property, plant and equipment and usability is significant to our audit because this process is complex and requires significant management judgment. Accordingly, the management identified impairment indications and managements assessment results a one-time impairment loss of Rs. 1,040.80 million, which has been accounted as exceptional item (Refer note no. 27). We carried out procedures to understand managements process for identifying impairment triggers and considered managements assessment of impairment in the above mentioned areas. Our audit procedures included the following:
• Assessing internal controls designed for identification of impairment indicators.
Accordingly, it has been determined as a key audit matter. • Evaluating the appropriateness of the Groups judgment regarding identification of assets which may be impaired.
• Considered the completeness and accuracy of the disclosures, which are included in notes 27 of the consolidated financial statements.
• Read the Independent Chartered Accountants firms report on Companys interim financial statements.
• Performed inquiry procedures as per SA 600 ‘Using the work of another auditor on the above matters
(ii) Goodwill
The Groups balance sheet includes Rs1623.80 million of goodwill, representing 4% of total Group assets. Goodwill is tested annually for impairment using discounted cash-flow models of each CGUs recoverable value compared to the carrying value of the assets. A deficit would result in impairment. Our audit procedures included the following:
• Assessed the appropriateness of the Groups methodology applied in determining the CGUs to which goodwill is allocated.
The inputs to the impairment testing model which have the most significant impact on CGU recoverable value include: • Assessed the assumptions around the key drivers of the recoverable value including average revenue per user, expected growth rates and used.
• Projected revenue growth, average revenue per user, operating margins; and • Discussed potential changes in key drivers as compared to previous year / actual performance with management in order to evaluate whether the inputs and assumptions used in the cash flow forecasts were reasonable.
• Discount rates used. • Tested the arithmetical accuracy of the model.
The annual impairment testing is considered a significant accounting judgment and estimate (Note 36) and a key audit matter because the assumptions on which the tests are based are highly judgmental and are affected by future market and economic conditions which are inherently uncertain. • Considered the completeness and accuracy of the disclosures, which are included in notes 36 of the consolidated financial statements.
(iii) Carrying value of trade receivables and advances from customers/parties
As mentioned in note no. 10 to the consolidated financial statements, trade receivable were aggregating to Rs. 5,741.87 million as on 31st March, 2019. Our audit procedures included the following:
The collectability of the trade receivables and the valuation of allowance for impairment of trade receivables require a significant management judgment. Specific factors management considers including the age of the balance, existence of disputes, recent historical payment patterns, new tariff order by TRAI, increase in competition on account of rates parity in the market and any other available information concerning the creditworthiness of counterparties. Management uses this information to determine whether a provision for impairment is required either for a specific transaction or for a customers balance overall. • We selected a sample of the larger trade receivable balances where a provision for impairment of trade receivables and advances was recognized.
• We assessed the ageing of trade receivables and advances, the customers historical payment patterns.
• We also obtained corroborative evidence of any disputes between the parties involved, attempts by management to recover the amounts outstanding and on the credit status of significant counterparties wherever available.
Accordingly, the management identified such factors and its assessment results into impairment of trade receivables and advances of Rs. 1,229.54 million, which has been accounted as exceptional item. (Refer note no. 27) • In assessing the appropriateness of the overall provision for impairment we considered the managements application of policy for recognizing provisions.
Accordingly, it has been determined as a key audit matter. • Further in addition to the above process, a forward-looking expected loss impairment model as prescribed in IND AS 109 "Financial Instruments" was also applied by the Company. This involves judgment as the expected credit losses must reflect information about past events, current conditions and forecasts of future conditions.
• W the assessed the provisioning policy, which included assessing whether the calculation was in accordance with expected credit loss impairment model as prescribed in IND AS 109 and comparing the provisioning rates against historical collection data.
• Read the Independent Chartered Accountants firms report on Companys interim financial statements..
• Performed inquiry procedures as per SA 600 ‘Using the work of another auditor on the above matters
• Considered the completeness and accuracy of the disclosures
(iv) Litigations & Contingent liabilities
The Group is subject to number of significant litigations. Major risks identified by the Holding Company in that area relate to VAT liability on account of transfer of setup boxes, entertainment tax, and license fees liability from DOT on account of dispute to consider non-business for AGR calculation and dispute in duty assessment with custom department. Our audit procedures included the following
• Assessing the procedures implemented by the holding Company to identify and gather the risks it is exposed to.
• Discussion with the management on the development in theses litigations during the year ended 31st March, 2019.
The amounts of litigations may be significant and estimates of the amounts of provisions or contingent liabilities are subject to significant management judgment. (Refer note no. 29 and 50) • Obtaining an understanding of the risk analysis performed by the holding Company, with the relating supporting documentation and studying written statements from internal/- external legal experts, when applicable.
Due to complexity involved in these litigation matters, managements judgment regarding recognition and measurement of provisions for these legal proceedings is inherently uncertain and might change over time as the outcomes of the legal cases are determined and it has been considered as a key audit matter. Accordingly, the management identified such factors and its assessment results into provision of Rs. 107.51 million, which has been accounted as exceptional item. (Refer note no. 27). • Opinion from the holding Companys legal counsel (internal/-external) and studying the same.
• Verification that accounting and /or disclosure as the case may be in the consolidated financial statements is in accordance with the assessment of legal counsel/management.
• Obtaining representation letter from the management on the assessment of those matters as per SA 580 (revised) - written representations.

Other Information

The Holding Companys Board of Directors is responsible for the other information. The other information comprises the management discussion & analysis and directors report included in the annual report but does not include the financial statements and our auditors report thereon.

Our opinion on the financial statements does not cover the other information and we do not express any form of assurance conclusion thereon.

In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard.

Responsibilities of Management and Those Charged with Governance for the Consolidated Financial Statements

The Holding Companys Board of Directors is responsible for the preparation and presentation of these consolidated financial statements in term of the requirements of the Actthat give a true and fair view of the consolidated financial position, consolidated financial performance and consolidated cash flows of the Group including its Associates in accordance with the accounting principles generally accepted in India, including the Accounting Standards specified under section 133 of the Act. The respective Board of Directors of the companies included in the Group and of its associates are responsible for maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding the assets of the Group and for preventing and detecting frauds and other irregularities; selection and application of appropriate accounting policies; making judgments and estimates that are reasonable and prudent; and the design, implementation and maintenance of adequate internal financial controls, that were operating effectively for ensuring accuracy and completeness of the accounting records, relevant to the preparation and presentation of the financial statements that give a true and fair view and are free from material misstatement, whether due to fraud or error, which have been used for the purpose of preparation of the consolidated financial statements by the Directors of the Holding Company, as aforesaid. In preparing the consolidated financial statements, the respective Board of Directors of the companies included in the Group and of its associates are responsible for assessing the ability of the Group and of its associates to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Group or to cease operations, or has no realistic alternative but to do so.

The respective Board of Directors of the companies included in the Group and of its associates is responsible for overseeing the financial reporting process of the Group and of its associates.

Auditors Responsibilities for the Audit of the Consolidated Financial Statements

Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditors report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with SAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these consolidated financial statements.

As part of an audit in accordance with SAs, we exercise professional judgment and maintain professional skepticism throughout the audit. We also:

•Identify and assess the risks of material misstatement consolidated financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.

•Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances. Under section 143(3) (i) of the Companies Act, 2013, we are also responsible for expressing our opinion on whether the Company has adequate internal financial controls system in place and the operating effectiveness of such controls.

•Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.

•Conclude on the appropriateness of managements use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the ability of the Group and its associates to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditors report to the related disclosures in the consolidated financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditors report. However, future events or conditions may cause the Group and its associates to cease to continue as a going concern.

•Evaluate the overall presentation, structure and content of the consolidated financial statements, including the disclosures, and whether the consolidated financial statements represent the underlying transactions and events in a manner that achieves fair presentation.

•Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group and its associates of which we are the independent auditors and whose financial information we have audited, to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision and performance of the audit of the financial statements of such entities included in the consolidated financial statements of which we are the independent auditors. For the other entities included in the consolidated financial statements, which have been audited by other auditors, such other auditors remain responsible for the direction, supervision and performance of the audits carried out by them. We remain solely responsible for our audit opinion.

We communicate with those charged with governance of the Holding Company and such other entities included in the consolidated financial statements of which we are the independent of the auditors regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant defficiencies in internal control that we identify during our audit We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.

From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the consolidated financial statements for the year ended 31st March, 2019 and are therefore the key audit matters. We describe these matters in our auditors report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication

Other Matters

(a) We did not audit the financial statements/financial information of 101 subsidiaries, whose financial statements/financial information reflect total assets of Rs. 6,270.57 million as at 31st March, 2019, total revenues of Rs. 4,567.71 million and net cash outflows amounting to Rs. (16.30) million for the year ended on that date, as considered in the consolidated financial statements and financial statements of 3 associates, which reflects the Groups share of net (loss) including total other comprehensive income of Rs. (42.53) million for the year ended 31st March, 2019 as considered in the consolidated financial statements, These financial statements/financial information have not been audited by us. These financial statements/financial information have been audited by other auditors whose reports have been furnished to us by the Management and our opinion on the consolidated financial statements, in so far as it relates to the amounts and disclosures included in respect of these subsidiaries and associates, and our report in terms of subsection (3) of Section 143 of the Act, in so far as it relates to the aforesaid subsidiaries and associates is based solely on the reports of the other auditors.

(b) We did not audit the financial information of 3 subsidiaries, whose financial statements/ financial information reflect total assets of Rs. 138.83 million as at 31st March, 2019, total revenues of Rs. 106.15 million and net cash inflows amounting to Rs. (0.50) million for the year ended on that date, as considered in the consolidated financial statements. The consolidated financial statements also include the Groups share of net loss including total other comprehensive income of Rs. (11.42) million for the year ended 31st March, 2019, as considered in the consolidated financial statements in respect of 3 associate. These financial statements / financial information have not been audited by us. These financial statements / financial information are unaudited and have been furnished to us by the Management and our opinion on the consolidated financial statements, in so far as it relates to the amounts and disclosures included in respect of these subsidiaries and associate is based solely on such unaudited financial statements/ financial information. In our opinion and according to the information and explanations given to us by the Management, these financial statements/ financial information are not material to the Group.

Our opinion on the consolidated financial statements above and our report on Other Legal and Regulatory Requirements below, is not modified in respect of the above matters with respect to our reliance on the work done and the reports of the other auditors and the financial statements/financial information certified by the Management.

(c ) The comparative financial information of the Company for the year ended 31st March, 2018 prepared in accordance with Indian Accounting Standards, included in these consolidated financial statements, have been audited by the predecessor auditors. The report of the predecessor auditors on the comparative financial information dated 18th May, 2018 expressed an unmodified opinion. Our opinion is not modified in respect of said matter.

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 the report of the other auditors on separate financial statements and the other financial information of subsidiaries and associates, companies incorporated in India, referred in the Other Matters paragraph above 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 of the aforesaid consolidated financial statements.

(b) In our opinion, proper books of account as required by law relating to preparation of the aforesaid consolidated financial statements have been kept so far as it appears from our examination of those books and the reports of the other auditors.

(c) The Consolidated Balance Sheet, the Consolidated Statement of Profit and Loss (including Other Comprehensive Income), the Consolidated Cash Flow Statement and Consolidated Statement of Changes in Equity dealt with by this Report are in agreement with the relevant books of account maintained for the purpose of preparation of the consolidated financial statements.

(d) In our opinion, the aforesaid consolidated financial statements comply with the Indian Accounting Standards prescribed under Section 133 of the Act.

(e) On the basis of the written representations received from the directors of the Parent as on 31st March, 2019 taken on record by the Board of Directors of the Parent, the reports of the statutory auditors of its subsidiaries and associates, companies incorporated in India, none of the directors of the Group companies and its associates, companies incorporated in India, is disqualified as on 31st March, 2019 from being appointed as a director in terms of Section 164 (2) of the Act.

(f) With respect to the adequacy of the internal financial controls over financial reporting and the operating effectiveness of such controls, refer to our separate Report in "ANNEXURE A", which is based on the auditors reports of the Parent, subsidiaries and associates, companies incorporated in India to whom internal financial controls over financial reporting is applicable. Our report expresses an unmodified opinion on the adequacy and operating effectiveness of internal financial controls over financial reporting of those companies, for the reasons stated therein.

(g) With respect to the other matters to be included

Auditors Report in accordance with the requirements of section 197(16) of the Act, as amended: In our opinion and to the best of our information according to the explanations given to us, the remuneration paid by the holding Company to its directors during the year is in accordance with the provisions of section 197 of the Act. (h) With respect to the other matters to be included

Auditors 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:

i. The consolidated financial statements disclose the impact of pending litigations on the consolidated financial position of the Group and its associates. Refer Note 29 to the consolidated financial statements.

ii. The Group and its associates did not have any material foreseeable losses on long-term contracts including derivative contracts.

iii. There were no amounts which were required to be transferred to the Investor Education and Protection Fund by the Parent, its subsidiaries and its associates, companies incorporated in India.

For Chaturvedi& Shah LLP
Chartered Accountants
(Firms Registration No. 101720W/W100355)
Vijay Napawaliya
Partner
(Membership No. 109859)
Place : New Delhi
Date : 16th April, 2019