IDEA CELLULAR LIMITED ANNUAL REPORT 2008-09 Mr. G. D. Birla and Mr. Aditya Birla, our founding fathers. We live by their values. Integrity, Commitment, Passion, Seamlessness and Speed The Chairman’s Letter to Shareholders

Dear Shareholders, The Indian mobility sector witnessed robust growth during the year. The total mobility subscribers, as on March 2009, stood at 392 million, registering an annual growth of around 50%. The low cost of entry and service, coupled with the deeper penetration of the network, have been the main drivers of the sector growth. Your Company had an excellent year, with consolidated revenue crossing the Rs. 100 billion mark. Its revenue at Rs. 101.54 billion, is up by 51% over that of the previous year. Even after the exclusion of revenue from the new service areas of Mumbai and Bihar, and from the joint ventures Spice and Indus, the annual revenue growth from older service areas is around 46%. This growth, coming on the back of the earlier year’s revenue growth of 54%, marks IDEA as India’s fastest growing major telco over the last two years. The net profit, for the year, stood at Rs. 8,816 million. Your company, during the financial year 2009-10, launched services in Orissa, Tamil Nadu (including Chennai), Jammu & Kashmir, Kolkata and West Bengal. With the imminent launch of services in Assam and North East service areas, your Company, alongwith its subsidiary and joint venture, will become a Pan India operator, befitting its stature and potential. Among other accolades, your company has been selected by the Economic Times as the ‘Emerging Company of the Year’ for 2009. The calendar year 2009, has seen overcapacity hitting the Indian telecom sector, largely due to the investment decisions of 2007-08, both from cross-over licensees and new licensees. This has inevitably lead to a phase of hyper competition. Your company has anticipated and prepared itself for this phase. Your company is strongly placed in its established service areas, while the approach for some of the new service areas is measured. I believe based on this well-crafted strategy, advantage of spectrum and scale, sophisticated management processes, brand strength, human capital and strong balance sheet, your Company will emerge even stronger through this phase. The Aditya Birla Group: In Perspective prides itself in having a course completion ratio of 90%, Today, we manage multinational teams – 1,30,000 which is a world benchmark. employees, comprising 30 nationalities, across 25 As perhaps many of you may be aware we track the countries, anchor our US$ 29.2 billion meritocratic organisational climate every two years. We use the conglomerate. Our values – Integrity, Commitment, Organisational Health Survey (OHS), as the barometer of Passion, Seamlessness and Speed, is the thread that strings employee engagement at work. It is conducted by Gallup. us together. Over 22,000 executives, across 17 businesses, spanning Post our Group being declared the “Best Employer” in 2007 25 countries and 750 cities/interiors participated in the by the Hewitt / Economic Times / Wall Street Study, our OHS6. The participation level at 94%, according to Gallup, brand as an employer continues to grow strongly. More than is a benchmark. 83% of the employees surveyed in the OHS6 8,000 leading professionals from India and globally have said that they are proud to be an employee of the Aditya teamed up with us. Birla Group and get professional satisfaction working here. 67% of our management employees have clearly Our rigorous assessment process, inclusive of Development emphasized their confidence in the ability of the leaders at Assessment Centres, assesses our people early in their various levels to successfully manage the emerging career on their potential to hold leadership roles. This way, challenges that the Group is facing. Almost three-fourths we have ensured that we have a robust bench strength of of our employees (73%) have stated that they would talent. We also use short term secondments and long term definitely advocate our Group as a place to build a assignments to develop the capability of our people to work meaningful career. across borders. This year over 1,700 colleagues have been job rotated. Going forward, I would like to emphasize that the brand of leadership that we seek to build combines the virtues of Over 80% of our businesses have participated in a professionalism with the commanding power of the mind, compensation benchmarking exercise this year and we have heart and soul. The mind which has the intellect to perceive taken significant corrective and proactive measures to stay the right from the wrong, the heart which has an emotional competitive and attractive. This positioning will further help bond with the organisation that cannot be severed, and a us to attract and retain the right talent. soul that is indomitable. Our biggest strength has been an emotional bonding that our employees have with the Group We lay great emphasis on continuous learning through our that makes the paradigm of duty truly boundaryless. in-house learning university – Gyanodaya. This globally benchmarked institution leverages resources from around the world to meet the development needs of our people. Best Regards, Over a 1,000 executives have taken courses this year. Additionally, more than 14,000 employees spread across the world, from Farmington Hills in USA to Giza in Egypt to Perth in Australia and Renukoot in Uttar Pradesh have used Gyanodaya’s E-learning platform called GVC. GVC Kumar Mangalam Birla Table of Contents

1 Corporate Information

3 Performance Highlights

5 Management Discussion and Analysis

8 Directors’ Report

16 Report on Corporate Governance

26 Auditors’ Report

30 Balance Sheet

31 Profit and Loss Account

32 Schedules to the Accounts

54 Cash Flow Statement

Consolidated Financial Statements

57 Auditors’ Report

58 Consolidated Balance Sheet

59 Consolidated Profit and Loss Account

60 Schedules to the Consolidated Accounts

81 Consolidated Cash Flow Statement

83 Statement relating to Subsidiary Companies Corporate Information

Board of Directors Mr. Kumar Mangalam Birla Chairman Mrs. Rajashree Birla Non Executive Director Dr. Rakesh Jain Non Executive Director Dr. Shridhir Sariputta Hansa Wijayasuriya Non Executive Director Mr. Biswajit Anna Subramanian Non Executive Director Mr. Arun Thiagarajan Independent Director Mr. Gian Prakash Gupta Independent Director Mr. Mohan Gyani Independent Director Ms. Tarjani Vakil Independent Director Mr. R.C. Bhargava Independent Director Mr. P. Murari Independent Director Mr. Sanjeev Aga Managing Director

Chief Financial Officer Mr. Akshaya Moondra

Company Secretary Mr. Pankaj Kapdeo

Auditors Deloitte Haskins & Sells Chartered Accountants 706, B Wing, ICC Trade Tower, Senapati Bapat Road, Pune – 411 016

Registered Office Suman Tower, Plot No. 18, Sector No. 11, Gandhinagar – 382 011 Gujarat

Corporate Office Windsor, 5th Floor, Off CST Road, Near Vidya Nagari, Kalina, Santacruz (East), Mumbai – 400 098

Registrar and Share Transfer Agents M/s. Bigshare Services Private Limited E/2 Ansa Industrial Estate, Saki Vihar Road, Saki Naka, Andheri (East), Mumbai – 400 072

Website http://www.ideacellular.com 1 Performance Highlights at a glance

Gross Revenue EBITDA

INR bn INR bn 28.4 120 30 101.5 100 25 22.7

80 20 67.4 14.9 60 15 43.9 10.9 10 8.4 40 29.9 22.7 20 5

0 0 FY 05 FY 06 FY 07 FY 08 FY 09 FY 05 FY 06 FY 07 FY 08 FY 09

Net Profit Cash Profit

INR bn INR bn 12 28 10.4 23.3 24 10 8.8 19.8 20 8 16 6 11.7 5.0 12 7.6 4 8 2.1 5.2 2 0.8 4 0 0 FY05 FY06 FY07FY08 FY09 FY05 FY06 FY07FY08 FY09

3 Annual Report 2008-09

Management Discussion and Analysis Report

Sector growth institutions/banks in the event of default committed by the UAS licensee company. The Indian mobility sector witnessed a growth of around 50% in subscriber terms during the financial year 2008-2009. The Implementation of Mobile Number Portability (MNP) sector reported 392 mn subscribers as of March 31, 2009. The DoT, on August 1, 2008, issued guidelines for the MNP Expanding telecom networks, falling tariffs and continued license. As per the guidelines, the country has been divided in reduction in handset costs, remained the key drivers for this two MNP zones for grant of licenses, with 11 licensed service growth. With wireless penetration level at 34%, the Indian areas in each zone. On March 20, 2009, the DoT signed the wireless market offers an attractive growth opportunity. The MNP operator license with M/s. Syniverse Technologies (Zone I) subscriber base under brand !dea, increased from 24 mn as of and M/s. MNP Interconnection Telecom Solutions (Zone II), end March 2008 to 43.02 mn as of end March 2009, a growth giving six months for MNP implementation in Metro service of around 79%, taking its national market share to 11%. areas and Category ‘A’ service areas, and one year for other Regulatory service areas. The DoT on May 6, 2009 has issued amendments to all CMTS/ UASL/ NLDOs/ ILDOs seeking implementation of Major regulatory developments for the period are: MNP in all Metro/ Category ‘A’ service areas latest by September DoT amendment on Intra Circle Roaming 20, 2009, and the other service areas latest by March 20, 2010. However, on September 3, 2009, DoT has extended the time On June 12, 2008, the DoT amended license terms, allowing a frame for implementation of Mobile Number Portability by licensee to enter into agreements with other service providers 3 months. The new date for implementation of Mobile Number within the same service area for the purpose of intra-circle Portability for Metro and Category ‘A’ service areas is roaming. December 31, 2009. WPC order on Microwave Spectrum Charges Timelines for auction of 3G and BWA Spectrum The WPC, on November 10, 2008, specified the microwave The DoT, on October 23, 2009 released a revised Information spectrum charges for 7th to 11th carrier. The DoT had earlier Memorandum for auction of 3G / BWA Spectrum. As per the revised the microwave spectrum charges vide its order dated revied schedule, auction of 3G / BWA Spectrum will commence November 3, 2008, wherein charges for a maximum of 6 carriers on January 14, 2010. were specified. The order was made effective from November Discussion on Consolidated Financial Statements and 3, 2006, thus increasing the charges applicable to operators Operational Performance holding more than 6 access spectrum carriers (access & backbone separately), retrospectively. Subscriber Base Amendment to Interconnect Usage Charges (IUC) Regulation As on March 31, 2009, brand !dea had an aggregate of 43.02 mn subscribers, including subscribers of Punjab and Karnataka On March 9, 2009, TRAI released the Interconnection Usage service areas operating under Spice Communications Limited, Charges (IUC) Xth Amendment. Accordingly, with effect from and the Bihar (including Jharkhand) service area operating under April 1, 2009, termination charges for incoming calls stood Aditya Birla Telecom Limited, representing an increase of 79.3% reduced to Re. 0.20 per minute from Re. 0.30 per minute, while compared to the subscriber base of 24.00 mn as on the termination charges for international incoming calls stood March 31, 2008. increased from Re. 0.30 per minute to Re. 0.40 per minute. Service and Sales Revenues Amendment relating to lock-in of promoters equity Growth in service revenues was 50.8% from Rs. 67,200 mn in On July 23, 2009, the DoT issued the conditions for sale of the previous financial year to Rs. 101,313 mn for the year ended equity by promoters of a UAS licensee company. As per the March 31, 2009. Value Added Services grew by 69.0% over the amendments, there shall be a lock-in period for sale of equity previous year. Revenues from National Long Distance services of a person whose share capital is 10% or more in the UAS accounted for approximately Rs. 7,111 mn, which stood licensee company on the effective date of UAS license and eliminated during of inter segment consolidation. whose net-worth has been taken into consideration for determining the eligibility for grant of UAS license, till Operating Expenses completion of three years from the effective date of the UAS During the year ended March 31, 2009, the Company incurred license or till fulfillment of all the rollout obligations under Operating Expenses of Rs. 73,179 mn representing 72.1% of clause 34 of the License Agreement, whichever is earlier. total revenues. The chief contributors to the total Operating However, the provision of lock-in period shall not apply, in Expense of 72.1% were, Personnel Expenditure 5.2%, Network pursuance to enforcement of pledge by the lending financial Operating Expenses 20.8%, License and WPC charges 11.1%, 5 IDEA CELLULAR LIMITED

Roaming and Access Charges 18.2%, Subscriber Acquisition and commitment, integrity, passion, seamlessness and speed, Servicing Expenses 8.1%, Advertisement & Business Promotion promotes strong bonding with its employees. During the year, Expenditure 4.5%, and Administration and Other Expenditure 4.1%. it has again undertaken sharing of value creation by granting another tranche of employee stock options to the eligible Profit before Interest, Depreciation and Amortisation employees. The findings of Organisation Health Study (OHS) For the year ended March 31, 2009, the Company had a have been analysed, which are very encouraging, and concern Profit before Interest, Depreciation and Amortisation of areas are being suitably addressed. The employee strength on Rs. 28,364 mn, a growth of 25.0% compared to the previous rolls stood at 6,481 as on March 31, 2009. year. The operating profit margins for the current financial year Risk Management and for the previous financial year stood at 27.9% and 33.7% respectively. The Risk Management framework of the Company ensures, amongst others, compliance with the requirements of Clause Depreciation, Amortisation and Finance Charges 49 of the Listing Agreement. The framework establishes risk management across all service areas and functions of the During the year ended March 31, 2009, Depreciation & Company, and has in place procedures to inform the Board Amortisation expenses increased by 60.0% to Rs. 14,028 mn as Members about the risk assessment and minimization process. against Rs. 8,768 mn for the previous year. Net finance charges These processes are periodically reviewed to ensure that the for the year increased by 78.1% from Rs. 2,776 mn to Rs. 4,945 management of the Company controls risks through a defined mn, due to increased borrowings and foreign exchange framework. The various risks, including the risks associated with fluctuations. the economy, regulations, competition, foreign exchange, Profits and Taxes interest rate etc., are monitored and managed effectively. Cash Profit from operations for the year ended March 31, 2009 Internal Control Systems stood at Rs. 23,313 mn, showing an increase of 17.5% over the The Company has appropriate internal control systems for previous year. The Profit before Tax for the year stood at business processes, covering operations, financial reporting and Rs. 9,391 mn. The tax charge for the year, mainly due to deferred compliance with applicable laws and regulations. Clearly defined tax charge, stood at Rs. 576 mn. The net profit for the year roles and responsibilities for all managerial positions drive ended March 31, 2009 was Rs. 8,816 mn, resulting into a net adherence of defined processes. Operating parameters are profit margin of 8.7%. monitored and controlled. Regular internal audits and checks Capital Expenditure ensure that responsibilities are executed effectively. The audit committee of the Board of Directors actively reviews the adequacy During the year ended March 31, 2009, the Company incurred and effectiveness of internal control systems and suggests capital expenditure of Rs. 66,857 mn. improvement for strengthening them, as appropriate. Balance Sheet Opportunities, Risks, Concerns and Threats

During the current financial year, shareholder funds increased The strong growth in the sector continues, mainly due to by Rs. 88,372 mn, largely due to a preferential issue of equity expansion of telecom networks to rural India, the reduced cost by the Company, and the issue of Compulsorily Convertible of entry and the reduced cost of handsets. Low penetration, Preference Shares (CCPS) by one of its subsidiary companies. more particularly in rural India, provides opportunity for further This has led to strengthening of the balance sheet, which in growth, and your company, an incumbent GSM player with 900 turn provides potential for further debt leveraging for any future MHz spectrum in about half of India, is well positioned to tap requirement. this opportunity.

The Gross Block stood at Rs. 205,234 mn, and Net Block The telecom sector has witnessed increasing competition including Capital Work in Progress (CWIP) stood at Rs. 166,672 towards the end of financial year 2008-09 and the first half of mn as at March 31, 2009. Treasury investments in mutual funds financial year 2009-10. New launches are coming both from increased by Rs. 14,892 mn during the year and stood at 20,452 CDMA operators with crossover spectrum, and new licensees. mn as at March 31, 2009. Net Current Assets stood at Rs. 13,324 These new launches, alongwith the expansion of some regional mn as at March 31, 2009, mainly due to investment of surplus players, has created major overcapacity in the sector, which in funds in fixed deposits with banks. The carried forward closing turn has lowered tariffs. However, your company, based on the debit balance of the Profit and Loss Account is Rs. 5,263 mn as inherent advantage of spectrum and scale, brand strength and at March 31, 2009. sophisticated management processes, is in a position to emerge even stronger through this phase of hyper competition and Human Resources sector overcapacity. The Company through its participative work environment, skill The telecom sector is characterised by change in technology. development activities, and by championing the values of Competition from new technologies is an inherent threat. While 6 Annual Report 2008-09 the planned 2100 MHz spectrum auction for 3G services spectrum allocation by the government. The Company believes will lead to additional cash outflow, it will also open new in partnering with vendors who are of international repute, and revenue streams. The Company’s strong balance sheet and with whom it builds long term relationships. market standing, positions it to participate effectively in such Outlook auction. The competitive intensity in the telecom sector has accelerated The Company requires certain approvals, licenses, registrations during the last three quarters, and is likely to increase with new and permissions for operating its business. In addition, regulators launches creating further overcapacity, placing pressure on may amend license conditions, norms for spectrum allocation, margins. However, it is anticipated that market forces will spectrum charges, merger & acquisition rules etc. which may eventually work the overcapacity out of the sector. The Company have a significant impact on the Company’s business. The focuses on strengthening its position in 900 MHz service areas, Company, however, is hopeful that the policy changes will be by exploiting its advantages of scale and spectrum, while in the equitable. newer service areas it follows a disciplined and measured The Company’s business is dependent on key vendors to supply approach. The Company is fully equipped for this phase of critical network equipment and services. Besides, its ability to intense competition, and expects to emerge competitively provide quality mobile network and expanding its area of stronger. The telecom sector will continue to demonstrate operations and the subscriber base is also dependent on the attractive long term opportunities for strong operators.

Cautionary Statement

Statements in the Management Discussion and Analysis describing the Company’s objectives, projections, estimates, expectations may constitute a “forward-looking statement” within the meaning of applicable securities laws and regulations. Actual results could differ materially from those expressed or implied. Important factors that could make a difference to the Company’s operations, include economic conditions affecting demand/supply and price conditions in the domestic markets in which the Company operates, changes in the Government Regulations, tax laws and other statutes and other incidental factors.

7 IDEA CELLULAR LIMITED

Directors’ Report

Dear Shareholders, Capital Expenditure The Directors are pleased to present the 14th Annual Report, Your Company continues its aggressive network expansion for together with the audited financial statements of your Company, enhanced coverage and improved quality experience to the for the financial year ended March 31, 2009. customer. Your Company incurred a capex of Rs 66,857 mn during the financial year 2008-09. As a result, cell sites of the Financial Results Company have increased from 24,793 as at end March, 2008 Financial highlights of the consolidated Statement of Operations to 49,860 as at end March, 2009. of your Company for the financial year 2008-09 are: The Company also made significant progress in rolling out its (Rupees in Million) National Long Distance (NLD) network and as at end September, Particulars 2008-09 2007-08 2009, it carried about 51% of its captive NLD traffic. Income from Services 101,313 67,200 Employee Stock Option Scheme Other Income 231 174 Your Company has formulated and implemented the Employee Stock Option Scheme 2006 (ESOS-2006). During the year under Total Revenue 101,544 67,374 review, the ESOS Compensation Committee granted 6,131,250 Operating Expenses 73,180 44,682 options on July 24, 2008, as a second tranche to the eligible EBITDA 28,364 22,692 employees of the Company. Each option is convertible into one Depreciation and Amortization 14,028 8,768 Equity Share of the Company upon vesting. These options will vest in 4 equal annual installments after one year of the grant EBIT 14,336 13,924 and shall be exercisable within a period of 5 years from the Interest and Financing charges 4,945 2,776 date of the vesting. Out of the total options granted, 2,655,000 EBT 9,391 11,148 options and 454,750 options lapsed out of the options granted Taxes 575 725 in first and second tranches respectively. As on March 31, 2009 the outstanding options are 22,952,500. Net Profit after Tax 8,816 10,423 Details of the options granted under ESOS – 2006 upto Balance brought forward from March 31, 2009, and other disclosure in compliance with Clause previous year (14,079) (24,502) 12 of Securities and Exchange Board of India (Employees Stock Carried forward Loss (5,263) (14,079) Option Scheme and Employees Stock Purchase Scheme) Guidelines 1999, are set out in Annexure ‘A’ to this Report. During the year ended March 31, 2009, gross revenues grew by Human Resources 50.7% to Rs. 101,544 mn from Rs. 67,374 mn for the year ended March 31, 2008. Your Company registered a net Your Company continuously invests in fostering people profit of Rs. 8,816 mn against a net profit of Rs.10,423 mn development, identifying and grooming management talent, in 2007-08. and has a culture of harnessing employees’ potential to the maximum. Dividend Awards and Recognitions As your Company does not have distributable profits as on March Your Company has been selected as “Emerging Company of the 31, 2009, your Directors have not recommended any dividend Year” for 2009 by The Economic Times, arguably Corporate for the year. India’s pre-eminent awards. This award is a recognition of the Review of Consolidated Operations strides made by your company in recent years. Your Company recorded an increase of 79% in its subscriber Significant Developments: base from 24.00 mn as of March 31, 2008 to 43.02 mn as of ● Investment in Spice Communications Limited March 31, 2009. Your Company has increased its subscriber During the year under review, the company acquired 40.8% market share from 9.2% in 2007-08 to 11% in 2008-09 on a stake in Spice Communications Limited (Spice), having national basis. The total Minutes of Usage have more than operations in Punjab and Karnataka service areas, from doubled from 86 bn minutes in 2007-08 to 175 bn minutes in MCorp Global Communications Private Limited (MCPL), the 2008-09. erstwhile promoters of Spice. Further, the Company Share Capital alongwith TMI India Limited, TMI Mauritius Limited, Axiata Group Berhad (formerly known as TM International Berhad) During the year under review, the Authorised Share Capital has and Green Acre Agro Services Private Limited, collectively been increased by Rs. 25,000 mn to Rs. 82,750 mn. referred to as “the acquirers” had made a public offer to Further, the Paid-up Equity Share Capital of the Company acquire upto 20% equity stake in Spice from other public increased by Rs. 4,647.35 mn on account of preferential issue shareholders. The said offer opened on September 17, 2008 of 464,734,670 Equity Shares of Rs. 10/- each to TMI Mauritius and closed on October 6, 2008. The acquirers made the Limited, a subsidiary of Axiata Group Berhad, Malaysia (formerly payment on October 15, 2008 to all the eligible known as TM International, Berhad). shareholders of Spice who had validly tendered their shares 8 Annual Report 2008-09

under the said offer. Consequently, the stake of the ● De-merger of Passive Infrastructure Company in Spice stands at 41.09% as of date at a cost of Your Directors wish to inform you that the Company had Rs. 22,041.87 mn. filed a Scheme of Arrangement on April 17, 2009 with the The Company has paid a Non-Compete Fee of Hon’ble High Court of Gujarat at Ahmedabad to de-merge Rs. 5,439.75 mn to MCPL, pursuant to the Non-Compete its passive infrastructure assets in the service areas of Agreement entered into as a part of the acquisition. Further, Andhra Pradesh, Delhi, Gujarat, Uttar Pradesh (both East & pursuant to a separate Scheme of Arrangement approved West including Uttaranchal), Haryana, Kerala, Rajasthan and by the Hon’ble High Court of Gujarat at Ahmedabad on Mumbai to Idea Cellular Towers Infrastructure Limited August 31, 2009, the Non-Compete fee paid to MCPL has (ICTIL), a wholly owned subsidiary, with an appointed date been debited to the Profit and Loss Account and setting off of January 1, 2009. Pursuant to the receipt of the High by withdrawal of equal amount from the balance in Court Order(s) and filing of the same with the Registrar of Securities Premium Account, as explained in the relevant note Companies on September 29, 2009, passive infrastructure to the Accounts. in respect of the above mentioned service areas have been Your Directors wish to inform that a Scheme of de-merged from the Company to ICTIL and given effect to Amalgamation of Spice with the Company has been filed in the accounts, as explained in the relevant note to the with the Hon’ble High Court of Gujarat at Ahmedabad by Accounts. the Company on May 11, 2009. Similarly, Spice has also ● Roll-out of services in new service areas filed the Scheme of Amalgamation with the Hon’ble High Your Directors wish to inform you that, brand !dea has Court of Delhi at New Delhi on May 17, 2009. The Scheme expanded its operations from 11 service areas in March, shall be effective on and from the last of the dates on 2008 to 20 service areas in October, 2009. The Company which all the required approvals are obtained and the has launched services in Mumbai, Orissa, Tamil Nadu sanctioned Scheme is filed with the Registrar of Companies (including Chennai), Jammu & Kashmir, Kolkata and West at Ahmedabad and Delhi respectively. The share swap ratio Bengal. In addition, Aditya Birla Telecom Limited, a wholly for the amalgamation has been fixed at 49 equity shares of owned subsidiary, launched operations in Bihar (including the Company for every 100 equity shares held in Spice. Jharkhand) service area. Subsequent to establishing joint ● De-merger of Licenses control over Spice, Punjab and Karnataka service areas have Pursuant to acquisition of Spice, the Company acquired the come under brand !dea. With the imminent launch of operations of Punjab and Karnataka service areas. Your services in Assam and North East service areas, your Company already has UAS Licenses in these two service Company, alongwith its subsidiary and joint venture, will areas, where no operations have been started. Under the become a Pan India operator, befitting its stature and circumstances, your Company chose to demerge these two potential. UAS Licenses to an entity eligible as per policy. ● De-merger of Unified Access Services License of Bihar Consequently, your Company has filed a Scheme of (including Jharkhand) service area from Aditya Birla Arrangement on May 11, 2009 with the Hon’ble High Court Telecom Limited (ABTL) to the Company of Gujarat at Ahmedabad to de-merge these two UAS Your Directors wish to inform that your Company is working Licenses. However, your Company has, subsequent to this towards including operations of its subsidiary and joint filing, sought a deferment of the proceedings from the venture company in its own fold. The operations of Punjab Hon’ble High Court of Gujarat at Ahmedabad, pending and Karnataka service areas, which currently are in Spice regulatory clarity on the subject. As explained in the relevant Communications Limited, are in the process of being note to the Accounts, the carrying cost of these licenses as merged with the Company. On similar lines, the telecom of March 31, 2009 is Rs. 3,585.80 mn. operations of Bihar (including Jharkhand) service area which ● Preferential Allotment are currently in ABTL, a wholly owned subsidiary, are also Your Directors wish to inform you that at the Extra Ordinary proposed to be merged with the company. General Meeting held on July 30, 2008, the members had In line with the above, your Board has approved and filed a approved issuance on a preferential basis 464,734,670 Scheme of Arrangement with the Hon‘ble High Court of Equity Shares of face value of Rs. 10/- each for cash at a Gujarat at Ahmedabad on September 24, 2009 for premium of Rs. 146.96 per Equity Share to TMI Mauritius de-merger of the Unified Access Services License (UASL) of Limited (‘TMI Mauritius’). Pursuant to the said allotment on Bihar (including Jharkhand) service area, including certain August 12, 2008 and August 13, 2008, the Company assets and liabilities from ABTL to the Company. received funds aggregating to Rs. 72,944.75 mn. New products and initiatives As per the terms of the Share Subscription Agreement executed with TMI Mauritius and others, TMI has been Your Company has made an extensive progress on the marketing provided certain rights which have been duly incorporated front by introducing various unique and innovative products and in the Articles of Association of the Company, including a services across all service areas of operation. Some major right to appoint one Director on the Board of your Company. initiatives are: Dr. Shridhir Sariputta Hansa Wijayasuriya has been ● To cater to the unique needs of the rural customer, ‘Krishi appointed as a nominee of TMI Mauritius on the Board of Voucher’ was launched in Maharashtra in partnership with the Company. Reuters Market Light (RML). This service is available 9 IDEA CELLULAR LIMITED

exclusively to Idea subscribers and is designed to equip Idea launched the Idea Mobile Roadie Challenge, a first of farmers with decision critical information that is easy to its kind customer engagement programme designed access and actionable, thus enhancing their ability to market exclusively for Idea customers integrating user experience their produce. on Web and Mobile. This activity won kudos at the ABBY Awards and EMVIES. ● Idea was the first operator in India to launch Nokia Life Tools in association with Nokia. Nokia Life Tools is a rural ● Idea strengthened its brand through a series of media VAS product aimed at enhancing the productivity of the properties like Idea Khatron Ke Khiladi-Level 2, Idea Bharat farmers and rural folks by providing Mandi Prices, Weather Ki Shaan on DD, Idea Rocks India – 4, Idea IIFA Awards and Information and Agricultural related information over Idea Filmfare Awards. To further strengthen Idea’s mobile. The information is district specific and of high association with cricket, Idea sponsored the India - Sri Lanka relevance to the farmers. Cricket tournament and signed up with IPL Teams – Mumbai Indians as Founding Partner and Delhi Daredevils as a ● Idea has tied-up with Indian Oil Corporation (IOC), the Principal Partner. largest petroleum company in India, to use their petrol pumps and gas agencies for branding and distribution of ● Idea continued its clutter breaking advertising by launching Idea SIM Cards and Recharge Vouchers. Alongwith sale of 3 new thematic advertising campaigns: ‘Education for all’ new activations and Recharge Vouchers, Idea has campaign in July 2008, ‘Democracy’ campaign in December opportunity to display branding across IOC’s national 2008 and ‘Walk when you Talk’ in June 2009. These network of petrol pumps, gas agencies and delivery boys. campaigns are expressions of Idea’s brand thought – ‘An Similarly Idea has also tied up with BPCL to use their gas !dea can change your life’. agencies for branding and distribution of Idea SIM Cards & Subsidiaries and Joint Ventures Recharge Vouchers. Subsidiaries ● ‘International Airtime Transfer’, a unique VAS service was launched, whereby NRI community can directly recharge ● Aditya Birla Telecom Limited (ABTL) provides GSM based the prepaid mobiles of Idea subscribers in India through mobile services in Bihar (including Jharkhand) service area, several international merchants and the web in Gulf, the and has a 16% shareholding in Indus Towers Limited. USA and UK. ● Idea Cellular Services Limited (ICSL) provides manpower ● Idea launched ‘Voice of Idea’, an innovative platform which services to the Company and ABTL. registers responses on caller tones. Integrated with the ‘for ● Idea Cellular Infrastructure Services Limited (ICISL), is a the people, by the people’ ad campaign, it enables Idea tower company owning towers in Bihar, Orissa, Jammu & subscribers to greet their callers with thought provoking Kashmir, Assam and North East service areas and provides questions of public interest. The subscribers have responded passive infrastructure Services in these service areas. enthusiastically with over 5 mn votes being cast. ● Idea Cellular Towers Infrastructure Limited (ICTIL), holds ● Idea launched NetSetter Data Cards and Blackberry solutions towers de-merged from the Company. ICTIL will to cater to its data-savy consumer segments. NetSetter is a subsequently merge into Indus Towers Limited. GPRS/EDGE compatible USB data modem to access internet, usable with both desktops and laptops with SMS facility. ● Swinder Singh Satara and Company Limited (SSS & Co.), is The Blackberry solution brings together smart phones, engaged in the business of sale and purchase of Data Cards, software and services to provide customers with easy Mobile Hand Sets and Fixed Wireless Phones. wireless access to email, phone, calendar, web and Joint Ventures multimedia applications, as well as of other mobile business and lifestyle applications. Spice Communications Limited (Spice), in which your Company holds 41.09% stake, provides GSM based mobile services in ● As one of Idea’s significant VAS activities, the Idea HPCL - Punjab and Karnataka service areas and also has NLD/ILD Automated gas booking solution was initiated and launched operations. by Idea in Kerala Circle. This solution is now also launched in Delhi Circle. Indus Towers Limited (Indus), in which ABTL holds 16% stake, is a joint venture between Bharti group, Vodafone Essar group ● As a significant digital initiative, ‘Zac’ – IDEA’s first ever and the Company (through ABTL), and provides passive interactive virtual character was launched in August, 2009. infrastructure services in 15 service areas. On visiting the activity micro-site, users are prompted to make Zac, fitter and healthier by giving him a 7-day fitness Your Company had applied to the Central Government seeking regime over an interactive mobile and web integrated exemption from attaching the documents referred to in Section interface. 212(1) of the Companies Act, 1956. In terms of the approval granted by the Central Government under Section 212(8) of ● Idea’s ‘Fans of Cricket’ campaign around IPL team Mumbai the Companies Act, 1956, a copy of the Balance Sheet, Profit Indians received an excellent response with more than 44 and Loss Account, Reports of the Board of Directors and Auditors Lac calls received, with maximum calls coming on the number of the subsidiaries for year ended March 31, 2009 have not alloted to Sachin Tendulkar. been attached with the financial statements of your Company. ● As Telecom Sponsor of cult youth property - MTV Roadies, However, the annual accounts of the subsidiary companies will 10 Annual Report 2008-09 be made available to the shareholders of the Company and of Conservation of Energy, Technology Absorption, the subsidiary companies, who seek such information at any Foreign Exchange Earnings & Outgo point of time and are also open for inspection by any The particulars as required to be disclosed pursuant to Section shareholders at the Registered Office of the Company and of 217(1) (e) of the Companies Act, 1956, read with the Companies the concerned subsidiary companies. The statement pursuant (Disclosures of Particulars in the Report of Board of Directors) to the approval under Section 212(8) of the Companies Act, Rules, 1988, are given in the Annexure forming part of this 1956, forms part of the Annual Report. Report. Fixed Deposits Particulars of Employees Your Company does not accept or hold any deposits and, as In accordance with the provisions of Section 217(2A), read with such, no amount of principal or interest on fixed deposits was the Companies (Particulars of Employees) Rules, 1975, the outstanding on the date of the Balance Sheet. names and other particulars of employees are to be set in the Corporate Governance Directors Report, as an addendum thereto. However, as per the Your Directors reaffirm their continued commitment to good provisions of Section 219(1)(b)(iv) of the Companies Act, 1956, corporate governance practices. Your Company adheres to all the report and accounts, as therein set out, are being sent to all major stipulations in this regard as provided in Clause 49 of the the members of the Company excluding the aforesaid Listing Agreement which relates to Corporate Governance. A information about employees. Any member, who is interested detailed report on the Corporate Governance, together with, a in obtaining such particulars about employees, may write to certificate from Statutory Auditors forms part of this report. the Company Secretary at the Registered Office of the Company. Board of Directors Directors’ Responsibility Statement Mr. M.R. Prasanna and Mr. Saurabh Misra, Directors resigned Your directors affirm that the audited accounts containing from the Board of your Company with effect from October 1, financial statements for the financial year 2008-09 are in 2008 and October 26, 2009 respectively. The Board places on conformity with the requirements of the Companies Act, 1956. record its sincere appreciation for the valuable guidance and They believe that the financial statements reflect fairly the form contribution made by Mr. M.R. Prasanna and Mr. Saurabh Misra and substance of transactions carried out during the year and in the deliberations of the Board during their respective tenures. reasonably present the Company’s financial condition and results of operations. Dr. Rakesh Jain was appointed as a Non-Executive Director on the Board of your Company w.e.f. October 26, 2009 to fill in Pursuant to Section 217(2AA) of the Companies Act, 1956, the the casual vacancy caused by resignation of Mr. Saurabh Misra. Directors confirm that: As per the provisions of Section 262 of the Companies Act, a) in the preparation of the annual accounts, the applicable 1956, Dr. Rakesh Jain holds office as a Director only till the date accounting standards have been followed other than the of the ensuing Annual General Meeting i.e. the date upto which accounting treatment for the Court approved Scheme(s) of Mr. Saurabh Misra in whose place he has been appointed would Arrangement which have been explained in the relevant have held the office. notes to the Accounts; Mr. R.C. Bhargava and Mr. P. Murari were appointed as Additional b) the accounting policies have been applied consistently and and Independent Directors of the Company with effect from judgments and estimates made are reasonable and prudent, October 20, 2008. Dr. Shridhir Sariputta Hansa Wijayasuriya so as to give a true and fair view of the state of affairs of was also appointed as an Additional Non-Executive Director of the Company at the end of the financial year and of the the Company with effect from October 20, 2008. As per the profit of the Company for that period; provisions of Section 260 of the Act, they will hold office upto c) proper and sufficient care has been taken to the best of the date of the ensuing Annual General Meeting of the their knowledge and belief for the maintenance of adequate Company. accounting records in accordance with the provisions of Your Company has received notices under Section 257 of the Act the Companies Act, 1956, for safeguarding the assets of together the requisite deposit, in respect of the above persons the Company and for preventing and detecting fraud and proposing their appointment as Directors of the Company. other irregularities; Resolution(s) seeking approval of the Members for the appointment of Dr. Rakesh Jain, Mr. R.C. Bhargava, Mr. P. Murari d) the annual accounts have been prepared on a going concern basis. and Dr. Shridhir Sariputta Hansa Wijayasuriya as Directors of the Company have been incorporated in the Notice of the ensuing Corporate Social Responsibility Annual General Meeting together with their brief resume(s). The Company is a responsible corporate citizen, and strives to Mr. Kumar Mangalam Birla, Mr. Mohan Gyani and Mr. Gian give back to the community it operates in. The Corporate Social Prakash Gupta retire from office by rotation, and being eligible, initiatives, which the Company has identified and implemented offer themselves for re-appointment at the ensuing Annual are as under: General Meeting of the Company. Brief resume of the Directors ● IIM Ahmedabad – Idea Telecom Centre of Excellence proposed to be re-appointed as required under Clause 49 of the Listing Agreement are provided in the Notice of the Annual Your Directors wish to inform that, your Company has entered General Meeting forming part of this Annual Report. into a tripartite agreement with the Indian Institute of 11 IDEA CELLULAR LIMITED

Management, Ahmedabad (“IIMA”) and the Department of Auditors Telecommunications (“DoT”), to set-up a Telecom Centre of M/s. Deloitte Haskins & Sells, Chartered Accountants retire as Excellence at the campus of IIMA known as “IIMA Idea Telecom Statutory Auditors of the Company at the conclusion of the Center of Excellence” (IITCOE). This Centre of Excellence focuses ensuing Annual General Meeting. The Statutory Auditors have on the areas of telecom policies, governance, regulation and confirmed their eligibility and willingness to accept the office on management, especially marketing and customer care. re-appointment. The necessary resolution seeking your approval IITCOE will Identify and capture best practices across countries; for re-appointment of Statutory Auditors has been incorporated will enhance human capital through training and teaching in the Notice convening the Annual General Meeting. programs for policy makers, regulators and the industry; will Auditors’ Report and Notes to Accounts bring fresh insights from other countries in telecom and in related sectors, and will find solutions to India’s specific The Board has duly reviewed the Statutory Auditors Report on situation, especially in the development of rural telephony. the Accounts. The notes forming part of the accounts referred to in the Auditors Report of the Company are self explanatory ● Pocket PCO project and do not call for any further explanation under Section 217(3) of the Act. Your Company alongwith International Finance Corporation (IFC), a member of The World Bank Group, has taken an initiative Management Discussion and Analysis for designing and implementing a “Pocket PCO” program in India. Management Discussion and Analysis Report for the year under Idea Pocket PCO is easy to use mobile phone that comes with a review, in accordance with the Listing Agreement requirements special Idea SIM having PCO software embedded in it. The device is presented in a separate section forming part of this Annual can be used by the individual as a mobile phone for personal Report. use and as a PCO for business opportunity. The project will help Appreciation rural micro-entrepreneurs to create pocket Public Call Offices (PCOs) in India’s under-served areas. The focus is to provide Your Directors wish to convey their appreciation to all customers, access to telephony services in rural communities, while creating promoters, lenders, trading partners, suppliers and the income generating opportunities. Your company is committed Government Authorities for their invaluable support and look to help people to improve their lives by providing high quality forward to continued support in future. Your Directors wish to access to telecommunications. place on record their appreciation to employees at all levels for their hard work, dedication and commitment, which has enabled ● FICCI-Aditya Birla CSR Centre for Excellence the company to march ahead. For the purposes of creating greater awareness and promoting Corporate Social Responsibility (“CSR”), as a part of the corporate mission and values, the Federation of Indian Chambers of Commerce and Industry (‘FICCI’), your Company and other group companies of the Aditya Birla Group, viz., Hindalco Industries For and on behalf of the Board Limited, Grasim Industries Limited, Aditya Birla Nuvo Limited and Essel Mining and Industries Limited have set-up a CSR Centre called as ‘FICCI-Aditya Birla CSR Centre for Excellence’. The object of setting-up the Centre, amongst others, is to create and develop the culture and concept of CSR among corporates, businesses, industries, organizations as well as other institutions, which benefit employees, their families and the society at large Place: Mumbai Kumar Mangalam Birla through welfare and training programs. Date: October 27, 2009 Chairman

12 Annual Report 2008-09

Annexure to the Directors’ Report Particulars pursuant to the Companies (Disclosure of Particulars in the Report of the Board of Directors) Rule 1988 are furnished hereunder: A. CONSERVATION OF ENERGY : Electricity is used for working of the Company’s network infrastructure equipments. The company regularly reviews power consumption patterns across its networks and implements requisite improvements/changes in the network or processes in order to optimize power consumption and thereby achieve cost savings. Some of the measures adopted by the Company for energy conservation are: (i) Increased battery back-up for cell sites; and (ii) Experimenting the use of deep discharge batteries. B. RESEARCH & DEVELOPMENT (R&D) 1. Specific areas in which R&D is carried out by the Company : Nil 2. Benefits derived as result of the above R&D : Nil 3. Future Plan of action : The Company will explore various options to adopt latest technology/use of equipment for its operations. 1. Expenditure on R&D: a) Capital : Nil b) Recurring : Nil c) Total : Nil d) Total R&D expenditure as percentage of total turnover : Nil TECHNOLOGY ABSORPTION, ADAPTATION AND INNOVATION: 1. Efforts in brief towards technology absorption, : Development of a skilled team of engineers in the area of radio adaptation, innovation engineering, installation of base station and operation of mobile telecom services. 2. Benefits derived as a result of the above efforts : Cost of installation of base station reduced due to better network planning and designing. Achieved better coverage and high quality of reception. 3. Particulars of imported technology in the last five years : a) Technology imported : No import of technology. However, GSM equipments are imported on regular basis. b) Year of import : Ongoing c) Has the technology been fully absorbed : Not applicable If not fully absorbed areas where this has not taken place, reasons thereof and future plans of action 4. Foreign exchange earnings and outgo : Earnings: Rs. 686.60 mn (Outgo includes CIF value of imports) Outgo: Rs. 19,699.99 mn

For and on behalf of the Board

Place: Mumbai Kumar Mangalam Birla Date: October 27, 2009 Chairman

13 IDEA CELLULAR LIMITED

Annexure ‘A’ to the Directors’ Report

Disclosure pursuant to the provisions of the Securities and Exchange Board of India (Employee Stock Option Scheme and Emloyee Stock Purchase Scheme) Guidelines, 1999

Particulars ESOS - 2006

Tranche I (December 31, 2007) Tranche II (July 24, 2008)

a) Options granted 1,99,31,000 61,31,250

b) The pricing formula The exercise price was determined by The exercise price was determined by averaging the daily closing price of the averaging the daily closing price of the Company’s equity shares during 7 days Company’s equity shares during 7 days immediately preceding the date of grant immediately preceding the date of and discounting it by 15%. grant.

Exercise price - Rs.112.57 per option Exercise price - Rs.84.03 per option

c) Options vested 49,82,750 NIL

d) Options exercised NIL NIL

e) The total number of shares arising as a Not Applicable Not Applicable result of exercise of options

f) Options lapsed 26,55,000 4,54,750

g) Variation of terms of options NIL NIL

h) Money realized by exercise of options NIL NIL

i) Total number of options in force 1,72,76,000 56,76,500

j) Employeewise details of options granted:

i) Senior managerial personnel: Mr. Sanjeev Aga: 17,12,000 Mr. Sanjeev Aga: 4,28,000

ii) Any other employee who received a NIL NIL grant in any one year of option amounting to 5% or more of options granted during that year

iii) Identified employees who were NIL NIL granted option, during any one year, equal to or exceeding 1% of the issued capital (excluding outstanding warrants and conversions) of the Company at the time of grant

k) Diluted Earnings Per Share Not Applicable, Since no option exercised

14 Annual Report 2008-09

Particulars ESOS - 2006

Tranche I (December 31, 2007) Tranche II (July 24, 2008)

l) Dif ference between the employee Rs. 423.72 million compensation cost, computed using the intrinsic value of the stock options and the employee compensation cost that shall have been recognised if the fair value of the options was used.

The impact of this difference on profits and The effect of adopting the fair value on the net income and earnings per share for 2008-09 on EPS of the company is as presented below : Particulars Rs. in million Net profit after tax but before exceptional items 10,012.11 Add: Intrinsic Value compensation cost 144.74 Less: Fair Value compensation cost 568.46 Adjusted Net Income 9,588.39 Earnings Per Share (Rs.) Basic Diluted As Reported 3.42 3.42 As Adjusted 3.27 3.27

m) (i) Weighted-average exercise prices and weighted-average fair values of options Not Applicable whose exercise price equals the market price of the stock

(ii)Weighted-average exercise prices and Weighted-average Weighted-average weighted-average fair values of options exercise price: Rs. 112.57 exercise price: Rs. 84.03 whose exercise price is less than the Weighted-average Weighted-average market price of the stock fair value of options: Rs. 68.99 fair value of options: Rs. 48.25

(iii) Weighted-average exercise prices and weighted-average fair values of options Not Applicable whose exercise price exceeds the market price of the stock n) A description of the method and significant Black – Scholes Method assumptions used during the year to estimate the fair values of options, including the following weighted-average information:

(i) risk-free interest rate (%) 7.78 7.50

(ii) expected life (No. of Years) 6 years 6 months 6 years 6 months

(iii) expected volatility (%) 40.00 45.80

(iv) dividend yield (%) Nil Nil

(v) the price of the underlying share in Rs. 139.10 Rs. 87.75 market at the time of option grant

15 IDEA CELLULAR LIMITED

Corporate Governance Report

Governance Philosophy professionals. The Board of your Company comprises of 12 Directors as on March 31, 2009, comprising of a Non-Executive The Aditya Birla Group is committed to the adoption of best Chairman, a Managing Director, 6 Independent Directors and 4 governance practices and its adherence in the true spirit, at all Non-Executive Directors. Clause 49 of the Listing Agreement as times. Our governance practices are a product of self desire, amended in April, 2008, requires that if the Non-Executive reflecting the culture of the trusteeship that is deeply ingrained Chairman is related to any promoter, than atleast one – half of in our value system and reflected in our strategic thought the Board of the Company shall consist of independent directors. process. At a macro level, our governance philosophy rests on five basic tenets, viz., Board accountability to the Company and Your Company has duly complied with the above requirement shareholders, strategic guidance and effective monitoring by of Clause 49 of the Listing Agreement. the Board, protection of minority interests and rights, equitable The Members of the Board are from diversified backgrounds treatment of all shareholders, as well as superior transparency and have varied expertise and considerable experience in their and timely disclosure. respective fields. In line with this philosophy, Idea Cellular Limited, an Aditya Birla Group Company, continuously strives for excellence through None of the Directors on the Board is a Member of more than adoption of best governance and disclosure practices. Your 10 Committees or a Chairman of more than 5 Committees (as Company is fully compliant with all the provisions of Clause 49 specified in Clause 49), across all the companies in which he/ of the Listing Agreement entered into with the Stock she is a Director. All the Directors have intimated periodically Exchange(s). The details of the compliance are as follows: about their Directorship and Membership on the Board Compliance with Corporate Governance Guidelines Committees of other companies, which are within the permissible limits of the Companies Act, 1956. 1. BOARD OF DIRECTORS The composition of the Board of Directors and the number Composition of the Board of Directorships and Committee positions held by them is as Your Company has a balanced Board, comprising of Executive under: and Non-Executive Directors which includes independent

Name of Director Category No. of Outside Directorship(s) Held1 Outside Committee Positions Held2 Public Private Member Chairman/ Chairperson

Mr. Kumar Mangalam Birla Non-Executive 9 13 - - Mrs. Rajashree Birla Non-Executive 6 12 - - Mr. M.R. Prasanna3 Non-Executive 9 4 - - Mr. Saurabh Misra Non-Executive 2 1 - - Mr. Biswajit A. Subramanian Non-Executive 1 - - - Mr. Arun Thiagarajan Independent 11 4 6 1 Mr. G.P. Gupta Independent 12 1 5 2 Mr. Mohan Gyani Independent - - - - Ms. Tarjani Vakil Independent 5 2 2 4 Mr. R.C. Bhargava4 Independent 8 1 5 4 Mr. P. Murari4 Independent 14 - 5 - Dr. Shridhir Sariputta Hansa Non-Executive 1 - - - Wijayasuriya4 Mr. Sanjeev Aga Managing Director 6 1 - 1

1. The Directorships held by the Directors, as mentioned above excludes alternate directorships, directorships in foreign companies, companies under Section 25 of the Companies Act, 1956 and Private Limited companies, which are not the subsidiaries of Public Limited companies. 2. Represents Membership/ Chairmanship of two Committees viz. Audit Committee and Shareholders’/ Investors’ Grievance Committee.

3. Mr. M. R. Prasanna resigned as a Director w.e.f. October 1, 2008. 4. Mr. R. C. Bhargava, Mr. P. Murari and Dr. Shridhir Sariputta Hansa Wijayasuriya were appointed as Additional Directors w. e. f. October 20, 2008.

16 Annual Report 2008-09

Board Meetings and Procedure Managerial Personnel have affirmed compliance to the Code of The Board of Directors plays the primary role in ensuring good Conduct. A declaration signed by the Managing Director governance and functioning of the Company. The Meetings are affirming the compliance with the Code of Conduct by the Board governed by a structured agenda. All the agenda items are Members and Senior Management Personnel of the Company backed by comprehensive agenda notes, containing all the vital is appended at the end of this report. information, so as to enable the Directors to have focused 2. COMMITTEES OF THE BOARD discussion at the meeting and to take informed decisions. All A. Audit Committee the relevant information as enumerated in Annexure IA to Clause 49 of the Listing Agreement is placed before the Board. The Composition, Meetings and Attendance agenda and agenda notes are circulated to all the Directors in The Company has an Audit Committee at the Board level with advance of each meeting of the Board of Directors. Where it is the powers and role that are in accordance with Clause 49 of not practical to send the relevant information as a part of the the Listing Agreement and Section 292A of the Companies Act, agenda papers, the same is tabled at the meeting. The 1956. The Committee acts as a link between the Management, presentations covering the Company’s performance, operations the Statutory Auditors, Internal Auditors and the Board of and business strategy are also made to the Board. Directors to oversee the financial reporting process. The Audit The Board also reviews periodically the compliance status of all Committee consists of four members, of which three members the applicable laws. All the decisions are taken after detailed including the Chairman are Independent Directors and one discussions by the Board Members at the meetings. The Member is a Non-Executive Director. The majority of the Audit Members of the Board have complete freedom to express their Committee members have accounting and financial opinion and have unfettered and complete access to information management expertise. The Company Secretary acts as a in the Company. Secretary to the Committee. The Board meets at least once in a quarter to review the quarterly The Managing Director and the Chief Financial Officer of the financial results and operations of the Company. Apart from Company are permanent invitees of the Audit Committee the above, additional Board Meetings are convened to address Meetings and representatives of the Statutory Auditors and Internal the specific needs of the Company. Auditors of the Company are also invited to the Audit Committee Meetings. In addition, other Senior Management Members are During the financial year 2008-09, six meetings of the Board also invited to the Committee meetings to present reports on the were held on April 24, 2008, May 22, 2008, June 25, 2008, respective items being discussed at the meeting from time to time. July 24, 2008, October 20, 2008 and January 22, 2009. The time gap between two meetings did not exceed four months. The Audit Committee observes and controls the financial The Board Meetings are generally held in Mumbai. reporting process of the Company with a view to provide accurate and proper disclosures. The Committee reviews the The details of attendance of Directors at Board Meetings and at internal audit reports periodically as well as the action taken the last Annual General Meeting are as under: report. The Committee also gives directions to the management in areas that needs to be strengthened. The recommendations Name of Director No. of Board Meetings Attended of the Audit Committee are binding on the Board. held during the tenure Last AGM Held Attended During the financial year 2008-09, six meetings of the Audit Committee were held on April 2, 2008, April 24, 2008, July 24, Mr. Kumar Mangalam Birla 6 6 No 2008, October 20, 2008, December 22, 2008, and January 22, Mrs. Rajashree Birla 6 5 No 2009. Mr. M.R. Prasanna 4 4 Yes The composition of the Audit Committee as on March 31, 2009 and the attendance of the members at the meetings are as under: Mr. Saurabh Misra 6 4 No Mr. Biswajit A. Subramanian 66 NoName of Director Category No. of No. of meetings Meetings held attended Mr. Arun Thiagarajan 6 3 Yes during the tenure Mr. G.P. Gupta 6 6 No Mr. G.P. Gupta Mr. Mohan Gyani 6 1 No (Chairman) Independent 6 6 Ms. Tarjani Vakil 6 5 No Mr. Arun Thiagarajan Independent 6 5 Mr. R.C.Bhargava 2 2 No Ms. Tarjani Vakil Independent 6 6 Dr. Shridhir Sariputta Mr. P. Murari 2 1 No Hansa Wijayasuriya Non Executive 3 1 Dr. Shridhir Sariputta Hansa Wijayasuriya 22 NoPowers of Audit Committee As enumerated in Clause 49 of the Listing Agreement, the Audit Mr. Sanjeev Aga 6 6 Yes Committee has the following powers: Code of Conduct: 1. To investigate any activity within its terms of reference; The Board of Directors play an important role in ensuring good 2. To seek information from any employee; governance and have laid down the Code of Conduct for all the 3. To obtain outside legal or other professional advice, and Board Members and Senior Managerial Personnel of the Company, which is also uploaded on the website of the Company 4. To secure attendance of outsiders with relevant expertise, (www.ideacellular.com). All Board Members and Senior if it considers necessary. 17 IDEA CELLULAR LIMITED

Terms of reference having post-audit discussions to ascertain any area of The broad terms of reference of Audit Committee includes the concern; following, as mandated in Clause 49 of the Listing Agreement i. Reviewing with the management, the quarterly financial and Section 292A of the Companies Act, 1956: statements before submission to the Board for approval; a. Oversight of the Company’s financial reporting process and j. Reviewing the reasons for substantial defaults in the the disclosure of its financial information to ensure that payment to the depositors, debenture holders, shareholders the financial statement is correct, sufficient and credible; (in case of non-payment of declared dividends) and creditors; b. Recommending to the Board, the appointment, re-appointment and if required, the removal of external k. Review of Management Discussion and Analysis of financial auditor, determination of audit fee and also approval of condition and results of operations; payment for any other services; l. Review of Management Letters / Letters of Internal Control c. Reviewing with the management, the annual financial Weaknesses issued by the Statutory / Internal Auditors; statements before submission to the Board, with particular m. Reviewing of functioning of ‘Whistle Blower Mechanism’ in reference to: case the same exists; and • Changes in accounting policies and practices; n. Carrying out any other function as and when referred by • Major accounting entries based on exercise of the Board. judgment by the management; B. Remuneration Committee • Qualifications in Draft Audit Report; The Company has constituted a Remuneration Committee • Significant adjustments made in financial statements comprising of three Non-Executive Directors, all of whom are arising out of audit findings; Independent Directors. The Company Secretary acts as Secretary • The Going Concern assumption; to the Committee. As on March 31, 2009, the Committee • Compliance with Accounting Standards; comprised of Mr. Arun Thiagarajan, Ms. Tarjani Vakil and • Compliance with listing and other legal requirements Mr. G.P. Gupta. concerning financial statements; During the financial year 2008-09, the Remuneration Committee • Any related party transactions i.e. transactions of the met once on December 22, 2008 and all the three members Company of material nature, with promoters or the attended the said meeting. management, their subsidiaries or relatives etc., that Terms of reference may have potential conflict with the interests of Company at large; The broad terms of reference of Remuneration Committee • Matters required to be included in the Directors’ includes the following: Responsibility Statement, in terms of Section 217 (2AA) a. Review of remuneration payable to the Directors and senior of the Companies Act, 1956. officials of the Company; d. Reviewing the adequacy of internal audit function, including b. Reviewing and advising the Board over the remuneration the structure of the internal audit department, staffing and policies of the Company generally; and seniority of the official heading the department, reporting c. Such other matters as may be decided by the Board from structure, coverage and frequency of internal audit; time to time. e. Discussion with internal auditors on any significant findings Remuneration of Directors and follow-up thereon; f. Reviewing the findings of any internal investigations by (i) Remuneration to the Managing Director the internal auditors into matters where there is suspected The remuneration package of Mr. Sanjeev Aga, Managing fraud or irregularity or a failure of internal control systems Director was recommended by the Remuneration of a material nature and reporting the matter to the Board; Committee, approved by the Board of Directors and the g. Reviewing with the management, the performance of same was approved by the members of the Company and external and internal auditors, and the adequacy of internal also by the Central Government. control systems; The remuneration package of Managing Director comprises h. Discussion with external auditors before the audit of a fixed salary component and a performance linked commences on the nature and scope of audit as well as bonus. Executive Director Relationship Business Remuneration during 2008-09 with other relationship All elements of Fixed Service Stock Directors with the Company, remuneration component & Contract, Option if any package i.e. performance linked notice details, salary, benefits, incentives, along period, if any bonuses, pension with performance severance fee etc. criteria Mr. Sanjeev Aga None Managing Director Rs. 49.40 See note (a) See note (b) See note (c) a. Mr. Sanjeev Aga was paid a sum of Rs.12.46 Million towards performance incentive linked to achievement of targets. b. The appointment is for a period of five years w.e.f. November 1, 2006. The appointment is subject to termination by three months notice on either side. No severance fees is payable to the Managing Director. For the revised terms of his remuneration, members’ approval is being sought at the ensuing Annual General Meeting. c. During the year 2008-09, the Company granted 4,28,000 stock options at an exercise price of Rs.84.03 per option to Mr. Sanjeev Aga. 17,12,000 stock options were granted on 31st December, 2007 at an exercise price of Rs. 112.57 per option. Each option is convertible into one Equity Share of the Company upon vesting. These options will vest in 4 equal annual instalments after one year of the grant and shall be exercisable within a period of 5 years from the date of the vesting. No options have been exercised by Mr. Sanjeev Aga. 18 Annual Report 2008-09

(ii) Remuneration to Non-Executive Directors The composition of the Shareholders’/Investors’ Grievance Committee as on March 31, 2009 and the attendance of the The Non-Executive Directors are not paid any remuneration members at the meeting held are as follows: except sitting fees for attending the Board Meetings and Committee Meetings. The sitting fees, as determined by Name of Category No. of No. of the Board, is presently Rs. 20,000/- for each meeting of the Director Meetings meetings Board and Rs.10,000/- for each Committee Meeting. held during attended the tenure The details of the sitting fees paid to Non-Executive Directors for the financial year ended March 31, 2009 are Mr. Sanjeev Aga Executive 1 1 as under: Mr. Saurabh Misra Non-Executive 1 1 Name of the Non-Executive Director Sitting Fees (Rs.) Compliance Officer Mr. Kumar Mangalam Birla 130,000 Mr. Pankaj Kapdeo, Vice President (Legal) & Company Secretary, Mrs. Rajashree Birla 100,000 acts as the Compliance Officer of the Company. The Compliance Officer can be contacted at: Mr. M.R. Prasanna 130,000 th Mr. Saurabh Misra* - “Windsor”, 5 Floor, Off CST Road, Mr. Biswajit A. Subramanian 120,000 Near Vidya Nagari, Mr. Arun Thiagarajan 130,000 Kalina, Santacruz (East), Mr. G.P. Gupta 190,000 Mumbai – 400 098 Tel: +91-9594003434 Mr. Mohan Gyani 20,000 Fax: +91-22-26527080 Ms. Tarjani Vakil 180,000 Email: [email protected] Mr. R.C. Bhargava 40,000 D. Compensation Committee Mr. P.Murari 20,000 A Compensation Committee known as (“ESOS Compensation Dr. Shridhir Sariputta Hansa Wijayasuriya 50,000 Committee”) has been constituted in accordance with SEBI * Mr. Saurabh Misra had expressed his unwillingness to (Employee Stock Option Scheme and Employee Stock Purchase accept sitting fees. He was not paid any sitting fees for Scheme) Guidelines, 1999, for formulation of an Employee Stock attending the meetings of the Board and Committee. Option Scheme. The Committee oversees the formulation of ESOP plans, the Details of Shareholding of Directors: implementation of the Scheme, its administration, supervision, The details of shareholding of Directors as on March 31, 2009 and formulating detailed terms and conditions in accordance are as under: with the SEBI Guidelines. The Compensation Committee comprises three Non-Executive Name of the Director No. of Equity Shares# Directors, of whom two members are Independent Directors. Mr. Kumar Mangalam Birla 233,333 As on March 31, 2009, the Committee comprised of Mr. Kumar Mangalam Birla, Mr. Arun Thiagarajan and Ms. Tarjani Vakil. Mr. G.P. Gupta 4,192 During the financial year 2008-09, the Committee met once on Ms. Tarjani Vakil 147 July 24, 2008 and all the three members attended the said Mr. Sanjeev Aga 182,868 meeting. # shares held singly or as a first shareholder are only considered E. Finance Committee The Company has constituted a Finance Committee to approve C. Shareholders’/Investors’ Grievance Committee the matters relating to availing of financial facilities. The Committee comprises of two Directors, one of whom is a Non- In order to ensure quick redressal of the complaints of the Executive Director. As on March 31, 2009, the Committee stakeholders, Company has in due compliance with clause 49 comprised of Mr. Saurabh Misra and Mr. Sanjeev Aga. of the Listing Agreement constituted a Shareholders’/Investors’ Grievance Committee. The Committee comprises of two During the financial year 2008-09, three meetings of the Finance members one of whom is a Non Executive Director. The Committee were held on October 20, 2008, December 22, 2008 Company Secretary acts as a Secretary to the Committee. and December 26, 2008 and all the members attended the said meetings. The Committee oversees the process of share transfer and F. IPO Committee monitors redressal of shareholders’/ investors’ complaints/ grievances viz. non-receipt of annual report, dividend payment, The IPO Committee of the Company was constituted to give issue of duplicate share certificates, transmission of shares and effect to the Initial Public Offering of the Company and issue of other related complaints. In addition, the Committee also further equity shares. The Committee comprises of two Directors, monitors other issues including status of dematerlisation / one of whom is a Non-Executive Director. As on March 31, rematerialisation of shares issued by the Company. 2009, the Committee comprised of Mr. Saurabh Misra and Mr. Sanjeev Aga. During the financial year 2008-09, the Shareholders’/Investors’ Grievance Committee met once on October 20, 2008 to During the financial year 2008-09, three meetings of the IPO deliberate on various matters referred above. Committee were held on August 6, 2008, August 12, 2008 and August 13, 2008 and all the members attended the said meetings. 19 IDEA CELLULAR LIMITED

3. SUBSIDIARY COMPANIES e. Proceeds from Public Issue, Preferential Issue etc. The Company does not have any material non-listed Indian The Company discloses to the Audit Committee, the subsidiary, whose turnover or net worth (paid-up capital uses / application of proceeds / funds raised from Initial and free reserves) exceeds 20% of the consolidated turnover Public Offering (IPO) and Preferential Issue as part of or net worth respectively of the Company. The minutes of the quarterly review of financial results. the Board meetings as well as statement of all significant Further, in terms of the approval granted by the transactions of the unlisted subsidiary companies are placed members in the Extra Ordinary General Meeting held before the Board of Directors for their review. on July 30, 2008, the unutilised IPO proceeds have been utilised for approved purposes, in addition to the 4. DISCLOSURES objects of IPO stated in the prospectus. a. Disclosure on materially significant related party During the financial year 2008-09, the Company issued transactions 464,734,670 equity shares of Rs. 10/- each for cash at The related party transactions are placed before Audit an issue price of Rs. 156.96 per equity share on a Committee as well as to the Board of Directors on a preferential basis to an Overseas Corporate Body in quarterly basis. For the financial year ended March 31, terms of Chapter XIII of the Securities and Exchange 2009, there were no transactions of material nature Board of India (Disclosure and Investor Protection) entered into with related parties which were not on Guidelines, 2000, the proceeds of which too have been the arm’s length basis or that may have potential utilised / are being utilised in terms of the stated objects conflict with the interest of the Company at large. The of the said issue. particulars of related party transactions have been 5. MANAGEMENT DISCUSSION AND ANALYSIS disclosed under Note 26 of Schedule 22B of the Balance A detailed Management Discussion and Analysis forms part Sheet forming part of the Annual Report. of the Directors’ Report. b. Disclosure of Accounting Treatment 6. SHAREHOLDERS INFORMATION The Company has followed all relevant Accounting i) Disclosure regarding appointment or Standards while preparing the financial statements, re-appointment of Directors other than the accounting treatment for the court The Company has provided brief resume(s) of the approved Scheme(s) of Arrangement for which Directors seeking appointment or re-appointment at necessary disclosures have been made in the relevant the ensuing Annual General Meeting, in the notice notes to the Accounts. attached with the Annual Report. c. Details of non-compliance with regard to the Capital ii) Communication to Shareholders Market The Company’s quarterly financial results, presentation made to Institutional Investors / Analysts, official news The Company has complied with all the requirements releases and other general information about the of the Stock Exchanges as well as the regulations and Company are uploaded on the Company’s website guidelines prescribed by the Securities and Exchange (www.ideacellular.com). Board of India (SEBI). There were no penalties or strictures imposed on the Company by Stock Exchanges The quarterly financial results of the Company are or SEBI or any statutory authority on any matter related generally published in The Economic Times (all to capital markets during the last three years. editions) and Western Times (a regional daily published from Gujarat). d. Board Disclosures - Risk Management At the end of each quarter, the Company organises The Company has an integrated approach to manage earnings call with analysts and investors and the the risks inherent in the various aspects of business. transcripts are uploaded on the website thereafter. The Audit Committee of the Board is regularly informed iii) General Body Meetings about the business risks and steps taken to mitigate The last three Annual General Meetings were held as the same. under: Financial Date Time Venue Particulars of Special Resolution Year 2007-08 September 29, 2008 2.00 p.m. Emerald Hall, • Alteration of Articles of Association of Haveli Arcade, the Company due to increase in Hotel Haveli, Sector 11, Authorised Share Capital Gandhinagar - 382 011. 2006-07 December 12, 2007 2.00 p.m. Emerald Hall, • Increase in Remuneration of Haveli Arcade, Managing Director Hotel Haveli, • Alteration of Articles of Association of Sector 11, the Company due to increase in Gandhinagar - 382 011. Authorised Share Capital • Amendment in the Articles of Association of the Company 2005-06 September 30, 2006 11.30 a.m. Suman Tower, None Plot No. 18, Sector 11, Gandhinagar - 382 011. 20 Annual Report 2008-09

Extra Ordinary General Meeting GENERAL SHAREHOLDERS’ INFORMATION

During the financial year 2008-09, an Extra Ordinary 1. Annual General Meeting General Meeting of the Company was held on July 30, 2008, for passing the following special resolutions: Day and Date : Monday, December 21, 2009 Time : 12:00 noon • Further issue of Capital Venue : Cambay Spa and Resort, • Utilisation of IPO proceeds of Equity Shares Plot No. X-22/23, GIDC Electronic Estate, Sector 25, Postal Ballot Gandhinagar – 382 044, There was no Special Resolution passed through Postal Gujarat Ballot during the financial year 2008-09 2. Financial Calendar for 2009-10 (Tentative) iv) Details of unclaimed shares in terms of Clause 5A of Financial reporting for the quarter: End July 2009 the Listing Agreement ending June 30, 2009 As per the terms of newly inserted clause 5A of the Listing Financial reporting for the quarter: End October 2009 Agreement, the Company would take necessary steps for ending September 30, 2009 crediting the shares allotted pursuant to the Initial Public Financial reporting for the quarter: End January 2009 Offering (IPO) of the Company in year 2007, which are ending December 31, 2009 unclaimed and are lying in escrow account to a demat Financial reporting for the quarter: End April 2010 suspense account and the details thereof as required to be ending March 31, 2010 disclosed in the Annual Report are given below: Annual General Meeting for the : July / August 2010 Particulars No. of No. of year 2009-10 cases shares Aggregate number of shareholders and 3. Book Closure Date : December 14, 2009 to the outstanding shares lying in the December 21, 2009 suspense account at the beginning of (both days inclusive) the year i.e. as on April 1, 2008 192 35598 4. Dividend Payment Date : Not Applicable (Since no dividend Number of shareholders who is proposed for the Financial approached to the Issuer / Registrar for Year 2008-09) transfer of shares from suspense account during the Financial Year 2008-09 74 13058 5. Registered Office : Suman Tower, Plot No. 18, Sector-11, Number of shareholders to whom shares Gandhinagar – 382 011, were transferred from suspense account Gujarat, India. during the Financial Year 2008-09 47 7933 Tel: +91-79-66714000 Fax: +91-79-23232251 Aggregate number of shareholders and the outstanding shares lying in the 6. Plant Locations : The Company being a suspense account at the end of the service provider, has no year i.e. as on March 31, 2009 145 27665 Plant Locations. 7. Listing Details 7. CEO/CFO CERTIFICATION The Equity Shares of the Company are listed on the As required by Clause 49 of the Listing Agreement, the following Stock Exchanges: CEO/CFO certification is appended as an Annexure to this report. Name of Stock Exchanges 8. REPORT ON CORPORATE GOVERNANCE National Stock Exchange of Bombay Stock Exchange Limited This Corporate Governance Report forms part of the Annual India Limited Phiroze Jeejeebhoy Towers, Report. The Company is in full compliance with all the “Exchange Plaza”, Dalal Street, provisions of Clause 49 of the Listing Agreement entered Bandra-Kurla Complex, Mumbai – 400 001 into with the Stock Exchange(s). Bandra (East), Mumbai – 400 023 9. COMPLIANCE The Company’s payment of Listing Fees is up-to-date. A Certificate from the Statutory Auditors of the Company, confirming compliance with the conditions of Corporate 8. Stock Codes Governance, as stipulated in Clause 49 of the Listing Stock Code Reuters Bloomberg Agreement of the Stock Exchange(s) is annexed and forms part of this Annual Report. As far as adoption of non- Bombay Stock Exchange 532822 IDEA.BO IDEA IN mandatory requirements are concerned, the Board has National Stock Exchange IDEA IDEA.NS NIDEA IN constituted a Remuneration Committee of Directors ISIN INE669E01016 comprising of Non-Executive and Independent Directors.

21 IDEA CELLULAR LIMITED

9. Market Price Data

Month Bombay Stock Exchange Limited National Stock Exchange of India Limited High Low Close Avg. Vol. High Low Close Avg. Vol. (in Rs.) (in Rs.) (in Rs.) (in Nos.) (in Rs.) (in Rs.) (in Rs.) (in Nos.) April – 08 112.50 96.60 105.50 2123631 112.50 96.55 105.55 9375300 May – 08 113.90 100.00 108.90 5926764 114.00 100.00 108.90 14320177 June – 08 112.00 92.40 93.10 2290985 112.00 92.65 93.40 6619318 July – 08 95.00 74.20 88.30 2959158 97.60 74.00 88.05 7518864 Aug – 08 92.60 80.05 82.50 1628785 93.45 79.50 82.40 4877007 Sept – 08 87.50 67.90 75.35 1469282 87.70 66.50 75.15 5178128 Oct – 08 78.15 34.05 42.75 2417920 78.40 34.00 42.55 6790556 Nov – 08 52.60 40.00 47.00 1443274 53.40 39.90 46.85 4503507 Dec – 08 58.35 42.20 52.65 1022018 58.40 37.10 52.65 3729929 Jan – 09 54.80 41.30 47.00 969306 54.90 41.20 47.00 3872367 Feb – 09 52.20 43.20 46.90 1282551 52.50 43.10 47.00 4431396 Mar – 09 53.25 41.85 50.15 1437507 53.35 42.00 50.25 4940030

10. Stock Performance a. Comparison of the Company’s share price with BSE Sensex

115 18000

100 16000 85 14000 70 12000 55 10000 40 25 8000 Jul 2008 Jan 2009 Jun 2008 Oct 2008 Apr 2008 Feb 2009 Feb Mar 2009 Dec 2008 Sep 2008 Nov 2008 Nov Aug 2008 Aug May 2008 May Idea Share Price BSE Sensex

b. Comparison of the Company’s share price with NSE Nifty

115 5500 100 5000 85 4500 70 4000 55 3500 40 3000 25 2500 Jul 2008 Jan 2009 Jun 2008 Oct 2008 Apr 2008 Feb 2009 Feb Mar 2009 Dec 2008 Sep 2008 Nov 2008 Nov Aug 2008 Aug May 2008 May

Idea Share Price NSE Nifty

22 Annual Report 2008-09

11. Registrar and Share Transfer Agents 15. Shareholding Pattern M/s. Bigshare Services Private Limited The shareholding pattern of the Company as on E/2 Ansa Industrial Estate, March 31, 2009 is as follows: Sakivihar Road, Saki Naka, Category No. of % Share- Andheri (East), Shares holding Mumbai – 400 072 Promoters 1,522,937,212 49.13 Tel: +91-22-28470652 Foreign Institutional Fax: +91-22-28475207 Investors 215,410,202 6.95 12. Share Transfer System Non-Resident Indians/ Transfer of shares in physical form are processed within a Overseas Corporate period of 12 days from the date of the lodgement subject Bodies 989,521,356 31.92 to documents being valid and complete in all respects. There Mutual Funds, Insurance have been no instances of transfer of shares in the physical Companies, Financial form during the financial year 2008-09. Institutions & Banks 242,685,212 7.82 13. Investor Services Bodies Corporate 37,809,754 1.22 The status of investors’ complaints as on March 31, 2009 is Resident Indians & Others 91,731,473 2.96 as follows:

No. of complaints as on April 1, 2008 6 16. Dematerialisation of Shares and Liquidity No. of complaints received during the The Shares of the Company are compulsorily traded in financial year 2008-09 228 dematerialised form. The shares of the Company are admitted for trading under both the Depository Systems in No. of complaints resolved upto March 31, 2009 234 India – NSDL and CDSL. A total number of 3,100,077,108 No. of complaints pending as on March 31, 2009 0 Equity Shares of the Company constituting over 99.99% of the issued, subscribed and paid-up share capital were in dematerialised form as on March 31, 2009. 14. Distribution of Shareholding The distribution of shareholding of the Company as on 17. Outstanding GDRs / ADRs etc. March 31, 2009 is as follows: No GDRs/ADRs/Warrants or Convertible Instruments are outstanding as on March 31, 2009. Number of Number % to total No. of % to 18. Investor Correspondence Equity Shares of Share- Share- Shares total held holders holders held Share- In order to facilitate quick redressal of the grievances / holding queries, the Investors and Shareholders may contact the Upto 5000 3,81,560 95.05 53,632,040 1.73 Company Secretary at the under mentioned address for any assistance: 5000 – 10000 11,525 2.87 9,035,797 0.29 Mr. Pankaj Kapdeo 10001– 20000 4,309 1.07 6,420,138 0.21 Vice President (Legal) & Company Secretary 20001 – 30000 1,364 0.34 3,493,358 0.11 Idea Cellular Limited th 30001 – 40000 498 0.13 1,768,244 0.06 “Windsor” 5 Floor, Off CST Road, Near Vidya Nagari, 40001 – 50000 522 0.13 2,470,992 0.08 Kalina, Santacruz (East), 50001 – 100000 794 0.20 5,654,971 0.18 Mumbai – 400 098 100001 & above 858 0.21 3,017,619,669 97.34 Tel: +91-9594003434 Fax: +91-22-26527080 Total 4,01,430 100.00 3,100,095,209 100.00 E-Mail: [email protected]

23 IDEA CELLULAR LIMITED

Declaration

As provided under Clause 49 of the Listing Agreement entered into with the Stock Exchange(s), it is hereby confirmed that all the Board Members and Senior Management Personnel of the Company have affirmed the compliance with the Code of Conduct for the year ended March 31, 2009

Place: Mumbai Sanjeev Aga Date: October 26, 2009 Managing Director CEO/CFO Certification To the Board of Directors Idea Cellular Limited a) We have reviewed the financial statements and cash flow statement of Idea Cellular Limited for the year ended March 31, 2009 and to the best of our knowledge and belief: i) these statements do not contain any materially untrue statement or omit any material fact or contain statements that might be misleading; ii) these statements together present a true and fair view of the Company’s affairs and are in compliance with existing Accounting Standards, applicable laws and regulations, other than the accounting treatment in respect of court approved Scheme(s) of Arrangement which have been explained in the relevant notes to the Accounts. b) To the best of our knowledge and belief, no transactions are entered into by the Company during the year ended March 31, 2009, which are fraudulent, illegal or violative of the Company’s Code of Conduct. c) We accept responsibility for establishing and maintaining internal controls for financial reporting and we have evaluated the effectiveness of internal control system of the Company pertaining to financial reporting. We have disclosed to the Auditors and the Audit Committee, deficiencies in the design and operations of such internal controls, if any, of which we are aware and steps that have been taken to rectify these deficiencies. d) We have indicated to the Auditors and the Audit Committee: i) Significant changes in the internal control over financial reporting during the year; ii) Significant changes in the accounting policies during the year and that the same has been disclosed in the notes to the financial statements; and iii) Instances of significant fraud of which we have become aware and the involvement therein, if any, of the management or any employee having a significant role in the Company’s internal control system over financial reporting.

Place: Mumbai Sanjeev Aga Akshaya Moondra Date: October 26, 2009 Managing Director Chief Financial Officer Auditors’ Certificate To the Members of Idea Cellular Limited We have examined the compliance of conditions of Corporate Governance by Idea Cellular Limited, for the year ended March 31, 2009, as stipulated in Clause 49 of the Listing Agreement of the said Company with the Stock Exchanges. The compliance of conditions of Corporate Governance is the responsibility of the Management. Our examination has been limited to review of the procedures and implementation thereof adopted by the Company for ensuring compliance with the conditions of Corporate Governance as stipulated in the said Clause. It is neither an audit nor an expression of opinion on the financial statements of the Company. In our opinion and to the best of our information and according to the explanations given to us and the representations made by the Directors and the management, we certify that the Company has complied with the conditions of Corporate Governance as stipulated in Clause 49 of the above mentioned Listing Agreement. We further state that such compliance is neither an assurance as to the future viability of the Company nor of the efficiency or effectiveness with which the management has conducted the affairs of the Company. For Deloitte Haskins & Sells Chartered Accountants

Hemant M. Joshi Partner Membership No:38019 Place: Mumbai Date: October 26, 2009 24 Annual Report 2008-09

Persons constituting group coming within the definition of “Group” for the purpose of regulation 3(1)(e)(i) of Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 1997, include the following:

1 Abha Investments Pte Limited 2 Aditya Birla Financial Services Pte Limited 3 BGH Exim Limited 4 Big Banyan Investments Pte Limited 5 Birla Group Holdings Private Limited 6 Birla TMT Holdings Private Limited 7 Blue Bucks Investments Pte Limited 8 Calyx Investments Pte Limited 9 Essel Mining & Industries Limited 10 Green Acre Agro Services Private Limited 11 Gwalior Properties And Estates Private Limited 12 Heritage Housing Finance Limited 13 IGH Holdings Private Limited 14 Indogenious Holdings Pte Limited 15 Infocyber India Private Limited 16 Kiran Investments Pte Limited 17 Mangalam Carbide Limited 18 Mangalam Services Limited 19 Naman Finance & Investments Private Limited 20 Pilani Investment and Industries Corporation Limited 21 Seshasayee Properties Private Limited 22 SKI Investments Pte Limited 23 Surya Abha Investments Pte Limited 24 Surya Kiran Investments Pte Limited 25 Surya Viniyog Pte Limited 26 TGS Investment & Trade Private Limited 27 Trapti Trading & Investments Private Limited 28 Turquoise Investments and Finance Private Limited 29 Umang Commercial Company Limited

25 IDEA CELLULAR LIMITED

Auditors’ Report To the Members of Idea Cellular Limited 1. We have audited the attached Balance Sheet of Idea Cellular (c) the Balance Sheet, the Profit and Loss Account and Limited (‘the Company’) as at March 31, 2009, the Profit the Cash Flow Statement dealt with by this report are and Loss Account and the Cash Flow Statement of the in agreement with the books of account; Company for the year ended on that date, both annexed thereto (together referred to as ‘financial statements’). These (d) in our opinion, the Balance Sheet, the Profit and Loss financial statements are the responsibility of the Company’s Account and the Cash Flow Statement dealt with by management. Our responsibility is to express an opinion this report comply with the Accounting Standards on these financial statements based on our audit. referred to in Section 211(3C) of the Companies Act, 1956; 2. We conducted our audit in accordance with the auditing standards generally accepted in India. These Standards (f) in our opinion and to the best of our information and require that we plan and perform the audit to obtain according to the explanations given to us, the said reasonable assurance about whether the financial financial statements read together with the notes statements are free of material misstatements. An audit thereon give the information required by the includes examining, on a test basis, evidence supporting Companies Act, 1956 in the manner so required and the amounts and disclosures in the financial statements. give a true and fair view in conformity with the An audit also includes assessing the accounting principles accounting principles generally accepted in India: used and the significant estimates made by management, (i) in the case of the Balance Sheet, of the state of as well as evaluating the overall financial statement affairs of the Company as at March 31, 2009; presentation. We believe that our audit provides a reasonable basis for our opinion. (ii) in the case of the Profit and Loss Account, of the profit of the Company for the year ended on that 3. Without qualifying our opinion, we draw attention to Note date; and B4 of schedule 22 to the financial statements. As explained in the said note, the difference between the carrying value (iii) in the case of the Cash Flow Statement, of the of the licenses and consideration, or impairment loss, if cash flows of the Company for the year ended on any would be adjusted with the securities premium account. that date. The impact of the above on the Reserve and Surplus of the 6. on the basis of the written representations received from Company is not ascertainable at this stage. the directors, as on March 31, 2009 and taken on record 4. As required by the Companies (Auditor’s Report) Order, by the Board of Directors, we report that none of the 2003, (‘the said Order’) issued by the Central Government directors is disqualified as on March 31, 2009 from being in terms of Section 227(4A) of the Companies Act, 1956, appointed as a director in terms of Section 274 (1)(g) of we enclose in the annexure a statement on the matters the Companies Act, 1956; specified in the paragraphs 4 and 5 of the said Order. 5. Further to our comments in the Annexure referred to in For Deloitte Haskins & Sells paragraph 3 above, we report that: Chartered Accountants

(a) we have obtained all the information and explanations, Hemant M. Joshi which to the best of our knowledge and belief were Partner necessary for the purposes of our audit; Membership No: 38019 (b) in our opinion, proper books of account as required by law have been kept by the Company so far as it appears Place: Mumbai from our examination of those books; Date: October 26, 2009

26 Annual Report 2008-09

Annexure to the Auditors’ Report

(Referred to in paragraph 3 of our report of even date) goods and services. During the course of our audit we have not observed any continuing failure to correct major 1. In respect of its fixed assets: weaknesses in such internal controls systems with regard a) The Company has maintained proper records showing to purchase of inventory and fixed assets and for the sale full particulars, including quantitative details and of goods and services. situation of fixed assets. 5. In our opinion and according to the information and b) Fixed Assets have been physically verified by the explanations given to us, there were no contracts, management according to the regular programme of particulars of which needed to be entered in the register periodical verification in phased manner which in our maintained under section 301 of the Companies Act, 1956 opinion is reasonable having regard to the size of the and hence provisions of paragraph 4(v)(b) of the said Order Company and the nature of its fixed assets. In relating to reasonableness of price having regard to accordance with this policy, the Company has physically prevailing market price is not applicable to the Company. verified certain fixed assets during the year. The Company is in the process of reconciling the results of 6. In our opinion and according to the information and such physical verification with the fixed assets register. explanations given to us, the Company has not accepted Management believes that differences if any, arising any deposits from the public to which the directives issued out of such reconciliation are not expected to be by the Reserve Bank of India and the provisions of sections material. 58A and 58AA of the Companies Act, 1956 and the rules c) The Company, during the year, demerged certain framed there under are applicable. Passive infrastructure assets to its Subsidiary Company as per the scheme sanctioned by the High Court. 7. In our opinion, the Company has an internal audit system According to the information and explanations given commensurate with the size and nature of its business. to us, we are of the opinion that the demerger of the 8. We have broadly reviewed the books of account maintained Passive Infrastructure assets although substantial has by the Company pursuant to the rules prescribed by the not affected the going concern status of the Company. Central Government for maintenance of cost records under (Refer Note B6 of schedule 22 to the financial section 209(1)(d) of the Companies Act, 1956 in respect statements) of telecommunication activities and are of the opinion that 2. In respect of its inventories: prima facie, the prescribed accounts and records have been made and maintained. However, we have not made a a) The inventories, except for those lying with the third detailed examination of the records. parties, have been physically verified by the management at the year-end. In our opinion, the 9. In respect of statutory dues: frequency of such verification is reasonable. b) In our opinion and according to the information and a) According to the information and explanations given explanations given to us, the procedures of physical to us and the records of the Company examined by us, verification of inventories followed by the management in our opinion, the Company is generally regular in are reasonable and adequate in relation to the size of depositing the undisputed statutory dues including the Company and the nature of its business. provident fund, employees’ state insurance, income- tax, sales tax, wealth tax, service tax, customs duty, c) On the basis of our examination of the records of cess and any other statutory dues as applicable with inventory and according to the information and the appropriate authorities. As explained to us, the explanations given to us, we are of the opinion that Company did not have any dues on account of Excise the Company is maintaining proper records of duty and Investor Education and Protection Fund. inventory. The discrepancies noticed on verification between the physical stock and the book records were b) According to the information and explanations given not material. to us, no undisputed amount payable in respect of 3. According to the information and explanations given to us, provident fund, employees’ state insurance, income- the Company has not granted / taken any loans, secured or tax, sales tax, wealth tax, service tax, customs duty, unsecured, to / from companies, firms or other parties excise duty, cess and any other statutory dues covered in the register maintained under section 301 of applicable to it were in arrears, as at March 31, 2009 the Companies Act, 1956. for a period of more than six months from the date they became payable. 4. In our opinion, and according to the information and explanations given to us, having regard to explanation that c) According to the information and explanations given major capital goods and spares thereof purchased are of to us, there are no dues of Excise duty, Wealth tax, special nature and suitable alternative sources do not exist Customs duty, Employees’ State Insurance which have for obtaining comparable quotations, there are adequate not been deposited on account of any dispute. The internal control procedures commensurate with the size of dues of Income tax, Entry tax, Service tax and Sales the Company and the nature of its business with regard to tax as disclosed below have not been deposited by the purchase of inventory and fixed assets and for the sale of Company on account of disputes. 27 IDEA CELLULAR LIMITED

Name of the Statute Nature of Period to which Amount Forum where the Dues the amount pertains (Rs. Million) dispute is pending Income Tax Act, 1961 Income tax 2002-03, 2004-05, 53.27 Commissioner of Income Tax 2006-07, 2007-08, (Appeals) 2008-09 Kerala Sales Tax Act, 1963 Sales tax 1998-99 0.06 Deputy Commissioner Kerala Sales Tax Act, 1963 Sales tax 2005-06 to 2007-08 0.03 Deputy Commissioner, (Appeals) Kerala Sales Tax Act, 1963 Sales tax 1997-98 0.39 Sales Tax Appellate Tribunal Andhra Pradesh General Sales tax 1997-98, 2002-03 227.46 Andhra Pradesh High Court Sales Tax Act, 1957 to 2004-05 Andhra Pradesh Value Sales tax 2005-06 to 2007-08 81.95 Andhra Pradesh High Court Added Tax, 2005 Delhi Sales Tax Act, 1975 Sales tax 2003-04,2004-05 92.74 Additional Commissioner (Appeals) Gujarat Sales Tax Act, 1969 Sales tax 1998-99 to 2001-02 7.04 Sales Tax Tribunal Gujarat Sales Tax Act, 1969 Sales tax 2006-07 0.83 Assessing officer Madhya Pradesh Commercial Sales tax 2000-01 , 2002-03 1.05 Appellate Board Tax Act, 1994 Madhya Pradesh Commercial Sales tax 2001-02 , 2003-04 7.29 Appellate Deputy Commissioner Tax Act, 1994 to 2005-06 Madhya Pradesh Commercial Sales tax 2004-05 3.12 Assistant Commissioner Tax Act, 1994 Madhya Pradesh Commercial Sales tax 2003-04 0.63 Madhya Pradesh Commercial Tax Tax Act, 1994 Tribunal Uttar Pradesh Trade Tax Act, 1948 Sales tax 2004-05 0.05 Joint Commissioner (Appeals) Uttar Pradesh Trade Tax Act, 1948 Sales tax 2005-06 0.43 Joint Commissioner (Appeals) Finance Act, 1994 Service tax 2004-05 31.32 Central Excise, Service Tax (Service Tax provisions) Appellate Tribunal Finance Act, 1994 Service tax 2007-08 10.53 Central Excise, Service Tax (Service Tax provisions) Appellate Tribunal Finance Act, 1994 Service tax 2004-05 to 2007-08 171.76 Central Excise, Service Tax (Service Tax provisions) Appellate Tribunal Finance Act, 1994 Service tax 2003-04, 2006-07, 6.50 Commissioner (Appeals) (Service Tax provisions) 2007-08 Finance Act, 1994 Service tax 1999-2000 to 3.10 Supreme Court (Service Tax provisions) 2003-04 Finance Act, 1994 Service tax 2005-06 to 2007-08 32.59 Commissioner (Appeals) (Service Tax provisions) Finance Act, 1994 Service tax 2005-06 2.68 Commissioner (Appeals) (Service Tax provisions) Customs Act, 1962 Custom duty 2003-04 1.15 Central Excise, Service Tax Appellate Tribunal Haryana Land Development Tax Entry tax 2002-03 9.52 Tribunal Act, 2001 MP Entry Tax Act, 1976 Entry tax 2003-04 to 2005-06 8.59 Appellate Deputy Commissioner MP Entry Tax Act, 1976 Entry tax 1998-99,1999-2000, 0.13 Assistant Commissioner 2000-01 MP Entry Tax Act, 1976 Entry tax 1998-99 to 2002-03 4.70 Madhya Pradesh Commercial Tax Tribunal The Uttar Pradesh Tax on Entry of Entry tax 2004-05 2.08 Joint Commissioner (Appeals) Goods Act, 2000 The Uttar Pradesh Tax on Entry of Entry tax 1999-2000, 2001-02 8.89 Trade Tax Tribunal Goods Act, 2000 to 2003-04 Uttar Pradesh Trade Tax Act, 1948 Entry tax 2001-02 to 2003-04 1.14 Joint Commissioner (Appeals) Uttar Pradesh Trade Tax Act, 1948 Entry tax 1999-2000, 2000-01, 11.72 Trade Tax Tribunal 2002-03, 2007-08 28 Annual Report 2008-09

10. The accumulated losses of the Company are less than fifty information and explanations given to us, as at the balance percent of its net worth and the Company has not incurred sheet date funds amounting to Rs.15,000 million raised on cash losses during the current financial year covered by the short term basis have been used for long term purpose. our audit and the immediately preceding financial year. 18. The Company has not made preferential allotment of shares 11. In our opinion and according to the information and to parties and companies covered in the register maintained explanations given to us, the Company has not defaulted under section 301 of the Companies Act, 1956, during the in repayment of dues to the financial institutions and banks. year. 12. According to the information and explanations given to us, 19. The Company has not issued any debentures during the the Company has not granted loans and advances on the year. basis of security by way of pledge of shares, debentures 20. The management has disclosed the end use of money raised and other securities. by public issue and the same has been verified by us. 13. The Company is not a chit fund or a nidhi / mutual benefit 21. During the course of our examination of the books of fund / society. Therefore, the provisions of paragraph 4(xiii) account, carried out in accordance with generally accepted of the said Order are not applicable to the Company. auditing practices in India, and according to the information 14. In our opinion and according to the information and and explanations given to us, we have neither come across explanations given to us, the Company is not dealing in or any incidence of material fraud on or by the Company, trading in shares, securities, debentures and other noticed or reported during the year, nor have we been investments. informed of any such case by the management. 15. In our opinion and according to the information and For Deloitte Haskins & Sells explanations given to us, the terms and conditions of the Chartered Accountants guarantees given by the Company for loans taken by others from banks and financial institutions are not prima facie prejudicial to the interest of the Company. Hemant M. Joshi Partner 16. In our opinion and according to the information and Membership No: 38019 explanations given to us, the term loans taken by the Company have been applied for the purpose for which they Place: Mumbai were raised to the extent utilised. Date: October 26, 2009 17. On the basis of an overall examination of the balance sheet of the Company, in our opinion and according to the

29 IDEA CELLULAR LIMITED

Balance Sheet as at March 31, 2009

(Rupees in Million) As at As at Schedules March 31, 2009 March 31, 2008 SOURCES OF FUNDS Shareholders’ Funds Share Capital 1 31,000.95 26,353.61 Outstanding Employee Stock Options 182.33 37.59 Reserves and Surplus 2 85,813.71 23,134.00 116,996.99 49,525.20

Loan Funds Secured 3 55,649.32 53,154.17 Unsecured 4 20,144.34 11,993.42 75,793.66 65,147.59 Deferred Tax Liability (Net) (Refer Note B 29 to Schedule 22) 1,425.38 661.85 TOTAL 194,216.03 115,334.64 APPLICATION OF FUNDS Fixed Assets Gross Block (At Cost) 5 155,627.51 132,043.01 Less: Depreciation & Amortisation 47,398.61 42,214.97 Net Block 108,228.90 89,828.04 Capital Work-in-Progress 17,218.18 16,257.17 125,447.08 106,085.21 Investments 6 49,288.08 5,699.31 Current Assets, Loans and Advances Current Assets Inventories 7 427.29 276.15 Sundry Debtors 8 3,295.87 1,985.93 Cash and Bank Balances 9 23,444.29 4,970.55 Other Current Assets 10 1,330.84 520.66 Loans and Advances 11 19,140.17 7,986.73 47,638.46 15,740.02

Less: Current Liabilities and Provisions 12 Current Liabilities 31,223.91 25,436.63 Provisions 986.51 818.21 32,210.42 26,254.84 Net Current Assets/(Liabilities) 15,428.04 (10,514.82) Profit and Loss Account 4,052.83 14,064.94 TOTAL 194,216.03 115,334.64 Significant Accounting Policies and Notes to the Financial Statements 22 The Schedules referred to above form an integral part of the Balance Sheet As per our report of even date attached For Deloitte Haskins & Sells For and on behalf of the Board Chartered Accountants Hemant M. Joshi Tarjani Vakil Biswajit Subramanian Partner Director Director Membership No.: 38019 Place: Mumbai Sanjeev Aga Akshaya Moondra Pankaj Kapdeo Date: October 26, 2009 Managing Director Chief Financial Officer Company Secretary

30 Annual Report 2008-09

Profit and Loss Account for the year ended March 31, 2009 (Rupees in Million) Schedules For the year ended For the year ended March 31, 2009 March 31, 2008 INCOME Service Revenue 98,383.47 67,199.83 Sales of Trading Goods 187.33 0.07 Other Income 13 215.77 174.55 TOTAL 98,786.57 67,374.45 OPERATING EXPENDITURE Cost of Trading Goods Sold 14 189.64 0.06 Personnel Expenditure 15 4,676.85 3,417.82 Network Operating Expenditure 16 20,761.57 10,469.53 Licence and WPC Charges 17 10,958.96 6,851.03 Roaming & Access Charges 18 18,158.81 11,334.41 Subscriber Acquisition & Servicing Expenditure 19 8,145.66 6,469.63 Advertisement and Business Promotion Expenditure 4,265.71 3,224.29 Administration & other Expenses 20 3,824.93 2,895.03 70,982.13 44,661.80 PROFIT BEFORE FINANCE CHARGES, DEPRECIATION, 27,804.44 22,712.65 AMORTISATION & TAXES Finance and Treasury Charges (Net) 21 4,507.24 2,776.42 Depreciation 5A 10,967.22 7,568.52 Amortisation of Intangible Assets 5B 1,461.34 1,199.10 Non Compete Fee (Refer note B 5 to Schedule 22) 5,439.75 Less: Amount Withdrawn from Securities Premium (Refer note B 5 to Schedule 22) (5,439.75) – – Loss on De-merger of Passive Infrastructure to Idea Cellular Towers Infrastructure Limited (Refer note B 6 to Schedule 22) 16,227.76 Less: Amount withdrawn from Reserve for Business Restructuring (Refer note B 6 to Schedule 22) (16,227.76) – – PROFIT BEFORE TAX 10,868.64 11,168.61 Provision for taxation - Current 1,268.99 425.33 - Deferred 763.53 651.30 - Fringe Benefit Tax 93.00 73.69 - MAT Credit (1,268.99) (425.33) PROFIT AFTER TAX 10,012.11 10,443.62 Balance of Loss brought forward from previous year (14,064.94) (24,508.56) BALANCE OF LOSS CARRIED FORWARD TO BALANCE SHEET (4,052.83) (14,064.94) EARNINGS PER SHARE (Refer note B 28 to Schedule 22) Basic 3.42 3.96 Diluted 3.42 3.96 Significant Accounting Policies and Notes to the Financial Statements 22 The Schedules referred to above form an integral part of the Profit & Loss Account As per our report of even date attached For Deloitte Haskins & Sells For and on behalf of the Board Chartered Accountants Hemant M. Joshi Tarjani Vakil Biswajit Subramanian Partner Director Director Membership No.: 38019 Place: Mumbai Sanjeev Aga Akshaya Moondra Pankaj Kapdeo Date: October 26, 2009 Managing Director Chief Financial Officer Company Secretary

31 IDEA CELLULAR LIMITED

Schedules forming part of the Accounts (Rupees in Million) As at As at March 31, 2009 March 31, 2008 SCHEDULE 1 SHARE CAPITAL Authorised (Refer note B 1(a) to Schedule 22) 6,775,000,000 (Previous year 4,275,000,000) Equity Shares of Rs.10 each 67,750.00 42,750.00 1500 (Previous year 1500) Redeemable Cumulative Non Convertible Preference Shares 15,000.00 15,000.00 of Rs.10 Mn. Each 82,750.00 57,750.00 Issued, Subscribed and Paid-Up Equity Share Capital (Refer note B 1(b) to Schedule 22) 3,100,095,209 (Previous year 2,635,360,539) Equity Shares of Rs. 10 each fully paid up 31,000.95 26,353.61 31,000.95 26,353.61 SCHEDULE 2 RESERVES AND SURPLUS Amalgamation Reserve 643.57 643.57 Capital Reserve 1,414.56 1,414.56 Security Premium Account Opening Balance 21,075.87 18,313.36 Add: Premium on issue of Preferential allotment (Refer note B 1(b) to Schedule 22) 68,297.40 – Add: Premium on issue of shares under Green Shoe Option – 2,762.51 Less: Share Issue Expenses (177.94) – Less: Withdrawals (Refer note B 5 to Schedule 22) (5,439.75) – 83,755.58 21,075.87 Reserve for Business Restructuring (Refer Note B 6 to Schedule 22) Opening Balance – – Additions during the year 16,227.76 – Less: Transferred to Profit and Loss Account during the year 16,227.76 – – – 85,813.71 23,134.00 SCHEDULE 3 SECURED LOANS Term Loan (Refer note B 8 to Schedule 22) Foreign Currency Loan - From Banks 4,268.34 4,268.04 - From Financial Institutions 4,279.80 – Rupee Loan - From Banks 40,071.95 41,480.20 - From Financial Institutions 6,682.76 7,099.70 (Repayable within one year Rs. 4,275.59 Mn, Previous Year Rs. 1,425.20 Mn) Vehicle Loan 346.47 306.23 (Repayable within one year Rs. 142.04 Mn, Previous Year Rs. 103.08 Mn) 55,649.32 53,154.17 SCHEDULE 4 UNSECURED LOANS Term Loan Foreign Currency Loan - From Banks 3,386.98 1,390.16 Rupee Loan - From Others (Refer note B 12 to Schedule 22) 1,757.36 1,757.36 Short Term Loan Rupee Loan from Banks – 8,845.90 Others 15,000.00 – 20,144.34 11,993.42 32 Annual Report 2008-09 77.76 80.74 405.79 411.88 353.96 152.84 330.24 142.05 77,415.71 78,884.44 78,884.44 10,943.60 10,943.60 10,457.07 (Rupees in Million) (Rupees in Million) - 91.96 9 31, 2009 March 31, 2008 March 9 31, 2009 March 31, 2008 March 76.32 149.81 52.83 638.74 196.96 455.99 488.41567.80 502.82 312.50 203.34 372.20 1,070.61 698.58 33,322.17 95,719.75 11,311.01 9,395.71 March 31, 2009 March 31, 2009 March Depreciation Block Net Amortisation Block Net 2.52 0.06 elecom Service License period. k Nil (Previous Year Rs. 45.00 Mn) Year k Nil (Previous and corresponding Accumulated Depreciation being Rs. 89.69 Mn. (Previous Year Rs. 4.88 Mn.) Year being Rs. 89.69 Mn. (Previous Depreciation Accumulated and corresponding and corresponding Accumulated Depreciation being Rs. 640.62 Mn (Previous Year Rs. 134.43 Mn) Year being Rs. 640.62 Mn (Previous Depreciation Accumulated and corresponding --- - 67.94 11.95 - 3.57 10.21 42.62 - - 165.80397.02 32.98491.99189.97 92.51 79.85 - 155.98 - - 1.82 - 1.12 4.04 33.45 716.66 357.42 - 3.47 29,925.73 10,596.47 5,189.06 2,010.97 10,249.65 1,061.36 - - 91.96 226.13 652.95 991.23 771.14 684.70 691.57 1,769.19 20,706.72 129,041.92 Gross Block Gross Block Gross March 31, 2009March de-merger 31, 2009 March 31, 2009 March de-merger ended Year 31, 2009March de-merger 31, 2009 March 31, 2009 March de-merger ended Year April 1, 2008 ended the Year account of ended the for Year 31, 2009 March April 1, 2008 ended the Year account of for the 31, 200 March April 1, 2008 ended the Year account of ended the for Year 31, 2009 March April 1, 2008 ended the Year account of for the 31, 200 March Less: Pre-operative Less: Pre-operative ParticularsLand LandLeasehold at As Building Additions for Machinery & Plant Deletions on 209.99 Fixture & Furniture 107,341.44 Sale/AdjustmentOffice Equipment 77.76 45,065.89 750.98Vehicles 19.96 577.68 21,187.53Sub-Total 644.83 As at 14.20 241.85Charge Capitalized 77.09 2,177.88 - 130.94TOTAL 110,122.89 As at 520.21 YearPrevious Additions for - - 45,794.66 Deletions on - 21,187.53 244.73 70,469.28 - Sale/Adjustment 3.82 110,122.89 42,441.36 45,794.66 1.60 2,269.99 As at - - 21,187.53 1.82 132,460.03 4.63 Particulars - 31,238.45 As at 2,269.99 10,969.74 80.24 FeesEntry/License 132,460.03 2,787.75 5,189.06 As at Software - Computer 31,238.45 at As 20,706.72 110,122.89Bandwidth 1,122.45 10,967.22 Additions for 2,054.97 26,305.67Sub-Total Deletions on 5,189.06 34,964.16 649.99 7,568.52Charge Capitalized Sale/Adjustment - 97,495.87 TOTAL 90.95 2,054.97 21,920.12 YearPrevious - Total 34,964.16Grand As at - 1,250.61 - 600.62 97,495.87 14,710.58 21,920.12 2,635.74 132,043.01 As at 7,235.59 Additions for - 3.25 1,250.61 31,238.45 47,045.27 - Deletions on 78,884.44 21,187.53 Sale/Adjustment - - 3.25 2,273.24 As at - 23,167.48 155,627.51 26.05 10,976.52 42,214.97 As at 3.25 12,428.56 21,920.12 1,461.40 23,167.48 9,795.79 As at 5,189.06 10,976.52 1,199.10 2,058.44 1,461.34 - 47,398.61 108,228.90 - 3.47 - 12,434.45 18.37 10,733.03 3.47 10,976.52 12,434.45 10,943.60 10,733.03 Schedules forming part forming Schedules of the Accounts SCHEDULE 5 - FIXED ASSETS (Refer note B 6 & 22 to Schedule 22) note SCHEDULE 5 - FIXED ASSETS (Refer ASSETS A. TANGIBLE ASSETS B - INTANGIBLE Notes: 1. Bloc - Rs. 1,988.03 Mn) and Net Year Block Rs. 38.51 Mn. (Previous disposal- Gross held for Plant & Machinery includes assets 2. Rs.975.01 Mn) Year capitalised under finance of assets lease Rs. 2,219.73 Mn (Previous Plant & Machinery Block includes Gross Notes: 1. Rs.38.28 Mn.) Year capitalised under finance lease Rs. 270.32 Mn. (Previous Block of assets - Software include Gross Computer 2. T based on the respective 19 years 7 to 31, 2009 ranges between amortisation as at March The remaining period of license fees 33 IDEA CELLULAR LIMITED

Schedules forming part of the Accounts (Rupees in Million) As at As at March 31, 2009 March 31, 2008 SCHEDULE 6 INVESTMENTS Long-term Trade Investment (Unquoted) Investments in Shares of Subsidiaries Aditya Birla Telecom Limited (Refer note B 6 to Schedule 22) 16,327.76 100.00 10,000,000 fully paid equity shares of Rs 10 each Idea Cellular Infrastructure Services Limited 0.50 0.50 50,000 fully paid equity shares of Rs 10 each Idea Cellular Services Limited 0.50 0.50 50,000 fully paid equity shares of Rs 10 each Swinder Singh Satara & Company Limited 38.31 38.31 50,000 fully paid equity shares of Rs 10 each Long-term Trade Investment (Quoted) Investment in Joint Venture Spice Communications Limited (Refer note B 3 to Schedule 22) 22,041.87 – 283,489,350 fully paid equity shares of Rs. 10 each (Market value - Rs. 16,343.16 Mn) Current Investment Investments in Units of Mutual Funds (Refer note B 19 to Schedule 22) 10,879.14 5,560.00 (Includes unutilised Initial Public Offer proceed of Rs.Nil, Previous Year Rs.4,885.90 Mn) 49,288.08 5,699.31 SCHEDULE 7 INVENTORIES (At lower of cost or estimated realisable value) Trading Goods (Refer note B 18 to Schedule 22) – 0.45 Sims and Other Cards 427.29 275.70 427.29 276.15 SCHEDULE 8 SUNDRY DEBTORS Debts outstanding for over six months Unsecured - Considered good 77.44 95.31 - Considered doubtful 2,640.99 2,356.33 2,718.43 2,451.64 Other Debts Unsecured - Considered good 3,218.43 1,890.62 - Considered doubtful 153.73 106.80 3,372.16 1,997.42 Less: Provision for doubtful debts 2,794.72 2,463.13 Total 3,295.87 1,985.93 Sundry Debtors include certain parties from whom Security Deposits of Rs.246.51Mn. (Previous Year Rs. 225.77 Mn) have been taken and are lying with the Company SCHEDULE 9 CASH AND BANK BALANCES Cash and Cheques on Hand 205.99 296.92 Balances with Scheduled Banks - in Current Accounts 1,202.60 1,179.81 - in Deposit Accounts 22,035.70 3,493.82 [Includes unutilised Initial Public Offer proceeds of Rs.NIL, (Previous year 3,150.00 Mn) and Rs. 35.55 Mn. (Previous year Rs. 71.90 Mn) as margin money] 23,444.29 4,970.55 34 Annual Report 2008-09

Schedules forming part of the Accounts (Rupees in Million) As at As at March 31, 2009 March 31, 2008 SCHEDULE 10 OTHER CURRENT ASSETS Unbilled Revenue 523.72 476.82 Interest Receivable on Deposits with Scheduled Banks 807.12 43.84 1,330.84 520.66 SCHEDULE 11 LOANS AND ADVANCES (Unsecured, considered good unless otherwise stated) Advances recoverable in cash or kind or for value to be received - Considered good 6,173.57 6,286.75 - Considered doubtful 90.75 90.75 Less: Provision for doubtful advances 90.75 90.75 6,173.57 6,286.75 Deposits with Body Corporates 8,922.08 – Deposits with Subsidiaries 748.03 272.16 Deposits and Balances with Govt. Authorities 204.74 241.10 Deposits with others 1,305.52 609.58 Advance Income Tax (Net of provision of Rs. 1,268.99 Mn., Previous year Rs. 425.33 Mn) 91.91 151.81 MAT Credit Entitlement 1,694.32 425.33 19,140.17 7,986.73 SCHEDULE 12 CURRENT LIABILITIES AND PROVISIONS Current Liabilities Sundry Creditors (Refer note B 20 to Schedule 22) 19,938.74 16,854.57 Book Bank Overdraft 1,089.05 2,255.71 Advances from Customers 5,416.55 4,054.32 Deposits from Customers and Others 1,423.21 1,268.38 Other Liabilities 1,802.76 910.94 Interest accrued but not due 1,553.60 92.71 31,223.91 25,436.63 Provisions Gratuity (Refer note B 24(a) to Schedule 22) 17.55 23.38 Leave Encashment 490.87 315.28 Asset Retirement Obligation (Refer note B 31 to Schedule 22) 470.89 473.58 Provision for Fringe Benefit Tax (Net of Advance of Rs. 92.00 Mn., Previous Year Rs.174.66 Mn) 7.20 5.97 986.51 818.21 Total 32,210.42 26,254.84

35 IDEA CELLULAR LIMITED

Schedules forming part of the Accounts (Rupees in Million) For the year ended For the year ended March 31, 2009 March 31, 2008 SCHEDULE 13 OTHER INCOME Liabilities / Provisions no longer required written back 156.78 139.73 Miscellaneous Receipts 58.99 34.82 215.77 174.55 SCHEDULE 14 COST OF TRADING GOODS SOLD (Refer note B 18 to Schedule 22) Opening Stock 0.45 0.45 Add: Purchases 189.19 0.06 Less: Closing Stock - 0.45 189.64 0.06 SCHEDULE 15 PERSONNEL EXPENDITURE Salaries and Allowances etc. 4,174.17 3,022.78 Contribution to Provident and Other Funds 215.82 147.41 Staff Welfare 194.56 158.57 Recruitment and Training 92.30 89.06 4,676.85 3,417.82 SCHEDULE 16 NETWORK OPERATING EXPENDITURE Security Service Charges 686.21 777.55 Power and Fuel 5,335.42 2,244.04 Repairs and Maintenance - Plant and Machinery 2,377.02 1,330.28 Switching & Cellsites Rent 1,711.96 829.38 Lease Line and Connectivity Charges 3,461.89 2,268.96 Network Insurance 41.39 26.50 Passive Infrastructure Charges 6,858.66 2,843.50 Other Network Operating expenses 289.02 149.32 20,761.57 10,469.53 SCHEDULE 17 LICENCE AND WPC CHARGES Licence Fees 7,245.71 4,150.85 WPC and Spectrum Charges 3,713.25 2,700.18 10,958.96 6,851.03 SCHEDULE 18 ROAMING & ACCESS CHARGES Roaming Charges 958.63 1,017.89 Access Charges 17,200.18 10,316.52 18,158.81 11,334.41

36 Annual Report 2008-09

Schedules forming part of the Accounts (Rupees in Million) For the year ended For the year ended March 31, 2009 March 31, 2008 SCHEDULE 19 SUBSCRIBER ACQUISITION & SERVICING EXPENDITURE Cost of Sim and Other Cards 955.83 532.97 Commission and Discount to dealers & recharge expenses 4,287.26 4,561.69 Customer Verification Expenses 358.92 192.86 Collection & Telecalling Expenses 2,438.46 1,121.32 Customer Retention & Customer loyalty Expenses 105.19 60.79 8,145.66 6,469.63 SCHEDULE 20 ADMINISTRATION & OTHER EXPENSES Repairs and Maintenance - Building 19.02 17.18 - Others 1,220.74 961.78 Other Insurance 30.46 21.02 Non Network Rent 473.28 341.57 Rates and Taxes 59.81 87.11 Electricity 188.09 110.44 Printing and Stationery 87.40 62.88 Communication Expenses 145.57 124.20 Traveling and Conveyance 438.13 407.60 Provision for bad and doubtful debts / advances 331.59 244.94 Bank Charges 117.85 97.31 Directors Sitting Fees 1.11 0.91 Legal and Professional Charges 266.39 171.18 Audit Fees (Refer note B 13 to Schedule 22) 25.70 22.00 Loss on Sale of Fixed Assets / Assets disposed off 17.57 8.89 Miscellaneous expenses 402.22 216.02 3,824.93 2,895.03 SCHEDULE 21 FINANCE AND TREASURY CHARGES (NET) Interest - On Fixed Period Loan (Net of Rs.190.39 Mn capitalised, Previous year Rs.147.47 Mn) 8,247.09 4,348.77 - Others 47.49 32.48 Financing Charges 189.20 211.02 8,483.78 4,592.27 Less: Interest Received (Gross of Tax) 2,330.36 849.52 Profit on Sale of Other Investments 2,227.48 431.79 Gain / (Loss) on Foreign Exchange Fluctuation (Refer note B 22 to Schedule 22) (581.30) 534.54 4,507.24 2,776.42

37 IDEA CELLULAR LIMITED

Schedules forming part of the Accounts SCHEDULE 22 useful economic lives as estimated by the management A. SIGNIFICANT ACCOUNTING POLICIES between 3 to 5 years. 1. Basis of Preparation of Financial Statements: iii) Bandwidth / Fibre taken on Indefeasible Right of Use (IRU) is amortised over the agreement period. The Financial Statements have been prepared under the historical cost convention on accrual basis. The mandatory Assets costing upto Rs. 5,000/- are depreciated fully in the applicable accounting standards in India and the provisions month of purchase. of the Companies Act, 1956 have been followed in 5. Inventories: preparation of these financial statements. Inventories are valued at cost or net realisable value, whichever 2. Fixed Assets: is lower. Cost is determined on weighted average basis. Fixed assets are stated at cost of acquisition and installation 6. Foreign currency transactions: less accumulated depreciation. Cost is inclusive of freight, duties, levies and any directly attributable cost of bringing Transactions in foreign currency are recorded at the the assets to their working condition for intended use. exchange rates prevailing at the dates of the transactions. Asset retirement obligations are capitalized based on a As per the transitional provisions given in the notification st constructive obligation as a result of past events, when it issued by Ministry of Corporate Affairs dated 31 March is probable that an outflow of resources will be required to 2009, the company has opted for the option of adjusting settle the obligation and a reliable estimate of the amount the exchange difference on long term foreign currency can be made. Such costs are depreciated over the monetary items to the cost of the assets acquired out of remaining useful life of the asset. these foreign currency monetary items. The company has aligned its accounting policy based on this notification. 3. Expenditure during pre-operative period of license: Exchange difference arising out of fluctuation in exchange Expenses incurred on Project and other charges during rates on settlement / period end is accounted based on construction period are included under pre-operative the nature of transaction as under: expenditure (grouped under Capital Work in Progress) and are allocated to the cost of Fixed Assets on the 1) Short term foreign currency monetary assets and commencement of commercial operations. liabilities: recognised in the Profit and Loss account. 4. Depreciation and amortization: 2) Long term foreign currency monetary liabilities used Depreciation on fixed assets is provided on straight-line for acquisition of fixed assets: adjusted to the cost of method (except stated otherwise) on the basis of estimated the fixed assets and amortised over the remaining useful economic lives as given below: - useful life of the asset. Tangible Assets Years 3) Other Long term foreign currency monetary liabilities: Buildings 9 to 30 recognised in “Foreign Currency Monetary Item Translation Difference Account” and amortised over Network Equipments 10 to 13 st the period of liability not exceeding 31 March 2011. Optical Fibre 15 Other Plant and Machineries 5 7. Taxation: Office Equipments 3 to 9 a) Current Tax: Provision for current income tax is made Computers 3 on the taxable income using the applicable tax rates and tax laws. Furniture and Fixtures 3 to 10 Motor Vehicles upto 5 b) Deferred Tax: Deferred tax arising on account of timing differences and which are capable of reversal Leasehold improvements Period of lease in one or more subsequent periods is recognised using Intangible Assets are amortised on straight-line method as the tax rates and tax laws that have been enacted or under:- substantively enacted. Deferred tax assets are not recognised unless there is virtual certainty with respect i) Cost of Rights and Licences including the fees paid on to the reversal of the same in future years. fixed basis prior to revenue share regime is amortised on straight-line method on commencement of c) Minimum Alternative Tax (MAT) credit: is recognised operations over the period of license. as an asset only when and to the extent there is ii) Software, which is not an integral part of Hardware, is convincing evidence that the Company will pay normal treated as Intangible asset and is amortized over their income tax during the specified period. In the year in 38 Annual Report 2008-09

which the MAT credit becomes eligible to be 11. Borrowing Cost: recognized as an asset in accordance with the Interest and other costs incurred in connection with the recommendations contained in Guidance Note issued borrowing of the funds are charged to revenue on accrual by the ICAI, the said asset is created by way of a credit basis except those borrowing costs which are directly to the Profit and Loss account and shown as MAT Credit attributable to the acquisition or construction of those fixed Entitlement. The Company reviews the same at each assets, which necessarily take a substantial period of time balance sheet date and writes down the carrying to get ready for their intended use. Such costs are amount of MAT Credit Entitlement to the extent there capitalized with the fixed assets. is no longer convincing evidence to the effect that 12. Licence Fees – Revenue Share: Company will pay normal Income Tax during the With effect from August 1, 1999 the variable Licence fee specified period. computed at prescribed rates of revenue share is being 8. Retirement Benefits: charged to the profit and loss account in the Period in Contributions to Provident and pension funds are funded which the related revenue arises. Revenue for this purpose with the appropriate authorities and charged to the profit comprises adjusted gross revenue as per the licence and loss account. agreement of the licence area to which the licence pertains. Contributions to superannuation are funded with the Life 13. Use of Estimate : Insurance Corporation of India and charged to the profit The preparation of financial statements in conformity with and loss account. generally accepted accounting principles requires estimates and assumptions to be made that affect the reported Liability for gratuity as at the year end is provided on the amounts of assets and liabilities and disclosure of basis of actuarial valuation and funded with Life Insurance contingent liabilities on the date of the financial statements Corporation of India. and the reported amounts of revenues and expenses during Provision in accounts for leave benefits to employees is the reporting year. Differences between actual results and based on actuarial valuation done by projected accrued estimates are recognised in the periods in which the results benefit method at the period end. are known / materialise. 9. Revenue Recognition and Receivables: 14. Leases: Revenue on account of mobile telephony services and sale a) Operating: Lease of assets under which significant of handsets and related accessories is recognized net of risks and rewards of ownership are effectively retained rebates, discount, service tax, etc. on rendering of services by the lessor are classified as operating leases. Lease and supply of goods respectively. Recharge fees on payments under an operating lease are recognised as recharge vouchers is recognized as revenue as and when expense in the profit and loss account, on a straight- the recharge voucher is activated by the subscriber. line or other systematic basis over the lease term. Unbilled receivables, represent revenues recognized from b) Finance: Leased assets acquired on which significant the bill cycle date to the end of each month. These are risk and reward of ownership effectively transferred billed in subsequent periods as per the terms of the billing to the Company are capitalised at lower of fair value plans. or the amounts paid under such lease arrangements. Such assets are amortised over the period of lease or Debts (net of security deposits outstanding there against) estimated life of such assets whichever is less. due from subscribers, which remain unpaid for more than 90 days from the date of bill and/or other debts which are 15. Earnings Per Share: otherwise considered doubtful, are provided for. The earnings considered in ascertaining the Company’s EPS comprises the net profit after tax, after reducing dividend Provision for doubtful debts on account of Interconnect on Cumulative Preference Shares for the Period (irrespective Usage Charges (IUC), Roaming Charges and passive of whether declared, paid or not), as per Accounting infrastructure sharing from other telecom operators is made Standard 20 on “Earning Per Share”, issued by the Institute for dues outstanding more than 180 days from the date of of Chartered Accountants of India. The number of shares billing other than cases when an amount is payable to used in computing basic EPS is the weighted average number that operator or in specific case when management is of of shares outstanding during the Period. The diluted EPS is the view that the amount is recoverable. calculated on the same basis as basic EPS, after adjusting 10. Investments: for the effects of potential dilutive equity shares unless the Current Investments are stated at lower of cost or fair value effect of the potential dilutive equity shares is anti-dilutive. in respect of each separate investment. 16. Impairment of Assets: Long-term investments are stated at cost less provision for Assets are reviewed for impairment whenever events or diminution in value other than temporary, if any. changes in circumstances indicate that the carrying amount 39 IDEA CELLULAR LIMITED

may not be recoverable. An impairment loss is recognized 2 The status of utilisation of IPO proceeds and Green Shoe in accordance for AS-28 “Impairment of Assets”, for the amount up to 31st March 2009 is as under: amount by which the asset’s carrying amount exceeds its (Rs. Mn.) recoverable amount as on the carrying date. The Activity To be Utilisation Utilisation recoverable amount is higher of the asset’s fair value less financed up to from costs to sell vis-à-vis value in use. For the purpose of through March 31, April impairment, assets are grouped at the lowest levels for the issue 2008 2008 to which there are separately identifiable cash flows. proceeds March 2009 17. Contingent Liability: Building strengthening and Provisions are recognized when the Company has a present expanding network and obligation as a result of past events; it is more likely than related services in the not that an outflow of resources will be required to settle New Circles 9,708.00 8,121.98 979.57# the obligation; and the amount has been reliably estimated. Capital expenditure Disclosures for contingent liabilities are considered to the for NLD operations 808.00 – 7.62# extent of notices / demands received by the Company. Roll out for services in Mumbai Circle 6,470.00 828.12 1,415.12# 18. Issue Expenditure: Redemption of Preference Expenses incurred in connection with issue of equity shares Shares 7,563.26 7,563.26 – are adjusted against share premium. Issue Expenses 620.04 620.04 – 19. Employee Stock Option: General Corporate purpose ** 3,018.20 3,018.20 5,633.59# In respect of stock option granted pursuant to the Total 28,187.50 20,151.60 8,035.90 company’s Employee Stock Option Scheme, the intrinsic value of the option is treated as discount and accounted # At the EGM held on 30th July 2008, members approved as employee compensation cost over the vesting period. balance unutilized proceeds of IPO for mergers, acquisitions and other general corporate purposes, in addition to the B. NOTES TO AUDITED ACCOUNTS objects of IPO, therefore the balance unutilised amounts 1 Equity Share Capital of the said objects has been utilised for general corporate purposes. a) Increase in Authorised Equity Share Capital : At the ** Including repayment of short term loans Annual General Meeting held on 29th September, 2008, members of the company passed a resolution to 3 Investment in Spice Communications Limited increase Authorised Equity Share Capital by During the year, the company has acquired from MCorp Rs. 25,000.00 Mn. to Rs. 67,750.00 Mn. Global Communications Private Limited (MCPL) their entire b) Preferential Allotment 40.8% stake in Spice Communications Limited (Spice) (having operations in Punjab and Karnataka Telecom At the Extra-ordinary General Meeting (EGM) held on circles). The company along with TMI India Limited, TMI th 30 July 2008, members passed a resolution to issue Mauritius Limited, Axiata Group Berhad (formerly known on a preferential basis to TMI Mauritius Limited, as TM International Berhad) and Green Acre Agro Services 464,734,670 Equity Shares of face value of Rs. 10/- Private Limited, collectively referred to as “The acquirers” each for cash at a premium of Rs. 146.96 per Equity had made a public offer to acquire upto 20% equity stake Share, aggregating to Rs. 72,945 Mn. Accordingly, in Spice from other public shareholders. The said offer 413,094,098 and 51,640,572 shares were allotted on was opened on 17th September 2008 and closed on th th 12 August 2008 and 13 August 2008 respectively. 6th October 2008. The acquirers have since made the The objects of the issue was towards augmentation of payment on 15th October 2008 to all eligible shareholders the long term resources of the Company in meeting of Spice who had validly tendered their shares under the the fund requirements for growth plans, to supplement said offer. Consequently, the stake of the Company in Spice working capital resources and for general corporate stands at 41.09% as of date. A scheme of amalgamation purposes. of Spice with the Company has been filed with Hon’ble th During the year ended 31st March 2009, Rs. 62,230 High Court of Gujarat at Ahmedabad on 11 May, 2009. Mn. has been utilised towards the specified objects of The scheme shall be effective on and from last of the the issue. The unutilized balance of Rs. 10,715 Mn. as dates on which all required approvals are obtained and on 31st March 2009 is lying in deposits with banks the sanctioned scheme is filed with the Registrar of and mutual funds. Companies at Ahmedabad and Delhi respectively. 40 Annual Report 2008-09

4 Demerger of Licenses Rs. 4,071.05 Mn. and Rs. 5,439.75 Mn. respectively and The Company, inter alia, has been granted UAS Licenses Profit after Tax for the year would have been lower by by the Department of Telecommunications (DoT) for Punjab Rs. 1,368.70 Mn. on account of amortisation. and Karnataka Service Areas which overlap with operational 6 De-merger of Passive Infrastructure UAS Licenses of Spice in respect of same Service Areas. A Scheme of Arrangement was filed with the Hon’able Since the Company has decided to merge Spice into itself, High Court of Gujarat at Ahmedabad to de-merge Passive th it has filed a scheme of arrangement on 11 May, 2009 Infrastructure (PI) assets in the telecom service areas of st with an appointed date of 1 December, 2008 in the Andhra Pradesh, Delhi, Gujarat, Uttar Pradesh (both East & Hon’ble High Court of Gujarat at Ahmedabad to de-merge West including Uttaranchal), Haryana, Kerala, Rajasthan its own UAS Licenses for Punjab and Karnataka service and Mumbai at nil consideration with an appointed date areas to an eligible entity. Upon the scheme becoming of 1st January 2009 to Idea Cellular Towers Infrastructure effective, the difference between the carrying values and Limited (ICTIL), a 100% subsidiary of Aditya Birla Telecom the consideration for de-merger of these UAS Licenses is Limited (ABTL). ABTL is a 100% subsidiary of the company. proposed to be adjusted against the balance in the The Hon’ble High Court of Delhi at New Delhi and the Securities / Share Premium Account through the Profit & Hon’ble High Court of Gujarat at Ahmedabad approved Loss account. The Company has, in the meanwhile sought the scheme on 3rd August 2009 and 31st August 2009 a deferment of the proceedings from Hon’ble High Court respectively. The scheme became effective on of Gujarat at Ahmedabad due to regulatory clarity on the 29th September 2009. As per the scheme:- subject. Upon clarity in the matter and Company deciding to go ahead with the Scheme, the aforesaid appointed i) PI assets having book value of Rs. 16,227.76 Mn. as on 31st December 2008 has been debited to the Profit date may undergo a change. & Loss account, Further, the Scheme of Amalgamation of Spice with the Company, as mentioned in Note 3 above, provides for the ii) Investment in ABTL has been increased by the book adjustment of the amount of loss arising out of impairment value of PI assets vested with ICTIL as part of this or sale, disposal or any other arrangement in connection scheme, by creating “Reserve for Business Restructuring”, with these licenses against the balance in the Securities / iii) An amount equal to net book values of PI assets as Share Premium Account in the event the Scheme of De- per point (i) above, has been withdrawn from “Reserve merger for the above mentioned overlapping licenses not for Business Restructuring” recognized as per point being pursued or not becoming effective for any reason (ii) above. whatsoever. In such an event, the net-worth of the Had the scheme not mandated the above accounting Company may diminish to that extent, which is currently treatment, the value of investment in ABTL would not not ascertainable. These UAS Licenses have therefore been have included the book values of Rs. 16,227.76 Mn. st carried at cost (Rs. 3,585.80 Mn.) as on 31 March, 2009. of the PI assets de-merged to ICTIL but would have 5 The Company has paid Non-Compete Fee of Rs. 5,439.75 remained at Rs. 100.00 Mn. Consequently, there would Mn. to MCPL in July 2008 pursuant to the Non-Compete have been no creation of “Reserve for Business Agreement entered into as a part of the acquisition of Restructuring” of Rs. 16,227.76 Mn. and withdrawal 40.8% equity in Spice as mentioned in Note 3 above. A of the same to the credit of P&L. Scheme of Arrangement was filed by the Company with 7 Rollout of services in Mumbai Circle

the Hon’ble High Court of Gujarat at Ahmedabad with an th st On 20 August, 2008, the Company has commenced its appointed date of 1 July, 2008, to adjust the Non-Compete commercial operations in Mumbai service area. fee paid to MCPL against the balance in Securities / Share Premium Account through the Profit & Loss account. The 8 Secured Loans said scheme was approved by the Hon’ble High Court on a) Foreign Currency and Rupee Loans 31st August 2009 and became effective on 21st September Foreign Currency Loans amounting to Rs. 8,548.14 2009, pursuant to filing of the High Court order with Mn. (Previous year Rs. 4,268.04 Mn.) and Rupee Loans Registrar of Companies, Gujarat. The scheme has been amounting to Rs. 46,754.71 Mn. (Previous year given effect to in these financial statements by debiting Rs. 48,579.90 Mn.) are secured by way of first charge Non-Compete Fee to Profit & Loss Account and setting off / assignment ranking pari-passu interse the lenders, from an equal amount withdrawn from the Securities as under: Premium account. Had the scheme not mandated the above accounting treatment, the Non-Compete Fee would have i. First charge by mortgage on all the movable and been capitalised as intangible asset and amortised over immovable properties of the Company, the non-compete period. In such an event, Intangible Assets ii. A first priority charge over all intangible assets of and Securities Premium would have been higher by the Company, 41 IDEA CELLULAR LIMITED

iii. Assignment of the rights, titles and interest, on 23rd August, 2002. The interest demand now raised deposits, investments, bank accounts, book debts, by WPC wing of DoT for the period before 15th April, insurance covers, other general assets, letters of 2002 is contrary to the DoT proposal in 2002. During credit and guarantee or performance bond, the year, the Company along with other telecom provided in favour of the Company. operators have approached TDSAT vide petition no. b) Vehicle Loan 123 of 2008 challenging this demand. Following submission of reply by DoT, the matter is expected to Vehicle Loan amounting to Rs. 346.47 Mn. (Previous be heard in November 2009. year Rs. 306.23 Mn.) is secured by hypothecation of Vehicles against which the loans have been taken. The Company has also taken up with the erstwhile promoter of IMCL for Rs. 348.79 Mn. (refer note 12 9 Interest from Department of Telecommunications below) The Company had recognised an income of Rs. 802.27 b) Under Export Promotion Credit Guarantee Scheme, st Mn. during the year ended 31 March, 2003 being refund Company had saved aggregated differential duty of excess interest charged by DoT on the licence fee payable amounting to Rs. 37.72 Mn. against which company by the Company pursuant to the judgement dated 9th April, had export obligation amounting to Rs. 301.06 Mn. 2002 of Telecom Disputes Settlement and Appellate The company has fulfilled its export obligation and is Tribunal (TDSAT). During the previous years, DoT arbitrarily awaiting formal acknowledgement from Director acknowledged an amount of Rs. 758.76 Mn. against General of Foreign Trade for the same. Company’s claim of Rs. 802.27 Mn. The Company has c) Other Matters not provided for represented this matter with DoT. The Company has not (Rs. Mn.) provided for the difference of Rs. 43.51 Mn., as in the Particulars As on As on opinion of the management, the amount is recoverable March 31, March 31, from DoT. 2009 2008 The Company is also entitled to interest on the amount of Income Tax Matters not the refund so accrued in terms of the Supreme Court acknowledged as debts 107.29 18.75 Judgment; the recognition of revenue on account of the Sales Tax, Entry Tax & same has been postponed pending acceptance in this Service Tax Matters not respect by DoT. As of 31st March, 2009, this case is pending acknowledged as debts 1,452.82 1,254.06 before the H’ble Supreme Court. Other claims not 10 Contingent Liabilities acknowledged as debts 1,345.07 1,117.18 a) During the financial year 2006-07, the WPC Wing of d) Estimated amount of contracts (net of advance) the DoT had raised demands towards monthly remaining to be executed on capital account and not compounded interest on WPC charges for the period provided for. upto the financial year 2002-03 in respect of the (Rs. Mn.) telecom service areas of the erstwhile Idea Mobile Particulars As on As on Communication Limited (IMCL) and BTA Cellcom Ltd March 31, March 31, amounting to Rs. 405.02 Mn., which were deposited 2009 2008 under protest in November 2006. The details of the Estimated amount of same are given below. contracts (net of advance) 11,007.00 17,555.13 Telecom operators had paid WPC Royalty and license 11 Details of guarantees given fees towards GSM frequency, access and back-bone (Rs. Mn.) frequency charges on circle area basis as provided in Particulars As on As on the license terms from inception till financial year March 31, March 31, 2002-03 while the DoT demands were on city basis. 2009 2008 The above matter was disputed by the operators and Bank guarantees given 9,233.51 9,868.26 contested in TDSAT. DoT proposed a change in the Corporate Guarantee basis of levy of spectrum charges based on revenue given to others on behalf share vide their letter dated 18th April, 2002 on the of Subsidiaries & condition of its acceptance in entirety and withdrawal Joint Ventures 8,881.93 2,820.00 of all legal proceedings by the operators. Vide their th 12 In accordance with an assignment agreement entered letter dated 26 March, 2002, DoT had also given time between the original promoters of the amalgamated to the operators to deposit the earlier principal subsidiary Idea Mobile Communications Limited (IMCL) i.e. th demands by 15 April, 2002.The operators accepted Escorts Ltd. and First Pacific Company Ltd., IMCL had issued the offer of change to revenue share basis on interest free unsecured Bond of Rs. 1,757.36 Mn. to Escorts 42 Annual Report 2008-09

Limited vide a Loan agreement dated 15th January, 2004. 16 Earning in Foreign Currency (on receipt basis) : This bond was in lieu of the loans from the original promoters and included accrued interest of Rs. 857.36 Mn. (Rs. Mn.) th th on 10 June, 2004. This Bond is repayable on 15 January, Particulars For the For the 2014 and carries a put option for Escorts Limited for a year ended year ended period of thirty days commencing on 15th January, 2010 March 31, March 31, to redeem the entire amount or part thereof at a price 2009 2008 which would have been payable by the Company had the Company opted for an early redemption in accordance with International Roaming Services* 686.60 789.08 the terms of the said agreement. The Company is entitled Others – 1.18 to pre payment and set off against certain contingent th liabilities that may crystallise after 10 June, 2004. On the * On accrual basis Rs.669.60 Mn. for current year and st request of Escorts Ltd, the Company on 21 July, 2006 has Rs.863.27 Mn. for previous year. consented to release the redemption proceeds of the above loan to Axis Bank on the same terms and conditions, as 17 Managerial Remuneration under section 198 of the mentioned in the above Loan agreement. Companies Act, 1956 paid or payable during the financial Escorts Limited have approached the Company for a pre- year is as under: payment settlement after adjusting agreed contingent liabilities and demands in September 2009. (Rs. Mn.)

13 Auditors’ Remuneration (excluding of service tax): Particulars For the For the (Rs. Mn.) year ended year ended Particulars For the For the March 31, March 31, year ended year ended 2009 2008 March 31, March 31, 2009 2008 Salary including perquisites 33.69 23.59 Contribution to provident and Statutory audit fees 25.70 20.00 other fund 3.25 2.65 Certification and other matters Performance incentive 12.46 14.40 (incl. in legal and professional charges) 1.40 1.50 Total 49.40 40.64 Out of pocket expenses The above remuneration excludes gratuity & leave (incl. in misc expenses) 0.30 0.40 encashment amounts as the same is been based on Total Remuneration 27.40 21.90 actuarial valuation. 14 CIF Value of imports: (Rs. Mn.) 18 Quantitative details of goods traded:

Particulars For the For the Particulars For the year ended For the year ended year ended year ended March 31, 2009 March 31, 2008 March 31, March 31, Nos. Value Nos. Value 2009 2008 (Rs. Mn.) (Rs. Mn.) Capital Goods (including spares) 19,095.14 16,030.04 Handsets/Data cards Trading Goods 189.19 – Opening Stock 108 0.45 108 0.45 15 Expenditure in Foreign Currency (on remittance basis): Purchases (Net of returns) 92,595 189.19 13 0.06 Sale 92,703 187.33 13 0.06 (Rs. Mn.) Closing stock ––108 0.45 Particulars For the For the year ended year ended March 31, March 31, 2009 2008 Interest 5.79 25.06 Travel 7.40 8.48 Professional and Consultancy fees 24.49 53.58 International Roaming services 163.10 136.99 Others 214.88 88.35 43 IDEA CELLULAR LIMITED

19 a) During the year, the Company has purchased and sold following units: During the year ended March 31, 2009 During the year ended March 31, 2008 Qty in Rs. in Qty in Rs. in Qty in Rs. in Qty in Rs. in Particulars ‘000 Mn. ‘000 Mn. ‘000 Mn. ‘000 Mn. Units Purchase Units Sale Units Purchase Units Sale Purchased Value Sold Value Purchased Value Sold Value ABN AMRO Cash Fund - IP - Growth 49,406 500 49,406 500 203,736 2,050 203,736 2,051 ABN Amro Interval Fund - Monthly Plan A 23,865 250 23,865 252 - - - - ABN AMRO Money Plus IP Fund - Growth 20,556 250 20,556 252 129,650 1,500 129,650 1,510 Birla Cash Plus - I P - Growth 614,998 13,960 629,127 14,299 194,831 4,030 180,701 3,724 Birla Cash Plus - Institutional Premium Plan - Growth 12,173,456 163,858 12,118,699 163,196 2,416,417 30,384 2,338,918 29,441 Birla Floating Rate Fund - LTP - Growth 112,340 1,530 112,340 1,535 158,499 2,050 158,499 2,064 Birla Sun Life Liquid Plus - IP - Growth 5,717,108 92,529 5,782,799 93,740 - - - - Birla SunLife Cash Manager - I P - Growth 1,234,364 17,936 722,848 10,443 433,326 5,613 433,326 5,623 Birla Sunlife Interval Income Fund - Monthly Plan - Series I - - 48,574 504 122,503 1,250 73,929 755 Birla SunLife Liquid Plus - IP - Growth - - - - 440,485 6,605 374,793 5,644 Birla Sunlife Monthly Interval Fund - Series 2 - - 122,373 1,261 122,373 1,250 - - Birla Sunlife Quarterly Interval Fund - Series 6 19,548 200 19,548 204 - - - - Birla Sunlife Quarterly Interval Fund - Series 8 - - 50,000 512 50,000 500 - - BSL Credit Oppurtunities - Growth 10,573,312 106,026 10,573,312 107,209 - - - - BSL Dynamic Bond Fund - Growth 379,666 5,020 379,666 5,059 - - - - BSL Monthly Interval Series 1 Growth 186,764 2,000 186,764 2,016 - - - - DBS Chola Liquid Fund - Institutional Plus - Growth 15,100 250 15,100 250 - - - - DBS Chola Liquid Fund - Super IP - Growth 73,847 830 73,847 832 144,256 1,540 144,256 1,542 DSP Merrill Lynch Cash Plus Fund - IP - Growth 105,371 1,120 105,371 1,121 14,811 150 14,811 151 DSP Merrill Lynch Liquidity Fund - IP - Growth 95,882 1,140 95,882 1,145 13,103 150 13,103 150 DSP Merrill Lynch Liquidity Fund - Regular Plan - Growth 12,632 250 12,632 250 - - - - DSP ML Liquid Plus Fund - IP - Growth - - - - 13,590 150 13,590 150 DWS Insta Cash Plus Fund - IP - Growth 76,289 1,000 76,289 1,002 310,745 3,783 310,745 3,787 DWS Insta Cash Plus Fund - Super IP - Growth 1,057,200 11,350 1,057,200 11,410 - - - - DWS Money Plus Fund - IP - Growth - - - - 123,236 1,335 123,236 1,349 DWS Ultra Short Term Fund - Institutional - Growth 24,447 250 24,447 252 - - - - Fidelity Cash Fund - IP - Growth 59,614 690 59,614 690 940 10 940 10 Fidelity Cash Fund - Super IP - Growth 318,595 3,720 318,595 3,725 18,167 200 18,167 200 Fidelity Liquid Plus Fund - Super IP - Growth 46,319 500 46,319 506 19,348 200 19,348 200 HDFC Cash Mgmt Fund - Call Plan - Growth - - - - 11,042 150 11,042 150 HDFC Cash Mgmt Fund - Savings Plan - Growth 646,221 11,640 646,221 11,660 9,110 150 9,110 150 HDFC Liquid Fund - Premium Plan - Growth 1,009,545 16,650 1,009,545 16,673 65,745 1,050 65,745 1,051 HSBC Cash Fund - I P - Growth 36,392 500 36,392 501 11,577 150 11,577 150 HSBC Cash Fund - Institutional Plus - Growth 719,743 9,350 719,743 9,362 414,559 5,064 414,559 5,069 HSBC Liquid Plus Fund - IP Plus - Growth - - - - 109,735 1,180 109,735 1,187 ICICI Prudential Flexible Income Plan - Growth 966,269 15,537 983,034 15,827 334,388 4,917 317,623 4,718 ICICI Prudential Liquid - I P - Growth 112,531 2,320 112,531 2,326 - - - - ICICI Prudential Liquid - Inst Plus - Growth 91,971 1,900 91,971 1,907 - - - - ICICI Prudential Liquid - Super IP - Growth 5,631,205 69,670 5,631,205 69,769 - - - - IDFC Cash Fund - Plan C - Super I P - Growth 1,145,180 12,000 1,145,180 12,004 - - - - IDFC Fixed Maturity Plan - Growth 45,011 450 45,011 454 - - - - IDFC Money Manager - Treasury Plan - Plan C - Growth 188,194 1,950 188,194 1,952 - - - - ING Liquid Fund - IP - Growth 53,621 690 53,621 692 135,933 1,660 135,933 1,662 ING Liquid Fund - Super IP - Growth 788,313 9,680 788,313 9,694 415,780 4,840 415,780 4,847 ING Vysya Liquid Plus Fund - IP - Growth - - - - 110,565 1,150 110,565 1,154 JM Fixed Maturity Fund – Series XII – Monthly Plan 3 45,011 450 45,011 454 - - - - JM High Liquidity - I P - Growth 384,369 5,390 384,369 5,396 34,577 450 34,577 451 JM High Liquidity - Super I P - Growth 438,756 5,820 438,756 5,833 289,658 3,577 289,658 3,582 JM Money Manager Fund - Super Plus Plan - Growth 63,249 750 63,249 754 290,147 3,181 290,147 3,213 Kotak Flexi Debt Fund - Growth - - - - 65,862 809 65,862 818 Kotak Floater - LT - Growth 18,220 250 18,220 253 - - - - Kotak Liquid - Inst Premium Plan - Growth 14,192 250 14,192 250 135,828 2,128 135,828 2,130 Kotak QIP Series 21,992253------Kotak Quarterly FMP - Series 5 48,861 500 48,861 511 - - - - LIC MF FMP Series 30 - - - - 150,000 1,500 150,000 1,533 44 Annual Report 2008-09

During the year ended March 31, 2009 During the year ended March 31, 2008 Qty in Rs. in Qty in Rs. in Qty in Rs. in Qty in Rs. in Particulars ‘000 Mn. ‘000 Mn. ‘000 Mn. ‘000 Mn. Units Purchase Units Sale Units Purchase Units Sale Purchased Value Sold Value Purchased Value Sold Value LIC MF Liquid Fund - Growth 15,724 250 15,724 251 279,375 3,930 279,375 3,936 LIC MF Liquid Fund - IP - Growth 31,111 500 15,557 250 - - - - Lotus India Liquid Fund - Institutional Plus - Growth ----14,07615014,076150 Lotus India Liquid Fund - IP - Growth 44,788 500 44,788 501 95,846 1,050 95,846 1,051 Lotus India Liquid Fund - IP Plus - Growth ----39,96343039,963430 Lotus India Liquid Fund - Super IP - Growth 120,047 1,360 120,047 1,363 131,110 1,440 131,110 1,441 PRINCIPAL Cash Mgmt Fund LO- I P - Growth 77,965 1,050 77,965 1,051 8,758 110 8,758 110 PRINCIPAL Cash Mgmt Fund LO- Inst Prem. Plan - Growth 285,240 3,730 285,240 3,739 314,170 3,800 314,170 3,803 PRINCIPAL Floating Rate Fund - FMP - IP - Growth 19,526 250 19,526 254 62,486 770 62,486 773 Prudential ICICI Interval Fund II Quarterly Interval Plan - B----100,0001,000100,0001,021 Prudential ICICI Liquid - I P - Growth ----21,11040021,110401 Prudential ICICI Liquid - Inst Plus - Growth ----43,60685043,606852 Prudential ICICI Liquid – Super IP - Growth ----815,1709,416815,1709,441 Prudential ICICI Monthly Interval Fund - Series 1 - - 47,126 505 47,126 500 - - Reliance Liquid Fund - TP – IP - Growth 95,991 1,950 95,991 1,956 53,070 1,030 53,070 1,031 Reliance Liquid Plus Fund – IP - Growth - - 22,905 251 146,585 1,562 123,681 1,326 Reliance Liquidity Fund - Growth 1,992,435 24,730 1,992,435 24,761 198,705 2,361 198,705 2,363 Reliance Medium Term Fund - Growth 13,291 240 13,291 241 - - - - SBI Magnum Insta Cash - Cash Plan ----39,96770039,967701 SBI Magnum Insta Cash Fund - Liquid Floater Plan - Growth----49,51166049,511660 SBI Premier Liquid Fund - Super IP - Growth 18,411 250 18,411 250 43,591 550 43,591 551 Standard Chartered Liquidity Manager Fund -Growth ----13,88915013,889150 Standard Chartered Liquidity Manager Fund Plus - Growth 429,659 5,050 429,659 5,054 472,939 5,280 472,939 5,283 Tata Fixed Income Portfolio Fund - A3 ----49,60750049,607504 Tata Liquid Fund - HIP - Growth ----207,4522,670207,4522,672 Tata Liquid Fund - RIP - Growth ----5,4621005,462100 Tata Liquid Fund - SHIP - Growth ----225,051 3,210 225,051 3,216 TATA Liquidity Management Fund - Growth ----59,22465059,224651 Templeton India TMA - IP - Growth 84,681 1,080 84,681 1,082 157,603 1,940 157,603 1,942 Templeton India TMA - Super IP - Growth 492,515 6,000 492,515 6,010 276,475 3,180 276,475 3,186 UTI Liquid Fund - Cash Plan - IP - Growth 1,267,544 17,210 1,267,544 17,232 122,293 1,580 122,293 1,585 UTI Liquid Plus Fund - IP - Growth 222,920 2,600 222,920 2,613 - - - - UTI Money Market – Growth 479,171 11,610 479,171 11,624 52,293 1,130 52,293 1,132 UTI Fixed Income Interval Fund-MIP Series-IP Growth 88,048 1,000 ------Grand Total 51,238,591 670,521 50,934,288 667,430 11,661,031 145,806 11,195,969 140,678 b) As at 31st March, 2009 the closing balance in mutual fund units are as follows: Particulars As at March 31, 2009 As at March 31, 2008 Qty in ‘000 Rs in Mn. Qty in ‘000 Rs in Mn. Closing Units Closing Value Closing Units Closing Value Birla Sunlife Cash Plus - I P - Growth - - 14,129 310 Birla Sunlife Cash Plus - Institutional Premium Plan - Growth 132,255 1,860 77,499 1,000 Birla Sunlife Cash Manager - IP - Growth 511,516 7,516 - - Birla Sunlife Interval Income Fund - Monthly Plan - Series I - - 48,574 500 Birla Sunlife Liquid Plus - IP - Growth - - 65,692 1,000 Birla Sunlife Monthly Interval Fund - Series 2 - - 122,373 1,250 Birla Sunlife Quarterly Interval Fund - Series 8 - - 50,000 500 ICICI Prudential Flexible Income Plan - Growth - - 16,765 250 Kotak QIP Series 21,993 253 - - LIC MF Liquid Fund - IP - Growth 15,554 250 - - Prudential ICICI Monthly Interval Fund - Series 1 - - 47,126 500 Reliance Liquid Plus Fund – IP - Growth - - 22,905 250 UTI Fixed Income Interval Fund-MIP Series-IP Growth 88,048 1,000 - - Total 769,366 10,879 465,063 5,560 45 IDEA CELLULAR LIMITED

20 As per the requirement of Section 22 of The Micro, Small and Medium Enterprises Development Act, 2006, following information are disclosed: (Rs. Mn.) Particulars 2008-09 2007-08 a) (i) The principal amount remaining unpaid to any supplier at the end of accounting year included in sundry creditors. 22.71 3.08 (ii) The interest due on above. Nil Nil The total of (i) & (ii) 22.71 3.08 b) The amount of interest paid by the buyer in terms of section 16 of the Act. Nil Nil c) The amount of the payment made to the supplier beyond the appointed day during the accounting year Nil Nil d) The amounts of interest accrued and remaining unpaid at the end of financial year Nil Nil e) The amount of interest due and payable for the period of delay in making payment (which have been paid but beyond the due date during the year) but without adding the interest specified under this Act. Nil Nil

21 During the year, under ESOS 2006, 6,131,250 options have been granted as ‘Tranche II’ to the eligible employees as on 24th July 2008. Each option when exercised would be converted into one equity share of Rs. 10/- each, fully paid up, of the Company. The options will vest in 4 equal annual installments after one year of the grant. The maximum period of exercise is 5 years from the date of vesting. The compensation costs of stock options granted to employees have been accounted by the Company using the intrinsic value method. Summary of Stock Option No. of Stock Options Particulars March 31, 2009 March 31, 2008 Tranche I Tranche II Tranche I Options Outstanding as on April 1, 2008 19,667,000 – – Options Granted during the year – 6,131,250 19,931,000 Option forfeited/lapsed during the year 2,391,000 454,750 264,000 Options exercised during the year –– – Options Outstanding as on March 31, 2009 17,276,000 5,676,500 19,667,000

Personnel Expenditure includes Rs. 144.74 Mn. (Previous Year Rs. 37.59 Mn.) being the amortisation of intrinsic value for the period ending 31st March, 2009. Had the compensation cost for the Company’s stock based compensation plan been determined as per fair value approach (calculated using Black & Scholes Option Prising Model), the Company’s net income would be lower by Rs. 423.72 Mn. (Previous Year: Rs. 100.93 Mn) and earnings per share as reported would be lower as indicated below: (Rs. Mn.) Particulars For the year ended For the year ended March 31, 2009 March 31, 2008 Net profit after tax but before exceptional items 10,012.11 10,443.62 Add: Total stock-based employee compensation expense determined under intrinsic value base method 144.74 37.59 Less: Total stock-based employee compensation expense determined under fair value base method 568.46 138.52 Adjusted net profit 9,588.39 10,342.69 Basic Earnings Per Share (in Rs.) - As reported 3.42 3.96 - Adjusted 3.27 3.93 Diluted Earnings Per Share (in Rs.) - As reported 3.42 3.96 - Adjusted 3.27 3.92 46 Annual Report 2008-09

The fair value of each option is estimated on the date of grant based on the following assumptions:

For the year ended For the year ended Particulars March 31, 2009 March 31, 2008 Tranche I Tranche II Tranche I Dividend yield (%) Nil Nil Nil Expected life 6 yrs 6 months 6 yrs 6 months 6 yrs 6 months Risk free interest rate (%) 7.78% 7.50% 7.78% Volatility (%) 40.00 45.80 40.00

22 As per the transitional provisions given in the notification issued by Ministry of Corporate Affairs dated 31st March 2009, the company has opted for the option of adjusting the exchange difference on long term foreign currency monetary items to the cost of the assets acquired out of these foreign currency monetary items. During the year, company has capitalised exchange difference amounting to Rs. 189.10 Mn. on restatement of long term loans used for acquiring fixed assets. Due to this, profit for the year is higher by Rs. 186.10 Mn.

23 Details of foreign currency exposures: a) Hedged by a derivative instrument: (Amount in Mn.) Particulars As at March 31, 2009 As at March 31, 2008 Foreign Currency Loan* Foreign Currency Loan in USD 30.00 30.00 Foreign Currency Loan in JPY 17,727.73 12,630.73 The Equivalent INR of Foreign Currency Loans 7,655.32 5,658.20 *Fully hedged for interest and principal repayments

b) Not hedged by a derivative instrument or otherwise: (Amount in Mn.) Particulars As on March 31, 2009 As on March 31, 2008 Foreign Currency Loan Foreign Currency Loan in USD 84.00 – Interest accrued on above in USD 0.55 – The Equivalent INR of Foreign Currency Loan 4,307.76 – Sundry Creditors: Sundry Creditors in USD 63.36 48.78 Sundry Creditors in EURO 0.31 0.42 The Equivalent INR of sundry creditors in Foreign Currency 3,249.24 1976.23 Sundry Debtors: Sundry Debtors in USD 3.65 4.56 Sundry Debtors in EURO 0.01 0.03 The Equivalent INR of sundry debtors in Foreign Currency 186.64 184.16 Bank Deposits: Bank Deposits in USD – 6.79 The Equivalent INR of Bank Deposits in Foreign Currency – 271.48

47 IDEA CELLULAR LIMITED

24 Employee Benefits: a) Defined Benefit Plan: The Company provides for its liability towards gratuity as per the actuarial valuation carried by the Life Insurance Corporation of India (LIC). The present value of the accrued gratuity minus fund value is provided in the books of accounts. (Rs. Mn.) Sr. Particulars For the year ended For the year ended No. March 31, 2009 March 31, 2008 1 Assumptions Discount Rate 8.00% 8.00% Salary Escalation 6%-7% 5%-7% 2 Table showing changes in present value of obligations Present value of obligations as at beginning of year 84.92 81.97 Interest cost 6.79 6.18 Current Service Cost 25.25 16.93 Benefits Paid 11.85 8.65 Actuarial (Gain)/ Loss on obligations 27.58 (11.48) Present value of obligations as at end of year 132.69 84.92 3 Table showing changes in the fair value of plan assets Fair value of plan assets at beginning of year 80.33 61.80 Expected return on plan assets 8.04 6.07 Contributions 48.03 21.12 Benefits paid 11.85 8.65 Actuarial Gain/ (Loss) on Plan assets NIL NIL Fair value of plan assets at the end of year 124.55 80.33 4 Table showing fair value of plan assets Fair value of plan assets at beginning of year 80.33 61.80 Actual return on plan assets 8.04 6.07 Contributions 48.03 21.12 Benefits Paid (11.85) 8.65 Fair value of plan assets at the end of year 124.55 80.33 Funded status 8.14 (4.60) Excess of Actual over estimated return on plan assets NIL NIL (Actual rate of return = Estimated rate of return as ARD falls on March 31) 5 Actuarial Gain/ Loss recognized Actuarial Gain/ (Loss) for the year -Obligation (27.58) 11.48 Actuarial (Gain)/ Loss for the year - plan assets NIL NIL Total (Gain)/ Loss for the year 27.58 (11.48) Actuarial (Gain)/ Loss recognized in the year 27.58 (11.48) 6 The amounts to be recognized in the Balance Sheet and statements of profit and loss Present value of obligations as at the end of year 132.69 84.92 Fair value of plan assets as at the end of the year 124.55 80.33 Funded status 8.14 (4.60) Net Asset/ (Liability) recognized in Balance Sheet (17.55) (23.38) 7 Expenses Recognised in statement of Profit & Loss Current Service cost 25.25 16.93 Interest Cost 6.79 6.18 Expected return on plan assets (8.04) 6.07 Net Actuarial (Gain)/ Loss recognised in the year 27.58 (11.48) Expenses recognised in statement of Profit & Loss 51.58 5.55 b) Defined Contribution Plan : During the year, the Company has recognised the following amounts in the Profit and Loss account: (Rs. Mn) Particulars For the year ended For the year ended March 31, 2009 March 31, 2008 Employers’ Contribution to Provident Fund 129.47 97.20 Employers’ Contribution to Superannuation Fund 31.41 25.00 48 Annual Report 2008-09

25 Segment Reporting 1. Primary Segments: The Company operates in two business segments: a) Mobility Services b) Long Distance (LD) 2. Secondary Segment: The Company caters only to the needs of Indian market representing a singular economic environment with similar risks and rewards and hence there are no reportable geographical segments Primary Business Information (Business Segments) for the year ended March 31, 2009. (Rs. Mn.) Particulars Business Segments Elimination Total Mobility LD Revenue External Revenue 98,540.27 30.53 - 98,570.80 Inter-segment Revenue 260.04 7,080.18 (7,340.22) - Total Revenue 98,800.31 7,110.71 (7,340.22) 98,570.80 Segment result 14,209.32 1,166.56 - 15,375.88 Interest & financing charges (Net) - - - 4,507.24 Profit before Tax - - - 10,868.64 Provision for tax (Net) - - - 856.53 Profit after tax - - - 10,012.11 Other information Segment assets 142,458.35 6,556.42 (10,190.08) 138,824.69 Unallocated corporate assets - - - 83,548.93 Total assets 142,458.35 6,556.42 (10,190.08) 222,373.62 Segment liabilities 97,797.07 5,389.89 (10,190.08) 92,996.88 Unallocated corporate liabilities - - - 16,432.58 Total liabilities 97,797.07 5,389.89 (10,190.08) 109,429.46 Capital expenditure 47,128.02 878.26 - 48,006.28 Depreciation & amortisation 12,410.98 17.58 - 12,428.56 Primary Business Information (Business Segments) for the year ended March 31, 2008. (Rs. Mn.) Particulars Business Segments Elimination Total Mobility LD Revenue External Revenue 67,199.90 - - 67,199.90 Inter-segment Revenue - 3,536.67 (3,536.67) - Total Revenue 67,199.90 3,536.67 (3,536.67) 67,199.90 Segment result 13,220.23 724.80 - 13,945.03 Interest & financing charges (Net) - - - 2,776.42 Profit before Tax - - - 11,168.61 Provision for tax (Net) - - - 724.99 Profit after tax - - - 10,443.62 Other information Segment assets 117,539.17 1,402.16 (1,120.93) 117,820.40 Unallocated corporate assets - - - 9,704.14 Total assets 117,539.17 1,402.16 (1,120.93) 127,524.54 Segment liabilities 91,996.79 520.60 (1,120.93) 91,396.46 Unallocated corporate liabilities - - - 667.82 Total liabilities 91,996.79 520.60 (1,120.93) 92,064.28 Capital expenditure 54,023.05 0.02 - 54,023.07 Depreciation & amortisation 8,766.37 1.25 - 8,767.62 49 IDEA CELLULAR LIMITED

26 Related Party Transactions As per Accounting Standard-18 on “Related Party Disclosure”, related parties of the Company are disclosed below: A. List of related Parties: Promoters Hindalco Industries Limited Grasim Industries Limited Aditya Birla Nuvo Limited Birla TMT Holdings Pvt. Limited Subsidiaries Swinder Singh Satara & Co. Limited (SSS & Co) Aditya Birla Telecom Limited (ABTL) Idea Cellular Services Limited (ICSL) Idea Cellular Infrastructure Services Limited (ICISL) Idea Cellular Towers Infrastructure Limited (ICTIL) Joint Venture Spice Communications Limited (SCL) (from 16th October 2008) Indus Towers Limited (ITL) Key Management Personnel Mr. Sanjeev Aga, MD Mr. AJS Jhala, CFO (upto 30th June 2008) Mr. Akshaya Moondra, CFO (from 1st July 2008)

50 Annual Report 2008-09

B. Transactions with Related Parties (Rs. Mn.) Nature of Relationship Promoters Joint Venture Subsidiaries Key Particulars Hindalco Grasim Aditya ITL SCL ABTL ICSL ICISL ICTIL SSS & Manage- Industries Industries Birla Nuvo Co. ment Limited Limited Limited Personnel Deposit Taken - - - - - 774.38 - - - - - (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) Remuneration ------63.09 (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (61.48) Security Deposit Given - - - 684.69 ------(-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) Purchase of Fixed Assets - - - 1.01 - 42.08 - 0.05 - - - (-) (0.13) (-) (-) (-) (-) (-) (-) (-) (-) (-) Sale of Fixed Assets - - - 131.37 4.75 30.30 - 28.92 - - - (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) Investments ------(-) (-) (-) (-) (-) (-) (0.50) (0.50) (-) (-) (-) Purchase of Service/ goods 0.12 - 0.33 2,291.15 167.34 29.78 228.02 - - 2.73 - (-) (-) (-) (-) (-) (-) (51.02) (-) (-) (-) (-) Sale of Service/ goods 5.36 7.67 0.52 - 95.90 23.60 - - - 116.07 - (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) Unsecured Loan/ ICD Taken - - - - - 1,000.00 - - - - - (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) Unsecured Loan/ ICD Repaid - - - - - 1,000.00 - - - - - (-) (-) (-) (-) (-) (40.00) (-) (-) (-) (-) (-) Unsecured Loans/ ICD given - - 750.00 4,188.80 - 3,285.88 - 208.90 7.54 52.37 - (-) (-) (-) (-) (-) (253.03) (37.34) (0.79) (-) (-) (-) Unsecured Loans/ ICD repaid by - - 750.00 - - 2,500.00 - 19.21 355.38 52.37 - (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) Interest on Unsecured loans Given - - 7.97 160.30 ------(-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) Pass through and reimbursement of - - - 339.15 ------expenses incurred on behalf of (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) Pass through and reimbursement of - - - 2,027.90 ------expenses incurred on company’s behalf by (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) Advance given ------355.38 - - (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) Expense incurred by Company - - - - 24.71 174.23 - 1.34 - 1.01 - on behalf of (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) Expenses incurred on Company’s0.131.49------behalf by (3.93) (2.00) (0.18) (-) (-) (-) (-) (-) (-) (-) (-) Rent Paid ------2.70- (-) (-) (-) (-) (-) (-) (-) (-) (-) (2.70) (-) (Figures in bracket are for the year ended March 31, 2008) C. Outstanding as on March 31, 2009 (Rs. Mn.) Nature of Relationship Promoters Joint Venture Subsidiaries Key Particulars Hindalco Grasim Aditya ITL SCL ABTL ICSL ICISL ICTIL SSS & Manage- Industries Industries Birla Nuvo Co. ment Limited Limited Limited Personnel Deposit Taken - - - - - 774.38 - - - - - (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) Unsecured Loan taken ------(-) (-) (-) (-) (-) (-) (-) (-) (-) (2.47) (-) Unsecured Loan/ Advances given - - - 5,275.13 - 1,201.65 - 220.70 7.54 - - (-) (-) (-) (-) (-) (260.60) (10.77) (0.79) (-) (-) (8.00) Remuneration Payable ------17.44 (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (24.20) Accounts Receivable - - - - 33.38 0.95 - - - 94.17 - (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) Accounts Payable - - - 1,853.55 - - 13.30 - - - - (0.08) (-) (-) (-) (-) (-) (22.91) (-) (-) (-) (-) Corporate Guarantee - - - - 5,246.73 3,635.20 - - - - - (-) (-) (-) (-) (-) (2,820.00) (-) (-) (-) (-) (-) (Figures in bracket are as of March 31, 2008) 51 IDEA CELLULAR LIMITED

D. Disclosures of amounts at the year end and the maximum amount of loans & advances outstanding during the year (Rs. Mn.) Name of the Party Outstanding Maximum Outstanding Maximum as at Outstanding as at Outstanding March 31, 2009 during the year March 31, 2008 during the year 2008-09 2007-08 Subsidiary : Aditya Birla Telecom Limited (ABTL) 1,201.65 3,292.42 260.60 260.60 Idea Cellular Services Limited (ICSL) – 59.02 10.77 26.87 Idea Cellular Infrastructure Services Limited (ICISL) 220.70 2,243.10 0.79 0.79 Idea Cellular Towers Infrastructure Limited (ICTIL) 7.54 362.92 – – Joint Venture: Indus Towers Limited 4,595.85 4,595.85 – – 27 The Company has entered into non-cancellable operating leases for periods ranging from 36 months to 240 months. For the current Year, total minimum lease payments amounting to Rs.1,927.44 Mn. (Previous Year Rs. 263.63 Mn.) are included in the rental expenditure head. The future lease payments in respect of the above are as follows. (Rs. Mn.) Particulars Not later than Later than one year but Later than five years one year not later than five years Minimum Lease payments 2,040.21 5,281.44 1,127.33 (313.24) (1,120.97) (902.12) (Figures in bracket are as of March 31, 2008) 28 Basic & Diluted Earnings Per Share Particulars For the year ended For the year ended March 31, 2009 March 31, 2008 Nominal value of Equity Shares (Rs.) 10/- 10/- Profit after Tax (Rs. Mn.) 10,012.11 10,443.62 Profit attributable to equity shareholders (Rs. Mn.) 10,012.11 10,443.62 Weighted average number of equity shares outstanding during the period 2,930,612,054 2,634,896,058 Basic Earnings Per Share (Rs.) 3.42 3.96 Dilutive effect on weighted average number of equityshares outstanding during the year – 483,044 Weighted average number of diluted equity shares 2,930,612,054 2,635,379,102 Diluted Earnings Per Share (Rs.) 3.42 3.96 29 Deferred Tax As of March 31, 2009, the Company has deferred tax liability of Rs. 3,736.48 Mn. and deferred tax asset of Rs. 2,311.10 Mn. as under: (Rs. Mn.) Particulars As at March 31, 2009 As at March 31, 2008 Deferred Tax Liability: Depreciation of Fixed Assets 3,525.12 1,588.36 Amortisation of Entry & Licence Fee (Net) 211.36 74.84 Total Deferred Tax Liability 3,736.48 1,663.20 Deferred Tax Asset: Provision for Doubtful Debts 949.93 837.22 Expenses allowable on payment basis 166.85 64.30 Brought Forward losses 1,124.00 – Others 70.32 99.83 Total Deferred Tax Asset 2,311.10 1,001.35 Net Deferred Tax Liability 1,425.38 661.85 52 Annual Report 2008-09

30 During the financial year 2007-08, company had entered into a composite IT outsourcing agreement wherein fixed assets and services related to IT has been supplied by the vendor. Such fixed assets received have been accounted for as a finance lease. Correspondingly, such assets are recorded at fair value of these assets at the time of receipt and depreciated on the stated useful life applicable to similar assets of the company. As at 31st March, 2009, an amount of Rs. 939.12 Mn. towards the supply of fixed assets during the year stands outstanding and will be paid during financial year 2009-10.

31 The movement in the Asset Retirement Obligation is set out as follows: (Rs. Mn.) Particulars For the year ended For the year ended March 31, 2009 March 31, 2008 Opening Balance 473.58 253.26 Additional Provision – 220.32 Utilisation (2.69) – Closing Balance 470.89 473.58

32 Previous year’s figures have been regrouped / rearranged wherever necessary to conform to the current period grouping.

For and on behalf of the Board

Sanjeev Aga Tarjani Vakil Biswajit Subramanian Managing Director Director Director

Akshaya Moondra Pankaj Kapdeo Chief Financial Officer Company Secretary

Place: Mumbai Date: October 26, 2009

53 IDEA CELLULAR LIMITED

Cash Flow Statement for the year ended March 31, 2009 (Rupees in Million) For the year ended For the year ended March 31, 2009 March 31, 2008 A) Cash Flow from Operating Activities Net Profit after tax 10,012.11 10,443.62 Adjustments For Depreciation 10,967.22 7,568.52 Amortisation of Intangible assets 1,461.34 1,199.10 Interest charge and Forex 8,483.78 4,592.27 Profit on sale of current investment (2,227.48) (431.79) Provision for Bad & Doubtful Debts/Advances 331.59 244.94 Employee Stock Option Cost 144.74 37.59 Provision for Gratuity, Leave Encashment 169.76 53.53 Provision for Fringe Benefit Tax 93.00 73.69 Provision for Deferred Tax 763.53 651.30 Liability no longer required written back (156.78) (139.73) Interest received (2,330.36) (849.52) (Profit) / Loss on sale of fixed assets/ assets disposed off 17.57 8.89 17,717.91 13,008.79 Operating profit before working capital changes 27,730.02 23,452.41 Changes in Current Assets and Current Liabilities (Increase)/Decrease in Sundry Debtors (1,641.53) (706.10) (Increase)/Decrease in Inventories (151.14) (97.05) (Increase)/Decrease in Other Current Assets (46.90) 163.33 (Increase)/Decrease in Loans and Advances (10,173.64) (3,585.68) Increase /(Decrease) in Current Liabilities 4,221.45 6,223.50 (7,791.76) 1,998.00 Cash generated from operations 19,938.26 25,450.41 Tax paid ( including FBT & TDS ) (1,300.86) (428.20) Net cash from operating activities 18,637.40 25,022.21 B) Cash Flow from Investing Activities Purchase of Fixed assets & Intangible assets (including CWIP) (47,744.67) (55,506.36) Proceeds from sale of Fixed assets 197.23 150.80 Payment for Non Compete Fee (5,439.75) – Payment for purchase of Shares (22,041.87) (1.00) Sale/ (Purchase) of Other Investments (3,091.66) (5,128.21) Interest and Dividend Received 1,567.08 922.93 Net cash from / (used in) investing activities (76,553.64) (59,561.84)

54 Annual Report 2008-09

Cash Flow Statement for the year ended March 31, 2009 (Rupees in Million) For the year ended For the year ended March 31, 2009 March 31, 2008 C) Cash Flow from Financing Activities Proceeds from issue of Share Capital 72,944.74 3,187.52 Share Issue Expenses (177.94) – Proceeds from Long Term Borrowings 7,504.42 20,627.09 Repayment of Long Term Borrowings (3,012.45) (1,480.44) Proceeds from Short Term Loan 40,952.10 22,120.90 Repayment of Short Term Loan (34,798.00) (18,625.00) Interest Paid (7,022.89) (4,517.17) Net cash from / (used in) financing activities 76,389.98 21,312.90 Net increase / (decrease) in cash and cash equivalent 18,473.74 (13,226.73) Cash and cash equivalent at the beginning 4,970.55 18,197.28 Cash and cash equivalent at the end 23,444.29 4,970.55

Notes to Cash flow Statement for the Year ended 31st March, 2009 1. Cash and cash equivalent includes Cash and Cheques on Hand 205.99 296.92 Balances with Scheduled Banks - in Current Accounts 1,202.60 1,179.81 - in Deposit Accounts 22,035.70 3,493.82 23,444.29 4,970.55

2. The above cash flow statement has been prepared under the indirect method as set out in Accounting Standard 3 on Cash Flow Statement. 3. Previous year’s figures have been rearranged/regrouped wherever necessary.

As per our report of even date attached

For Deloitte Haskins & Sells For and on behalf of the Board Chartered Accountants

Hemant M. Joshi Tarjani Vakil Biswajit Subramanian Partner Director Director Membership No.: 38019

Place: Mumbai Sanjeev Aga Akshaya Moondra Pankaj Kapdeo Date: October 26, 2009 Managing Director Chief Financial Officer Company Secretary

55 IDEA CELLULAR LIMITED

Balance Sheet Abstract and Company’s General Business Profile I Registration Details Registration No.30976 State Code04

Balance Sheet Date 3 1 0 3 0 9 Date Month Year II Capital raised during the year (Amount in Rs. Thousands) Public Issue Rights Issue NIL NIL Bonus Issue Private Placement NI L 4647340 III Position of Mobilisation and Deployment of Fund (Amount in Rs. Thousands) Total Liabilities Total Assets 194216030 194216030 Source of Funds Paid up Capital Reserves and Surplus 31000950 85813710 Secured Loans Unsecured Loans 55649320 20144340 Application of Funds Net Fixed Assets Investments 125447080 49288080 Net Current Assets/(Liability) Misc. Expenditure 15428040 NI L Accumulated Losses 4052830 IV Performance of Company (Amount in Rs. Thousands) Turnover Total Expenditure 98786570 87917930 + - Profit/Loss before tax + - Profit/Loss after tax  10868640  10012110 (Please tick appropriate box + for profit, - for loss) Earnings per share in Rs. Dividend Rate 3 . 42 00 V Generic names of the three principal products/Services of company (as per monetary terms) Items Code No. N O T A P P L I C A B L E (ITC Code)

Product T E L E C O M S E R V I C E S Description

For and on behalf of the Board

Sanjeev Aga Tarjani Vakil Biswajit Subramanian Managing Director Director Director

Akshaya Moondra Pankaj Kapdeo Chief Financial Officer Company Secretary

Place: Mumbai Date: October 26, 2009 56 Annual Report 2008-09

Auditors’ Report on the Consolidated Financial Statements To the Board of Directors of Idea Cellular Limited 1. We have audited the attached Consolidated Balance Sheet 4. Without qualifying our opinion, we draw attention to Note of Idea Cellular Limited (‘the Company’), its subsidiaries and B4 of schedule 22 to the financial statements. As explained joint ventures (collectively referred as “the Group”) as at in the said note, the difference between the carrying value March 31, 2009 and also the Consolidated Profit and Loss of the licenses and consideration, or impairment loss, if account and the Consolidated Cash Flow Statement for the any would be adjusted with the securities premium account. year ended on that date annexed thereto (all together The impact of the above on the Reserve and Surplus of the referred to as “the consolidated financial statements”). These Group is not ascertainable at this stage. financial statements are the responsibility of the Company’s management and have been prepared by the Management 5. We report that the consolidated financial statements have on the basis of separate financial statements and other been prepared by the Company’s Management in financial information regarding components. Our accordance with the requirements of Accounting Standard responsibility is to express an opinion on these consolidated 21 ‘Consolidated Financial Statements’ and Accounting financial statements based on our audit. Standard (AS) 27, Financial Reporting of interest in Joint Venture issued by the Institute of Chartered Accountants of 2. We conducted our audit in accordance with the auditing India. standards generally accepted in India. Those Standards 6. Based on our audit and on consideration of reports of other require that we plan and perform the audit to obtain auditor on separate financial statements and on the other reasonable assurance about whether the financial financial information of the components, and to the best statements are prepared, in all material respects, in of our information and explanations given to us, we are of accordance with an identified financial reporting framework the opinion that the attached consolidated financial and are free of material misstatement. An audit includes, statements give a true and fair view in conformity with the examining on a test basis, evidence supporting the amounts accounting principles generally accepted in India: and disclosures in the financial statements. An audit also includes assessing the accounting principles used and a) in the case of the Consolidated Balance Sheet, of the significant estimates made by the Management, as well as state of affairs of the Group as at March 31, 2009; evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our b) in case of the Consolidated Profit and Loss Account, of opinion. the profits of the Group for the year ended on that date; and 3. We did not audit the financial statements of Spice c) in the case of the Consolidated Cash Flow Statement, Communications Limited, joint venture of the Company and of the cash flows of the Group for the year ended on Indus Towers Limited, joint venture of Aditya Birla Telecom that date. Limited whose financial statements reflect total assets (net) of Rs.16,509.54 million as at March 31, 2009, total revenue For Deloitte Haskins & Sells of Rs.4,619.84 million and net cash inflow amounting to Chartered Accountants Rs.246.43 million for the year ended on that date as considered in the consolidated financial statements. Hemant M. Joshi These financial statements and other financial information Partner have been audited by other auditor whose reports have Membership No: 38019 been furnished to us by the Management of the Group, and our opinion, is based solely on the reports of the Place: Mumbai other auditor. Date: October 26, 2009

57 IDEA CELLULAR LIMITED Consolidated Balance Sheet as at March 31, 2009 (Rupees in Million) As at As at Schedules March 31, 2009 March 31, 2008 SOURCES OF FUNDS Shareholders’ Funds Share Capital 1 31,000.95 26,353.61 Outstanding Employee Stock Options 182.33 37.59 Reserves and Surplus 2 106,713.99 23,134.00 137,897.27 49,525.20 Compulsorily Convertible Preference Shares issued by Subsidiary Company 19.25 – (Refer note B 7 to schedule 22) Loan Funds Secured 3 65,452.04 53,158.59 Unsecured 4 23,670.32 11,995.44 89,122.36 65,154.03 Net Deferred Tax Liabilities 1,425.38 661.85 Less: Net Deferred Tax Assets (295.47) (0.83) Deferred Tax Liability (Net) (Refer note B 25 to schedule 22) 1,129.91 661.02

TOTAL 228,168.79 115,340.25 APPLICATION OF FUNDS Fixed Assets Gross Block (At Cost) 5 205,234.23 132,164.24 Less: Depreciation and Amortisation 59,970.79 42,218.89 Net Block 145,263.44 89,945.35 Capital Work-in-Progress 21,408.63 17,217.42 166,672.07 107,162.77 Goodwill on Consolidation 22,457.37 61.20 Investments 6 20,451.89 5,560.00 Current Assets, Loans and Advances Current Assets Inventories 7 521.26 276.15 Sundry Debtors 8 3,617.91 1,985.93 Cash and Bank Balances 9 30,863.96 4,974.51 Other Current Assets 10 1,861.42 520.76 Loans and Advances 11 16,820.64 7,742.16 53,685.19 15,499.51 Less: Current Liabilities and Provisions 12 Current Liabilities 38,636.76 26,203.11 Provisions 1,724.37 819.31 40,361.13 27,022.42 Net Current Assets 13,324.06 (11,522.91) Profit and Loss Account 5,263.40 14,079.19 TOTAL 228,168.79 115,340.25 Significant Accounting Policies and Notes to the Financial Statements 22 The Schedules referred to above form an integral part of Balance Sheet As per our report of even date attached For Deloitte Haskins & Sells For and on behalf of the Board Chartered Accountants Hemant M. Joshi Tarjani Vakil Biswajit Subramanian Partner Director Director Membership No.: 38019 Place: Mumbai Sanjeev Aga Akshaya Moondra Pankaj Kapdeo Date: October 26, 2009 Managing Director Chief Financial Officer Company Secretary 58 Annual Report 2008-09 Consolidated Profit and Loss Account for the year ended March 31, 2009 (Rupees in Million) Schedules For the For the year ended year ended March 31, 2009 March 31, 2008

INCOME Service Revenue 101,169.13 67,199.83 Sale of Trading Goods 143.72 0.07 Other Income 13 230.94 174.56 TOTAL 101,543.79 67,374.46 OPERATING EXPENDITURE Cost of Trading Goods Sold 14 147.90 0.06 Personnel Expenditure 15 5,245.00 3,463.57 Network Operating Expenditure 16 21,078.31 10,470.11 Licence and WPC Charges 17 11,239.32 6,851.03 Roaming & Access Charges 18 18,442.09 11,334.41 Subscriber Acquisition & Servicing Expenditure 19 8,270.69 6,424.23 Advertisement and Business Promotion Expenditure 4,572.77 3,224.86 Administration & other Expenses 20 4,183.26 2,913.58 73,179.34 44,681.85 PROFIT BEFORE FINANCE CHARGES, DEPRECIATION, AMORTISATION & TAX 28,364.45 22,692.61 Finance and Treasury Charges (Net) 21 4,945.22 2,776.20 Depreciation 5 A 12,472.70 7,569.01 Amortisation of Intangible Assets 5 B 1,555.23 1,199.10 Non Compete Fee (Refer note B 5 to Schedule 22) 5,439.75 Less: Amount Withdrawn from Securities Premium (Refer note B 5 to Schedule 22) (5,439.75) – – PROFIT BEFORE TAX 9,391.30 11,148.30 Provision for taxation -Current 1,273.29 425.93 - Deferred 468.97 650.47 - Fringe Benefit tax 102.24 74.13 -MAT Credit (1,268.99) (425.33) PROFIT AFTER TAX 8,815.79 10,423.10 Balance of Loss brought forward from previous year (14,079.19) (24,502.29) BALANCE OF LOSS CARRIED FORWARD TO BALANCE SHEET (5,263.40) (14,079.19) EARNINGS PER SHARE (in Rupees) (Refer Note B 24 to schedule 22) Basic 3.01 3.96 Diluted 3.01 3.96 Significant Accounting Policies and Notes to the Financial Statements 22 The Schedules referred to above form an integral part of Profit & Loss Account As per our report of even date attached

For Deloitte Haskins & Sells For and on behalf of the Board Chartered Accountants Hemant M. Joshi Tarjani Vakil Biswajit Subramanian Partner Director Director Membership No.: 38019 Place: Mumbai Sanjeev Aga Akshaya Moondra Pankaj Kapdeo Date: October 26, 2009 Managing Director Chief Financial Officer Company Secretary 59 IDEA CELLULAR LIMITED

Schedules forming part of the Consolidated Accounts (Rupees in Million) As at As at March 31, 2009 March 31, 2008 SCHEDULE 1 SHARE CAPITAL AUTHORISED 6,775,000,000 (Previous year 4,275,000,000) Equity Shares of Rs.10 each 67,750.00 42,750.00 1500 (Previous year 1500) Redeemable Cumulative Non Convertible Preference Shares 15,000.00 15,000.00 of Rs.10 Mn. each 82,750.00 57,750.00 ISSUED, SUBSCRIBED and PAID-UP Equity Share Capital 3,100,095,209 (Previous year 2,635,360,539) Equity Shares of Rs. 10 each fully paid up 31,000.95 26,353.61 31,000.95 26,353.61 SCHEDULE 2 RESERVES AND SURPLUS Amalgamation Reserve 643.57 643.57 Capital Reserve 1,414.56 1,414.56 Security Premium Account Opening Balance 21,075.87 18,313.36 Add: Premium on issue of shares under GSO – 2,762.51 Add: Premium on issue of Preferential allotment (Refer note B 1(b) to Schedule 22) 68,297.40 – Add: Premium on issue of Compulsorily Convertible Preference Shares by Subsidiary (Refer note B 7 to Schedule 22) 20,963.25 – Less: Share Issue Expenses (240.91) – Less: Withdrawals (Refer note B 5 to Schedule 22) (5,439.75) – 104,655.86 21,075.87 106,713.99 23,134.00 SCHEDULE 3 SECURED LOANS Term Loan Foreign Currency Loan -From Banks 5,315.11 4,268.04 -From Financial Institutions 5,095.00 – Rupee Loan -From Banks 43,311.95 41,480.20 -From Financial Institutions 7,402.76 7,099.70 (Repayable within one year Rs. 4,275.59 Mn, Previous year Rs. 1,425.20 Mn) Vehicle Loan (Repayable within one year Rs.148.70 Mn., Previous year Rs. 104.83 Mn) 362.68 310.65 Finance Lease Liability 2,034.65 – Vendor Finance (Repayable within one year Rs. 865.34 Mn., Previous year Rs.Nil) 1,929.89 – 65,452.04 53,158.59 SCHEDULE 4 UNSECURED LOANS Term Loan Foreign Currency Loan - From Banks 3,386.98 1,390.16 Rupee Loan - From Others 1,757.36 1,757.36 Short Term Loan Rupee Loan from Banks 2,963.47 8,845.90 Others 15,073.09 2.02 Vendor Finance 489.42 – 23,670.32 11,995.44

60 Annual Report 2008-09 77.76 80.74 354.00 158.84 142.33 335.00 418.03 405.78 78,901.77 78,901.77 77,415.81 10,557.06 11,043.58 09 Mar 31, 2008 2009 Mar 31, 2008 (Rupees in Million) (Rupees in Million) - 92.27 79.14 176.35 56.72 802.59 536.26974.47320.63 547.46 255.28 397.50 231.96 610.79 31, 2009 Mar 31, 1,415.38 721.21 43,093.73 130,996.81 13,262.50 10,663.18 4.45 0.06 elecom Service License period and corresponding Accumulated Depreciation being and corresponding Accumulated Depreciation being Rs. 89.69 Mn. k Nil (Previous year Rs. 45.00 Mn.) k Nil (Previous Depreciation Block Net Amortisation Block Net -- - - 2008 on account during the Year Adjustment Mar 67.94 0.01 14.76 3.57 10.21 - 46.51 - 397.29493.65191.30 44.18 400.63 1.70 95.93 91.79 161.80 1.14 11.60 34.17 166.46 30.71 37.27 2.48 716.66 333.42 368.78 3.48 29,925.72 3,118.06 12,075.60 2,025.65 10,249.66 1,872.84 1,140.00 - 92.27 255.49 842.75 718.13 31, 2009 Apr 1, 859.31 1,083.72 1,229.75 2,136.59 174,090.54 23,925.68 Gross Block Gross Block Gross of JV during the Year of JV during the Year of JV during the Year of JV during the Year 22,020.11 3,479.79 1,424.96 3.28 26,921.58 10,976.53 2,206.26 1,555.23 3.48 14,734.60 12,186.98 Apr 1, 2008 on account during the Year Adjustment Mar Apr 1, 20081, Apr on account during the Year Adjustment Mar 31, 200920081, Apr accounton during the Year Adjustment Mar 31, 2009 Mar 31, 20 Rs. 950.55 Mn. (Previous Year Rs. 134.43 Mn ) Year Rs. 950.55 Mn. (Previous (Previous Year Rs.4.88 Mn ) Year (Previous Particulars As at Additions Additions Sale/ As at As at Additions Additions Sale/ As at As at As at Land LandLeasehold Building Machinery & Plant Fixture & Furniture 210.27 107,341.53 EquipmentOffice Vehicles 8,329.51 77.76 751.29 0.09Sub-Total 584.49Less : Pre-operative 652.49 60,512.59 51.57Charge Capitalised 0.31 179.13 Assets 430.82 Tangible Total 48.95 110,144.13 2,093.09 110,144.13 YearPrevious 526.30 282.51 8,994.44 8,994.44 14.20 81.65 161.68 3.01 3.82 70,476.41 61,371.84 61,371.84 1.65 2.52 15.24 2,197.76 270.26 - 2,197.76 - 178,312.65 178,312.65 31,242.36 31,242.36 42,455.47 3,595.29 81.44 3,595.29 2,787.75 12,472.70 Fees License Entry/ 12,477.15 Software - 110,144.13Computer 20,806.72 1,122.44 26,306.24Bandwidth 3,118.96 2,078.61 2,078.61Sub-Total 45,236.19 360.83 45,236.19Less : Pre-operative 133,076.46 133,076.46 Charge Capitalised - Intangible Assets Total 656.60 - 22,020.11 Year 90.95Previous 3,479.79 7,571.88 TotalGrand 14,810.56 3.28 1,424.96 2,635.76 - 132,164.24 12,474.23 - 31,242.36 - 78,901.77 768.36 62,796.80 3.28 26,921.58 7,235.60 2,201.04 10,976.53 205,234.23 2,206.26 42,218.89 - 5,801.55 26.05 1,555.29 22,020.11 14,027.93 9,795.79 2,082.09 3.48 59,970.79 14,734.60 145,263.44 - 12,186.98 11,043.58 1,199.10 18.36 10,976.53 11,043.58 Particulars As at Additions Additions Sale/ As at As at Additions Additions Sale/ As at As at As at Notes: 1. Rs.38.28 Mn ) capitalised - Software Block of assets under finance Year include Gross lease Rs. 270.32 Mn. (Previous Computer 2. The remaining amortisation periodranges 31, 2009 7 to 19 years of license fees as at March between based on the respective T Schedules forming part forming Schedules of the Consolidated Accounts SCHEDULE 5 - FIXED ASSETS ASSETS A. TANGIBLE Notes: 1. Plant & Machinery Bloc year Rs. 1,988.03 Mn.) and Net Block Rs. 783.23 Mn. (Previous held for disposal- Gross includes assets ASSETS B. INTANGIBLE 2. Plant & Machinery Rs.975.01 Mn) capitalised includes Gross Block under finance of assets Year lease Rs. 4338.62 Mn. (Previous 61 IDEA CELLULAR LIMITED

Schedules forming part of the Consolidated Accounts (Rupees in Million) As at As at March 31, 2009 March 31, 2008 SCHEDULE 6 INVESTMENTS Unquoted Share in investment of Spice in Subsidiary Company (Refer note B 14 to Schedule 22) 0.21 – Units of Mutual Funds (Current) (Refer note B 13 to schedule 22) 20,451.68 5,560.00 (Includes unutilised Initial Public Offer proceed of Rs. Nil, Previous Year Rs. 4,885.90 Mn) 20,451.89 5,560.00

SCHEDULE 7 INVENTORIES (At lower of cost or estimated realisable value) Trading Goods 46.65 0.45 Sim Cards and Others 474.61 275.70 521.26 276.15 SCHEDULE 8 SUNDRY DEBTORS Debts outstanding for over six months Unsecured - Considered good 87.66 95.31 - Considered doubtful 2,744.18 2,356.33 2,831.84 2,451.64

Other Debts Unsecured - Considered good 3,530.23 1,890.62 - Considered doubtful 169.20 106.80 3,699.43 1,997.42 Less: Provision for doubtful debts 2,913.36 2,463.13 Total 3,617.91 1,985.93

Sundry Debtors include certain parties from whom Security Deposits of Rs. 246.51 Mn (Previous Year Rs. 225.77 Mn) have been taken and are lying with the Company

SCHEDULE 9 CASH AND BANK BALANCES Cash and Cheques on Hand 214.47 297.01 Balances with Scheduled Banks - in Current Accounts 1,671.97 1,181.98 - in Deposit Accounts 28,977.11 3,495.52 Balances with Other Banks - in Deposit Accounts 0.41 – [Includes unutilised Initial Public Offer proceeds of Rs. 127.54 Mn., (Previous year 3,150.00 Mn) and Rs.111.93 Mn. (Previous year Rs. 71.90 Mn) as margin money] 30,863.96 4,974.51

62 Annual Report 2008-09

Schedules forming part of the Consolidated Accounts (Rupees in Million) As at As at March 31, 2009 March 31, 2008 SCHEDULE 10 OTHER CURRENT ASSETS Unbilled Revenue 1,057.59 476.82 Interest Receivable on Deposits 803.83 43.94 1,861.42 520.76

SCHEDULE 11 LOANS AND ADVANCES (Unsecured, considered good unless otherwise stated) Advances recoverable in cash or kind or for value to be received - Considered good 7,349.90 6,295.25 - Considered doubtful 96.29 90.75 Less: Provision for doubtful advances 96.29 90.75 7,349.90 6,295.25 Deposits with Body Corporates 5,474.28 - Deposits and Balances with Govt. Authorities 892.97 242.50 Deposit with others 1,001.58 620.56 Advance Income Tax (Net of provision of Rs. 1,274.77 Mn., Previous year Rs. 425.33 Mn) 407.59 158.52 MAT Credit Entitlement 1,694.32 425.33 16,820.64 7,742.16

SCHEDULE 12 CURRENT LIABILITIES AND PROVISIONS CURRENT LIABILITIES Sundry Creditors 25,965.24 17,598.80 Book Bank Overdraft 1,264.72 2,272.97 Advances from Customers 5,763.79 4,054.32 Deposits from Customers and Others 1,496.59 1,268.38 Other Liabilities 2,115.82 915.93 Interest accrued but not due 2,030.60 92.71 38,636.76 26,203.11

Provisions Gratuity (Refer note B 18 to schedule 22) 34.38 23.38 Leave Encashment 510.39 316.09 Asset Retirement Obligation (Refer note B 27 to schedule 22) 1,173.05 473.58 Provision for Fringe Benefit Tax (Net of Advance Tax of Rs. 104.15 Mn, Previous year Rs. 174.72 Mn.) 6.55 6.26 1,724.37 819.31 40,361.13 27,022.42

63 IDEA CELLULAR LIMITED

Schedules forming part of the Consolidated Accounts (Rupees in Million) For the year ended For the year ended March 31, 2009 March 31, 2008 SCHEDULE 13 OTHER INCOME Liabilities/Provisions no longer required written back 160.31 139.73 Miscellaneous Receipts 70.63 34.83 230.94 174.56 SCHEDULE 14 COST OF TRADING GOODS SOLD Opening Stock 0.45 0.45 Add: Opening Stock on acquisition of JV 0.78 – Add: Purchases 193.32 0.06 Less: Consumption – – Closing Stock 46.65 0.45 147.90 0.06 SCHEDULE 15 PERSONNEL EXPENDITURE Salaries and Allowances etc. 4,666.07 3,060.62 Contribution to Provident and Other Funds 246.68 150.40 Staff Welfare 212.31 158.66 Recruitment and Training 119.94 93.89 5,245.00 3,463.57 SCHEDULE 16 NETWORK OPERATING EXPENDITURE Security Service Charges 1,028.07 777.67 Power and Fuel 5,557.40 2,244.04 Repairs and Maintenance - Plant and Machinery 3,089.41 1,330.33 Switching & Cellsites Rent 2,758.17 829.70 Lease Line and Connectivity Charges 3,633.72 2,269.05 Network Insurance 44.33 26.50 Passive Infrastructure Charges 4,648.73 – Other Network Operating expenses 318.48 2,992.82 21,078.31 10,470.11 SCHEDULE 17 LICENCE AND WPC CHARGES Licence Fees 7,435.76 4,150.85 WPC and Spectrum Charges 3,803.56 2,700.18 11,239.32 6,851.03

SCHEDULE 18 ROAMING & ACCESS CHARGES Roaming Charges 813.53 1,017.89 Access Charges 17,628.56 10,316.52 18,442.09 11,334.41

64 Annual Report 2008-09

Schedules forming part of the Consolidated Accounts (Rupees in Million) For the year ended For the year ended March 31, 2009 March 31, 2008 SCHEDULE 19 SUBSCRIBER ACQUISITION & SERVICING EXPENDITURE Cost of Sim and Other Cards 993.37 532.97 Commission and Discount to dealers & recharge expenses 4,268.10 4,516.29 Customer Verification Expenses 375.97 192.86 Collection & Telecalling Expenses 2,551.93 1,121.32 Customer Retention & Customer loyalty Expenses 81.32 60.79 8,270.69 6,424.23 SCHEDULE 20 ADMINISTRATION & OTHER EXPENSES Repairs and Maintenance – Building 20.65 17.22 – Others 1,267.41 961.80 Other Insurance 37.10 21.02 Non Network Rent 512.43 339.68 Rates and Taxes 69.92 93.60 Electricity 191.84 110.50 Printing and Stationery 94.11 62.98 Communication Expenses 159.33 124.34 Traveling and Conveyance 521.60 414.25 Provision for bad and doubtful debts / advances 357.50 244.94 Bank Charges 125.50 97.35 Directors Sitting Fees 1.23 0.91 Legal and Professional Charges 323.08 176.98 Audit Fees 29.31 22.33 Loss on Sale of Fixed Assets/Asset disposed off 15.12 8.89 Miscellaneous expenses 457.13 216.79 4,183.26 2,913.58 SCHEDULE 21 FINANCE AND TREASURY CHARGES (NET) Interest (Net of Rs. 243.83 Mn. capitalised, previous year Rs. 147.47 Mn.) – On Fixed Period Loan 8,592.00 4,348.77 – Others 221.89 32.58 Financing Charges 398.03 211.02 9,211.92 4,592.37 Less: Interest Received (Gross of Tax) 2,251.50 849.62 Profit on Sale of Current Investments 2,680.89 432.01 Gain / (Loss) on foreign exchange fluctuation (Refer note B 16 to schedule 22) (665.69) 534.54 4,945.22 2,776.20

65 IDEA CELLULAR LIMITED

Schedules forming part of the Consolidated Accounts SCHEDULE 22 The Joint Venture, which is included in this Consolidated A. SIGNIFICANT ACCOUNTING POLICIES Financial Statements along with Company’s holding therein, is as under: 1. Basis of Preparation of Financial Statements: Voting Power % as at The Consolidated Financial Statements of Idea Cellular No. Name of the Company March 31, March 31, Limited (“the Company”), its subsidiary companies and Joint 2009 2008 Ventures (together referred to as the “Group”) have been prepared in accordance with Accounting Standard 21 on 1 Indus Towers Limited 16.00* 16.00 “Consolidated Financial Statements” and Accounting 2 Spice Communications Limited 41.09 – Standard 27 on “Financial Reporting of Interests in Joint * entire shareholding is held by Aditya Birla Telecom Limited Ventures” issued by the Institute of Chartered Accountants of India (“ICAI”). The Consolidated Financial Statements 3. Fixed Assets: are prepared under historical cost convention on accrual Fixed assets are stated at cost of acquisition and installation basis. The mandatory applicable accounting standards have less accumulated depreciation. Cost is inclusive of freight, been followed in preparation of these financial statements. duties, levies and any directly attributable cost of bringing 2. Principles of Consolidation: the assets to their working condition for intended use. The basis of preparation of the Consolidated Financial Asset retirement obligations are capitalised based on a Statements is as follows: constructive obligation as a result of past events, when it is probable that an outflow of resources will be required to The Financial Statements (The Balance Sheet and the Profit settle the obligation and a reliable estimate of the amount and Loss Account) of the Company, its subsidiaries and can be made. Such costs are depreciated over the joint venture have been combined on a line-by-line basis remaining useful life of the asset. by adding together the book values of like items of assets, liabilities, income and expenses, after eliminating intra- 4. Expenditure during pre-operative period of licence: group balances, transactions and the resulting unrealised Expenses incurred on project and other charges during profit or losses. construction period are included under pre-operative The Financial Statements of the subsidiaries used in the expenditure (grouped under capital work in progress) and consolidation are drawn upto March 31, 2009, the same are allocated to the cost of fixed assets on the reporting date as that of the Company commencement of commercial operations. The differential with respect to the cost of investments in 5. Depreciation and amortisation: the subsidiaries over the Company’s portion of equity is Depreciation on fixed assets is provided on straight line recognised as Goodwill or Capital Reserve, as the case may method (except stated otherwise) on the prorata basis of be. estimated useful economic lives as given below:- The Consolidated Financial Statements are prepared using Tangible Assets Years uniform accounting policies for like transactions and other events in similar circumstances except where stated Buildings 9 to 30 otherwise. Network Equipments 10 to 20 The list of subsidiaries, which are included in this Optical Fibre 15 Consolidated Financial Statements along with Company’s holding therein, is as under: Other Plant and Machineries 3 to 5 Office Equipment 3 to 9 Voting Power % as at Computers 3 to 5 No. Name of the Company Furniture and Fixtures 3 to 10 March 31, March 31, 2009 2008 Motor Vehicles Upto 5 Leasehold improvements Period of lease 1 Swinder Singh Satara and Co. Limited 100.00 100.00 Intangible Assets: 2 Aditya Birla Telecom Limited 100.00 100.00 i) Cost of Rights and Licences including the fees paid on 3 Idea Cellular Services Limited 100.00 100.00 fixed basis prior to revenue share regime is amortised on commencement of operations over the period of 4 Idea Cellular Infrastructure license. Services Limited 100.00 100.00 ii) Software, which is not an integral part of hardware, is 5 Idea Cellular Towers treated as intangible asset and is amortised over their Infrastructure Limited 100.00* 100.00 useful economic lives as estimated by the management All the above subsidiaries are incorporated in India. between 3 to 5 years. 66 Annual Report 2008-09

iii) Bandwidth / Fibre taken on Indefeasible Right of Use balance sheet date and writes down the carrying (IRU) is amortised over the agreement period. amount of MAT Credit Entitlement to the extent there is no longer convincing evidence to the effect that Assets costing upto Rs. 5,000/- are depreciated fully Company will pay normal Income Tax during the in the month of purchase. specified period. 6. Inventories: 9. Retirement Benefits: Inventories are valued at cost or net realisable value, Contributions to Provident and pension funds are funded whichever is lower. Cost is determined on weighted average with the appropriate authorities and charged to the profit basis. and loss account. 7. Foreign currency transactions: Contributions to superannuation are funded with the Life Transactions in foreign currency are recorded at the Insurance Corporation of India and charged to the profit exchange rates prevailing at the dates of the transactions. and loss account. As per the transitional provisions given in the notification st Liability for gratuity as at the period end is provided on issued by Ministry of Corporate Affairs dated 31 March the basis of actuarial valuation and funded with Life 2009, the company has opted for the option of adjusting Insurance Corporation of India. the exchange difference on long term foreign currency monetary items to the cost of the assets acquired out of Provision in accounts for leave benefits to employees is these foreign currency monetary items. The company has based on actuarial valuation done by projected accrued aligned its accounting policy based on this notification. benefit method at the period end. Exchange difference arising out of fluctuation in exchange 10. Revenue Recognition and Receivables: rates on settlement / period end is accounted based on the nature of transaction as under: Revenue on account of mobile telephony services and sale of handsets and related accessories is recognised net of 1) Short term foreign currency monetary assets and rebates, discount, service tax, etc. on rendering of services liabilities: recognised in the Profit and Loss account. and supply of goods respectively. Recharge fees on recharge vouchers is recognised as revenue as and when 2) Long term foreign currency monetary liabilities used the recharge voucher is activated by the subscriber. for acquisition of fixed assets: adjusted to the cost of the fixed assets and amortised over the remaining Unbilled receivables, represent revenues recognised from useful life of the asset. the bill cycle date to the end of each month. These are billed in subsequent periods as per the terms of the billing 3) Other Long term foreign currency monetary liabilities: plans. recognised in “Foreign Currency Monetary Item Translation Difference Account” and amortised over Debts (net of security deposits outstanding there against) the period of liability not exceeding 31st March 2011. due from subscribers, which remain unpaid for more than 90 days from the date of bill and/or other debts which are 8. Taxation: otherwise considered doubtful, are provided for. a) Current Tax: Provision for current income tax is made Provision for doubtful debts on account of Interconnect on the taxable income using the applicable tax rates Usage Charges (IUC), Roaming Charges and passive and tax laws. infrastructure sharing from other telecom operators is made b) Deferred Tax: Deferred tax arising on account of for dues outstanding more than 180 days from the date of timing differences and which are capable of reversal billing other than cases when an amount is payable to in one or more subsequent periods is recognised using that operator or in specific case when management is of the tax rates and tax laws that have been enacted or the view that the amount is recoverable. substantively enacted. Deferred tax assets are not 11. Investments: recognised unless there is virtual certainty with respect to the reversal of the same in future years. Current Investments are stated at lower of cost or fair value in respect of each separate investment. c) Minimum Alternative Tax (MAT) credit: is recognised as an asset only when and to the extent there is Long-term investments are stated at cost less provision for convincing evidence that the Company will pay normal diminution in value other than temporary, if any. income tax during the specified period. In the year in 12. Borrowing Cost: which the MAT credit becomes eligible to be recognized as an asset in accordance with the Interest and other costs incurred in connection with the recommendations contained in Guidance Note issued borrowing of the funds are charged to revenue on accrual by the ICAI, the said asset is created by way of a credit basis except those borrowing costs which are directly to the Profit and Loss account and shown as MAT Credit attributable to the acquisition or construction of those fixed Entitlement. The Company reviews the same at each assets, which necessarily take a substantial period of time 67 IDEA CELLULAR LIMITED

to get ready for their intended use. Such costs are on Cumulative Preference Shares for the Period (irrespective capitalized with the fixed assets. of whether declared, paid or not), as per Accounting Standard 20 on “Earning Per Share” issued by the Institute 13. Licence Fees – Revenue Share: of Chartered Accountants of India. The number of shares With effect from 1st August, 1999 the variable Licence fee used in computing basic EPS is the weighted average computed at prescribed rates of revenue share is being number of shares outstanding during the Period. The charged to the profit and loss account in the Period in diluted EPS is calculated on the same basis as basic EPS, which the related revenue arises. Revenue for this purpose after adjusting for the effects of potential dilutive equity comprises adjusted gross revenue as per the license shares unless the effect of the potential dilutive equity agreement of the license area to which the license pertains. shares is anti-dilutive. 14. Use of Estimate: 17. Impairment of Assets: The preparation of financial statements in conformity with Assets are reviewed for impairment whenever events or generally accepted accounting principles requires estimates changes in circumstances indicate that the carrying amount and assumptions to be made that affect the reported may not be recoverable. An impairment loss is recognized amounts of assets and liabilities and disclosure of in accordance for AS-28 “Impairment of Assets”, for the contingent liabilities on the date of the financial statements amount by which the asset’s carrying amount exceeds its and the reported amounts of revenues and expenses during recoverable amount as on the carrying date. The the reporting year. Differences between actual results and recoverable amount is higher of the asset’s fair value less estimates are recognised in the periods in which the results costs to sell vis-à-vis value in use. For the purpose of are known / materialise. impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows. 15. Leases: 18. Contingent Liability: a) Operating: Lease of assets under which significant Provisions are recognized when the Company has a present risks and rewards of ownership are effectively retained obligation as a result of past events; it is more likely than by the lessor are classified as operating leases. Lease not that an outflow of resources will be required to settle payments under an operating lease are recognised as the obligation; and the amount has been reliably estimated. expense in the profit and loss account, on a straight- Disclosures for contingent liabilities are considered to the line or other systematic basis over the lease term. extent of notices / demands received by the Company. b) Finance: Leased assets acquired on which significant 19. Issue Expenditure: risk and reward of ownership effectively transferred to the Company are capitalised at lower of fair value Expenses incurred in connection with issue of equity shares or the amounts paid under such lease arrangements. are adjusted against share premium. Such assets are amortised over the period of lease or estimated life of such assets whichever is less. 20. Employee Stock Option:

16. Earnings Per Share: In respect of stock option granted pursuant to the company’s Employee Stock Option Scheme, the intrinsic The earnings considered in ascertaining the Group’s EPS value of the option is treated as discount and accounted comprises the net profit after tax, after reducing dividend as employee compensation cost over the vesting period.

68 Annual Report 2008-09

Schedules forming part of the Consolidated Accounts SCHEDULE 22

B. NOTES TO ACCOUNTS

1 Equity Share Capital

a) Increase in Authorised Equity Share Capital: At the Annual General Meeting held on 29th September, 2008, members of the company passed a resolution to increase Authorised Equity Share Capital by Rs. 25,000.00 Mn. to Rs. 67,750.00 Mn.

b) Preferential Allotment

At the Extra-ordinary General Meeting (EGM) held on 30th July 2008, members passed a resolution to issue on a preferential basis to TMI Mauritius Limited, 464,734,670 Equity Shares of face value of Rs. 10/- each for cash at a premium of Rs. 146.96 per Equity Share, aggregating to Rs. 72,945 Mn. Accordingly, 413,094,098 and 51,640,572 shares were allotted on 12th August 2008 and 13th August 2008 respectively. The objects of the issue was towards augmentation of the long term resources of the Company in meeting the fund requirements for growth plans, to supplement working capital resources and for general corporate purposes.

During the year ended 31st March 2009, Rs. 62,230 Mn. has been utilised towards the specified objects of the issue. The unutilized balance of Rs. 10,715 Mn. as on 31st March 2009 is lying in deposits with banks and mutual funds.

2 The status of utilisation of IPO proceeds and Green Shoe amount up to 31st March 2009 is as under:

(Rs. Mn.)

Activity To be financed Utilisation up to Utilisation from through the 31st March 2008 April 2008 to issue proceeds March 2009

Building strengthening and expanding network and related services in the New Circles 9,708.00 8,121.98 979.57#

Capital expenditure for NLD operations 808.00 – 7.62#

Roll out for services in Mumbai Circle 6,470.00 828.12 1,415.12#

Redemption of Preference Shares 7,563.26 7,563.26 –

Issue Expenses 620.04 620.04 –

General Corporate purpose ** 3,018.20 3,018.20 5,633.59#

Total 28,187.50 20,151.60 8,035.90

# At the EGM held on 30th July 2008, members approved balance unutilized proceeds of IPO for mergers, acquisitions and other general corporate purposes, in addition to the objects of IPO, therefore the balance unutilised amounts of the said objects has been utilised for general corporate purposes. ** Including repayment of short term loans 3 Investment in Spice Communications Limited During the year, the company has acquired from MCorp Global Communications Private Limited (MCPL) their entire 40.8% stake in Spice Communications Limited (Spice) (having operations in Punjab and Karnataka Telecom circles). The company along with TMI India Limited, TMI Mauritius Limited, Axiata Group Berhad (formerly known as TM International Berhad) and Green Acre Agro Services Private Limited, collectively referred to as “The acquirers” had made a public offer to acquire upto 20% equity stake in Spice from other public shareholders. The said offer was opened on 17th September 2008 and closed on 6th October 2008. The acquirers have since made the payment on 15th October 2008 to all eligible shareholders of Spice who had validly tendered their shares under the said offer. Consequently, the stake of the Company in Spice stands at 41.09% as of date. A scheme of amalgamation of Spice with the Company has been filed with Hon’ble High Court of Gujarat at Ahmedabad on 11th May, 2009. The scheme shall be effective on and from last of the dates on which all required approvals are obtained and the sanctioned scheme is filed with the Registrar of Companies at Ahmedabad and Delhi respectively. 69 IDEA CELLULAR LIMITED

Accordingly, Spice has been consolidated with effect from 16th October 2008. The goodwill on acquisition is calculated as under:- (Rs. Mn.) Investment value for 41.09% stake in Spice 22,041.87 Less: Proportionate share in Networth of Spice - Equity Capital 2,834.90 - Share Premium 2,030.91 - P&L account * (5,220.11) (354.30) Goodwill on acquisition of Spice 22,396.17

* after adjusting an amount of Rs. 64.61 Mn. (net of depreciation) pertaining to foreign currency exchange difference capitalised by Spice as per the Notification dated 31st March 2009 issued by Ministry of Company affairs on transitional provisions of AS-11 4 Demerger of Licenses The Company, inter alia, has been granted UAS Licenses by the Department of Telecommunications (DoT) for Punjab and Karnataka Service Areas which overlap with operational UAS Licenses of Spice in respect of same Service Areas. Since the Company has decided to merge Spice into itself, it has filed a scheme of arrangement on 11th May, 2009 with an appointed date of 1st December, 2008 in the Hon’ble High Court of Gujarat at Ahmedabad to de-merge its own UAS Licenses for Punjab and Karnataka service areas to an eligible entity. Upon the scheme becoming effective, the difference between the carrying values and the consideration for de-merger of these UAS Licenses is proposed to be adjusted against the balance in the Securities / Share Premium Account through the Profit & Loss account. The Company has, in the meanwhile sought a deferment of the proceedings from Hon’ble High Court of Gujarat at Ahmedabad due to regulatory clarity on the subject. Upon clarity in the matter and Company deciding to go ahead with the Scheme, the aforesaid appointed date may undergo a change. Further, the Scheme of Amalgamation of Spice with the Company, as mentioned in Note 3 above, provides for the adjustment of the amount of loss arising out of impairment or sale, disposal or any other arrangement in connection with these licenses against the balance in the Securities / Share Premium Account in the event the Scheme of De-merger for the above mentioned overlapping licenses not being pursued or not becoming effective for any reason whatsoever. In such an event, the net-worth of the Company may diminish to that extent, which is currently not ascertainable. These UAS Licenses have therefore been carried at cost (Rs. 3,585.80 Mn.) as on 31st March, 2009. 5 The Company has paid Non-Compete Fee of Rs. 5,439.75 Mn. to MCPL in July 2008 pursuant to the Non-Compete Agreement entered into as a part of the acquisition of 40.8% equity in Spice as mentioned in Note 3 above. A Scheme of Arrangement was filed by the Company with the Hon’ble High Court of Gujarat at Ahmedabad with an appointed date of 1st July, 2008, to adjust the Non-Compete fee paid to MCPL against the balance in Securities/ Share Premium Account through the Profit & Loss account. The said scheme was approved by the Hon’ble High Court on 31st August 2009 and became effective on 21st September 2009, pursuant to filing of the High Court order with Registrar of Companies, Gujarat. The scheme has been given effect to in these financial statements by debiting Non-Compete Fee to Profit & Loss Account and setting off from an equal amount withdrawn from the Securities Premium account. Had the scheme not mandated the above accounting treatment, the Non-Compete Fee would have been capitalised as intangible asset and amortised over the non-compete period. In such an event, Intangible Assets and Securities Premium would have been higher by Rs. 4,071.05 Mn. and Rs. 5,439.75 Mn. respectively and Profit after Tax for the year would have been lower by Rs. 1,368.70 Mn. on account of amortisation. 6 De-merger of Passive Infrastructure A Scheme of Arrangement was filed with the Hon’ble High Court of Gujarat at Ahmedabad to de-merge Passive Infrastructure (PI) assets in the telecom service areas of Andhra Pradesh, Delhi, Gujarat, Uttar Pradesh (both East & West including Uttaranchal), Haryana, Kerala, Rajasthan and Mumbai at nil consideration to Idea Cellular Towers Infrastructure Limited (ICTIL), a 100% subsidiary, with an appointed date of 1st January 2009. The Hon’ble High Court of Delhi at New Delhi and the Hon’ble High Court of Gujarat at Ahmedabad approved the scheme on 3rd August 2009 and 31st August 2009 respectively. The scheme became effective on 29th September 2009. Post demerger ICTIL has revised the estimated useful life of the assets in line with the other major Passive Infrastructure companies catering to telecom sector. This has resulted in higher profit for the year by Rs. 13.06 Mn. 7 During the year, Aditya Birla Telecom Limited, a subsidiary of the Company has issued 1,925,000 Compulsory Convertible Preference Shares of the face value Rs. 10/- each for a total consideration of Rs. 20,982.50 Mn. to P5 Asia Holding Investments (Mauritius) Limited. 8 On 20th August 2008 and 1st October 2008 the Company has commenced its commercial operations in Mumbai and Bihar service area respectively. 70 Annual Report 2008-09

9 Interest from Department of Telecommunications The Company had recognised an income of Rs. 802.27 Mn. during the year ended 31st March, 2003 being refund of excess interest charged by DoT on the licence fee payable by the Company pursuant to the judgement dated 9th April, 2002 of Telecom Disputes Settlement and Appellate Tribunal (TDSAT). During the previous years, DoT arbitrarily acknowledged an amount of Rs. 758.76 Mn. against Company’s claim of Rs. 802.27 Mn. The Company has represented this matter with DoT. The Company has not provided for the difference of Rs. 43.51 Mn., as in the opinion of the management, the amount is recoverable from DoT. The Company is also entitled to interest on the amount of the refund so accrued in terms of the Supreme Court Judgment; the recognition of revenue on account of the same has been postponed pending acceptance in this respect by DoT. As of 31st March, 2009, this case is pending before the H’ble Supreme Court. 10 Contingent Liabilities a) During the financial year 2006-07, the WPC Wing of the DoT had raised demands towards monthly compounded interest on WPC charges for the period upto the financial year 2002-03 in respect of the telecom service areas of the erstwhile Idea Mobile Communication Limited (IMCL) and BTA Cellcom Ltd amounting to Rs. 405.02 Mn., which were deposited under protest in November 2006. The details of the same are given below. Telecom operators had paid WPC Royalty and license fees towards GSM frequency, access and back-bone frequency charges on circle area basis as provided in the license terms from inception till financial year 2002-03 while the DoT demands were on city basis. The above matter was disputed by the operators and contested in TDSAT. DoT proposed a change in the basis of levy of spectrum charges based on revenue share vide their letter dated 18th April, 2002 on the condition of its acceptance in entirety and withdrawal of all legal proceedings by the operators. Vide their letter dated 26th March, 2002, DoT had also given time to the operators to deposit the earlier principal demands by 15th April, 2002.The operators accepted the offer of change to revenue share basis on 23rd August, 2002. The interest demand now raised by WPC wing of DoT for the period before 15th April, 2002 is contrary to the DoT proposal in 2002. During the year, the Company along with other telecom operators have approached TDSAT vide petition no. 123 of 2008 challenging this demand. Following submission of reply by DoT, the matter is expected to be heard in November 2009. The Company has also taken up with the erstwhile promoter of IMCL for Rs. 348.79 Mn. (refer note 13 below) Spice Communications Limited, a Joint Venture of the Company has also got notices from WPC wing of the DoT on the similar ground. Company’s share (net of Provision) in the amount of Principal and interest demanded by WPC is Rs. 153.29 Mn. b) Under Export Promotion Credit Guarantee Scheme, Company had saved aggregated differential duty amounting to Rs. 37.72 Mn. against which company had export obligation amounting to Rs. 301.06 Mn. The company has fulfilled its export obligation and is awaiting formal acknowledgement from Director General of Foreign Trade for the same. c) Other Matters not provided for (Rs. Mn.)

Particulars As on As on March 31, 2009 March 31, 2008

Income Tax Matters not acknowledged as debts 107.29 18.75 Sales Tax & Service Tax Matters not acknowledged as debts 1,521.45 1,254.06 License Fee & Spectrum charge matters not acknowledged as debts 335.41 – Other claims not acknowledged as debts 1,441.63 1,117.18

d) Estimated amount of contracts (net of advance) remaining to be executed on capital account and not provided for. (Rs. Mn.)

Particulars As on As on March 31, 2009 March 31, 2008

Estimated amount of contracts (net of advance) 17,499.76 20,390.42

11 Details of guarantees given (Rs. Mn.)

Particulars As on As on March 31, 2009 March 31, 2008

Bank guarantees given 10,695.58 9,963.55

71 IDEA CELLULAR LIMITED

12 In accordance with an assignment agreement entered between the original promoters of the amalgamated subsidiary Idea Mobile Communications Limited (IMCL) i.e. Escorts Ltd. and First Pacific Company Ltd., IMCL had issued interest free unsecured Bond of Rs. 1,757.36 Mn. to Escorts Limited vide a Loan agreement dated 15th January, 2004. This bond was in lieu of the loans from the original promoters and included accrued interest of Rs. 857.36 Mn. on 10th June, 2004. This Bond is repayable on 15th January, 2014 and carries a put option for Escorts Limited for a period of thirty days commencing on 15th January, 2010 to redeem the entire amount or part thereof at a price which would have been payable by the Company had the Company opted for an early redemption in accordance with the terms of the said agreement. The Company is entitled to pre payment and set off against certain contingent liabilities that may crystallise after 10th June, 2004. On the request of Escorts Ltd, the Company on 21st July, 2006 has consented to release the redemption proceeds of the above loan to Axis Bank on the same terms and conditions, as mentioned in the above Loan agreement. Escorts Limited have approached the Company for a pre-payment settlement after adjusting agreed contingent liabilities and demands in September 2009. 13 As on 31st March, 2009 the closing balance in units are as follows: As on March 31, 2009 As on March 31, 2008 Particulars Qty in ‘000 Rs in Mn. Qty in ‘000 Rs in Mn. Closing Units Closing Value Closing Units Closing Value Birla Sunlife Cash Plus - I P – Growth ––14,129 310 Birla Sunlife Interval Income Fund - Monthly Plan - Series I ––48,574 500 Birla Sunlife Liquid Plus - IP – Growth ––65,692 1,000 Birla Sunlife Monthly Interval Fund - Series 2 ––122,373 1,250 Birla Sunlife Quarterly Interval Fund - Series 8 ––50,000 500 Birla Sun Life Cash Plus – Institutional Premium Plan – Growth 314,995 4,430 77,499 1,000 Birla Sun Life Cash Manager - IP – Growth 954,040 14,019 –– ICICI Prudential Flexible Income Plan - Growth ––16,765 250 ICICI Prudential Liquid - Super IP - Growth 38,500 500 –– Kotak QIP Series 21,993 253 –– LIC MF Liquid Fund - IP - Growth 15,554 250 –– Prudential ICICI Monthly Interval Fund - Series 1 ––47,126 500 Reliance Liquid Plus Fund – IP – Growth ––22,905 250 UTI Fixed Income Interval Fund-MIP Series-IP Growth 88,048 1,000 –– Total 1,433,130 20,452 465,063 5,560

14 During the previous year, Spice invested in a new 100% subsidiary, Carlos Towers Limited. However the said subsidiary has been excluded in consolidation by Spice as its control is intended to be temporary. Company’s share in Spice’s investment in Carlos Towers Limited, amounting to Rs. 0.21 Mn. has been disclosed under investment schedule. 15 Under ESOS 2006, 6,131,250 options have been granted as ‘Tranche II’ to the eligible employees as on 24th July 2008. Each option when exercised would be converted into one equity share of Rs. 10/- each, fully paid up, of the Company. The options will vest in 4 equal annual installments after one year of the grant. The maximum period of exercise is 5 years from the date of vesting. The compensation costs of stock options granted to employees have been accounted by the Company using the intrinsic value method. Summary of Stock Option No. of Stock Options Particulars March 31, 2009 March 31, 2008 Tranche I Tranche II Tranche I Options Outstanding as on April 1, 2008 19,667,000 – – Options Granted during the year – 6,131,250 19,931,000 Option forfeited/lapsed during the year 2,391,000 454,750 264,000 Options exercised during the year –– – Options Outstanding as on March 31, 2009 17,276,000 5,676,500 19,667,000 Personnel cost includes Rs. 144.74 Mn. (Previous Year Rs. 37.59 Mn.) being the amortisation of intrinsic value for the period ending 31st March, 2009. 72 Annual Report 2008-09

Had the compensation cost for the Company’s stock based compensation plan been determined as per fair value approach (calculated using Black & Scholes Option Pricing Model), the Company’s net income would be lower by Rs. 423.72 Mn. (Previous Year: Rs. 100.93 Mn) and earnings per share as reported would be lower as indicated below: (Rs. Mn.)

Particulars For the year ended For the year ended March 31, 2009 March 31, 2008

Net profit after tax but before exceptional items 8,815.79 10,423.10

Add: Total stock-based employee compensation expense determined under intrinsic value base method 144.74 37.59

Less: Total stock-based employee compensation expense determined under fair value base method 568.46 138.52

Adjusted net profit 8,392.07 10,322.17

Basic Earnings Per Share (in Rs.)

- As reported 3.01 3.96

- Adjusted 2.86 3.92

Diluted Earnings Per Share (in Rs.)

- As reported 3.01 3.96

- Adjusted 2.86 3.92

The fair value of each option is estimated on the date of grant based on the following assumptions:

Particulars For the year ended For the year ended March 31, 2009 March 31, 2008 Tranche I Tranche II Tranche I

Dividend yield (%) Nil Nil Nil Expected life 6 yrs 6 months 6 yrs 6 months 6 yrs 6 months Risk free interest rate (%) 7.78% 7.50% 7.78% Volatility (%) 40.00 45.80 40.00

16 As per the transitional provisions given in the notification issued by Ministry of Corporate Affairs dated 31st March 2009, the company has opted for the option of adjusting the exchange difference on long term foreign currency monetary items to the cost of the assets acquired out of these foreign currency monetary items. During the year, the Group has capitalised exchange difference amounting to Rs. 374.37 Mn. (including Rs. 185.27 Mn. pertaining to subsidiaries and company’s share in joint ventures) on restatement of long term loans used for acquiring fixed assets. Due to this, profit for the year is higher by Rs. 316.49 Mn. 17 Details of foreign currency exposures: a) Hedged by a derivative instrument: (Amount in Mn.)

Particulars As on As on March 31, 2009 March 31, 2008

Foreign Currency Loan*

in USD 30.00 30.00

in JPY 17,727.73 12,630.73

Equivalent INR 7,655.32 5,658.20

*Fully hedged for interest and principal repayments 73 IDEA CELLULAR LIMITED

b) Not hedged by a derivative instrument or otherwise: (Amount in Mn.)

Particulars As on As on March 31, 2009 March 31, 2008 Foreign Currency Loan in USD 167.88 – Interest accrued on above in USD 0.66 – Equivalent INR 8,587.05 – Sundry Creditors: in USD 80.99 48.78 in EURO 0.31 0.42 Equivalent INR 4,139.56 1976.23 Sundry Debtors: in USD 5.09 4.56 in EURO 0.02 0.03 Equivalent INR 258.43 184.16 Bank Deposits: in USD – 6.79 Equivalent INR – 271.48 Advance Paid to Supplier: in USD 1.13 – Equivalent INR 56.87 –

18 Employee Benefits: a) Defined Benefit Plan: The Group provides for its liability towards gratuity as per the actuarial valuation carried by the Life Insurance Corporation of India (LIC). The present value of the accrued gratuity minus fund value is provided in the books of accounts. i) Changes in benefit obligation for the Company and its Subsidiaries (Rs. Mn.) Sr. For the year ended For the year ended No Particulars March 31, 2009 March 31, 2008 Funded Unfunded 1 Assumptions Discount Rate 8.00% 7.00% 8.00% Salary Escalation 6%-7% 6.00% 5%-7% 2 Table showing changes in present value of obligations Present value of obligations as at beginning of year 84.92 – 81.97 Interest cost 6.79 0.07 6.18 Current Service Cost 25.25 0.91 16.93 Benefits Paid 11.85 – 8.65 Actuarial (Gain)/ Loss on obligations 27.58 0.46 (11.48) Present value of obligations as at end of year 132.69 1.44 84.92 3 Table showing changes in the fair value of plan assets Fair value of plan assets at beginning of year 80.33 – 61.80 Expected return on plan assets 8.04 – 6.07 Contributions 48.03 – 21.12 Benefits paid 11.85 – 8.65 Actuarial Gain/ (Loss) on Plan assets NIL NIL NIL Fair value of plan assets at the end of year 124.55 – 80.33 74 Annual Report 2008-09

(Rs. Mn.) Sr. For the year ended For the year ended No Particulars March 31, 2009 March 31, 2008 Funded Unfunded

4 Table showing fair value of plan assets Fair value of plan assets at beginning of year 80.33 – 61.80 Actual return on plan assets 8.04 – 6.07 Contributions 48.03 – 21.12 Benefits Paid (11.85) – 8.65 Fair value of plan assets at the end of year 124.55 – 80.33 Funded status 8.14 – (4.60) Excess of Actual over estimated return on plan assets NIL NIL NIL (Actual rate of return = Estimated rate of return as ARD falls on March 31) 5 Actuarial Gain/Loss recognized Actuarial Gain/ (Loss) for the year -Obligation (27.58) – 11.48 Actuarial (Gain)/ Loss for the year - plan assets NIL – NIL Total (Gain)/ Loss for the year 27.58 – (11.48) Actuarial (Gain)/ Loss recognized in the year 27.58 – (11.48) 6 The amounts to be recognized in the Balance Sheet and statements of profit and loss Present value of obligations as at the end of year 132.69 1.44 84.92 Fair value of plan assets as at the end of the year 124.55 – 80.33 Funded status 8.14 – (4.60) Net Asset/ (Liability) recognized in Balance Sheet (17.55) (1.44) (23.38) 7 Expenses Recognised in statement of Profit & loss Current Service cost 25.25 0.91 16.93 Interest Cost 6.79 0.07 6.18 Expected return on plan assets (8.04) – 6.07 Net Actuarial (Gain)/ Loss recognised in the year 27.58 0.46 (11.48) Expenses recognised in statement of Profit & Loss 51.58 1.44 5.55

ii) Changes in benefit obligation for the Company’s share in Joint Ventures (Rs. Mn.) Change in defined benefit obligation Opening defined benefit obligation 11.08 Liability taken over from joint venturers 2.21 Current Service Cost 3.57 Interest Cost 0.50 Benefits paid (3.80) Actuarial (gain)/ losses 1.03 Closing Defined benefit obligation 14.59 Fair value of Plan assets (2.75) Unfunded liability recognized in the Balance Sheet 15.39 Expenses Recognised in statement of Profit & Loss Current Service cost 3.57 Interest Cost 0.50 Expected return on plan assets (0.04) Net Actuarial (Gain)/ Loss recognised in the year 1.06 Expenses recognised in statement of Profit & Loss 5.08 75 IDEA CELLULAR LIMITED

iii) Assumptions Discount rate 7% - 7.6% Salary Escalation rate 7% - 10%

b) Defined Contribution Plan: During the year, the Company has recognised the following amounts in the Profit and Loss account: (Rs. Mn) Particulars For the year ended For the year ended March 31, 2009 March 31, 2008

Employers’ Contribution to Provident Fund 139.98 97.20 Employers’ Contribution to Superannuation Fund 31.53 25.00 19 Segment Reporting 1. Primary Segments: The Company operates in two business segments: a) Mobility Services b) Long Distance (LD) c) Passive Infrastructure (PI) 2. Secondary Segment: The Company caters only to the needs of Indian market representing a singular economic environment with similar risks and rewards and hence there are no reportable geographical segments Primary Business Information (Business Segments) for the year ended March 31, 2009. (Rs. Mn.) Particulars Business Segments Elimination Total Mobility LD Others Revenue External Revenue 101,084.60 25.64 202.61 – 101,312.85 Inter-segment Revenue 259.97 7,104.15 2,295.13 (9,659.25) – Total Revenue 101,344.57 7,129.79 2,497.74 (9,659.25) 101,312.85 Segment result 13,439.37 1,182.19 (285.04) – 14,336.52 Interest & financing charges (Net) – – – – 4,945.22 Profit before Tax – – – – 9,391.30 Provision for tax (Net) – – – – 575.51 Profit after tax – – – – 8,815.79 Other information Segment assets 187,015.55 6,556.42 32,436.96 (20,551.43) 205,457.50 Unallocated corporate assets – – – – 57,809.02 Total assets 187,015.55 6,556.42 32,436.96 (20,551.43) 263,266.52 Segment liabilities 127,139.82 5,389.89 17,498.66 (20,551.43) 129,476.94 Unallocated corporate liabilities – – – – 1,136.46 Total liabilities 127,139.82 5,389.89 17,498.66 (20,551.43) 130,613.40 Capital expenditure 52,317.15 878.26 13,792.60 – 66,988.01 Depreciation & amortisation 13,004.26 17.58 1,006.09 – 14,027.93

76 Annual Report 2008-09

Primary Business Information (Business Segments) for the year ended March 31, 2008. (Rs. Mn.) Particulars Business Segments Elimination Total Mobility LD Revenue External Revenue 67,199.90 – – 67,199.90 Inter-segment Revenue – 3,536.67 (3,536.67) – Total Revenue 67,199.90 3,536.67 (3,536.67) 67,199.90 Segment result 13,199.70 724.80 – 13,924.50 Interest & financing charges (Net) – – – 2,776.20 Profit before Tax – – – 11,148.30 Provision for tax (Net) – – – 725.20 Profit after tax – – – 10,423.10 Other information Segment assets 118,644.46 1,402.16 (1,120.93) 118,945.69 Unallocated corporate assets – – – 9,337.79 Total assets 118,644.46 1,402.16 (1,120.93) 128,283.48 Segment liabilities 92,770.52 520.60 (1,120.93) 92,170.19 Unallocated corporate liabilities – – – 667.28 Total liabilities 92,770.52 520.60 (1,120.93) 92,837.47 Capital expenditure 54,993.54 0.02 – 54,993.56 Depreciation & amortisation 8,766.86 1.25 – 8,768.11 20 Related Party Transactions As per Accounting Standard-18 on “Related Party Disclosure”, related parties of the Company are disclosed below: A. List of related Parties : Promoters Hindalco Industries Limited Grasim Industries Limited Aditya Birla Nuvo Limited Birla TMT Holdings Pvt. Limited Key Management Personnel Mr. Sanjeev Aga, MD Mr. AJS Jhala, CFO (upto 30th June 2008) Mr. Akshaya Moondra, CFO (from 1st July 2008) B. Transactions with Related Parties (Rs. Mn.) Particulars Promoters Key Hindalco Grasim Aditya Birla Management Industries Industries Nuvo Limited Personnel Limited Limited Remuneration – – – 63.09 (–)(–)(–) (61.48) Purchase of Fixed Assets – – – – (–) (0.13) (–) (–) Purchase of Service/ Goods 0.12 – 0.33 – (–) (–) (–) (–) Sale of Service/ Goods 5.39 7.67 0.52 – (–)(–)(–)(–) Employee Expenses – – – – (0.08) (–)(–)(–) Unsecured Loans/ ICD repaid – – 750.00 – (–) (–) (–) (–) Unsecured Loans given/ ICD – – 750.00 – (–)(–)(–)(–) Interest on Unsecured Loans given – – 7.97 – (–)(–)(–)(–) Expenses incurred on Company’s behalf by 0.13 1.49 – – (3.93) (2.00) (0.18) (-) (Figures in bracket are for the year ended March 31, 2008) 77 IDEA CELLULAR LIMITED

C. Outstanding as on March 31, 2009 (Rs Mn.) Particulars Promoters Key Management Hindalco Personnel Industries Limited Unsecured Loan given -- (-) (8.00) Accounts Receivable 0.03 - (-) (-) Remuneration Payable - 17.44 (-) (24.20) Accounts Payable -- (0.08) (-) (Figures in bracket are as of March 31, 2008) 21 The Company has entered into non-cancellable operating leases for office and main switching centre locations for periods ranging from 36 months to 480 months. For the current year, total minimum lease payments amounting to Rs. 3,067.12 Mn. (Previous year Rs. 264.63 Mn.) is charged to Profit & Loss account. The future lease payments in respect of the above are as follows. (Rs. Mn.) Particulars Not later than Later than one year Later than five one year but not later years than five years Minimum Lease payments 2,652.18 8,169.93 4,627.78 (313.24) (1,120.97) (902.12) (Figures in bracket are as of March 31, 2008) 22 During the financial year 2007-08, company had entered into a composite IT outsourcing agreement wherein fixed assets and services related to IT has been supplied by the vendor. Such fixed assets received have been accounted for as a finance lease. Correspondingly, such assets are recorded at fair value of these assets at the time of receipt and depreciated on the stated useful life applicable to similar assets of the company. As at 31st March, 2009, an amount of Rs. 939.12 Mn. towards the supply of fixed assets during the year stands outstanding and will be paid during financial year 2009-10. 23 During the financial year, Spice has taken certain fixed assets on finance lease, the company’s share of minimum lease rentals outstanding as at 31st March 2009 are as follows :- (Rs. Mn.) Particulars Not later than Later than one year Later than five one year but not later years than five years Minimum Lease payments outstanding 443.36 2,004.25 1,815.78 Future Interest outstanding 380.76 1,284.55 563.41 Present value of lease payments 62.59 719.70 1,252.36

24 Basic & Diluted Earnings Per Share Particulars For the year ended For the year ended March 31, 2009 March 31, 2008 Nominal value of Equity Shares (Rs.) 10/- 10/- Profit after Tax (Rs. Mn.) 8,815.79 10,423.10 Profit attributable to equity shareholders (Rs. Mn.) 8,815.79 10,423.10 Weighted average number of equity shares outstanding during the year 2,930,612,054 2,634,896,058 Basic Earnings Per Share (Rs.) 3.01 3.96 Dilutive effect on weighted average number of equityshares outstanding during the year – 483,044 Weighted average number of diluted equity shares 2,930,612,054 2,635,379,102 Diluted Earnings Per Share (Rs.) 3.01 3.96 78 Annual Report 2008-09

25 Deferred Tax As of March 31, 2009, the Company has deferred tax liability of Rs. 4,993.27 Mn. and deferred tax asset of Rs. 3,863.36 Mn. as under: (Rs. Mn.) Particulars As on As on March 31, 2009 March 31, 2008 Deferred Tax Liability: Depreciation and Amortisation 4,967.95 1,663.38 Others 25.32 – Total Deferred Tax Liability 4,993.27 1,663.38 Deferred Tax Asset: Brought forward loss 2,390.81 – Provision for Doubtful Debts 949.93 837.22 Expenses allowable on payment basis 204.81 64.60 Others 317.81 100.54 Total Deferred Tax Asset 3,863.36 1,002.36 Net Deferred Tax Liability 1,129.91 661.02

26 The Company has the following joint ventures as on 31st March, 2009 and its percentage holding is given below :

Name of the Joint Venture % holding As on As on March 31, 2009 March 31, 2008 Spice Communications Limited 41.09% – Indus Towers Limited 16.00% 16.00% The proportionate share of assets, liabilities, income, expenditure, contingent liabilities and capital commitment of the above joint venture companies included in these consolidated financial statements are given below: (Rs. Mn.) Particulars As on As on March 31, 2009 March 31, 2008 Assets Net Block (including CWIP) 18,226.60 0.53 Investment 0.21 – Deferred Tax Assets 143.61 – Current Assets 5,536.71 1.36 Profit and Loss Account 752.09 7.01 Liabilities Reserves & Surplus – – Loans 17,541.23 2.02 Current Liabilities 7,472.10 6.71 For the year ended For the year ended March 31, 2009 March 31, 2008 Revenues 4,543.66 – Operating Costs 3,727.12 6.97 EBIDTA 816.54 (6.97) Finance Cost 873.65 0.03 Depreciation & Amortisation 827.26 0.01 PBT (884.37) (7.01) Taxes (139.23) – PAT (745.14) (7.01) Contingent Liability 2,114.44 – Capital Commitment 4,035.59 2.94 79 IDEA CELLULAR LIMITED

27 The movement in the Asset Retirement Obligation is set out as follows: (Rs. Mn.) Particulars For the year ended For the year ended March 31, 2009 March 31, 2008 Opening Balance 473.58 253.26 Additional Provision 702.16 220.32 Utilisation (2.69) – Closing Balance 1,173.05 473.58

28 Previous year’s figures have been regrouped / rearranged wherever necessary to conform to the current year grouping and are not comparable with the current period due to the consolidation of financials pertaining to additional subsidiaries and joint ventures.

For and on behalf of the Board

Tarjani Vakil Biswajit Subramanian Director Director

Place: Mumbai Sanjeev Aga Akshaya Moondra Pankaj Kapdeo Date: October 26, 2009 Managing Director Chief Financial Officer Company Secretary

80 Annual Report 2008-09

Consolidated Cash Flow Statement for the year ended March 31, 2009 (Rupees in Million) For the year ended For the year ended March 31, 2009 March 31, 2008

A) Cash Flow from Operating Activities Net Profit after Tax 8,815.79 10,423.10 Adjustments For Depreciation 12,472.70 7,569.01 Amortisation of Intangible assets 1,555.23 1,199.10 Interest charge 9,211.92 4,592.37 Profit on sale of current investment (2,680.89) (432.01) Provision for Bad & Doubtful Debts/Advances 357.50 244.94 Employee Stock Option Cost 144.74 37.59 Provision for Gratuity and Leave Encashment 182.10 54.34 Provision for Current Tax 1,273.29 425.93 MAT Credit entitlement (1,268.99) (425.33) Provision for Deferred Tax 468.97 650.47 Provision for Fringe Benefit Tax 102.24 74.13 Liability no longer required written back (160.31) (139.73) Interest Income (2,251.50) (849.62) (Profit) / Loss on sale of fixed assets/ assets discarded 15.12 8.89 19,422.12 13,010.08 Operating profit before working capital changes 28,237.91 23,433.18 Changes in Current Assets and Current Liabilities (Increase)/Decrease in Sundry Debtors (1,679.85) (706.10) (Increase)/Decrease in Inventories (235.41) (97.05) (Increase)/Decrease in Other Current Assets (543.59) 163.42 (Increase)/Decrease in Loans and Advances (6,732.19) (3,380.55) Increase /(Decrease) in Current Liabilities 5,058.54 6,241.72 (4,132.50) 2,221.44 Cash generated from operations 24,105.41 25,654.62 Tax paid (including Current Tax, FBT & TDS) (1,463.31) (430.52) Net cash from operating activities 22,642.10 25,224.10 B) Cash Flow from Investing Activities Purchase of Fixed assets & Intangible assets (including CWIP) (62,156.83) (55,726.29) Proceeds from sale of Fixed assets 103.83 150.79 Payment for Non Compete Fee (5,439.75) – Sale/ (purchase) of Other Investments (Net) (12,210.80) (5,115.67) Interest and Dividend Received 1,510.54 922.94 Payment for purchase of Shares of Spice Communications Limited (JV) (22,041.88) – Net cash from / (used in) investing activities (100,234.89) (59,768.23)

81 IDEA CELLULAR LIMITED

Consolidated Cash Flow Statement for the year ended March 31, 2009 (Rupees in Million) For the Year ended For the year ended March 31, 2009 March 31, 2008

C) Cash Flow from Financing Activities Proceeds from issue of Equity Shares 72,944.74 3,187.52 Compulsorily Convertible Preference shares issued by Subsidiary 20,982.50 – Share Issue Expenses (240.91) – Proceeds from Long term borrowings 12,342.23 20,632.01 Repayment of Long Term Borrowings (3,071.58) (1,480.94) Proceeds from Short Term Loan 42,958.61 22,120.90 Repayment of Short Term Loan (36,255.54) (18,622.98) Interest Paid (7,632.81) (4,517.27) Net cash from / (used in) financing activities 102,027.24 21,319.24 Net increase / (decrease) in cash and cash equivalent 24,434.45 (13,224.89) Cash and cash equivalent at the beginning 4,974.51 18,199.40 Add : Cash and Cash Equivalents acquired on acquisition of Spice Communications Limited (JV) 1,455.00 Cash and cash equivalent at the end 30,863.96 4,974.51

Notes to Cash flow Statement 1. Cash and cash equivalent includes Cash and Cheques on Hand 214.47 297.01 Balances with Scheduled & Other Banks - on Current Accounts 1,671.97 1,181.98 - on Deposit Accounts 28,977.52 3,495.52 30,863.96 4,974.51

2. The above cash flow statement has been prepared under the indirect method as set out in Accounting Standard 3 on Cash Flow Statement. 3. Previous year’s figures have been rearranged/regrouped wherever necessary.

As per our report of even date attached.

For Deloitte Haskins & Sells For and on behalf of the Board Chartered Accountants

Hemant M. Joshi Tarjani Vakil Biswajit Subramanian Partner Director Director Membership No.: 38019 Place: Mumbai Sanjeev Aga Akshaya Moondra Pankaj Kapdeo Date: October 26, 2009 Managing Director Chief Financial Officer Company Secretary

82 Annual Report 2008-09

Statement pursuant to Section 212 of the Companies Act, 1956, related to Subsidiary Companies Particulars Aditya Birla Idea Cellular Idea Cellular Idea Cellular Swinder Singh Telecom Services Infrastructure Towers Satara & Limited Limited Services Infrastructure Company Limited Limited Limited 1. Financial year of the Subsidiary ended on March 31, 2009 March 31, 2009 March 31, 2009 March 31, 2009 March 31, 2009 2. Shares of the Subsidiary held by the Company on the above date :- (a) Number & face value 10,000,000 50,000 50,000 50,000 50,000 Equity Shares Equity Shares Equity Shares Equity Shares Equity Shares of Rs.10 each of Rs.10 each of Rs.10 each of Rs.10 each of Rs.10 each (b) Extent of holding 100% 100% 100% *100% 100% 3. Net aggregate amount of profits / (losses ) of the subsidiary for the above financial year on the subsidiary so far as they concern members of the company :- (a) Dealt within the accounts of the NIL NIL NIL NIL NIL company for the year ended March 31, 2009 (Rs. Mn) (b) Not dealt with the accounts of the (285.65) 0.11 (37.86) (129.57) 1.74 company for the year ended March 31, 2009 (Rs. Mn) 4. Net aggregate amount of profits / (losses) for previous year of the subsidiary so far as they concern members of the company :- (a) Dealt within the accounts of the NIL NIL NIL NIL NIL company for the year ended March 31, 2008 (Rs. Mn) (b) Not dealt with the accounts of the (13.02) (1.97) (0.10) (0.64) 1.67 company for the year ended March 31, 2008 (Rs. Mn) * Shares held through Aditya Birla Telecom Limited For and on behalf of the Board Tarjani Vakil Biswajit Subramanian Sanjeev Aga Director Director Managing Director Akshaya Moondra Pankaj Kapdeo Chief Financial Officer Company Secretary Place: Mumbai Date: October 26, 2009

Statement pursuant to exemption received under section 212(8) of the Companies Act, 1956 relating to subsidiary companies for the year ended March 31, 2009 (Rupees in Million) Sr. Name of the Company Country of Capital Reserves Total Total Investments Turnover Profit/ Provision for Profit/ Proposed No. Registration Assets Liabilities other than (Loss) Taxation (Loss) Dividend Investments in before after subsidiary Taxation Taxation 1 Aditya Birla Telecom Limited India 119.25 20,575.97 15,319.59 4,197.60 9,572.73 434.60 (431.52) (145.87) (285.65) NIL 2 Idea Cellular Services Limited India 0.50 (1.86) 25.22 26.58 – 239.17 3.05 2.94 0.11 NIL 3 Idea Cellular Infrastructure Services Limited India 0.50 (37.96) 3,422.20 3,459.66 – 337.33 (37.29) 0.57 (37.86) NIL 4 Idea Cellular Towers Infrastructure Limited India 0.50 16,098.13 16,107.44 8.81 – 410.56 (129.57) – (129.57) NIL 5 Swinder Singh Satara & Co Limited India 0.50 11.84 119.28 106.94 – 79.72 2.31 0.57 1.74 NIL

83 IDEA CELLULAR LIMITED

NOTES

84 Printed at Infomedia 18 Limited Corporate Office: “”Windsor , 5th Floor Off CST Road, Kalina Santacruz (East ) Mumbai - 400 098

Registered Office: Suman Tower Plot No.18, Sector-11 Gandhinagar - 382 011 Gujarat