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BOYW\U]c`Q][^O\g aVO`SV]ZRS`a^O`b\S`a O\RS[^Z]gSSa TO`bVS`b]USbVS` Tata Communications Limited TWENTY FOURTH ANNUAL REPORT 2009-10
CONTENTS
Corporate Details ...... 2 Notice ...... 3 Directors’ Report ...... 7 Report on Corporate Governance ...... 26 Directors’ Responsibility Statement for the year 2009-10 and Secretarial Responsibility Statement ...... 38 Declaration by CEO regarding Company’s Code of Conduct and CEO/CFO Certification ...... 39 Auditors’ Certificate on Corporate Governance ...... 40 Auditors’ Report ...... 41 Balance Sheet ...... 44 Profit & Loss Account ...... 45 Cash Flow Statement ...... 46 Schedules ...... 47 Notes to the Accounts ...... 57 Section 212 of the Companies Act, 1956, related to Subsidiary Companies 94 Consolidated Accounts Auditors’ Report on Consolidated Financial Statements ...... 97 Consolidated Balance Sheet...... 98 Consolidated Profit & Loss Account ...... 99 Consolidated Cash Flow Statement ...... 100 Consolidated Schedules ...... 101 Consolidated Notes to the Accounts ...... 109 Board of Directors ...... 143
Annual General Meeting on Friday, 6 August 2010, at MC Ghia Hall, Kalaghoda Mumbai at 11.00 a.m. As a measure of economy, copies of the Annual Report will not be distributed at the Annual General Meeting. Shareholders are requested to kindly bring their copies to the meeting.
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CORPORATE DETAILS
BOARD OF DIRECTORS (As on 30 June 2010)
Mr. Subodh Bhargava (Chairman) (Independent) Mr. N. Srinath (Managing Director and Chief Executive Officer) Mr. Kishor A. Chaukar (Panatone Nominee) Mr. P. V. Kalyanasundaram (Independent) Dr. V.R.S. Sampath (Independent) Mr. Amal Ganguli (Independent) Mr. Vinod Kumar (Panatone Nominee) Mr. S. Ramadorai (Panatone Nominee) Mr. A. K. Srivastava (Government Nominee) Mr. Arun Gandhi (Panatone Nominee) Dr. Ashok Jhunjhunwala (Panatone Nominee) Mr. Manish Sinha (Government Nominee)
Mr. Satish Ranade Company Secretary & Chief Legal Officer Mr. Sanjay Baweja Chief Financial Officer REGISTERED OFFICE VSB, Mahatma Gandhi Road, Fort, Mumbai – 400 001. CORPORATE OFFICE C21& C36, ‘G’ Block, Bandra Kurla Complex, Mumbai – 400 098.
BANKERS Bank of America HDFC Bank Ltd. Hongkong & Shanghai Banking Corporation Citibank Inc. Indian Overseas Bank Royal Bank of Scotland Development Bank of Singapore Deustche Bank Kotak Mahindra Bank Ltd. ICICI Bank Ltd. State Bank of India Vijaya Bank LEGAL ADVISORS Messrs ANS Law Associates Messrs Mulla & Mulla and Craigie Blunt & Caroe STATUTORY AUDITORS Messrs S.B. Billimoria & Co., Chartered Accountants REGISTRARS & Messrs Sharepro Services (India) Pvt. Ltd. TRANSFER AGENTS 13 AB, Samhita Warehousing Complex, 2nd Floor, Near Sakinaka Telephone Exchange, Andheri Kurla Road Andheri (East), Mumbai - 400 072.
2 NOTICE NOTICE is hereby given that the Twenty Fourth Annual General Meeting of Tata Communications Limited will be held at 1100 hours on Friday, 6 August 2010, at MC Ghia Hall, Bhogilal Hargovindas Building, Second Floor, 18/20 Kaikhushru Dubash Road, Kalaghoda, Mumbai – 400001 to transact the following business: Ordinary Business 1. To receive, consider and adopt the Balance Sheet of the Company as on 31 March 2010, the audited Profit and Loss Account for the year ended on that date, the Auditors’ Report thereon and the Report of the Board of Directors. 2. To appoint a Director in place of Mr. PV Kalyanasundaram who retires by rotation at this Annual General Meeting and being eligible offers himself for reappointment. 3. To appoint a Director in place of Dr. VRS Sampath who retires by rotation at this Annual General Meeting and being eligible offers himself for reappointment. 4. To appoint a Director in place of Mr. Amal Ganguli who retires by rotation at this Annual General Meeting and being eligible offers himself for reappointment. Special Business 5. To consider and, if thought fit, to pass with or without modification the following Resolution as a Special Resolution: “RESOLVED THAT pursuant to Section 224 A and other applicable provisions, if any, of the Companies Act, 1956, M/s. S.B. Billimoria & Co., Chartered Accountants be and are hereby appointed Statutory Auditors of the Company to hold office from the conclusion of this Annual General Meeting until the conclusion of the next Annual General Meeting and to examine and audit the accounts of the Company for the financial year 2010-2011 on such remuneration as may be mutually agreed upon between the Board of Directors and the Auditors, plus reimbursement of service tax, travelling and out of pocket expenses.” “RESOLVED FURTHER THAT the Auditors of the Company be and are hereby authorized to carry out (either themselves or through qualified associates) the audit of the Company’s accounts maintained at all its branches and establishments (whether now existing or acquired during the financial year ending 31 March 2011) wherever in India or abroad.” By Order of the Board of Directors
Satish Ranade Company Secretary Dated : 5 July, 2010 Registered Office : VSB, Fort, M.G. Road, Mumbai - 400 001. NOTES : 1. A MEMBER ENTITLED TO ATTEND AND VOTE IS ENTITLED TO APPOINT A PROXY TO ATTEND AND VOTE INSTEAD OF HIMSELF AND THE PROXY NEED NOT BE A MEMBER. THE INSTRUMENT APPOINTING A PROXY SHOULD, HOWEVER, BE DEPOSITED AT THE REGISTERED OFFICE OF THE COMPANY NOT LESS THAN 48 HOURS BEFORE THE COMMENCEMENT OF THE MEETING. 2. Members who hold shares in dematerialized form are requested to bring their DP ID and Client ID numbers for easy identification of attendance at the meeting. 3. The statement of material facts pursuant to Section 173 (2) of the Companies Act, 1956, setting out the material facts in respect of the business under Item No. 5 is annexed hereto. 4. Details regarding the persons proposed to be appointed as Directors and their brief resume have been given in the annexure attached to the Notice.
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5. Registers of members and transfer books of the Company shall remain closed from 2 August 2010 to 6 August 2010 (both days inclusive). 6. Pursuant to the provisions of Section 205A(5) of the Companies Act, 1956, dividends which remain unclaimed in the unpaid dividend account for a period of seven years from the date of transfer of the same, will be transferred to the Investor Education and Protection Fund established by the Central Government. The Members and Shareholders who have not encashed their dividend warrant(s) so far for the financial year ended 31 March 2003 or any subsequent financial years are requested to make their claim to the R & T Agents of the Company. According to the provisions of the Act, no claims shall lie against the said Fund or the Company for the amounts of dividend so transferred nor shall any payment be made in respect of such claims. The summary of the unpaid dividend for the past years and the date on which the outstanding amount shall be transferred to Investor Education and Protection Fund on the dates are given in the table below. Date of AGM Balance as on Dividend for the year Transfer to Investor 30 June 2010(Rs.) Education & Protection Fund 2 Sept 2003 797,253.50 2002-03 2 Oct 2010 2 Sept 2004 799,137.00 2003-04 2 Oct 2011 14 Sept 2005 1,045,488.00 2004-05 14 Oct 2012 13 Sept 2006 877,041.00 2005-06 13 Oct 2013 2 Aug 2007 736,294.00 2006-07 2 Sept 2014 2 Aug 2008 841,491.00 2007-08 2 Sept 2015 7 Aug 2009 860,791.50 2008-09 7 Sept 2016 Total 5,957,424.00
7. Consequent upon the introduction of Section 109A of the Companies Act, 1956, shareholders are entitled to make nomination in respect of shares held by them in physical form. Shareholders desirous of making nominations are requested to send their requests in Form No. 2B in duplicate (which will be made available on request) to the R & T Agents of the Company.
4 Annexure to the Notice dated 5 July 2010 The Statement of Material Facts pursuant to Section 173 (2) of the Companies Act, 1956. In respect of Item No. 5 M/s. S B Billimoria & Co., Chartered Accountants were appointed as the statutory auditors of the Company at the Twenty Third Annual General Meeting of the Company held on 7 August 2009 and hold office till the conclusion of the Twenty Fourth Annual General Meeting. Since the Government of India continues to hold not less than 25% of the subscribed share capital of the Company, the appointment of the auditors of the Company is required to be approved by a Special Resolution pursuant to Section 224A of the Companies Act, 1956. The Directors recommend the resolutions.
None of the Directors are interested in the resolutions. By Order of the Board of Directors
Satish Ranade Company Secretary Dated : 5 July 2010 Registered Office : VSB, Fort, M.G. Road, Mumbai - 400 001.
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Details of Directors Seeking Appointment / Re-Appointment at the 24th Annual General Meeting
Particulars Mr. P.V. Kalyanasundaram Dr. V.R.S. Sampath Mr. Amal Ganguli
Date of Birth 25 February 1958 12 August 1956 17 October 1939
Date of Appointment 14 September 2005 14 September 2005 17 July 2006
Qualifications Bachelor of Arts degree in Bachelor of Arts degree in Fellow of the Institute of History from the New history from the Presidency Chartered Accountants in College, Chennai, Bachelor College, Bachelor of Law England and Wales, Fellow of Law degree from Madras degree from Madras Law of Institute of Chartered Law College College, Master of Law Accountants of India, Fellow Degree and a PHD from of British Institute of the University of Madras. Management, member of Masters of Arts degree in New Delhi Chapter of history from the Madurai Institute of Internal Kamraj University. Auditors, Florida, USA, Alumnus of IMI, Geneva.
Expertise in Specific Eminent Lawyer Eminent Lawyer Accounting and Audit Functional Area
Directorships held in other NIL 1 13 Public Companies (excluding foreign and private companies)
Memberships/Chairmanships NIL NIL 10 of Committees in other Public Companies
Shareholding In TCL NIL NIL NIL
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DIRECTORS’ REPORT
Dear Shareholders, Dividend The directors present the 24th annual report and The directors have recommended that no dividend audited accounts of Tata Communications Limited be paid for the financial year ended 31 March 2010. (TCL) for the financial year ended 31 March 2010. This was deemed prudent in the light of several factors impacting your Company. The Company’s PERFORMANCE revenue has shown growth but profitability has come The year under review saw continued sluggishness under pressure over the last couple of years primarily in markets in which your Company operates. Most due to sharp drop in tariffs and the high capital corporates, who are the major customers of the expenditure to meet current and future business company, have remained cautious and focussed on requirements resulting in significantly higher reducing costs and becoming more efficient thereby depreciation and additional interest costs and some limiting the growth in our addressable market. large investments being still in their gestation phase Despite this, your Company continued to expand and and will take a few more years to be profitable. grow, and has increased its consolidated revenues to Your Company has reinvested its cash in the business Rs.111.94 billion (previous year Rs. 102.07 billion) and to expand its capabilities in key markets around the EBIDTA was at Rs. 10.12 billion (previous year Rs. 13.66 world, including India. However, your Company has billion). However, consolidated profit/(loss) after also been increasing its debt funding to support exceptional items and before tax was Rs. (6.81) billion growth and expansion. As a result, interest costs have (previous year Rs. 4.23 billion), whereas profit/(loss) been rising, affecting adversely your Company’s after tax was Rs. (5.98) billion (previous year Rs. 3.16 profitability. Therefore, as a part of its attempts to billion). control the debt burden on the Company, the Board has decided to reinvest the amount available into On standalone basis, during the year under review, growth investments for the business. your Company earned total revenue of Rs. 33.83 billion (previous year Rs. 39.81 billion). Profit before The amount available for appropriation is Rs. 25.83 tax for the year was Rs. 3.09 billion, (previous year billion, out of which the Company proposes to transfer Rs.7.13 billion). Profit after tax was Rs. 4.83 billion Rs. 0.48 billion to general reserves and Rs. 3.55 billion (previous year Rs. 5.16 billion). to the debenture redemption reserve, leaving Rs. 21.79 billion to be carried forward. The Company’s profitability has been affected adversely by the global economic conditions, Funding nascent stage of some of its investments and due During the year, the Company continued to borrow to increases in some specific items of cost. The for financing its projects and operations. The consolidated net loss includes Rs. 4.64 billion in Company issued unsecured debentures amounting respect of the Company’s holding in Neotel, South to Rs. 7.00 billion in 2009-10. All debentures issued by Africa, which is still in the early growth phase and the Company have been rated ‘AAA’. The trust deeds will continue to need support for some more time for the debentures issued by the Company will be before it turns profitable. The net loss also includes available for the inspection by the members at the increases in other non-cash costs viz. depreciation Company’s registered office during normal working on account of significant capitalisation done over hours, 21 days before the date of the 24th Annual the past two years, and the changes in retirement General Meeting. provisions in India and overseas subsidiaries. We remain confident that the Company’s strategy is OVERVIEW sound and the direction that the Company is taking Over the last few years, your Company has will prove beneficial to the Company and its consistently pursued its strategy of providing a range stakeholders in the future. of communication services to enhance the reach and
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leadership of its customers in the wholesale, nearly US$509 million towards capital expenditure enterprise and retail segments across different and other investments. The Company has geographies. It is leveraging its integrated wholesale commissioned additional submarine cable systems capability, strong market position in India, portfolio and is expanding capacity in the current year, of managed services and its focus on emerging connecting emerging markets in Asia, the Middle East markets to compete with other global service and Africa to each other and onwards to Europe and providers. The Company has judiciously invested in America to meet the increasing bandwidth demand key infrastructure and service delivery capabilities to of broadband, enterprise and wholesale customers be able to meet the demands of its customers. over the next five to eight years. Investments have also been made in new data centres and in expanding The Company’s focused strategy has enabled it to be the network and service capability in different one of the leading players worldwide in its major markets globally. The Company expects to continue business segments, with operations in more than 50 investing in increasing its capabilities and market countries. Tata Communications remains the largest presence. provider of international wholesale voice services globally and one of the largest owners and providers Tata Communications has set up extensive operating of submarine cable capacity in the world. The framework for servicing the specific needs of Company is a global Tier-1 Internet Services Provider customers across various market segments and (ISP) and is a major player in the growing global IP geographies. The Company continues to focus on Transit market. Your Company also offers building long lasting relationships with its customers telecommunication services through its subsidiary in and business associates and to lead the industry in Sri Lanka and associates/joint ventures in Nepal and responsiveness and flexibility. The service fulfilment, South Africa. service assurance and billing functions are integrated into a single team called Customer Services and In the coming years, your Company will continue to Operations. This provides the right focus and focus on redefining telecom services for “wholesale” synergies across all “customer touch points” in all commodity and low-value operations to a stages of the service life cycle and has led to partnership-driven, value-enhancing business; on significantly enhanced customer satisfaction across expanding networks in India to reach the customers’ our business segments and geographies. premises; on rapidly growing its global enterprise segment with catalyst services including Telepresence, The Department of Telecommunications (DoT), media and entertainment solutions, Ethernet and through a license amendment dated 3 December cloud computing; and on achieving global 2009, made it mandatory for all telecom service benchmarks in customer services and operations. providers to obtain security clearances before placing purchase orders for procuring telecom equipment During the year under review, the enterprise from manufacturers who are not Indian owned/ customers’ demand for greater global connectivity controlled. Further notifications issued by the DoT lay and services continued to grow, worldwide down more conditions relating to the transfer of broadband penetration increased and demand for technology requirements to be imposed on foreign rich media and interactive digital content continued vendors, self certification regarding equipment being to increase globally. This gave the Company the free from malware, etc. Service providers and vendors opportunity to leverage its Tata Global Network (TGN) are generally finding it difficult to comply with these of optical fibre undersea cables and Internet Protocol conditions. The Company is facing delays in fulfilment (IP) networks to its advantage. of its customer orders and in expanding its network infrastructure in India, which is having an adverse Over the last four years, Tata Communications effect on the Company’s revenues. invested over US$2 billion in building infrastructure and new service capabilities as well as in entering The Company continues to work with the new markets. In 2009-10, the Company invested Government of India to resolve this issue.
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Premature Termination of Monopoly and ample avenues to its employees to not only Compensation contribute but also learn and grow. As reported earlier, the Government of India (GOI) The different corporate entities that are part of Tata had allowed other players into the international long Communications together employed 6,457 people as distance (ILD) business from 1 April 2002, terminating on 31 March 2010 (5,825 on 31 March 2009). Of these, the Company’s exclusivity two years ahead of 1,181 (1,050 in the previous year) were located schedule. The GoI gave the Company a compensation outside India. With people of about 40 nationalities package and had given an assurance prior to the on the rolls, the workforce profile is diverse and multi- disinvestment of 2002 that it would consider cultural. The Company seeks to hire, train and retain additional compensation, if found necessary, on a the best talent available globally to enable efficient detailed review when undertaken. However, in and effective performance in the competitive market. February 2002, just before the disinvestment of the Company, the GoI unilaterally granted a further At Tata Communications, employees are encouraged to live the vision and values adopted by the Company. dispensation as full and final settlement of every sort of claim against the premature ILD demonopolisation. Integrity is recognized and rewarded. An employee satisfaction survey is carried out annually through an The Company filed a claim in the Mumbai High Court independent global agency across all our different in 2005 which is yet to come up for hearing. operating locations. This year, more than 94% of the Surplus Land employees participated in this survey and the overall employee satisfaction scores showed a healthy Under the terms of the share purchase and upward trend in respect of all major parameters and shareholders’ agreements signed between the GoI across all geographies. and the strategic partner (the parties) at the time of disinvestment, it was agreed that certain identified The compensation and employee benefit practices lands would be demerged into a separate company. of Tata Communications are designed to be It was further provided that if, for any reason, the competitive in the respective geographies where we Company cannot hive off or demerge the land into a operate. Employee relations continued to be separate entity, alternative courses as stipulated in harmonious at all our locations, through the process the share purchase and shareholders’ agreement of continuous dialogue and openness to find mutually would be explored. A draft scheme of demerger was acceptable solutions to issues. presented to the Board in April 2005, and the parties AWARDS AND RECOGNITION are examining the legality and feasibility of implementing the scheme. The land identified for The Company’s transformational initiatives are being demerger at different locations measured 773.13 recognised in India and abroad. During the year, the acres, and carried a book value of Rs.1.64 million. Company earned several prestigious recognitions, including: As reported earlier, the VSNL Employees Cooperative Housing Society, Chennai (Society) had moved the • Best Global Wholesale Offering Award from Hon’ble Delhi High Court in respect of their long Capacity magazine, one of the most important pending issue of transfer of 32.5 acres of land situated publications for telecommunications carriers and at Padianallur, Chennai, which was part of the service providers. identified surplus land. According to the order of the • Global Telecoms Business Innovation Award for Hon’ble High Court, the process of transferring the International Wholesale Infrastructure said land to the Society was completed during the Transformation and International Network year. Infrastructure Transformation. HUMAN RESOURCES • During the year, your Company’s MD & CEO, Mr. Your Company invests in continuous training to N Srinath, was named as the world’s eighth most enhance employee skills and capabilities and offers influential telecom personality for the second
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COMMUNICATIONS Twenty Fourth Annual Report 2009-2010 Tata Communications Limited
consecutive year by the Global Telecoms Business Services Operations Centre (MSOC) at Chennai, all magazine. eleven data centres in India and six data centres at international locations have received ISO 20000 and • European CEO announced Tata Communications ISO 27001 certifications. as Telepresence Managed Service Provider of the Year 2009. Compliance with SOX • Frost & Sullivan named the Company #1 Pursuant to its listing on the New York Stock Enterprise Data Services Provider in India 2009. Exchange, Tata Communications has been complying with section 404 of the Sarbanes Oxley Act, 2002 • In March 2010, Tata Communications entered the (SOX). SOX sets forth requirements for internal control Gartner’s Magic Quadrant for Global Network over financial reporting and its documentation. For Service Providers. the current fiscal year, in addition to the • Frost & Sullivan’s 2009 Product Innovation award management’s own assessment of the effectiveness for Managed Telepresence Service. of such internal control, the Company’s external auditors are also required to issue an opinion on • “Best service coverage” in the 2009 Optical whether effective internal control over financial Transmission Vision (OTV) APAC Network reporting was maintained in respect of all material Operator Awards. aspects by the management.
CONTINUOUS IMPROVEMENT Revenue Assurance
In order to be able to respond quickly to the Revenue assurance aims to prevent revenue leakages customers, your Company continues with various to ensure robust internal controls and IT processes internal initiatives to compete effectively, improve that keep pace with increasing business complexities, organisational flexibility and efficiency, streamline thus moving towards zero tolerance of revenue internal processes across all its entities globally and leakages. Your Company has recently undertaken a institutionalise a culture of continuous improvement. ‘benchmark’ study to enhance revenue assurance The Company is developing and deploying a processes and the findings will be implemented this Continuous Improvement methodology (QUICK) year. which is being designed in partnership with Tata Enterprise Risk Management Quality Management Services to serve as a model for continuous improvement. Some important initiatives Your Company has established an enterprise-wide risk are: management (ERM) framework to optimise identification and management of risks globally, as Business Excellence well as to comply with clause 49 of the listing agreement with Indian stock exchanges. In line with Your Company continues to transform itself in tandem your Company’s commitment to deliver sustainable with market and regulatory changes using the value, this framework aims to provide an integrated framework of the Tata Business Excellence Model and organised approach for evaluating and managing (TBEM) which covers areas like leadership, strategy, risks. customer and market focus, knowledge management, human resources, process management, customer Risk-based Internal Audit service and social responsibility. The risk assessments performed under the ERM Your Company has received TL 9000 certification for exercise are a key input for the annual internal audit three years commencing 31 March 2010 for the India programme, which covers the Company’s various region. Nine out of thirteen key office premises across businesses and functions. This approach provides India have received ISO 14001 certification for adequate assurance to the management that the environment management. Our Global Managed right areas are covered under the audit plan.
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STATUTORY INFORMATION AND DISCLOSURES Company’s subsidiaries, is attached. The consolidated Fixed Deposits financial statements of the Company and its subsidiaries, prepared in accordance with accounting The Company has not accepted nor does it hold any standard 21 (AS 21) prescribed by the Institute of public deposits. Chartered Accountants of India, form part of the Particulars of Employees annual report and accounts. The provisions of Section 217(2A) of the Companies These documents will be provided on request to any Act, 1956, read with the Companies (Particulars of shareholder wishing to have a copy, on receipt of such Employees) Rules, 1975, require the Company to request by the deputy company secretary at the provide certain details about the employees who Company’s registered office. These documents will were in receipt of remuneration of not less than Rs. also be available for inspection by any shareholder at 24 lakhs (Rs 2,400,000) during the year ended 31 the Company’s registered office. March 2010 or not less than Rs. 2 lakhs (Rs. 200,000) The Board of Directors per month, during any part of the said year. The Company had 313 such employees employed during The Board of Directors of the Company consists of the year ended 31 March 2010. According to the twelve directors. Mr. H.P. Mishra, who was nominated provisions of section 219(1)(b)(iv) of the Companies by the Government of India as a permanent (non- Act, 1956, the Directors’ Report being sent to the retiring) director, has ceased to be a director on the shareholders does not include this annexure. The Board of Tata Communications Limited with effect Annexure regarding the Particulars of Employees from 1 April 2010. Mr. Manish Sinha, Dy. Director under section 217(2A) of the Companies Act, 1956 General (LF), Department of Telecommunications, has will be available for inspection by any member at the been appointed in his place on the Board as a registered office of the Company during working permanent (non-retiring) director. In accordance with hours, 21 days before the date of the AGM. the provisions of the Companies Act, 1956 and the Company’s Articles of Association, Mr. P.V. R & D, Technology Absorption and Foreign Kalyanasundaram, Dr. V.R.S. Sampath and Mr. Amal Exchange Earnings Ganguli retire by rotation at the ensuing annual There are no particulars to be disclosed pertaining to general meeting and being eligible, offer themselves the year under review, in respect of Research & for reappointment. Development (R&D) and technology absorption as None of the Company’s directors are disqualified from required under Companies (Disclosure of Particulars being appointed as a director as specified in Section in the Report of the Board of Directors) Rules, 1988. 274 of the Companies Act, 1956 as amended by the For the purpose of Form ‘C’ under the said rules, Companies (Amendment) Act, 2000. foreign exchange earnings were equivalent to Rs. 8.32 billion and foreign exchange outgo was equivalent For details about the directors, please refer to point 2 to Rs. 5.86 billion. of the Report on Corporate Governance. The Company has invested in developing new Corporate Governance products and services adopting latest technologies Pursuant to Clause 49 of the Listing Agreement with such as content delivery network (CDN), cloud the stock exchanges, Management Discussion and computing, Telepresence and Wimax. Analysis, Corporate Governance Report and Auditors’ Auditors’ Report Certificate regarding compliance with conditions of There are no qualifications in the report of the corporate governance form part of the directors’ statutory auditors for the year 2009-10. report. Subsidiaries ACKNOWLEDGMENTS The statement pursuant to section 212 of the The directors would like to express their thanks to Companies Act, 1956 containing details of the the various customers and business associates of the
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Company around the world for their support and partners including its shareholders, bankers, solicitors confidence in the Company and the services provided and suppliers, for their support. by it. The directors also recognise and commend the dedication and commitment of all the employees On behalf of the Board of Directors globally. The directors appreciate the support of various Ministries and departments of the Government of India, including the Department of Subodh Bhargava Telecommunications and the Information & Dated: 5 July 2010 Chairman Broadcasting Ministry as well as the Governments and regulators of the various countries in which Tata Registered Office: Communications operates. The directors are also VSB, MG Road, Fort, grateful to the Company’s other stakeholders and Mumbai – 400001.
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ANNEXURE 1: MANAGEMENT DISCUSSION AND ANALYSIS
INDUSTRY ANALYSIS Global Telecom Market Indian Telecom Market The global telecom industry has undergone changes in the segments of Tata Communications’ interests. Over the last decade the Indian telecom industry has changed significantly, with all major segments being The international wholesale voice market continues opened to competition. There are several new to be a business of scale, with constant pressures on prices and margins. The recent global economic entrants in areas that the Company operates in, resulting in increasing competition. There are now downturn has further increased this pressure on 281 circles-based access licenses across 23 service prices and slowed the growth of traffic volumes on a year-on-year basis. Alternate services such as portal areas, 30 licensed national long distance (NLD) operators and 25 licensed international long distance based offerings on the Web are growing in popularity (ILD) operators, several of whom are large and usage. The share of mobile communications continues to grow in relation to fixed voice and there international companies who now have a direct presence in the country. is an increasing use of Voice over Internet Protocol (VoIP).The need for profitability in a largely India’s telecom market is growing rapidly and is commoditized market is making operators seek both expected to be worth Rs. 158.52 billion by 2010, scale and cost efficiency in their operations. Apart contributing 5.6% to India’s gross domestic product from driving consolidation, this could also create new (GDP). According to the latest figures from the business models based on greater collaboration Telecom Regulatory Authority of India (TRAI), as of between operators which, we believe, your Company end-March 2010, India’s mobile subscriber base stood is well positioned to benefit from. at 584.32 million, while the fixed-line subscriber base The data market is also undergoing rapid changes. declined to 36.96 million, and the broadband With the growing need for bandwidth around the subscriber base reached 8.75 million. The past year world, the demand for submarine cable capacity witnessed significant regulatory developments continues to grow. Several new cable systems have including changes in the access deficit charge (ADC) been announced or are being constructed in different regime, a review of the Interconnect regime, markets, such as across the Pacific, within Asia, recommendations on issues like Mobile Virtual connecting Europe and Asia, and on both the east Network Operators, Internet Telephony and Carrier and west coasts of Africa. Availability of large capacity Access Code (CAC)/calling cards. Mobile Number in line with market growth and diversity to provide Portability (MNP) is expected to be implemented continuity of services in the event of cable cuts due during the latter half of 2010. to acts of man or nature, continue to be important The auction of spectrum for 3G and Broadband drivers of this growth. The addition of these new Wireless Access (BWA) services was conducted during cables presents both investment opportunities as well April and June 2010. The revenue estimates did not as downward price challenges. enable the Company to acquire spectrum in any of The growth of the Internet on the back of growing the circles in the BWA auction. The winning bids, in global broadband usage, increasing demand for our opinion, were in excess of what current multimedia services, the success of new collaboration broadband business cases could support, and seemed and communications applications and the continued to reflect the effects of a perceived scarcity of increase in the use of the web by both individuals spectrum combined with the limited number of slots and corporations, is driving the demand for IP being auctioned. bandwidth. Growth is seen in the demand for IP In summary, the telecom landscape continues to Transit services in all the major geographies but prices evolve and operators such as your Company will have continue to fall, thereby increasing pressures on to constantly transform themselves to remain margins. New services such as Content Distribution competitive. Networks are fast emerging as growth opportunities,
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COMMUNICATIONS Twenty Fourth Annual Report 2009-2010 Tata Communications Limited
leveraging the increasing demand for video traffic customer usage and revenue. As operators expand on the web. Your Company is actively offering these their broadband networks and subsequently their services for both volume and margin growth. requirements for core Internet connectivity, it creates The global enterprise market has seen growing new opportunities for providers of wholesale IP transit demand for network services, data centre services and and data services. Your Company is leveraging its value added services. The global recession caused strength in Data Services by extending this offering delays in decision-making and deferred procurement to Mobile Operators, notably early adoption of IPX, a by some customer segments, but broadly, Information framework that allows the integration of multiple and Communications Technology investments by services and applications over a single data enterprises is showing a steady and solid recovery. connection. This investment is motivated by the need for better Carrier Outsourcing & Transformation Services engagement and service levels with their own The new challenges in the global economy are customers, the need for higher velocity and flexibility compelling carriers to find quicker and more cost- in business, and the growth of global supply chains effective ways to service their customers. While and markets. Industry leaders are more sharply carriers in developed markets are seeking to reduce focused on increasing the ratio of IT budgets that are costs and focus on core activities, carriers in emerging applied towards competitive advantage and markets are attempting to overcome skills shortages innovation versus basic services and compliance. The and expedite time to market for new services or recession limited their budget growth, and thus has geographies. This is generating significant demand sharpened their focus towards finding the best value for various types of network skills as well as for solutions that will enable their IT to deliver a process improvement and deployment capability competitive edge. The exploration of new approaches which are emerging as good growth opportunities like Ethernet wide area networking, cloud computing for your Company’s transformation services offering. services and Telepresence virtual meetings is arguably now higher on many CIO agendas than it would Impact of Global Economic Scenario otherwise have been. The economic slowdown triggered by events in the Mobile Market US and the recent European Union crisis, continues to impact most markets worldwide. Most of the The mobile industry has shown some resilience to developed markets are only slowly emerging from a the economical downturn. There is some concern on recession and even the high-growth emerging revenue growth as operators face the prospect of markets are seeing a slowdown in growth rates. fewer new subscribers and a flat to declining average Sectors like banking, financial services and revenue per user (ARPU). This effect is most manufacturing have been hit the most due to the pronounced in the established markets of Europe and financial crisis and the consequent slowdown in North America, while developing markets such as the demand. Businesses across the world are battling to Middle East, Asia and Africa are just starting to show reduce costs and conserve cash; at the same time, signs of this in select areas. they are also seeking to access the growth Mobile operators are increasingly focused on cost- opportunities that are available in emerging markets cutting measures, which presents an opportunity for in Asia, Middle East and Africa. The biggest impact providers of Value Added Services such as Steering this is having on your Company’s business is in terms of Roaming and Roaming Hubbing and associated of severe price pressures from existing customers, services. The sharper focus on costs and price pressure delays in orders from some customers and more on supplier contracts creates an opportunity for the intense price-based competition for new customer Company to displace competitors. acquisitions. With the increasing penetration of smart devices and REGULATORY DEVELOPMENTS the rolling-out of broadband HSPA/3G+ networks, As reported earlier, in the year 2005, the Company mobile data is rapidly increasing its share of overall along with several other service providers had
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challenged before the Hon’ble Telecom Disputes between the Company (and several of its subsidiaries) Settlement And Appellate Tribunal (TDSAT), the and the various U.S. Government Departments definition of “gross revenue” and “adjusted gross (Department of Justice, Federal Bureau of revenue” (AGR) as applied by the DoT for levying Investigation, the Department of Homeland Security, licence fees as being unfair and beyond the scope and the Department of Defense). As a part of these and powers of the DoT. requirements, the Company and its subsidiaries have, The final verdict was rendered by the TDSAT on 30 over the last year, invested in enhancing security for August 2007 broadly in line with several of the its North American networks; appointed a Chief contentions of the Company. However the industry Security Officer; hired a Chief Information Security and your Company are not satisfied on two issues, Officer for North America and Europe; rolled out viz. (i) date of applicability of the TDSAT verdict, which security training for North American and European according to the Company should be the date from employees; and established formal mechanisms to which the license fee based on revenue sharing identify and address network security issues by regime came into effect, and not from the date of creating committees of senior engineers and filing the petition in TDSAT (May, 2005 in the case of managers to address findings and plans for the Company) as ordered by the TDSAT and (ii) mitigation. deductibility of charges passed on to other service OPERATIONAL REVIEW providers for leasing bandwidth, port charges, etc., Your Company operates under three main business which was disallowed by TDSAT. The Company and segments globally – Global Voice, Global Enterprise also several other telecom operators have challenged and Carrier Data and Other Services. TDSAT’s order of 30 August 2007 on the above two issues in the Hon’ble Supreme Court of India. As Global Voice reported earlier, the DoT has also filed an appeal in International Long Distance (ILD) the Apex Court against the judgement of the TDSAT. Both the appeals are pending and this matter is Tata Communications remains the leading provider subjudice. of international wholesale voice communication services globally. Your Company has over 1,600 direct The Company had also separately filed a petition in and bilateral relationships with leading international the TDSAT on the matter of applicability of penal voice telecommunication providers. provisions under the international and national long distance license agreements towards charging of During 2009-10, Tata Communications handled 32.6 penalty and interest on penalty. The TDSAT by its billion minutes of international voice traffic globally, judgment of 11 February 2010 has allowed the a growth of 33% over the previous year. Traffic to and petitions filed by the Company, striking down the from India has grown from about 8.4 billion minutes clause imposing penalty. As a consequence, the in 2007-08 to about 9.8 billion in the year under Company is entitled to a refund of Rs. 115.72 crores review. Your Company believes that its scale, reach, (Rs. 1.15 billion) realised by the DoT in January 2008 innovative solutions, expertise and strong business and interest thereon. A claim of Rs. 160.00 crores (Rs. relationships give it the required edge to compete in 1.60 billion) was raised upon the DoT on 10 March this space. 2010, which DoT has refused. The Company is Your Company is a “one-stop-shop” for all global voice examining the available options for its future course solutions, offering flexible service options and a full of action. range of complementary services for VoIP, Voice over The regulatory scenario in the other geographies broadband, web portal and client-based providers. across the world where your Company operates Tata Communications is constantly upgrading and through its subsidiaries did not see any major policy expanding its offerings in this segment. In September changes impacting the Company’s business. 2009, your Company launched new and innovative Tata Communications continues to implement and services like enhanced voice peering and support for comply with its obligations under the agreement high quality Mobile Video Telephony.
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COMMUNICATIONS Twenty Fourth Annual Report 2009-2010 Tata Communications Limited
As per current regulations, your Company does not decreased from 10 billion minutes in 2008-09 to 9.5 have direct access to the end customer and is billion minutes in 2009-10. Continued shrinkage in dependent on traffic from other access operators for the Company’s addressable market and falling tariffs its long distance voice services. Several of the is expected to impact this business further. operators who hand over their long distance voice Your Company has a strong network infrastructure traffic to Tata Communications have since taken and interconnect agreements with all basic and licenses and started operations for themselves, cellular mobile service operators in India to carry NLD thereby shrinking the Company’s addressable market traffic to and from their networks. However, it is and hence affecting this business adversely. dependent on these access providers handing over Nevertheless, your Company continues to strive to traffic to the Company, many of whom have acquired be competitive, leveraging its scale of operations and their own NLD licences and started their own operational expertise. In August 2009, the licensor operations. In August 2009, the DoT permitted the amended the terms of the International Long NLD operators (NLDOs) also to provide services Distance (ILD) License to permit ILD service providers directly to the end user through calling cards. The to access subscribers directly through calling cards. Company now needs to negotiate interconnection However, the current policy framework does not terms with each access operator. regulate interconnection charges between operators While increased competition in the long distance for the purpose of calling cards. The Company will need to negotiate these terms with each access space affects your Company’s business, it also opens provider concerned before it can launch a calling card up opportunities to share the Company’s network infrastructure with new licensees. The sharing of service for international calling. active infrastructure by NLDOs is now permitted and During the year under review, there were further a consultation process for the introduction of Internet reductions in tariff and interconnect rates globally, Telephony in the NLD sector has been initiated. The combined with a slower year-on-year market growth, Company hopes that this may provide new avenues increasing the downward pressure on revenues. This for the Company in the NLD business area. pressure was only partially compensated, since the increase in traffic volumes was also slower. Globally, Global Enterprise and Carrier Data Services your Company continues to focus on increasing Carrier Data volumes, while cutting costs in order to improve Tata Communications is one of the world’s leading margins. wholesale providers of data, IP and mobile signalling The Company has also moved to capitalize on the services. Your Company leverages its global growing trend of outsourcing by telecom operators submarine cable network and global Points of to manage their international voice services. The Presence (POPs) to provide high-speed bandwidth Company offers innovative and flexible solutions like connectivity to other telecom carriers and Internet infrastructure sharing, customised distribution Service Providers (ISPs) worldwide. models, traffic management, destination During the past year, the growing demand for management and traffic aggregation to answer bandwidth has resulted in substantial capacity various challenges faced by telecom operators. The upgrades and new builds on the Company’s global Company hopes to see a significant growth in this submarine cable system, the Tata Global Network space in coming years. (TGN). The Company announced the new TGN-Gulf National Long Distance (NLD) cable connecting several countries in the Gulf to the Increased mobile penetration has resulted in TGN and expects the commissioning of the TGN- significant growth in the NLD traffic within India. Eurasia system connecting India to Europe during However, the increased competition through the issue 2010. The Company has also commenced services to of new NLD licences, along with other regulatory key markets in East Africa on the capacity that it has initiatives, has reduced the gap between NLD and procured on the Seacom cable system. local tariffs. The Company’s NLD traffic has slightly Tata Communications operates one of the world’s
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leading IP networks and provides wholesale IP transit proposition, the Company partners with software and services to tier-2 ISPs and regional carriers. Tata systems integration companies including Tata Communications is one of the few Internet service Consultancy Services, for integrated joint product and providers that has a strong position in all the major service offerings. Your Company also markets its regions worldwide, including North America, Europe, services through indirect channels catering to the Asia, Middle East and Africa. The Company also offers small and medium enterprise market in India and other value-added services like Content Delivery some select international markets. Networks, leveraging its existing position of strength The Indian enterprise segment has been growing at in the ISP market segment. a very healthy rate driven by two factors. Firstly, Indian Tata Communications is also a leading provider of business are increasingly adopting IT and networking mobile signalling services to mobile operators technology to improve productivity and create worldwide. Its offerings include signalling conversion competitive advantage. Secondly, since Indian and managed roaming services. In addition, the business is growing globally and international Company is introducing new, innovative services such companies are increasing their Indian presence, there as hubbing for prepaid services and is working with is an associated need for greater connectivity to and its partners to develop offerings in the emerging within the country. Banking and financial services, mobile-commerce market. information technology and business process The Company has put in place a converged wholesale outsourcing/call centres are some examples of high strategy, to combine carrier services with our Global growth sectors in the country. Voice Solutions and Carrier Data Services, to bring Tata Communications is one of the largest players in increased value to our carrier customers. In January the data centre business in India, with facilities in 2010 the Company launched an IP Exchange (IPX) many of the major commercial centres. It recently solution enabling mobile service providers to opened its largest centre in Pune with nearly 55,000 seamlessly and efficiently route all communication square feet of rack space offering Co-location, traffic, including voice, IP and signalling, via one IP Managed Hosting & Storage and a suite of pipe while supporting end-to-end service quality, complementary services including Managed Security security, multilateral connectivity and cascading and CDN services. Globally, the Company has 42 payments. facilities covering over nearly 1 million square feet. Virtualization technology is changing the economics Enterprise Data of data centre computing, with utility computing and Tata Communications offers a wide range of cloud computing on the cusp of moving into the customised telecommunication solutions to its mainstream. Your Company’s global and India Enterprise customers. In addition to international and managed hosting services are aggressively national private leased circuits (IPLCs and NPLCs), your supporting this direction. Company offers Virtual Private Networks and Tata Communications sees business transformation associated Managed Services, Ethernet Services, being led by IP technologies that are enabling Internet Access, Managed Hosting, Messaging, converged and cloud-based services as well as a new Internet Telephony, etc. The Company also provides generation of managed services. In line with its IP- other value added offerings such as Collaboration and enabled business transformation strategy, Tata Conferencing services, Managed Security services, and Communications will complete the deployment of its other Professional services. global voice network core to an IP-based Next The Company continues to expand its coverage of Generation Network (NGN) by September 2010. The Managed Global MPLS - VPN (Multi Protocol Label NGN will provide a dramatically simplified network Switching - Virtual Private Network) and Ethernet architecture and enable Tata Communications’ services by directly entering select new markets as customers to leverage a single global IP network to well as through partnerships with regional / local deliver their range of services. The NGN completion operators. To further strengthen its customer value will mark the next step in Tata Communications’ IP
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COMMUNICATIONS Twenty Fourth Annual Report 2009-2010 Tata Communications Limited
evolution and positions the Company as the right medium business segments in India. The solution partner for convergence in the IP world. ensures clean Internet traffic by eliminating malware, Adoption of new services and service delivery models spam and virus without the customer having to incur that enhance competitiveness is accelerating in areas capital expenditure on security hardware. This such as adoption of Ethernet for wide area networks, solution is the first of its kind by an Internet service in which your Company is a major player both provider in India. globally and in India. Managed security services from Your Company has launched the world’s leading specialist providers enable compliance and business dedicated global video network called Video Connect protection with lowest costs of ownership, often in which is designed to help broadcasters, studios and the network cloud. Your Company’s global Managed production houses deliver video content flexibly and Security Service suite is young, but well ranked by cost-effectively to media hotspots worldwide. By analysts. leveraging Tata Communications’ global network Your Company is a global leader in collaboration infrastructure, Video Connect also enables permanent services like Managed Telepresence for companies availability of bandwidth and seamless transmission and between companies. This service provides “virtual of video at constant bit rates. A dedicated video meetings” using simple and life-like telepresence network operations centre ensures round-the-clock endpoints which provide enhanced collaboration system availability along with analytics to provide across global companies and markets, reducing travel reports on video quality. and raising productivity. Leveraging its global In January 2010, Tata Communications unveiled its network, Tata Communications is continuing to grow media management platform, Mosaic. This platform, the world’s largest public room telepresence network. with its cloud-based media management, helps media Tata Communications currently manages 13 customers improve cross-enterprise collaboration for telepresence public rooms and is targeting another content creation, management and multiformat 25 by the end of 2010. The Company also provides a delivery. Mosaic enables enterprises to deliver standalone global Telepresence Exchange Service that innovative services that meet rapidly changing enables telepresence rooms to be interconnected consumer demands, maintain and expand audience regardless of the network or service provider they numbers, provides flexibility of an open operating belong to. environment and lower production costs. One of Tata Communications plans to continue its growth Mosaic’s unique capabilities is that it provides strategy of partnership, investment and infrastructure complete digital asset management, ensuring secure, development in emerging markets. Tata efficient access to content and workflow throughout Communications and Neotel, South Africa’s first the value chain, which is delivered as an online service converged communications national operator, have over the web. The new service is targeted at the entire launched their data centres in South Africa in spectrum of media customers encompassing content Johannesburg and Cape Town. Tata Communications creators, producers, post-production houses, digital will also invest US$200 million in the Middle East over media publishers, content service providers and TV the next two years to develop telecom infrastructure channels. as well as network services and managed and hosted As part of its Global Media and Entertainment services that leverage the network including Services (GMES) portfolio, Video Connect and Mosaic managed security, managed hosting and cloud will complement Tata Communications’ existing computing solutions. Media and Entertainment services, offering Your Company is continuously developing new companies an integrated end-to-end solution that products and services to enhance value to customers. enables global collaboration across the media In September 2009, Tata Communications combined ecosystem. Other services in Tata Communications’ its next generation managed security solutions with GMES portfolio include Satellite Broadcasting with TV superior Internet leased line products, and launched uplinking and Playout Room capabilities. its Internet Clean Pipe Solution for the small and The Company intends to invest in the range of
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US$50 million over the next two years to strengthen range of highly customised Internet Leased line its product offerings addressing the media and services along with VOIP and Value Added Services entertainment segment requirements. like Security, Web hosting, etc. These existing capabilities that your Company has developed, its Other Services existing customer base of SMBs, its business In the retail and small business space, Tata applications portfolio and current network are Communications remains a premier Internet Service particularly suited to growing its SMB business. This Provider, offering connectivity, messaging, Internet focus on SMBs will also allow the Company to better telephony and a wide variety of content services. leverage and align with the overall enterprise connectivity, managed and cloud services strategy of Retail Services the rest of its Global Enterprise Business. India has among the lowest penetration of broadband Wi-Fi in the world. The growth in broadband subscribers has been slower than anticipated, the primary issue Wi-fi services are an important supplement to the being the limited availability of quality last mile Company’s Internet access services. Wi-Fi enables networks capable of delivering the bandwidth that computers, PDAs and other computing devices to use broadband needs. highspeed Internet without any wires or cables, at places that are Wi-Fi enabled, called hotspots. With Tata Communications Internet Services Ltd (TCISL), a over 500 hotspots, TCISL is India’s leading Wi-Fi 100% subsidiary, was set up to be the vehicle for hotspot provider spread across segments such as expansion in retail services like broadband in India. airports, hotels, coffee shops, restaurant chains, Its current offerings include wireline, wireless, dial up hospitals, educational institutes, railway stations, and wi-fi broadband/Internet access as well as a range shopping malls and even stores. TCISL now offers its of content and value added services like movies, customers a Global Internet Roaming service in over music, gaming, online back-up, PC security, web 160 countries. hosting, domain name registering, etc. New Growth Opportunities Further growth in this business was linked to the Tata Communications Transformation Services Company being able to successfully acquire spectrum Limited for creating access networks in the recently concluded auctions for Broadband Wireless Access. With the increasing need for reducing costs, several Unfortunately, the Company was not able to acquire carriers around the world are looking to low cost spectrum in any of the circles. The auction closed at economies to relocate some of their business prices that were seen to be in excess of what the processes. Leveraging its operating expertise across current Broadband business cases would be able to a wide variety of technology platforms as well as support and seemed to reflect the effects of a global experience in different developed and perceived scarcity of spectrum combined with the emerging markets and its relationships with these limited number of slots being auctioned. In the carriers, your Company is seeking to cater to this need. immediate term, the Company will step up its focus This initiative is implemented through Tata on small and medium businesses (SMBs) and will Communications Transformation Services Limited, a approach the market led by a portfolio of business wholly owned subsidiary (TCTS) in India. applications. By leveraging its global technical expertise and the The small business segment in India has been availability of highly skilled resources in India, TCTS is growing at a frantic pace and the Internet is proving uniquely positioned to take advantage of this to be a decisive edge for small businesses to emerging opportunity with international carriers. overcome the various other infrastructural challenges TCTS has about 1,000 highly skilled telecom in the country. TCISL has been pursuing a focussed professionals working in its world-class delivery strategy for the small business segment with a specific centres in Pune and Chennai. They have experience
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COMMUNICATIONS Twenty Fourth Annual Report 2009-2010 Tata Communications Limited
in a range of telecom services including Network network of SA. It has also been awarded the Level 3 Engineering, Service Fulfilment and Service Assurance certification (highest amongst telecom service across multiple technologies and vendors. With an providers in SA) for the second year in a row with end-to-end process capability coupled with domain regard to the Broad Based Black Economic expertise, they are well positioned to cater to varied Empowerment initiatives of the SA government. transformational requirements of global telecom As a part of Neotel’s growth story, it had acquired service providers across North America, Europe, Transtel, a division of the state owned transport Middle-East and Africa. Some significant work company Transnet. This acquisition was completed completed by them for customers include network and the organization has been fully integrated with engineering and provisioning for a leading European Neotel. This integration has resulted in the Company telco, operations, administration and maintenance for achieving better scale in its operations and is now a submarine cable company, vendor evaluation and yielding some visible cost synergies. proof-of-concept for Wi-Max roll-out for a direct JV with CEC broadcast satellite service provider and process framework development, design and outsourcing for It was reported last year that your Company had a West African service provider. entered into an equity joint venture agreement (EJV) with the shareholders of China Enterprise Tata Communications Banking InfraSolutions Limited Communications Limited (CEC). On 10 June 2010, Tata In order to capture emerging opportunities in Communications (Hong Kong) Ltd, a wholly-owned banking and financial services, your Company has indirect subsidiary of Tata Communications Ltd and formed Tata Communications Banking InfraSolutions the shareholders of CEC jointly withdrew their equity Ltd. (earlier known as Banking ATM InfraSolutions joint venture application with the Chinese Limited) in February 2008, as its 100% owned Government and mutually agreed to terminate the subsidiary. TCBIL aims at providing infrastructure various agreements regarding Tata Communications’ solutions to the banking industry including services proposed equity investment in CEC. relating to establishing and operating Automated CEC and Tata Communications will continue with their Teller Machines, Electronic Transaction Processing existing network services co-operation relationship Solutions, Cheque Truncation Services, Core Banking and have also entered into a new co-operation Solutions, etc. With a highly experienced team of agreement whereby Tata Communications and CEC professionals from the Banking and Financial Services will work together on a commercial basis to allow industry, TCBIL commenced its commercial operations Tata Communications to benefit from access to CEC’s in April 2009. The Company has already received network and assets in China, as Tata Communications orders for its services from some of the leading banks continues to focus on this key market. in the country. ORGANISATIONAL RESTRUCTURING Joint Ventures & Associates Consolidating Subsidiaries Neotel (Proprietary) Ltd. Your Company had seven direct and 37 indirect Neotel was set up as South Africa’s (SA) Second subsidiaries as on 31 March 2010. As reported earlier, National Operator (SNO) in 2005. During the year, two a process had been initiated to reduce this number of the shareholders in the company, Eskom and to a total of about 30, through appropriate Transnet, sold their entire 30% stake in Neotel to the restructuring. The aim is to have no more than one Company and Tata Africa thereby increasing our entity in each country to the extent possible and combined stake to an effective 56% (earlier effective necessary. 26%). With the launch of the new brand ‘Tata Neotel today employs around 1,100 people, and offers Communications’, the name of the parent and the telecommunication services to the Wholesale, names of the first level of subsidiaries have been Enterprise and Consumer segments. Neotel runs the changed to reflect this new global brand. Appropriate first Next Generation Network and the first CDMA Brand Equity and Brand Promotion Agreements will
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be signed with Tata Sons Ltd. by those subsidiaries The Company encourages a culture of volunteerism whose names have been changed. to contribute to socio-economic development. During Global Structure the year 2009-10, approximately 800 volunteers devoted more than 6,600 hours of their personal time Tata Communications has structured itself into global to collectively make a difference to the lives of many business units and global shared service functions, marginalized and affected segments of society. During to best enable it to operate in its different customer the year, the Company and its employees also segments and markets. Several initiatives are being contributed towards the relief measures for the flood implemented within the framework of this structure victims of AP and Karnataka. to improve customer experience, define and create a common company culture, tighten corporate identity During the year, the Company continued its and branding and implement the next generation partnership with Dr Reddy’s Foundation (DRF) in the network architecture for converged services, among activities of the Telecom Training Academy that has others. been set up to provide internship opportunities in different vocational skills to students from the Corporate Sustainability Initiatives economically weaker sections from rural and smaller Tata Communications believes in the need to enhance towns to make them acquire the right type of skills the quality of life of people and to serve the required for the telecom industry. As on 31 March communities where it operates. As a member of the 2010, there are about 80 interns in the Company at Tata Council for Community Initiatives, the Company various stages of the internship programme. Many has been constantly learning from group initiatives interns from the previous batches have already and improving its processes and policies to serve successfully completed their internship and have society better. The Company’s principles of corporate been absorbed in the industry. sustainability are based on the premises of creating Towards enabling visually challenged students, the sustainable value for enhancing, human, social, natural Company partnered with Victoria Memorial School and economic capital. It lays great importance on for the Blind and supported it in establishing a being accountable to all its stakeholders. recording studio for converting books and other As part of the affirmative action initiatives aimed at reading materials to digital format in CDs, for use by providing support to the marginalized sections of the the visually challenged. community, Tata Communications implemented The Company is sensitive towards environmental and several programmes addressing three major drivers ecological concerns arising out of its operations. of social equilibrium: education, employability and Carbon footprint mapping and reduction are an entrepreneurship development. The Entrepreneurship important agenda for the Company. The Company Development Programme (EDP) being run in believes in Green IT infrastructures and is constantly partnership with the Entrepreneurship Development improving its data centers and operations to become Institute (EDI), Ahmedabad, has been a great success. more and more energy efficient. The Company has During the year 2009-10, three EDPs were conducted an ISO 14001 certified Environmental Management at Nasik, Surat and Lonavla. Around 80 socially and System and a well enunciated Environment Policy in economically under-privileged candidates have place to guide its activities. successfully completed the training in these EDPs. Out of this, 47 candidates have already started their own Tata Communications was recently awarded a micro-enterprises. Similarly, the Company has Certificate of Appreciation under Exemplary provided vocational training in IT related skills to 330 Innovations in CSR category of the Business World- socio-economically disadvantaged youth, making FICCI-SEDF CSR Award 2009-10. This Certificate of them employable. During the year, the Company Appreciation recognizes Tata Communications’ supported socio-economically disadvantaged commitment and contributions to the cause of socio- students doing engineering courses in terms of economic development of the communities by way sustenance scholarships and remedial coaching. of innovations in employee volunteering,
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entrepreneurship development and employability downturn globally has led to a slowdown in customer enhancement (DRF Initiative). uptake and put increasing downward pressure on Management of Business Ethics (MBE) prices as customers seek to reduce costs. The Company aims to be recognized in a sustained Key Customers – Service Providers manner for being ethical and value driven in all its Business with other carriers and service providers endeavours. It actively promotes demonstration of represents a large proportion of our total business. this behaviour by its employees and other Several carriers that we do business with have in the stakeholders through a series of activities and recent past suffered from reduced profit margins and processes within the framework of the Tata Code of other significant financial pressures. Market Conduct. The Company has put in place the necessary restructuring through acquisitions and mergers structures and processes, to implement and improve continue and this could lead to realignment among ethical standards and practices in the organization. the various players in the industry. Some of these All new recruits are provided an overview of the Tata changes could negatively impact our business. Code of Conduct and the Company’s Whistleblower Further, if any of the major carriers that we do Policy as part of their induction process. To internalize business with encounter sudden financial difficulties the code of conduct and sustain the momentum, the or file for bankruptcy, we may be unable to recover Company conducts employee seminars, compliance amounts owed to us. training and ethics awareness workshops at frequent intervals. Relevant personnel are also provided Technology Risk training on compliance with the Foreign Corrupt Technology is continuously changing in the Practices Act (FCPA) of the US with which the telecommunications industry and service providers Company must comply by virtue of its US listing. The need to ensure that they are constantly bringing new Company understands that a strong commitment to services and technologies to market in order to be ethics is critical to the long term success of business able to compete effectively. We continuously develop, and believes that any success not achieved ethically test and introduce new communications services so is no success at all. In order to inculcate the ethical that we can compete for new customers and in new value system deep into the minds of the employees, segments of the communications business. the Company has launched a Web Based Training Sometimes the introduction of new services requires Module on the Tata Code of Conduct available to all the successful upgrade or development of new its employees globally. It has helped to create a better technology, which may be dependent on external understanding and awareness about our value system vendors. If we are not able to successfully complete among our global workforce. the development and introduction of new services, RISKS AND CONCERNS including new managed services, in a timely manner, our business could be adversely affected. Like all businesses, Tata Communications is exposed to certain risks and concerns in the course of its Intellectual property management and protection business: is becoming increasingly important in global businesses. It is important that we are able to Price Reductions source, either through our own development, Reductions in prices for communications services, acquisition or licensing, the necessary intellectual both voice and data, in India and worldwide have property rights on a cost effective basis in order to had and are expected to continue to have an adverse be able to continue doing business or introduce effect on our operations. We expect that the prices new services. In addition, the Company must be for our communications services will generally vigilant in protecting its own intellectual property continue to decrease as overall competitive activity rights through patent, copyright, trademark and increases and as we and our competitors increase trade secret laws in various jurisdictions worldwide. capacity on existing and new networks or as a result Any impediment in this process could harm our of technological advances. The recent economic business.
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Operating Risks carrier pre selection (CPS) to be completed by We must continue to increase the volume of voice, December 2003. The customer choice regime has not Internet, data, and video transmissions on our global been implemented due to technical and other network in order to realize the anticipated cash flow, reasons. This delay is a cause for concern for Tata operating efficiencies and cost benefits of our Communications because it restricts the market that network, particularly since certain of our costs (such the Company can directly address. as repair and maintenance costs) are fixed. In an order last year, the TRAI recalled the directive Any one of several factors could adversely impact our requiring all service providers to implement CAC/CPS; ongoing operations such as: instead the TRAI recommended the use of calling cards as the customer choice mechanism, which the • our technical infrastructure is vulnerable to DoT has accepted. Now long distance operators can damage, interruptions or failures which may sell directly to end-customers calling cards for result in reduced traffic, reduced revenues and domestic and international long distance services. harm to our reputation by virtue of our being However, there is still uncertainty around the unable to fulfil our commitments under interconnection terms and conditions. significant contracts. Regulatory Environment • We may be unable to hire and retain sufficient qualified personnel or to source the right We have interests in a large number of geographic equipment and technology. areas throughout the world and must comply with an extensive range of requirements that are meant • Acquisitions have been key to our growth and to regulate and supervise the licensing, construction successful integration of acquired businesses is and operation of telecommunications networks and important for us to realize the full value of our services. These requirements are likely to increase with investments. our overseas expansion. In particular, there are • Our operations are global and any terrorist agencies which regulate and supervise the allocation activities and any other acts of violence or war of frequency spectrum and which monitor and involving India, the United States and other enforce regulation and competition laws that apply countries which impact our business continuity to the telecommunications industry. Legal and could adversely affect our results. regulatory decisions and changes in the regulatory Lack of End Customer Ownership environment in the jurisdictions in which we do business could adversely affect us. An important concern for the Company in its long distance voice business in India is the lack of direct The tariffs charged by telecommunication service access to end consumers. Tata Communications is providers in India are subject to TRAI regulations. The dependent on access providers to route the national Company periodically renegotiates interconnect long distance and international calls of their agreements with various domestic mobile service customers through the Company’s networks. Several operators and basic telecom service providers and of these operators have taken licenses and started settlement rates with international carriers, resulting operations as our competitors in the long distance in the revision of rates from time to time depending and other markets thereby shrinking the Company’s on market conditions. Such revisions could be adverse addressable market. It would be a serious and could have a material effect on Tata disadvantage not to have access to a large enough Communications’ operations and financial condition. market to compete for business. In December 2009, the DoT notified an amendment A customer choice regime for long distance calling to the license condition making it mandatory to seek was to have been implemented in accordance with security clearance before placement of purchase the TRAI directive in phases for different segments of orders for telecom equipments/software to be used the long distance sector, with the final in provisioning of telecom services. This amendment implementation of carrier access code (CAC) and and subsequent notifications insisting that the
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COMMUNICATIONS Twenty Fourth Annual Report 2009-2010 Tata Communications Limited
licensees provide certain undertakings/certifications telecommunications projects, which may expose us may result in substantial delays in creating capacity to liquidity and execution risks. Our operations and in our networks and in provisioning of services to profitability may be adversely affected if the funding customers, which may adversely affect the revenues required for the plans is relatively more expensive or and profitability of the Company. delayed. The Grey Market and the IUC Regime The Company incurred substantial debt in the fiscal Effective 1 October 2008 the TRAI discontinued the year 2010 primarily to finance its various projects as access deficit charge (ADC) built into the interconnection well as fund the capital requirements of its usage charge (IUC) regime governing inter-operator subsidiaries. As of 31 March 2010, the outstanding settlements for voice calls passing through different principal amount of our debt was approximately Rs. networks. However, effective 1 April 2009, the IUC 23.28 billion for the Company on a standalone basis regulations provide for a higher termination charge of and Rs. 66.65 billion on a consolidated basis. The Rs.0.40 per minute for incoming international long Company may need to resort to additional long-term distance calls as against Rs.0.20 per minute for debt and working capital lines of credit to meet future terminating domestic long distance calls. This difference financing needs, with the possibility of raising non- creates an arbitrage opportunity which may make the debt funding being limited at this juncture. This would total elimination of the grey market difficult. increase the debt servicing obligations of the Increasing Competition in India Company. Unless the Company is able to explore non- debt funding avenues in the near future, its ability to The de-regulation of the Indian telecom market raise additional debt funding may remain subject to exposes the Company to increased competition in all certain restrictions, in turn adversely affecting its debt its key segments: servicing ability and capital expenditure programme. • The Internet Service Provider (ISP) business is Weakening of the rupee against the dollar or other intensely competitive and has a large number of major foreign currencies may have an adverse effect players. ISPs are allowed to provide Internet on our cost of borrowing and consequently may telephony calls overseas. Though the quality of increase our financing costs, which could have a such service may not be comparable to traditional significant adverse impact on our results. international long distance (ILD) calls, it may impact Tata Communications’ ILD business, as also Changing Economic Conditions the Company’s own Internet telephony services. Downturns in the Indian, regional and global • Tata Communications operates in the markets for economies could have a material adverse effect on international long distance, national long distance the Company’s business prospects. Tata and broadband services, where there are several Communications’ operations and investments as well potential and existing competitors. Relaxation of as rights to undersea cable capacity extending to licensing conditions and granting of new licences other countries, exposes the Company to risks for national long distance (NLD) and ILD services, inherent in international operations. These include: including to several international operators, by • General economic, social and political conditions; the DOT has intensified competition in these sectors. New ILD licensees have established direct • The difficulty of enforcing agreements and connectivity with foreign carriers, and increased collecting receivables through certain foreign competition is likely to impact the Company’s legal systems; business adversely. The DoT has permitted resale • Foreign currency exchange rates fluctuations, of international private leased circuit services, which could adversely affect the results of our which will further intensify the competition. operations and the value of our international Funding assets and investments although the Company We have made, and in the future would need to make, partially hedges its foreign exchange risk; substantial capital investments in new • Foreign earnings may be subject to withholding
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requirements or the imposition of tariffs, International Operations exchange controls or other restrictions; A large part of the Company’s consolidated revenues • Difficulties in obtaining licenses or are generated through its operations in international interconnection arrangements on acceptable markets. Integrating acquisitions and managing terms. operations in diverse international locations is very critical to the success of Tata Communications’ Key Disputes and Litigation business plans. Over the past fiscal years, the Company has made A list of additional “risk factors” which could impact certain tax holiday and expense claims based on our the business of the Company’s profitability are more understanding of the tax laws as reinforced by legal fully set forth in the Company’s Form 20-F, which is precedent and legal advice received from external filed annually with the U.S. Securities and Exchange tax counsel. In some cases the Indian Tax Authority Commission and can be found at the following weblink: has not accepted our claims and in few instances has
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COMMUNICATIONS Twenty Fourth Annual Report 2009-2010 Tata Communications Limited
REPORT ON CORPORATE GOVERNANCE FOR THE YEAR 2009-10 (In accordance with clause 49 of the listing agreement with Indian stock exchanges)
Corporate governance is about promoting corporate The Company communicates regularly with its fairness, transparency and accountability. The corporate shareholders through bulletins, presentations and governance structure specifies the distribution of rights meetings with analysts and investors. and responsibilities of the board, managers, shareholders and other stakeholders, and spells out the rules and 2. BOARD OF DIRECTORS procedures for making decisions on corporate affairs. The Company is managed exclusively by and under the 1. CORPORATE GOVERNANCE PHILOSOPHY AND directions of the Board. The composition of the Board is PRACTICE governed by the applicable laws and regulations and the Articles of Association of the Company. The powers The Company being a Tata Company, follows fair, delegated by the Board to the Managing Director and by transparent and ethical governance practices. The the Managing Director to the subordinate officers are Company has adopted the Tata Code of Conduct for its documented in the Delegation of Powers (DoP). The DoP employees including the Managing Director, as also a Code is reviewed periodically. of Conduct for its Non-Executive Directors. Both these Codes are available on the Company’s website. Eleven out of twelve directors are non-executive directors, The Company believes that, though total business risk forming more than half of the total number of directors. elimination is not possible, it can be minimized by The Company has four independent directors and one consistently developing and following the best practices executive director. of Corporate Governance. To this end, the Company focuses on developing and implementing higher standards of None of the directors held directorships in more than the accountability to enable optimum returns to all permissible number of companies under the applicable stakeholders. The Company is installing new state-of-the provisions. Similarly, none of the directors on the board’s art systems including integrated financial accounting and sub-committees held membership of more than ten budgeting systems and a systematic process of training committees of boards, nor is any director a chairman of and development which enhances the quality of its more than five committees of boards. personnel. Mr. H.P. Mishra, who was nominated earlier by the The Company’s operations and accounts are audited at Government of India as a permanent (non-retiring) Director, three levels: an internal audit; a statutory audit by an Indian has ceased to be a Director on the Board of Tata accounting firm under Indian accounting requirements and Communications Limited with effect from 1 April 2010. Mr. their restatement as per the US GAAP by an internationally Manish Sinha, Dy. Director General (LF), Department of recognized accounting firm. The Company is in compliance Telecommunications, has been appointed in his place on with the requirements of the revised guidelines on the Board as a permanent (Non-retiring) Director. corporate governance stipulated under Clause 49 of the Listing Agreements with the Stock Exchanges. Besides, the The names and categories of the directors on the board, Company, being listed on the New York Stock Exchange, their attendance at board meetings during the year and has an obligation to comply with the stringent rules and at the last annual general meeting, and the number of regulations of the Sarbanes-Oxley Act, 2002 (SOX). The directorships and committee memberships held by them Company believes that achieving SOX compliance will, in other companies as of 31 March 2010 (with Directorships inter-alia, further enhance its financial reporting structure. updated as of 31 May 2010) are given below:
Attendance No. of Directorships No. of Committee Positions No. of Shares Board Meetings at the last AGM in Indian Public held in Public Companies held as on Name Category during the tenure (07.08.2009) Companies Including including 31 March 2010 Tata Communications Ltd. Tata Communications Ltd. Held Attended Chairman Member Chairman Member Directors in Office (as on 31 March 2010) Mr. Subodh Bhargava Independent 7 7 Yes 3 9 4 5 NIL [Chairman] Non Executive Mr. N. Srinath Not Independent 7 7 Yes 2 3 Nil 1 NIL Executive Mr. Kishor A. Chaukar Not Independent 7 7 Yes 4 11 3 3 NIL Non Executive
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Attendance No. of Directorships No. of Committee Positions No. of Shares Board Meetings at the last AGM in Indian Public held in Public Companies held as on Name Category during the tenure (07.08.2009) Companies Including including 31 March 2010 Tata Communications Ltd. Tata Communications Ltd. Held Attended Chairman Member Chairman Member Directors in Office (as on 31 March 2010) Mr. P.V. Independent 7 5 No Nil 1 Nil 1 NIL Kalyanasundaram Non Executive
Dr. V.R.S. Sampath Independent 7 7 Yes Nil 2 Nil 1 NIL Non Executive
Mr. Amal Ganguli Independent 7 7 Yes Nil 13 5 5 NIL Non Executive
Mr. Vinod Kumar Not Independent 7 7 Yes Nil 4 Nil Nil NIL Non Executive
Mr. S. Ramadorai Not Independent 7 4 Yes 3 10 3 4 NIL Non Executive
Mr. A.K. Srivastava1 Not Independent 7 5 Yes Nil 3 Nil 1 NIL Non Executive
Mr. Arun Gandhi Not Independent 7 5 Yes Nil 13 Nil 4 NIL Non Executive
Mr. H.P. Mishra1 Not Independent 7 5 Yes Nil 1 Nil 1 NIL (Until 1 April 2010) Non Executive
Dr. Ashok Not Independent 7 6 Yes Nil 8 Nil 5 NIL Jhunjhunwala Non Executive Directors who joined after 31 March 2010
Mr. Manish Sinha1 Not Independent [w.e.f. 1 April 2010] Non Executive Nil Nil NA Nil 3 Nil 3 NIL 1 Nominee director of the Government of India.
Notes : (a) None of the directors is related to any other director. (b) None of the directors has any business relationship with the Company. (c) None of the directors received any loans and advances from the Company during the year. (d) The information as required under Annexure IA to Clause 49 is being made available to the board. (e) Apart from Directors’ Remuneration, the Company did not have any pecuniary relationship or transactions with non- executive directors during 2009-10. (f) The detailed resume of each director and the details of the directors proposed to be appointed / reappointed at the 24th Annual General Meeting are published elsewhere in the annual report. (g) The gap between two board meetings did not exceed four months. The dates on which the 7 board meetings were held are as follows: 1&2 April 2009 26 May 2009 25 July 2009 7 August 2009 26 October 2009 1 December 2009 29 January 2010
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COMMUNICATIONS Twenty Fourth Annual Report 2009-2010 Tata Communications Limited
3. AUDIT COMMITTEE 4. REMUNERATION COMMITTEE The audit committee consists of four members. The a) Constitution and Terms of Reference Chairman of the committee is Mr. Amal Ganguli, an independent director, who is Fellow of the Institute of The Remuneration Committee consists of three members. The Chairman of the Committee is Mr. Chartered Accountants in England and Wales, Fellow of Kishor Chaukar. Mr. Subodh Bhargava and Mr. A.K. Institute of Chartered Accountants of India, Fellow of British Srivastava are the other members on the Institute of Management, Member of New Delhi Chapter of Institute of Internal Auditors, Florida, USA. Mr. Amal Committee. Mr. Satish Ranade, Company Secretary and Chief Legal Officer is the Remuneration Ganguli became the Chairman of the Audit Committee Committee’s Convener. One meeting of the w.e.f. 19 October 2006. Remuneration Committee was held on 26 May The other members of the committee are Mr. Subodh 2009. All the members of the Remuneration Bhargava, Independent Director, Mr. P.V. Kalyanasundaram, Committee were present in the meeting. Independent Director and Mr. Manish Sinha, Government The broad terms of reference of the Nominee Director. Mr. Satish Ranade, Company Secretary Remuneration Committee are to review the & Chief Legal Officer is the audit committee’s Secretary. performance of the Whole-time Director, after Mr. H.P. Mishra, ceased to be a Director on the Board of considering the Company’s performance and Tata Communications Limited with effect from 1 April 2010 recommend to the Board remuneration including and consequently ceased to be a member of the Audit salary, perquisites and commission to be paid to Committee from that date. Mr. Manish Sinha, Dy. Director the Company’s Whole-time Director within the General (LF), Department of Telecommunications, who was overall ceilings approved by the shareholders. appointed on 1 April 2010 on the Board was also appointed as a member of the Audit Committee. b) Remuneration Policy The audit committee has adequate powers and detailed The distribution of commission amongst the non- terms of reference to play an effective role as required executive directors (NEDs) is placed before the under the provisions of the Companies Act, 1956 and Board. The commission to NEDs is proposed to clause 49 of Company’s listing agreement with the stock be distributed broadly on the basis of their exchanges. attendance and contribution at the Board and Committee meetings as well as the time spent Attendance at the Audit Committee Meetings on operational matters other than at the Name No. of Audit Committee meetings. Mr. Vinod Kumar, Director who is in Meetings during 2009-10 employment of a subsidiary of the Company is not paid sitting fees or commission. The Board Held during Attended has not recommended any commission to the Tenure non-executive directors for the financial year Mr. Amal Ganguli 2009-10. [Chairman] 8 8 The Company paid sitting fees of Rs.20,000/- per Mr. Subodh Bhargava 8 8 meeting to the NEDs for attending the meetings Mr. P.V. Kalyanasundaram 8 5 of the Board and Audit Committee. The Company Mr. H.P. Mishra 8 5 paid sitting fees of Rs.10,000/- per meeting to [until 1 April 2010] the NEDs for attending the meetings of the Committees of the Board other than the Audit Directors who joined after 31 March 2010 Committee. Mr. Manish Sinha The Company pays remuneration by way of salary, w.e.f. 1 April 2010] NIL NIL perquisites and allowances (fixed component) At the Annual General Meeting held on 7 August 2009, and commission (variable component) to the the Chairman of the Audit Committee, Mr. Amal Ganguli whole time director. Salary is paid within the was present. During the last financial year, the Audit range approved by the shareholders. Annual Committee held eight meetings and not more than four increments, recommended by the Remuneration months had elapsed between any two meetings. The dates Committee are approved by the Board. Within of meetings of the Audit Committee are as follows: the prescribed ceiling, the perquisites package is recommended by the remuneration committee 8 April 2009 28 April 2009 26 May 2009 24 July 2009 and approved by the Board. 23 September 2009 25 October 2009 Commission is calculated with reference to net 18 December 2009 28 January 2010 profits of the Company in a particular financial
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year and is determined by the Board of Directors d) The details of remuneration to the whole-time at the end of the financial year based on the director during the year 2009-10 are as follows: recommendations of the remuneration committee, subject to overall ceilings stipulated (Amount in Rs.’000) in Sections 198 and 309 of the Companies Act, Name Salary Perquisites & Commission* 1956. Specific amount payable to the whole-time Allowances director is based on the performance criteria laid Mr. N. Srinath 7187.24 1344.67 7500.00 down by the Board which broadly takes in to account the profits earned by the Company for Total 7187.24 1344.67 7500.00 that year. * Commission payable will be paid only after the date of c) Table of commission and sitting fees to the the Annual General Meeting. non-executive directors for the year 2009-10 is as follows: 5. INVESTOR GRIEVANCE COMMITTEE (Amount in Rs.’000) The committee consists of three members. The Chairman Name of the Director Commission Sitting Fees of the Committee is Mr. Kishor A. Chaukar who is the Managing Director of Tata Industries Limited. The other Mr. Subodh Bhargava members are Dr. V.R.S. Sampath, Independent Director and [Chairman] NIL 330 Mr. A.K. Srivastava, nominee Director of the Government. During the last financial year, the Committee held four meetings on 26 May 2009, 25 July 2009, 26 October 2009 Mr. Kishor A. Chaukar NIL 260 and 29 January 2010. Mr. Satish Ranade, Company Secretary & Chief Legal Officer is the convener of the Investor Mr. P.V. Kalyanasundaram NIL 220 Grievance Committee. The details of grievances received from the shareholders Dr. V.R.S. Sampath NIL 220 during the year and their status on 31 March 2010 is given below: Mr. Amal Ganguli NIL 310 Sr. Nature of Complaints No. of Complaints Mr. Vinod Kumar * NIL NIL No. Received Pending 1. SEBI/Stock Exchange Mr. S. Ramadorai NIL 80 Complaint 1 NIL 2. Direct/Miscellaneous/ Mr. A.K. Srivastava** NIL NIL Other Complaint 1 NIL
Mr. Arun Gandhi NIL 100 TOTAL 2 NIL This committee has been delegated the powers to approve Mr. H.P. Mishra the issue of Duplicate Share Certificates and approve (until 1 April 2010) ** NIL NIL transfer/transmission of shares. However, in the interest of shareholder friendliness, the Registrar and Transfer Dr. Ashok Jhunjhunwala NIL 140 Agents have been authorised to issue Duplicate Share Certificates and approve transfer/transmission up to a Mr. Manish Sinha ** maximum of 500 shares per folio, limited only to routine [w.e.f. 1 April 2010] NIL NIL day-to-day work. As the shares of the Company are under compulsory NIL 1,660 dematerialized trading for all investors, this delegation is considered adequate. All the shares received for transfer * Mr. Vinod Kumar being the managing director and till 31 March 2010 has been duly processed. employee of an International subsidiary of the Company, 6. ETHICS AND COMPLIANCE COMMITTEE no sitting fees/commission is deemed payable to him. In accordance with the Securities and Exchange Board of ** The Government Directors have informed the Company India (Prohibition of Insider Trading) Regulations, 1992, as that they shall not accept any Sitting Fees and commission amended, the Board of Directors of the Company adopted as their Directorships are considered to be part of their the “Tata Communications Code Of Conduct For Prevention official duty. of Insider Trading and Code of Corporate Disclosure
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COMMUNICATIONS Twenty Fourth Annual Report 2009-2010 Tata Communications Limited
Practices” to be followed by “Directors”, “Designated the committee is Mr. Kishor A. Chaukar, who is the Employees”, “Designated Persons” and “Insiders”. The code Managing Director of Tata Industries Limited, Dr. V.R.S. is based on the principle that Directors, Designated Sampath, Independent Director and Mr. Manish Sinha Employees, Designated Persons and Insiders should not Government Nominee Director are the members. Mr. Satish have undue advantage over other shareholders, in their Ranade, Company Secretary & Chief Legal Officer is the personal security transactions, due to their possible convener of the Committee. Mr. H.P. Mishra, ceased to be a advance knowledge of Price Sensitive Information. The Director on the Board of Tata Communications Limited with code, therefore, seeks to ensure timely and adequate effect from 1 April 2010 and consequently ceased to be a disclosure of Price Sensitive Information to the investor member of the Ethics and Compliance Committee from community by the Company to enable them to take that date. Mr. Manish Sinha, Dy. Director General (LF), informed investment decisions with regard to the Department of Telecommunications, who was appointed Company’s securities. on 1 April 2010 on the Board was also appointed as a member of the Ethics and Compliance Committee. Four In terms of the said code, an Ethics and Compliance meetings of the committee were held during the year Committee was constituted in 2003. The present 2009-10 on 26 May 2009, 25 July 2009, 26 October 2009 committee consists of three members. The Chairman of and 29 January 2010.
7 GENERAL BODY MEETINGS The location and time of the last three general body meetings are as follows: Meeting Date Location, Description and Type of Resolutions Voting
7 August 2009 The 23rd Annual General Meeting was held at 1100 All the resolutions were put to vote hours at MC Ghia Hall, Bhogilal Hargovindas Building, by show of hands and were carried Second Floor, 18/20 Kaikhushru Dubash Marg, unanimously. Kalaghoda, Mumbai 400023. There were Seven resolutions (1 special and 6 ordinary).
2 August 2008 The 22nd Annual General Meeting was held at 1100 All the resolutions were put to vote hours at MC Ghia Hall, Bhogilal Hargovindas Building, by show of hands and were carried Second Floor, 18/20 Kaikhushru Dubash Marg, unanimously. Kalaghoda, Mumbai 400023. There were Seven resolutions (2 special and 5 ordinary).
14 December 2007 Court Convened Extraordinary General Meeting was All three resolutions were put to held at 1100 hours on Friday, at MC Ghia Hall, Bhogilal vote by show of hands and were Hargovindas Building, Second Floor, 18/20 Kaikhushru carried unanimously. Dubash Road Marg, Kalghoda, Mumbai - 400 021. (3 special resolutions).
2 August 2007 The 21st Annual General Meeting was held at 1100 All the resolutions were put to vote hours at MC Ghia Hall, Bhogilal Hargovindas Building, by show of hands and were carried Second Floor, 18/20 Kaikhushru Dubash Marg, unanimously. Kalaghoda, Mumbai 400023. There were Ten resolutions (2 special and 8 ordinary).
8 DISCLOSURES authority on any matter related to capital markets during the last three years. i) There were no significant related-party transactions of the Company with its promoters, ii) The Company has adopted a Whistle Blower directors or management, their subsidiaries or Policy and has established necessary mechanisms relatives that may have potential conflict with for employees to report concerns about unethical the interest of the Company at large. Note behaviour. No person has been denied access to number B.21 of the Notes on Accounts may also the Audit Committee. be referred to in this respect. No non-compliance notice has been issued and no penalties or iii) SECRETARIAL AUDIT strictures have been imposed on the Company A qualified practicing Company Secretary carried by SEBI, any stock exchange or any statutory out quarterly secretarial audit to reconcile the
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total admitted capital with National Securities Third quarter ending Depository Limited (NSDL) and Central 31 December 2010 : On or before 14 February 2011 Depository Services (India) Limited (CDSL) and the total issued and listed capital. Fourth quarter ending 31 March 2011 : On or before 15 May, 2011 The audits confirm that the total issued/paid-up or if audited, on or before capital is in agreement with the total number of 30 May 2011. shares in physical form and the total number of dematerialized shares held with NSDL and CDSL. BOOK CLOSURE DATES FOR THE PURPOSE OF DIVIDEND iv) The Company fulfilled the following non- The Company’s register of members and share transfer mandatory requirements: books will remain closed from 2 August 2010 to 6 August 2010 (both days inclusive). a. The Company has setup a Remuneration Committee. Please see the paragraph on DIVIDEND POLICY Remuneration Committee. Company believes in enhancing shareholders returns every b. The Auditor’s Report on the financial year and in line with this company has constantly statements of the Company is unqualified. endeavored to maintain the Dividend Payout Ratio at broadly same levels every year. However, there are various 9. MEANS OF COMMUNICATION constraints that may impact on a firm’s decision to pay out earnings in the form of dividends. Company’s quarterly results are ordinarily published in the Financial Express and Loksatta among others, and • Cash flow constraints are also hosted on Company’s website: • Contractual constraints www.tatacommunications.com. The Company’s press releases, details of significant developments and investor • Legal constraints updates are also made available on the website. • Tax considerations The Company generally holds a press conference/investors’ • Return considerations meet after the half-yearly results are taken on record by the board relating to the period ending 30 September and The board recommends dividends at its discretion. The 31 March every year. factors that may be considered by the Board before making any recommendations for the dividend include, but are The management discussion and analysis forms part of not limited to, future expansion plans and capital the directors’ report and is included in the annual report requirements, profits earned during the financial year, for the year 2009-10. Segmental information may be overall financial conditions, cost of raising funds from referred to in Note number B.20 of the Notes on Accounts. alternate sources, liquidity and cash flow position and 10 SHAREHOLDER INFORMATION applicable taxes including tax on dividend as well as exemptions under tax laws available to various categories DATE AND VENUE OF THE AGM of investors from time to time, and money market conditions. The twenty fourth annual general meeting of the Company will be held at 1100 hours on Friday, 6 August 2010, at MC DIVIDEND PAYMENT Ghia Hall, Bhogilal Hargovindas Building, Second Floor, 18/ The Board has not recommended payment of any dividend 20 Kaikhushru Dubash Road Marg, Kalaghoda, for the Financial Year 2009-10. Mumbai - 400023. LISTING ON STOCK EXCHANGES IN INDIA AND LISTING FINANCIAL CALENDAR FEES Fiscal year ending : 31 March 2010 The Company’s shares are listed on the stock exchanges Annual General Meeting : 6 August 2010 at Mumbai (BSE) and National Stock Exchange (NSE) in India. Annual listing fees as due to each of the above stock KEY FINANCIAL REPORTING DATES FOR THE FINANCIAL exchanges for 2009-10 have been paid. YEAR 2010-11 LISTING ON STOCK EXCHANGE OUTSIDE INDIA First quarter ending 30 June 2010 : On or before 14 August 2010 The Company’s ADRs are listed on the New York Stock Exchange (NYSE) and have been traded on the NYSE since Second quarter ending 15 August 2000. The annual listing fee payable to the NYSE 30 September 2010 : On or before 14 November 2010 is being paid regularly.
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COMMUNICATIONS Twenty Fourth Annual Report 2009-2010 Tata Communications Limited
DEPOSITORY BANK FOR ADR HOLDERS STOCK CODE The Bank of New York Mellon, 101, Barclays Street, 22nd Bombay Stock Exchange : 500483 Floor West, New York, NY 10286, Telephone: +1 (212) 815 8365, Facsimile: +1 (212) 571 3050. National Stock Exchange : TATACOMM
Local Address : The Bank of New York Mellon, 3 North New York Stock Exchange : TCL Avenue, Maker Maxcity, Premises No. 35 & 36, 3rd Floor, Bandra Kurla Complex, Bandra (East), Mumbai 400 051. ISIN No. for equity shares : INE151A01013 Telephone: 91-22-30282301, Facsimile: 91-22-67703917. ISIN No. for ADRs : US8765641050 CUSTODIAN FOR THE DEPOSITORY IN INDIA CUSIP No. for ADRs : 876564105 ICICI Bank Limited, Securities Markets Services, 1st Floor, Empire Complex, 414 Senapati Bapat Marg, Lower Parel, Mumbai – 400013. Telephone: 91-22-6667 2026, 6667 2030. Facsimile: 91-22-6667 2779/2740.
STOCK MARKET DATA RELATING TO SHARES LISTED IN INDIA Monthly high and low quotations and volume of shares traded at BSE, NSE and NYSE for 2009-10 are: BSE Share Price (In Rs.) NSE Share Price (In Rs.) NYSE ADR Price (in USD) Month Average Average Average High Low Volume High Low Volume High Low Volume
Apr-09 594.90 510.55 51500 593.75 510.00 317400 24.89 20.34 112500
May-09 651.00 464.00 64300 660.00 457.35 583900 27.46 18.90 203800
Jun-09 561.90 441.00 293700 562.00 440.05 1297900 22.55 17.60 251500
Jul-09 519.70 450.00 89600 520.00 450.00 435800 21.78 18.02 102600
Aug-09 535.95 460.10 89300 536.00 460.10 355700 21.49 18.76 67200
Sep-09 516.30 470.00 72500 517.85 470.00 265400 20.93 19.21 74400
Oct-09 498.50 387.00 64700 497.95 384.10 291100 21.35 15.13 136800
Nov-09 399.00 336.20 63300 398.40 335.00 248400 16.74 14.71 102600
Dec-09 400.00 335.00 75300 396.00 334.10 349400 17.49 14.13 103700
Jan-10 377.80 307.00 144100 377.70 337.50 514700 16.26 13.11 147600
Feb-10 338.00 280.00 54000 313.75 277.25 205200 14.19 12.27 98300
Mar-10 304.70 273.20 63100 301.50 271.80 210200 12.99 12.10 107500
SHARE TRANSFER SYSTEM Share transfers in physical form can be lodged with the R&T agents of the Company. The transfers are normally processed within 15 days from the date of receipt if the documents are complete in all respects. The Investor Grievances Committee is empowered to approve the share transfers. However, in the interests of shareholder friendliness, the R&T Agents have been empowered to approve the share transfers up to 500 shares per folio per transfer.
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TCL Closing Price at BSE V/S Sensex Close
700 20000
18000 600 16000
500 14000
12000 400 10000 300 BSE Close 8000 Sensex Close
200 6000 4000 100 2000
0 0 1-Jul-09 4-Jan-10 1-Jun-09 1-Oct-09 1-Apr-09 1-Feb-10 1-Sep-09 2-Mar-10 1-Dec-09 3-Nov-09 3-Aug-09 4-May-09 31-Mar-10 Closing Price at BSE (Rs.) Sensex Close
TCL Closing Price at NSE V/S Nifty Close
700 6000
600 5000
500 4000 400 3000 300 NSE Close Nifty Close 2000 200
100 1000
0 0 1-Jul-09 4-Jan-10 1-Jun-09 1-Oct-09 1-Apr-09 1-Sep-09 2-Mar-10 1-Dec-09 3-Nov-09 3-Aug-09 4-May-09 11-Feb-10 31-Mar-10 TCL Close Nifty Close
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COMMUNICATIONS Twenty Fourth Annual Report 2009-2010 Tata Communications Limited
TCL Closing Price at NYSE (USD) V/S Dow Jones Industrial Average (DJIA)
30 12000
25 10000
20 8000
15 6000 DJIA Close
NYSE Close (USD) NYSE 10 4000
5 2000
0 0 1-Jul-09 2-Nov-09 4-Jan-10 1-Jun-09 1-Oct-09 1-Apr-09 1-Feb-10 1-Sep-09 1-Mar-10 1-Dec-09 3-Aug-09 1-May-09 31-Mar-10 NYSE Close Dow Jones Close
DISTRIBUTION OF SHAREHOLDING Number of Shareholders Number of ordinary shares held 31.03.2010 31.03.2009
1 to 500 69078 46851
501 to 1000 1393 816
1001 to 10000 1387 965
Over 10000 118 108
Total 71976 48740
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CATEGORIES OF SHAREHOLDERS AS OF 31 MARCH Category Number of Voting Strength Number of Shares Held Shareholders (Percentage)
PROMOTERS 2010 2009 2010 2009 2010 2009
Tata Group
Panatone Finvest Limited 2 2 33.24 36.73 94729654 104671123
Tata Sons Limited 4 3 12.94 10.88 36871497 31013497
The Tata Power Company Limited 1 1 3.85 2.48 10980837 7075837
Tata Steel Limited 0 0 0.00 0 0 0
Tata Industries Limited 0 0 0.00 0 0 0
Central Government 1 1 26.12 26.12 74446885 74446885
NON-PROMOTERS
Indian Public Financial Institutions 37 56 11.89 11.15 33875430 31779685
Indian Nationalised Banks 8 13 0.07 0.04 188438 103522
Foreign Financial Institutions 50 88 0.91 1.50 2602296 4287323
Foreign companies (shares held 2 2 7.48 8.70 21317826 24788680 by The Bank of New York Mellon as depository for ADRs)
Non-resident individuals / 1057 563 0.09 0.03 255548 94455 Overseas Corporate Bodies
Other Indian Bodies Corporate 1346 875 0.71 0.68 2037223 1925404
Others 69468 47136 2.70 1.69 7694366 4813589
Total 71976 48740 100 100 285000000 285000000
Dematerialisation of Shares and Liquidity Approx 99.92% of the Company’s share capital available in the market is dematerialised as on 31 March 2010. The Company’s shares are regularly traded on the Stock Exchange Mumbai and the National Stock Exchange, as is evident from the table containing stock market data. Outstanding ADRs 10658913 ADRs (each representing two ordinary shares of the Company) are outstanding as of 31 March 2010. In respect of these ADRs, the option to convert into shares is alive.
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COMMUNICATIONS Twenty Fourth Annual Report 2009-2010 Tata Communications Limited
SHARE CAPITAL HISTORY Details of share capital history since incorporation is as follows: Dates Particulars of Issue Number of Total Number Nominal Value Shares of Shares of Shares (Rs.) 19.03.1986 Allotted as Purchase consideration for assets & liabilities of OCS 126 126 126,000
01.04.1986 Allotted as Purchase consideration for assets & liabilities of OCS +599,874 600,000 600,000,000
March 1991 Shares of Rs.1000/- each subdivided into shares of Rs.10/- each NIL 60,000,000 600,000,000
06.02.1992 Bonus of 1:3 issued to Government of India. +20,000,000 80,000,000 800,000,000
Jan-Feb 1992 12 million shares disinvested in favour of Indian Financial Institutions by GOI @ Rs.123/- per share NIL 80,000,000 800,000,000
1994-1995 2,382,529 Shares transferred to disinvested parties as bonus shares NIL 80,000,000 800,000,000
27.03.1997 Raised its share capital by way of GDR Issue, and also GOI Divested 39 lakh shares in GDR markets @ US$13.93 per GDR equivalent to Rs.1000 per share. +12,165,000 92,165,000 921,650,000
04.04.1997 Raised its capital by way of GDR Issue Green Shoe option @ US$13.93 per GDR equivalent Rs.1000 per share. +2,835,000 95,000,000 950,000,000
Feb 1999 10 million shares divested by GOI in GDR markets @ US$9.25 per GDR equivalent to Rs.786.25 per share. NIL 95,000,000 950,000,000
May 1999 396,991 shares Divested by GOI by way of offer of shares to employees @ Rs.294 per share locked in for a period of 3 years. NIL 95,000,000 950,000,000
Sept 1999 10 lakh shares Divested by GOI in domestic markets @ Rs.750 per share. NIL 95,000,000 950,000,000
15.08.2000 Listing of ADRs on New York Stock Exchange NIL 95,000,000 950,000,000
24.11.2000 Bonus shares in the ratio of 2:1. +190,000,000 285,000,000 2,850,000,000
27.09.2001 Declared dividend @ 500% i.e. Rs.50/- per share at 15 AGM. NIL 285,000,000 2,850,000,000
January 2002 Paid special interim Dividend of 750% i.e. Rs.75/- per share NIL 285,000,000 2,850,000,000 13.02.2002 25% Stake transferred to Tata Group’s investment vehicle Panatone Finvest Ltd. Govt holdings reduced to 27.97% from 52.97%. Ceases to be a Government of India Enterprise NIL 285,000,000 2,850,000,000
36 C M Y K
Dates Particulars of Issue Number of Total Number Nominal Value Shares of Shares of Shares (Rs.) 21.02.2002 5264555 shares Divested by GOI by way of offer of shares to employees @ Rs.47.85 per share locked in for a period of 1 year. NIL 285,000,000 2,850,000,000
10.04.02 Open Offer by Panatone Finvest Limited in accordance with SEBI guidelines to acquire upto 57 million shares @ Rs.202/- per share NIL 285,000,000 2,850,000,000
08.06.02 Open offer complete with Panatone holding total of 128249910 shares including 57 million shares as above. NIL 285,000,000 2,850,000,000
Locations of Other Offices Regional Offices: Mumbai, Chennai, Kolkata and New Delhi. Branches: Ambattur, Arvi, Bengaluru, Bhubaneswar, Chandigarh, Coimbatore, Dehradun, Ernakulam, Gandhinagar, Goa, Guwahati, Hyderabad, Indore, Jaipur, Jalandhar, Kanpur, Patna, Pondicherry, Pune, Thiruvananthapuram.
Address for Correspondence
Registered Office Any shareholder complaints/queries may be addressed to: VSB, Mahatma Gandhi Road, Fort, Mumbai - 400 001. Registrar and Transfer Agents Tel : +91 22 6657 8765 Fax : +9122 6639 5162 M/s. Sharepro Services (India) Pvt. Ltd. Email : [email protected] (Unit: Tata Communications Limited) Website : www.tatacommunications.com 13 AB, Samhita Warehousing Complex, 2nd Floor, Near Sakinaka Telephone Exchange, Corporate Office Andheri Kurla Road, Andheri (East), Mumbai – 400072. Plot No. C-21 and C-36, G Block, Tel : (022) 2851 1872, 67720300/400. Bandra Kurla Complex, Bandra (East) Fax : (022) 26591586, 28508927. Mumbai – 400 098. E-mail : [email protected] Tel : +91 22 6657 8765 Fax : +9122 6639 5162 Any queries relating to financial statements of the Email : [email protected] Company may be addressed to: Website : www.tatacommunications.com Investor Relations Cell Compliance Officer Tata Communications Limited VSB, MG Road, Mr. Satish Ranade Fort, Mumbai - 400 001. Company Secretary & Chief Legal Officer Tel : +91 (22) 66578765 Plot No. C-21 and C-36, G Block, Fax: +91 (22) 66395162 Bandra Kurla Complex, Bandra (East) Email: [email protected] Mumbai – 400 098. Tel : +91 22 6657 8765 Fax : +91 22 6725 1962 Email : [email protected]
37 C M Y K
COMMUNICATIONS Twenty Fourth Annual Report 2009-2010 Tata Communications Limited
DIRECTORS’ RESPONSIBILITY STATEMENT FOR THE YEAR 2009-10 Pursuant to Section 217(2AA) of the Companies Act, 1956, the directors, based on the representations received from the operating management, confirm that: • In the preparation of the annual accounts, the applicable accounting standards have been followed and there are no material departures; • They have consulted the Statutory Auditors in the selection of the accounting policies and have applied them consistently and made judgements and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company at the end of the financial year and of the profit of the Company for that period; • They have taken proper and sufficient care, to the best of their knowledge and ability, for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 1956, for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities; • They have prepared the annual accounts on a going concern basis. • All Board members and senior management personnel have affirmed compliance with the stipulated code of conduct. On behalf of the Board of Directors Subodh Bhargava Dated: 5 July 2010 Chairman
Secretary Responsibility Statement
The Company Secretary & Chief Legal Officer confirms that the company has: (i) maintained all the books of account and statutory registers required under the Companies Act,1956 (“the Act”) and the rules made thereunder; (ii) filed all the forms and returns and furnished all the necessary particulars to the Registrar of Companies and/or authorities as required by the Act; (iii) issued all notices required to be given for convening of board meetings and the general meeting, within the time limit, if any, prescribed by law; (iv) conducted the board meetings and annual general meeting as per the Act; (v) complied with all the requirements relating to the minutes of the proceedings of the meetings of the directors and the shareholders; (vi) made due disclosures required under the Act including those required in pursuance of the disclosures made by the directors; (vii) obtained all the necessary approvals of directors, shareholders, the central government and other authorities as per the requirements; (viii) effected share transfers and dispatched the certificates within the statutory time limit; (ix) paid dividend amounts to the shareholders and transferred unpaid dividend amounts, if applicable, to the general revenue account of the central government or the investor education and protection fund within the time limit prescribed; (x) complied with the applicable requirements of the listing agreement entered into with the stock exchanges in India and the applicable requirements of the New York Stock Exchange. The Company has also complied with other statutory requirements under the Companies Act, 1956 and other related statutes in force. Satish Ranade Company Secretary Dated : 11 June 2010 & Chief Legal Officer
38 C M Y K
DECLARATION REGARDING COMPLIANCE BY BOARD MEMBERS AND SENIOR MANAGEMENT PERSONNEL WITH THE COMPANY’S CODE OF CONDUCT
This is to confirm that the Company has adopted a Code of Conduct for its Board Members and senior management of the Company.
I confirm that the Company has in respect of the financial year ended March 31, 2010, received from the senior management team of the Company and the Members of the Board a declaration of compliance with the Code of Conduct as applicable to them.
Place: Mumbai Satish Ranade N. Srinath Date: 11 June 2010 Company Secretary Managing Director & CEO & Chief Legal Officer
CHIEF EXECUTIVE OFFICER (CEO) AND CHIEF FINANCIAL OFFICER (CFO) CERTIFICATION FOR THE YEAR 2009-10 As required under Clause 49(V) of the Listing Agreement with Indian Stock Exchanges, the undersigned hereby confirm the following:
a) We have reviewed financial statements and the cash flow statement for the year and that 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.
b) There are, to the best of our knowledge and belief, no transactions entered into by the Company during the year 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 that we have evaluated the effectiveness of internal control systems of the Company pertaining to financial reporting and have disclosed to the Auditors and the Audit Committee, deficiencies in the design or operation of such internal controls, if any, of which we are aware and the steps we have taken or propose to take to rectify these deficiencies.
d) We have indicated to the Auditors and the Audit Committee the following:
i) significant changes in internal control over financial reporting during the year, if any;
ii) significant changes in accounting policies during the year and that the same have been disclosed in the notes to the financial statements, if any; and
iii) There have been no instances of fraud of which we have become aware.
Place: Mumbai Sanjay Baweja N. Srinath Date: 11 June 2010 Chief Financial Officer Managing Director & CEO
39 C M Y K
COMMUNICATIONS Twenty Fourth Annual Report 2009-2010 Tata Communications Limited
AUDITORS’ CERTIFICATE ON COMPLIANCE WITH THE CONDITIONS OF CORPORATE GOVERNANCE UNDER CLAUSE 49 OF THE LISTING AGREEMENTS
To the Members of
TATA COMMUNICATIONS LIMITED
We have examined the compliance with the conditions of corporate governance by TATA COMMUNICATIONS LIMITED (‘the Company) for the year ended on 31 March, 2010, as stipulated in Clause 49 of the Listing Agreement of the said Company with stock exchanges.
The compliance of conditions of Corporate Governance is the responsibility of the Company’s Management. Our examination has been limited to a review of the procedures and the implementation thereof, adopted by the Company for ensuring compliance with the conditions of corporate governance. 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 the above mentioned Listing Agreement.
We further state that such compliance is neither an assurance as to the future viability of the Company nor the efficiency or effectiveness with which the Management has conducted the affairs of the Company.
For S. B. BILLIMORIA & CO. Chartered Accountants (Registration No. 101496W)
Saira Nainar Partner Membership No: 40081 Mumbai, 9 July, 2010
40 AUDITORS’ REPORT TO THE MEMBERS OF TATA COMMUNICATIONS LIMITED
1. We have audited the attached Balance Sheet of TATA (iv) in our opinion, the Balance Sheet, the Profit and COMMUNICATIONS LIMITED (“the Company”) as at Loss Account and the Cash Flow Statement dealt 31st March, 2010, the Profit and Loss Account and the with by this report are in compliance with the Cash Flow Statement of the Company for the year Accounting Standards referred to in Section ended on that date, both annexed thereto. These 211(3C) of the Companies Act, 1956; financial statements are the responsibility of the Company’s Management. Our responsibility is to (v) in our opinion and to the best of our information express an opinion on these financial statements and according to the explanations given to us, based on our audit. the said accounts give the information required by the Companies Act, 1956 in the manner so 2. We conducted our audit in accordance with the required and give a true and fair view in auditing standards generally accepted in India. Those conformity with the accounting principles Standards require that we plan and perform the audit generally accepted in India: to obtain reasonable assurance about whether the financial statements are free of material (a) in the case of the Balance Sheet, of the state misstatements. An audit includes examining, on a test of affairs of the Company as at 31st March, basis, evidence supporting the amounts and the 2010; disclosures in the financial statements. An audit also includes assessing the accounting principles used and (b) in the case of the Profit and Loss Account, of the significant estimates made by the Management, the profit of the Company for the year ended as well as evaluating the overall financial statement on that date and presentation. We believe that our audit provides a reasonable basis for our opinion. (c) in the case of the Cash Flow Statement, of the cash flows of the Company for the year 3. As required by the Companies (Auditor’s Report) ended on that date. Order, 2003 (CARO) issued by the Central Government in terms of Section 227(4A) of the Companies Act, 5. On the basis of the written representations received 1956, we give in the Annexure a statement on the from the Directors as on 31st March, 2010 taken on matters specified in paragraphs 4 and 5 of the said record by the Board of Directors, we report that none Order. of the Directors is disqualified as on 31st March, 2010 from being appointed as a director in terms of Section 4. Further to our comments in the Annexure referred to 274(1)(g) of the Companies Act, 1956. in paragraph 3 above, we report that:
(i) we have obtained all the information and explanations which to the best of our knowledge and belief were necessary for the purposes of our audit;
(ii) in our opinion, proper books of account as required by law have been kept by the Company For S. B. BILLIMORIA & CO. so far as it appears from our examination of those Chartered Accountants books; (Registration No. 101496W)
(iii) the Balance Sheet, the Profit and Loss Account P. R. Ramesh and the Cash Flow Statement dealt with by this Partner report are in agreement with the books of (Membership No. 070928) account; MUMBAI, 31 May, 2010
41 COMMUNICATIONS Twenty Fourth Annual Report 2009-2010 Tata Communications Limited
ANNEXURE TO THE AUDITORS’ REPORT (Referred to in paragraph 3 of our report of even date)
(i) Having regard to the nature of the Company’s (iv) According to the information and explanations given business/ activities/ result for the year, clauses (vi), (xii), to us, the Company has not taken or granted any loans (xiii), (xiv), (xviii), and (xx) of CARO are not applicable secured or unsecured from or to companies, firms or to the Company. other parties covered by the register maintained under Section 301 of the Companies Act, 1956. (ii) (a) The Company has maintained proper records showing full particulars, including quantitative (v) In our opinion and according to the information and details and situation of fixed assets. explanations given to us, there is adequate internal control system commensurate with the size of the (b) According to the information and explanations Company and the nature of its business for the given to us, the fixed assets were physically verified by the management in accordance with purchase of inventory and fixed assets. The internal control systems for rendering of certain enterprise the programme of verification, which in our data services needs to be suitably strengthened. opinion, is reasonable having regard to the size Except for the forgoing, we have not observed any of the Company and the nature of its assets. The continuing major weakness in the internal control differences identified pursuant to the physical systems. verification have been duly adjusted in the books of account. Having regard to the size of the (vi) (a) To the best of our knowledge and belief and Company and on the basis of the explanations according to the information and explanations received, in our opinion, the net unadjusted given to us, we are of the opinion that the differences were not significant. transactions that need to be entered into the (c) The fixed assets disposed off during the year, in register maintained under Section 301 of the our opinion, do not constitute substantial part of Companies Act, 1956 have been so entered. fixed assets of the Company and such disposal (b) In our opinion and having regard to our has, in our opinion, not affected the going comments in paragraph (v)(a) above, and concern status of the Company. according to the information and explanations (iii) (a) As explained to us, the stocks of stores and spares given to us, transactions made in pursuance of have been verified by the Management in contracts or arrangements entered in the register accordance with the programme of verification. maintained under Section 301 of the Companies In our opinion, the frequency of verification is Act, 1956 and exceeding value of Rupees five reasonable. lakhs in respect of any party during the year have been made at prices which are reasonable having (b) In our opinion and according to the information regard to prevailing market prices at the relevant and explanations given to us, the procedures time, where such market prices are available. physical verification of stocks followed by the Management are reasonable and adequate in (vii) In our opinion, the Company has an internal audit relation to the size of the Company and the system commensurate with the size and nature of its nature of its business. business.
(c) In our opinion and according to the information (viii) We have broadly reviewed the books of account and and explanations given to us, the Company is records maintained by the Company relating to maintaining proper records of inventory. The telecommunication activities pursuant to the Rules discrepancies noticed on verification between the made by the Central Government for the maintenance physical stocks and book records were not of cost records under Section 209(1)(d) of the material having regard to the size of the Companies Act, 1956 and are of the opinion that prima operations of the Company. facie, the prescribed accounts and records have been
42 made and maintained. We have, however, not made a (xi) In our opinion and according to the information and detailed examination of the records with a view to explanations given to us, the Company has not determining whether they are accurate or complete. defaulted in repayment of dues to a financial institution or bank or debenture-holders. (ix) (a) According to the information and explanations given to us, the Company is generally regular in (xii) In our opinion and according to the information and depositing with appropriate authorities explanations given to us, the terms and conditions undisputed statutory dues including Provident on which the Company has given guarantee for loans fund, Investor Education and Protection Fund, taken by others from banks or financial institutions Employees’ state insurance, Income tax, Wealth are not prima facie prejudicial to the interest of the tax, Sales tax, Customs duty, Excise duty, Service Company. tax, cess and other material statutory dues applicable to it. (xiii) To the best of our knowledge and belief and according (b) According to the information and explanations to the information and explanations given to us, in given to us, no undisputed amounts payable in our opinion, term loans availed by the Company were respect of Provident fund, Investor Education and prima facie applied by the Company during the year Protection Fund, Employees’ state insurance, for the purpose for which they were obtained. Income tax, Sales tax, Customs duty, Excise duty (xiv) According to the information and explanations given and cess were in arrears, as at March 31, 2010 for to us, and on an overall examination of the Balance a period of more than six months from the date Sheet of the Company, funds raised on short term they became payable. basis have prima facie not been used during the year (c) According to the information and explanations for long term investment. given to us, details of dues of Sales tax, Service tax and Income tax which have not been (xv) According to the information and explanations given deposited on account of any dispute are given to us and the records examined by us, security/ below: charges have been created in respect of secured debentures issued. Particulars Period to Forum where Amount which the the dispute (Rs. in (xvi) To the best of our knowledge and belief and according amount is pending crores) to the information and explanations given to us, no relates fraud by the Company and no material fraud on the Company was noticed or reported during the year, Sales Tax 2005-06, although there have been few instances of receivables 2006-07, Jt. Commissioner 117.11 becoming doubtful of recovery, consequent upon 2001-02 Commissioner 0.06 fraudulent representation made by the customers, the amounts thereof are not material in the context of Entry Tax 2002-03, Deputy the size of the Company and the nature of the 2005-06 Commissioner 0.03 business and which were subsequently written off.
2007-08 Nagar Nigam Meerut 0.04 For S. B. BILLIMORIA & CO. Cess 2005-06 to Navi Mumbai 0.85 Chartered Accountants 2008-09 Muncipal (Registration No. 101496W) Corporation P. R. Ramesh (x) The Company does not have accumulated losses. The Partner Company has not incurred cash losses during the (Membership No. 070928) financial year covered by our audit and in the immediately preceding financial year. MUMBAI, 31 May, 2010
43 COMMUNICATIONS Twenty Fourth Annual Report 2009-2010 Tata Communications Limited
BALANCE SHEET AS AT 31 MARCH, 2010 As at As at Schedule 31 March, 2010 31 March, 2009 Rs in crores Rs in crores SOURCE OF FUNDS: SHARE CAPITAL 1 285.00 285.00 RESERVES AND SURPLUS 2 6,995.78 6,513.05 TOTAL SHAREHOLDERS’ FUNDS 7,280.78 6,798.05 SECURED LOANS 3 1,281.76 1,288.82 UNSECURED LOANS 4 1,357.15 1,039.05 DEFERRED TAX LIABILITY (NET) (Refer Note B17, Schedule 20) 175.11 133.25 TOTAL FUNDS EMPLOYED 10,094.80 9,259.17 APPLICATION OF FUNDS: FIXED ASSETS: 5 (a) Gross Block 6,820.94 5,890.00 (b) Less: Accumulated Depreciation/Amortisation 2,316.14 1,792.06 (c) Net Block 4,504.80 4,097.94 (d) Capital work-in-progress 386.15 536.38 4,890.95 4,634.32 INVESTMENTS 6 2,501.30 2,723.67 CURRENT ASSETS, LOANS AND ADVANCES A. CURRENT ASSETS (a) Inventories 7 1.25 1.56 (b) Sundry Debtors 8 632.29 1,343.22 (c) Cash and Bank Balances 9 110.86 372.37 (d) Other Current Assets 10 196.61 252.71 941.01 1,969.86 B. LOANS AND ADVANCES 11 3,750.37 2,827.42 4,691.38 4,797.28 Less: CURRENT LIABILITIES AND PROVISIONS (A) CURRENT LIABILITIES 12 1,814.16 2,607.49 (B) PROVISIONS 13 174.67 288.61 1,988.83 2,896.10 NET CURRENT ASSETS 2,702.55 1,901.18 TOTAL APPLICATION OF FUNDS 10,094.80 9,259.17 SIGNIFICANT ACCOUNTING POLICIES AND NOTES TO ACCOUNTS 20
In terms of our report attached For and on behalf of the Board For S.B. BILLIMORIA & CO. Chartered Accountants P.R. RAMESH SUBODH BHARGAVA N SRINATH Partner Chairman Managing Director & Chief Executive Officer SANJAY BAWEJA SATISH RANADE Chief Financial Officer Company Secretary & Chief Legal Officer MUMBAI MUMBAI DATED: 31 May, 2010 DATED: 31 May, 2010
44 PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED 31 MARCH, 2010 Schedule Year ended Year ended 31 March, 2010 31 March, 2009 Rs in crores Rs in crores INCOME: REVENUES FROM TELECOMMUNICATION SERVICES 3,218.04 3,749.43 OTHER INCOME 14 125.75 169.82 INTEREST INCOME 15 39.67 61.98 TOTAL INCOME 3,383.46 3,981.23 EXPENDITURE: SALARIES AND RELATED COSTS 16 418.44 355.53 NETWORK COSTS 17 1,415.04 1,761.37 OPERATING AND OTHER EXPENSES 18 638.12 786.02 DEPRECIATION AND AMORTISATION 574.73 425.27 (Net of transfer from Capital Reserve) INTEREST EXPENSE 19 246.08 190.60 TOTAL EXPENDITURE 3,292.41 3,518.79 PROFIT BEFORE TAXES AND EXCEPTIONAL ITEMS 91.05 462.44 EXCEPTIONAL ITEMS: (a) CLAIM SETTLEMENT (Refer note B11, Schedule 20) — 95.60 (b) PROFIT ON SALE OF LONG TERM INVESTMENT — (346.65) (Refer note B5, Schedule 20) (c) INTEREST ON INCOME TAX REFUND (218.28) — (Refer note B9, Schedule 20) PROFIT BEFORE TAXES 309.33 713.49 TAXES (a) CURRENT TAX 64.30 150.36 (b) DEFERRED TAX EXPENSE 41.86 41.68 (c) EXCESS PROVISION FOR TAX WRITTEN BACK (280.01) — (Refer note B9, Schedule 20) (d) FRINGE BENEFIT TAX — 5.50 PROFIT AFTER TAXES 483.18 515.95 BALANCE BROUGHT FORWARD FROM PREVIOUS YEAR 2,099.38 1,892.30 ADD: ADJUSTMENT FOR PROFIT FOR MERGER OF — 2.72 VSNL BROADBAND LIMITED (VBL) (Refer note B10, Schedule 20) LESS: DEFERRED TAX ADJUSTMENT ON MERGER OF VBL — 7.44 (Refer note B17, Schedule 20) AMOUNT AVAILABLE FOR APPROPRIATIONS 2,582.56 2,403.53 APPROPRIATIONS : (a) PROPOSED DIVIDEND (Refer note B3, Schedule 20) — 128.25 (b) TAX ON DIVIDEND — 21.80 (c) GENERAL RESERVE 48.32 51.60 (d) DEBENTURE REDEMPTION RESERVE (Refer note B14, Schedule 20) 354.84 102.50 BALANCE CARRIED TO BALANCE SHEET 2,179.40 2,099.38 EARNINGS PER SHARE Basic/Diluted earnings per share (Rs.) 16.95 18.10 (Refer Note B20, Schedule 20) In terms of our report attached For and on behalf of the Board For S.B. BILLIMORIA & CO. Chartered Accountants P.R. RAMESH SUBODH BHARGAVA N SRINATH Partner Chairman Managing Director & Chief Executive Officer SANJAY BAWEJA SATISH RANADE Chief Financial Officer Company Secretary & Chief Legal Officer MUMBAI MUMBAI DATED: 31 May, 2010 DATED: 31 May, 2010
45 COMMUNICATIONS Twenty Fourth Annual Report 2009-2010 Tata Communications Limited
CASH FLOW STATEMENT FOR THE YEAR ENDED 31 MARCH, 2010 Year ended Year ended 31 March 2010 31 March 2009 Rs in crores Rs in crores CASH FLOWS FROM OPERATING ACTIVITIES 1 PROFIT BEFORE TAXES AND EXCEPTIONAL ITEMS 91.05 462.44 Adjustments for: Depreciation and amortisation 574.73 425.27 Prior year depreciation and excess depreciation written back (1.63) (0.07) (Profit)/loss on sale of fixed assets (2.67) 1.52 Interest income (39.67) (61.98) Interest expense 246.08 190.60 Fixed assets written down 8.01 3.37 Dividend income on current investments — (21.56) Profit on sale and revaluation gain on current investments (31.15) (34.15) Provision for Contingencies 0.23 1.39 Bad Debts written off 121.65 151.35 Provisions for Doubtful advances 2.80 — Provisions for Doubtful Debts (92.18) 2.41 Dividend income from long-term investments (4.10) (3.96) OPERATING PROFIT BEFORE WORKING CAPITAL CHANGES 873.15 1,116.63 Inventories 0.31 3.98 Sundry debtors 681.46 (408.88) Other current assets 45.83 210.60 Loans and advances 8.79 141.70 Margin Money with Banks and Unpaid Dividend 0.14 0.32 Restricted cash — (0.04) Current liabilities and provisions (784.10) 484.70 Cash generated from operations before tax and exceptional items 825.58 1,549.01 Income tax paid (459.43) (366.74) Cash generated from operations before exceptional items 366.15 1,182.27 Interest on income tax refunds 218.28 — Claim settlement — (95.60) NET CASH FROM OPERATING ACTIVITIES 584.43 1,086.67 2 CASH FLOWS FROM INVESTING ACTIVITIES Purchase of fixed assets (838.48) (1,315.11) Purchase of long-term investments (6.84) — Advance paid against equity share capital (0.04) (395.71) Sale/(Purchase) of current investments (net of mutual funds dividend re-invested) (net) 260.40 (226.63) Proceeds from sale of fixed assets 3.97 3.85 Proceeds from sale of long-term investment — 424.22 Loans to subsidiaries(net) (254.74) (543.03) Dividend income from long-term investments 4.10 3.96 Fixed deposits (net) (0.24) (7.22) Interest received 49.94 49.96 NET CASH USED IN INVESTING ACTIVITIES (781.93) (2,005.71) 3 CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from short term loans 2,738.84 1,387.13 Repayment of short term loans (3,209.16) (1,232.42) Proceeds from long term loans 791.03 1,700.00 Repayment of long term loans (9.68) (357.06) Dividends paid including dividend tax (150.23) (150.39) Interest paid (224.91) (142.88) NET CASH FLOW FROM / (USED IN) FINANCING ACTIVITIES (64.11) 1,204.38 NET INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS (261.61) 285.34 CASH AND CASH EQUIVALENTS AS AT THE BEGINNING OF THE YEAR 363.87 78.53 (Refer Note B16, Schedule 20) CASH AND CASH EQUIVALENTS AS AT THE END OF THE YEAR 102.26 363.87 (Refer Note B16, Schedule 20) Notes : 1. Figures in brackets represent outflows. 2. Advance paid to Tata Communications Internet Services Ltd. of Rs. 290 crores is converted into cumulative convertible preference shares of Rs. 190 crores and equity shares of Rs. 100 crores respectively and to Tata Communications Banking InfraSolutions Ltd. of Rs. 0.05 crores and VSNL SNOSPV Pte. Ltd. of Rs. 24.30 crores have been converted into equity shares during the year ended 31 March, 2009. 3. Loans to Tata Communications International Pte. Ltd. of Rs. 208.46 crores have been converted into equity shares and to VSNL SNOSPV Pte. Ltd. of Rs. 94.41 crores is converted into cumulative convertible redeemable preference shares during the year ended 31 March, 2009.
In terms of our report attached For and on behalf of the Board For S.B. BILLIMORIA & CO. Chartered Accountants P.R. RAMESH SUBODH BHARGAVA N SRINATH Partner Chairman Managing Director & Chief Executive Officer SANJAY BAWEJA SATISH RANADE Chief Financial Officer Company Secretary & Chief Legal Officer MUMBAI MUMBAI DATED: 31 May, 2010 DATED: 31 May, 2010
46 SCHEDULES FORMING PART OF THE BALANCE SHEET As at As at SCHEDULE - 1 31 March, 2010 31 March, 2009 SHARE CAPITAL Rs in crores Rs in crores AUTHORISED : 300,000,000 (2009:300,000,000) Equity Shares of Rs.10 each 300.00 300.00 ISSUED, SUBSCRIBED AND PAID UP 285,000,000 (2009: 285,000,000) Equity Shares of Rs.10 each, fully paid up 285.00 285.00 Of the above: 1) 60,000,000 (2009: 60,000,000) shares have been fully paid up, pursuant to a contract without payment being received in cash 2) 210,000,000 (2009: 210,000,000) shares have been allotted as fully paid bonus shares by capitalisation of General Reserve 3) 15,000,000 (2009: 15,000,000) shares are allotted as fully paid up by way of Euro issue,represented by 7,500,000 American Depository Receipts (ADRs)
SCHEDULE - 2 RESERVES AND SURPLUS CAPITAL RESERVE (Refer Note B2, Schedule 20) Balance at the beginning of the year 207.69 208.29 Less : Depreciation on assets gifted transferred to Profit and Loss account 0.45 0.60 207.24 207.69
SECURITIES PREMIUM ACCOUNT Balance at the beginning of the year 725.01 834.88 Less: Adjustment pursuant to merger of VSNL Broadband limited as approved by H’ble High Court (Refer Note B10, Schedule 20) — 109.87 Balance at the end of the year 725.01 725.01
GENERAL RESERVE Balance at the beginning of the year 3,378.47 3,326.87 Add: Transferred from Profit and Loss account 48.32 51.60 3,426.79 3,378.47
DEBENTURE REDEMPTION RESERVE Balance at the beginning of the year 102.50 — Add: Transferred from profit and loss account (Refer Note B14, Schedule 20) 354.84 102.50 457.34 102.50
PROFIT AND LOSS ACCOUNT Balance carried forward 2,179.40 2,099.38 6,995.78 6,513.05
47 COMMUNICATIONS Twenty Fourth Annual Report 2009-2010 Tata Communications Limited
SCHEDULES FORMING PART OF THE BALANCE SHEET As at As at SCHEDULE - 3 31 March, 2010 31 March, 2009 SECURED LOANS Rs in crores Rs in crores DEBENTURES (Refer Note B14(a), Schedule 20) 10,000, 11.70% Rated taxable Secured Redeemable Non-convertible Debentures of face value Rs. 10 lakhs each 1,000.00 1,000.00 1,900, 11.00% Rated taxable Secured Redeemable Non-convertible Debentures of face value Rs. 10 lakhs each 190.00 190.00 550, 11.20% Rated taxable Secured Redeemable Non-convertible Debentures of face value Rs. 10 lakhs each 55.00 55.00 50, 11.25% Rated taxable Secured Redeemable Non-convertible Debentures of face value Rs. 10 lakhs each 5.00 5.00 TERM LOAN Term - Loan from Bank (note) 31.76 38.82 1,281.76 1,288.82
Note: Secured by Plant and Machinery of Rs. 127.00 crores and Office Equipments of Rs. 0.50 crores and Furniture and Fixtures of Rs.0.50 crores
SCHEDULE - 4 UNSECURED LOANS DEBENTURES (Refer Note B14(b), Schedule 20) 4000, 7.74% Rated taxable Unsecured Redeemable Non-convertible Debentures of face value Rs. 10 lakhs each 400.00 — 1500, 9.50% Rated taxable Unsecured Redeemable Non-convertible Debentures of face value Rs. 10 lakhs each 150.00 — 1500, 9.85% Rated taxable Unsecured Redeemable Non-convertible Debentures of face value Rs. 10 lakhs each 150.00 — LONG TERM LOANS [Repayable Rs. 405.25 crores within one year (2009: Rs. 0.13 crores)] From Banks 524.86 450.00 From Others 13.55 — SHORT - TERM LOANS FROM BANKS (Repayable within one year) 118.74 589.05 1,357.15 1,039.05
48 ) ) Rs. 0.05 Rs. 536.38 386.15 4,634.32 4,890.95 Rs. 24.91 crores Rs. Rs. 649.85 crores Rs. Rs in crores ) and Rs. Nil (2009: Nil (2009: ) and Rs. Rs.17.85 crores Rs.17.85 Expense ) respectively from the effective date to 31 March, 2008. ) respectively from the effective 31 March, to date Rs 0.26 crores ) (Net). respectively from effective date to 31st March, 2008. respectively from effective to 31st March, date eciation/Amortisation Expense and Deductions/Adjustments under Accumulated in Gross Block and Accumulated Depreciation/Amortisation and Rs. Nil (2009: Nil (2009: and Rs. Depreciation/Amortisation includes Rs. Nil (2009: Nil (2009: Depreciation/Amortisation includes Rs. crores) Rs (0.07) crores 01 March, 2007 as stated in Note no B 10 of Schedule 20: in Note 2007 as stated 01 March, (i) under Additions on Merger been stated Respective as on the effective have date book values (ii) Nil (2009: and Deductions/Adjustments Additions Gross Block include Rs. to (iii) Depr and Rs. 257.91 crores (2009: Rs. 218.50 crores) respectively. The Capital Work in progress include in progress Work Capital The respectively. 218.50 crores) Rs. (2009: 257.91 crores and Rs. jointly held assets under construction. towards 115.96 crores) Rs. 206.83 crores (2009: Rs. (2009: (2009: (2009: 649.85 crores of assets held jointly with other enterprises of Rs. share towards 4 on the effective date of VSNL Broadband Limited with the Company to the merger of Pursuant 5 16.52 crores Depreciation of Rs. Year Depreciation/Amortisation Expense includes Prior 6 Depreciation Gross Block and Accumulated and machinery of Plant includes proportionate amounts 7 the previous year. in italics are for Figures Rs. Rs. 1.03 Rs. ) in respect of which 0.03 crores ) respectively. The life of IRUs has been of IRUs life The ) respectively. under lease. This includes: This under lease. ) SCHEDULES FORMING PART OF THE BALANCE SHEET OF SCHEDULES FORMING PART 1.15 0.03 — — 1.18 0.94 0.01 0.05 — 1.00 0.18 1.18 — — (0.14) 1.04 1.00 — 0.09 (0.11) 0.98 0.06 1.62 — 17.15 (5.79) 82.98 16.40 — 4.10 (4.46) 16.04 66.94 9.44 — 34.87 (2.52) 111.79 38.21 — 10.76 (0.50) 48.47 63.32 2009 on Merger Adjustments2010 2009 on Merger Amortisation Adjustments 2010 2010 49.5648.27 0.93 0.12 29.02 24.86 (0.07) (1.63) 79.44 71.62 26.94 14.33 0.21 0.02 11.10 3.04 (0.04) 38.21 (0.99) 16.40 41.23 55.22 213.39259.44 — — 4.05 77.86 —250.01 — 217.44 337.30 2.11 9.72 45.41 91.98 — (2.39) — 1.10 341.71 4.36 124.03 — — 0.82 10.82 49.77 206.62 45.49 287.53 (2.22) 168.12 173.59 ) being cost of flats in Co-operative Societies under of flats ) being cost in Co-operative ) in respect of which lease agreement has not been ) for flats at Mumbai and Rs. 1.03 crores (2009: (2009: 1.03 crores ) for flats at Mumbai and Rs. Rs. 95.42 crores Rs. 1 April,1 Additions Additions Deductions/ 31 March,April, 1 Additions Depreciation/ Deductions/ 31 March, 31 March, 3,530.83 164.72 1,203.96 (58.20) 4,841.31 1,142.384,352.65 36.94 167.91 1,431.73 378.51 (62.29) (50.09) 5,890.00 1,507.74 3,333.57 1,363.75 38.00 443.65 (53.34) 1,792.06 4,097.94 4,841.31 — 738.71 (45.88) 5,534.14 1,507.74 — 500.52 (41.79) 1,966.47 3,567.67 Rs.203.04 crores Rs.203.04 ) for leasehold office space, of which Rs. 1.84 crores (2009: (2009: 1.84 crores of which Rs. leasehold office space, ) for (2009: Rs. 0.44 crores Rs. Rs.32.75 crores Rs.32.75 Rs. 1.21 crores Rs. 7.79 crores ] ) pertains to assets acquired on or after 31 March, 2001. ) pertains assets acquired on or after to 31 March, ) and Rs. 116.07 crores (2009: (2009: 116.07 crores ) and Rs. ) for office space at New Delhi) for office space in respect not been of which agreements executed. have 2.75 crores (2009: (2009: 2.75 crores :Rs. 8.22 crores) :Rs. executed/ registered executed/ conveyance is not done and lease deed available conveyance formation. 1.84 crores crores BUILDINGPLANT AND MACHINERY 337.30 — VEHICLES MOTOR 126.03 (8.89) 454.44 49.77 — 6.82 (1.87) 54.72 399.72 OFFICE EQUIPMENTCOMPUTERS 7 341.71 — 79.40 (2.87) 418.24 168.12 — 50.31 (2.37) 216.06 202.18 FIXED ASSETSFIXED LAND 217.44 GROSS BLOCK — 0.87 —(2009 218.31 / AMORTISATION DEPRECIATION ACCUMULATED 10.82 NET BLOCK — 2.58 — 13.40 204.91 FURNITURE AND FIXTURES 7 WORK-IN-PROGRESS CAPITAL [including advances for capital [including advances 6.57 crores expenditure Rs. Total 5,890.00 — 997.03 (66.09) 6,820.94 1,792.06 — 575.18 (51.10) 2,316.14 4,504.80 GRAND TOTAL (iii) identified as Surplus land. 0.16 crores Rs. block of buildings include: Gross (i) (2009: 7.79 crores Rs. (i) Rs. (2009: Land in Srinagar of Rs.0.03 crores Leasehold (ii) (2009: 0.06 crores Rs. Land includes Rs.203.04 crores crores Land includes Rs.203.04 (ii) (2009: 0.44 crores Rs. (iii) 3 Rs. Use (IRUs) for domestic and international telecommunication circuits of Rs 344.10 crores (2009: Rs. of Rs 344.10 crores (2009: telecommunication circuits domestic and international for (IRUs) Use 315.60 crores of the life cables or the period of IRU at lower agreements. estimated TES: 2 NO 1 3 of Plant and machinery Depreciation Gross Block and Accumlated Rights includes Indefeasible of SCHEDULE - 5 FIXED ASSETS
49 COMMUNICATIONS Twenty Fourth Annual Report 2009-2010 Tata Communications Limited
SCHEDULES FORMING PART OF THE BALANCE SHEET As at As at SCHEDULE - 6 31 March, 2010 31 March, 2009 INVESTMENTS Number of shares Rs in crores Rs in crores I. TRADE INVESTMENTS (At Cost) A. Fully Paid Equity Shares (Unquoted) Tata Teleservices Ltd. * 439,863,622 933.75 933.75 (Equity shares of Rs 10 each) New ICO Global Communications (Holdings) Limited 680,373 0.01 0.01 (Class A common stock of US$ 0.01 each) United Telecom Limited - Joint Venture 5,731,900 35.82 28.99 (Equity shares of NRS 100 each) (1,093,060 Equity shares of NRS 100 each subscribed during the year) (Refer Note B4, Schedule 20) Cochin Submarine Cable Depot India Private Limited - Joint Venture 40,000 0.04 — (Equity shares of Rs.10 each) (40,000 Equity shares of Rs.10 each subscribed during the year) B. Investment in Subsidiary Companies (i) Fully Paid Equity Shares (Unquoted) Tata Communications Lanka Limited 13,661,422 7.41 7.41 (Equity shares of LKR 10 each) Tata Communications International Pte. Ltd. * 110,810,000 474.23 474.23 (Equity shares of US$ 1 each) (Refer Note B6, Schedule 20) Tata Communications Services (America) Inc. 3,000 1.31 1.31 (Equity shares of US$ 0.01 each) VSNL SNOSPV Pte. Ltd. * 769,333 3.29 3.29 (Equity shares of US$ 1.00 each) (Refer Note B6, Schedule 20) Tata Communications Internet Services Ltd. 195,004,050 194.47 194.47 (Equity shares of Rs. 10 each) (Refer Note B6, Schedule 20) Tata Communications Transformation Services Limited 500,000 0.50 0.50 (Equity shares of Rs. 10 each) Tata Communications Banking InfraSolutions Limited 50,000 0.05 0.05 (Formerly known as Banking ATM InfraSolutions Limited) (Equity shares of Rs. 10 each) S&A Internet Services Private Limited 10,000 0.01 — (Equity shares of Rs.10 each) (10,000 Equity shares of Rs.10 each subscribed during the year) (ii) Fully Paid Preference Shares (Unquoted) Tata Communications International Pte. Ltd * 30,955,250 139.32 139.32 (Cumulative convertible redeemable Preference Shares of US$1 each) (Refer Note B6, Schedule 20) Tata Communications Internet Services Limited 19,000,000 190.00 190.00 (Cumulative convertible Preference Shares of Rs.100 each) (Refer Note B6, Schedule 20) VSNL SNOSPV Pte. Ltd * 24,680,000 118.71 118.71 (Cumulative convertible redeemable Preference shares of US $ 1 each) (Refer Note B6, Schedule 20) 2,098.92 2,092.04 * Equity investments in these companies are subject to certain restrictions on transfer as per the terms of individual contractual agreements
50 SCHEDULES FORMING PART OF THE BALANCE SHEET SCHEDULE - 6 INVESTMENTS (Contd.) II. OTHERS As at As at 31 March, 2010 31 March, 2009 No. of Units Rs in crores Rs in crores INVESTMENT IN MUTUAL FUNDS (Unquoted) Fixed Maturity Plan UTI Fixed Income Interval Fund -Monthly Interval Plan I -Institutional Plan-Growth — 15.00 ICICI Prudential Interval Fund IV-Quarterly Interval Plan B -Institutional Plan-Growth — 25.00 Liquid Growth Plan JM Money Manager Fund - Super Plus Plan - Growth — 60.17 Kotak Long Term Floater Growth — 60.28 ICICI Prudential Flexible Income Plan - Growth — 60.88 TATA Floater Fund - Growth — 25.00 Birla Sunlife Savings Fund - Institutional Plan - Growth 14,303,818 25.00 10.14 Fortis Money Plus - Institutional Plan - Growth — 80.04 HDFC Floating Rate Income Fund -Short Term Fund -Wholesale Plan-Growth — 60.06 IDFC Money Manager Treasury Plan B - Growth — 25.04 LIC MF Liquid Fund - Growth — 100.02 LIC Income Plus Fund-Growth — 100.00 Baroda Pioneer Treasury Advantage Fund-IP-Growth 74,804,905 77.54 — DSP BlackRock Floating Rate Fund-IP-Growth 60,516 8.01 — IDFC Money Manager Fund-Treasury Plan C-Growth 68,741,536 75.01 — Kotak Flexi Debt Fund-IP-Growth 44,187,481 50.01 — LIC Savings Plus Fund - Growth 76,658,737 112.06 — ICICI Prudential Flexible Income Plan-Premium-Growth 2,628,862 45.00 — ICICI Prudential Ultra Short Term Plan-Sup Premium-Growth 7,995,431 8.25 — Reliance Medium Term-Growth 786,908 1.50 — Short Term Growth Plan Canara Robeco Short Tem Fund -Institutional Plan -Growth — 10.00 402.38 631.63 Total (I + II) 2,501.30 2,723.67
Book Value of unquoted investments 2,501.30 2,723.67 All investments other than investment in Mutual Funds are long-term investment
51 COMMUNICATIONS Twenty Fourth Annual Report 2009-2010 Tata Communications Limited
SCHEDULES FORMING PART OF THE BALANCE SHEET As at As at SCHEDULE - 7 31 March, 2010 31 March, 2009 INVENTORIES Rs in crores Rs in crores Equipment for resale 0.08 0.08 Less: Provision for obsolescence (0.08) (0.08) — — Consumable stores and spares 1.25 1.56 1.25 1.56
SCHEDULE - 8 SUNDRY DEBTORS (UNSECURED) Over six months Considered good 166.32 549.67 Considered doubtful 100.94 193.12 267.26 742.79 Less: Provision for doubtful debts (100.94) (193.12) 166.32 549.67 Other debts Considered good 465.97 793.55 632.29 1,343.22
SCHEDULE - 9 CASH AND BANK BALANCES (Refer Note B16, Schedule 20) Cash in hand 0.05 0.06 Cheques in hand 65.93 54.77 Remittances in transit 2.57 0.28 Current accounts with Scheduled Banks 34.35 54.10 Deposit accounts with Scheduled Banks 7.96 263.16 110.86 372.37
SCHEDULE - 10 OTHER CURRENT ASSETS Interest receivable (note) 16.23 26.50 Service tax recoverable 48.32 95.82 Pension contributions recoverable from Government of India [Net of provision of Rs. 53.71 crores; (2009: Rs. 53.71 crores)] (Refer note B7, Schedule 20) 7.44 7.44 NLD licence fees reimbursement recoverable from Government of India 0.64 0.64 Licence fees paid under protest (Refer note B13, Schedule 20) 115.73 120.85 Others 8.25 1.46 196.61 252.71
Note: Interest receivable includes interest due from subsidiaries of Rs. 14.31 crores (2009: Rs. 23.54 crores)
52 SCHEDULES FORMING PART OF THE BALANCE SHEET As at As at SCHEDULE - 11 31 March, 2010 31 March, 2009 LOANS AND ADVANCES (UNSECURED) Rs in crores Rs in crores Considered good Prepaid expenditure 119.37 97.81 Loans and advances to employees (note 1) 1.16 2.59 Deposits – Public bodies 11.64 11.63 – Others 20.21 34.41 Advance recoverable in cash or kind for value to be received 83.21 83.94 Advance payment of tax (net of provision for tax) 2,092.85 1,417.70 Loans and advances to subsidiary companies, joint ventures and associate (note 2) 1,367.64 1,132.37 Others 54.29 46.97 3,750.37 2,827.42 Considered doubtful Other loans and advances 10.41 7.61 Less: Provision for doubtful advances (10.41) (7.61) 3,750.37 2,827.42
Notes: (1) Staff Advances includes loans due from officer of the Company Rs. 0.01 crores (2009:Rs. 0.01 crores) [Maximum amount due at any time during the year is Rs. 0.01 crores (2009: Rs. 0.01 crores)] (2) Loans and advances to subsidiary companies, joint ventures and associate Tata Communications International Pte. Ltd. 817.04 834.17 Tata Communications (Bermuda) Limited 0.16 0.01 VSNL SNOSPV Pte. Ltd. 407.08 151.59 Neotel (Pty)Ltd. 2.32 2.29 Tata Communications (Netherlands) BV 1.91 2.98 Tata Communications Lanka Ltd. 0.08 0.03 Tata Communications (UK) Limited — 0.29 Tata Communications (US) Inc. 4.29 0.30 Tata Communications Internet Services Limted 104.20 138.70 Tata Communications Transformation Services Limited 3.08 0.06 Tata Communications Banking InfraSolutions Limited (Formerly known as Banking ATM InfraSolutions Limited) 25.66 0.35 Videsh Sanchar Nigam Spain Srl 0.01 0.01 Tata Communications (America) Inc. 0.61 1.59 S&A Internet Services Pvt. Ltd. 1.06 — United Telecom Limited 0.01 — Cochin Submarine Cable Depot (India) Private Limited 0.13 —
53 COMMUNICATIONS Twenty Fourth Annual Report 2009-2010 Tata Communications Limited
SCHEDULES FORMING PART OF THE BALANCE SHEET As at As at SCHEDULE - 12 31 March, 2010 31 March, 2009 CURRENT LIABILITIES Rs in crores Rs in crores Sundry Creditors: – Creditors for interconnect charges 524.22 1,015.84 – Dues of micro, small and medium enterprise (Refer note B33, Schedule 20) 1.27 0.69 – Others (note 3) 631.79 794.88 Deferred revenues and advance received from customers 445.45 498.36 Liability towards Investors Education and Protection Fund under Section 205C of the Companies Act 1956 (not due): Unpaid dividend (note 1) 0.60 0.78 Government of India Current Account 20.57 20.57 Other liabilities (note 2) 120.46 227.74 Interest accrued but not due on loans 69.80 48.63 1,814.16 2,607.49 Notes: (1) There are no dividends due and outstanding for a period exceeding seven years. (2) Includes Rs.10.22 crores overdrawn book bank balance (2009: Rs. 86.04 crores) (3) Sundry creditors - others includes due to subsidiary companies, joint ventures and associate Tata Communications (Canada) ULC 14.17 12.92 Tata Communications Lanka Ltd 0.01 — Tata Communications Banking InfraSolutions Limited 0.20 — Neotel Pty Ltd. 2.96 — Videsh Sanchar Nigam Spain Srl. 0.18 0.18 Tata Communications (Hongkong) Limited — 0.06 Tata Communications International Pte Ltd — 5.02 Tata Communications Internet Services Limted 0.18 — United Telecom Limited 9.11 9.32 Tata Communications Transformation Services Ltd. 2.67 1.51 Tata Communications UK Limited 1.01 1.36 Tata Communications (Japan) KK 0.46 —
SCHEDULE - 13 PROVISIONS Provisions for employee benefits 156.71 120.46 Provision for proposed dividend — 128.25 Tax on dividend — 21.80 Provision for contingencies (Refer Note B24, Schedule 20) 9.26 9.40 Provision for taxes (net of advance taxes) 8.70 8.70 174.67 288.61
54 SCHEDULES FORMING PART OF THE PROFIT AND LOSS ACCOUNT Year ended Year ended SCHEDULE - 14 31 March, 2010 31 March, 2009 OTHER INCOME Rs in crores Rs in crores Dividend Income from current Investments — 21.56 Dividend Income from investment in a subsidiary 4.10 3.96 Profit on sale of current investments (net) 31.15 34.07 Profit on sale of fixed assets (net) 2.67 — Rent 19.84 21.98 Exchange gain (net) (12.28) 46.56 Provisions / Liabilities no longer required - written back 23.75 10.78 Other 56.52 30.91 125.75 169.82 SCHEDULE - 15 INTEREST INCOME Interest income Bank Deposits 1.76 20.21 [Tax deducted at source Rs.0.56 crores (2009: Rs. 1.67 crores)] Other Loans and Advances (note) 37.91 41.77 [Tax deducted at source Rs.5.51 crores (2009: Rs. 6.45 crores)]
39.67 61.98 Note: Interest on Loans and Advances includes Rs.37.66 crores (2009: Rs. 41.58 crores) from subsidiaries. Tax Deducted at source on such income is Rs.5.45 crores (2009: Rs. 6.45 crores)
SCHEDULE - 16 SALARIES AND RELATED COSTS Salaries and related costs 346.14 292.72 Contributions to provident,gratuity and other funds 33.20 31.69 Staff welfare expenses 39.10 31.12 418.44 355.53 SCHEDULE - 17 NETWORK COSTS Charges for use of transmission facilities 1,240.81 1,569.50 Royalty and licence fee to Department of Telecommunications 122.77 125.76 Rent of satellite channels 25.64 31.35 Rent of landlines [net of excess provision written back Rs. Nil (2009: Rs. 10.02 crores)] 20.88 28.66 Administrative lease charges 4.94 6.10 1,415.04 1,761.37
55 COMMUNICATIONS Twenty Fourth Annual Report 2009-2010 Tata Communications Limited
SCHEDULES FORMING PART OF THE PROFIT AND LOSS ACCOUNT Year ended Year ended SCHEDULE - 18 31 March, 2010 31 March, 2009 OPERATING AND OTHER EXPENSES Rs in crores Rs in crores Consumption of stores 11.56 11.20 Light and power 107.72 90.87 Repairs and Maintenance: – Buildings 12.99 11.13 – Plant and Machinery 120.81 148.53 – Others 14.87 14.48 Bad Debts written off 121.65 151.35 Provision for doubtful debts / (written back) (92.18) 2.41 Advances written off 3.81 — Provision for doubtful advances 2.80 — Rent 17.35 40.77 Rates and taxes 6.06 10.35 Travelling expenses 20.03 22.17 Telephone expenses 17.41 13.27 Printing, postage and stationery 3.89 2.69 Legal and professional fees 55.32 57.80 Advertising and publicity 19.35 8.13 Commissions 20.63 22.51 Services rendered by agencies 68.48 80.30 Insurance 9.89 7.82 Donations — 0.40 Loss on sale of fixed assets (net) — 1.52 Prior period adjustments (net) (0.77) 0.18 Other expenses 96.45 88.14 638.12 786.02
SCHEDULE - 19 INTEREST EXPENSE Interest paid on loans 93.66 143.20 Interest on Debentures 167.86 46.06 Other Interest 2.28 1.35 Less: Interest Capitalisation (17.72) (0.01) 246.08 190.60 Note: Interest expense (before capitalisation) includes interest on fixed loans of Rs. 245.65 crores (2009: Rs. 118.37 crores)
56 SIGNIFICANT ACCOUNTING POLICIES AND NOTES TO ACCOUNTS SCHEDULE 20 A. SIGNIFICANT ACCOUNTING POLICIES 1. Basis of Preparation The financial statements are prepared under the historical cost convention and the requirements of the Companies Act, 1956. 2. Use of estimates The preparation of financial statements requires the management of the Company to make estimates and assumptions that affect the reported balances of assets and liabilities and disclosures relating to the contingent liabilities as at the date of the financial statements and reported amounts of income and expenses during the period. Examples of such estimates include provisions for doubtful debts and advances, employee benefits, provision for income taxes, impairment of assets and useful life of fixed assets. 3. Fixed Assets i) Fixed assets are stated at cost less accumulated depreciation. Cost includes freight, duties, taxes and all incidental expenses incurred to bring the assets to their present location and condition. ii) Fixed assets received as gifts from other Foreign Telecom Carriers / vendors are capitalised and credited to capital reserve on the basis of notional cost (cost assessed by custom authorities). Cost includes freight, insurance and customs duty. iii) Intangible assets in the nature of Indefeasible Rights of Use (IRUs) for international and domestic telecommunication circuits are classified under fixed assets. IRU agreements in respect of these intangible substantially transfer all the risks and rewards of ownership. iv) Jointly owned assets are capitalised in proportion to the Company’s ownership interest in such assets. v) Costs of borrowing related to the acquisition or construction of fixed assets that are attributable to the qualifying assets are capitalized as part of the cost of such asset. A qualifying asset is one which necessarily takes a substantial period to get ready for its intended use. All other borrowing costs are recognized as an expense in the period in which they are incurred in accordance with the Accounting Standard on “Borrowing Costs” (AS-16) notified by the Companies (Accounting Standards) Rules, 2006.
4. Depreciation Depreciation is provided on the straight line method (SLM), at the rates and in the manner prescribed in Schedule XIV to the Companies Act, 1956 except as follows: Assets Rates of Depreciation /Period of amortisation i) Plant and Machinery a. Land cables 6.33% b. Earth station and switches 7.92% c. Other Networking equipments 11.88% d. Customer premises cables & equipments 19.00% ii) Indefeasible Rights of Use (IRU’s) Life of IRU or period of agreement,whichever is lower iii) Leasehold Land Over the lease period These rates are not less than those prescribed under Schedule XIV.
57 COMMUNICATIONS Twenty Fourth Annual Report 2009-2010 Tata Communications Limited
SIGNIFICANT ACCOUNTING POLICIES AND NOTES TO ACCOUNTS (Contd.)
5. Operating Leases Lease arrangements where the risk and rewards incidental to ownership of an asset substantially vest with the lessor are classified as operating leases. Rental income and rental expenses on assets given or obtained under operating lease arrangements are recognised on a straight line basis over the term of the lease. The initial direct costs relating to operating leases are recorded as expenses as they are incurred. 6. Impairment At each balance sheet date, the Company reviews the carrying amounts of its fixed assets to determine whether there is any indication that those assets suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss. The recoverable amount is the higher of an asset’s net selling price and value in use. In assessing the value in use, the estimated future cash flows expected from the continuing use of the asset and from its ultimate disposal are discounted to their present values using a pre-determined discount rate that reflects the current market assessments of the time value of money and risks specific to the asset. 7. Investments Long-term investments are valued at cost less provision for other than temporary diminution in value. Current investments comprising investments in mutual funds are stated at the lower of cost or market value, determined on an individual investment basis. 8. Inventories Inventories are valued at the lower of cost or net realisable value. Cost is determined on a weighted average basis. 9. Employee Benefits i) Short Term Employee benefits The undiscounted amount of short term employee benefits expected to be paid in exchange for services rendered by employees is recognized during the period when the employee renders the service. These benefits include compensated absences such as paid annual leave and performance incentives payable within twelve months. ii) Post employment benefits Contributions to defined contribution retirement benefit schemes are recognized as expenses when employees have rendered services entitling them to the contributions. For defined benefit schemes, the cost of providing benefits is determined using the Projected Unit Credit Method, with actuarial valuations being carried out at each balance sheet date. Actuarial gains and losses are recognized in full in the profit and loss account for the period in which they occur. Past service cost is recognized immediately to the extent that the benefits are already vested, and otherwise is amortized on a straight-line basis over the average period until the benefits become vested. The retirement benefit obligation recognized in the balance sheet represents the present value of the defined benefit obligation as adjusted for unrecognized past service cost, and as reduced by the fair value of scheme assets. Any asset resulting from this calculation is limited to past service cost, plus the present value of available refunds and reductions in future contributions to the scheme. 10. Revenue Recognition i) Revenues from Telephony services are recognised at the end of each month based upon minutes of traffic completed in such month. A substantial portion of revenues are on account of recoveries from Foreign Telecommunication Carriers for incoming traffic and recovery from domestic carriers for delivery of calls on foreign and domestic networks.
58 SIGNIFICANT ACCOUNTING POLICIES AND NOTES TO ACCOUNTS (Contd.)
ii) Revenues from Data services are recognised over the period of the respective arrangements based on contracted fee schedules. iii) Revenues from right to use of fibre capacity provided based on IRU are recognised over the period of such arrangements. iv) Revenues from Internet Telephony services are recognised based on usage. v) Dividends from investments are recognized when the right to receive payment is established and no significant uncertainty as to measurability or collectibility exists. vi) Transactions with providers of telecommunication services such as buying, selling, swapping and/or exchange of traffic are accounted for as non-monetary transactions depending on the terms of the agreements entered into with such telecommunication service providers. 11. Taxation i) Current tax expense is determined in accordance with the provisions of the Income Tax Act, 1961. Deferred tax assets and liabilities are measured using the tax rates, which have been enacted or substantively enacted at the balance sheet date. Deferred tax expense or benefit is recognized on timing differences being the differences between taxable incomes and accounting incomes that originate in one period and are capable of reversing in one or more subsequent periods. ii) In the event of unabsorbed depreciation and carry forward of losses, deferred tax assets are recognised only to the extent that there is virtual certainty that sufficient taxable income will be available to realise these assets. In other situations, deferred tax assets are recognised only to the extent that there is reasonable certainty that sufficient future taxable income will be available to realise these assets. iii) Provision for current income taxes and advance taxes arising in the same jurisdiction are presented in the balance sheet after offsetting on an assessment year basis. 12. Foreign Currency Transactions i) Foreign currency transactions are converted into Indian Rupees at rates of exchange approximating those prevailing at the transaction date or at average exchange rate during the transaction month. Foreign currency monetary assets and liabilities are translated to Indian Rupees at the closing rate prevailing on the balance sheet date. Exchange differences on foreign currency transactions are recognized in the profit and loss account. ii) Premium or discount on forward contracts are amortised over the life of such contracts and recognised in the profit and loss account. Forward contracts outstanding as at the balance sheet date are stated at exchange rates prevailing at the reporting date and any gains or losses are recognised in the profit and loss account. Profit or loss arising on cancellation or enforcement/exercise of forward exchange is recognised in the profit and loss account in the period of such cancellation or enforcement/exercise. 13. Earnings Per Share Basic earnings per share are calculated by dividing the net profit or loss for the year attributable to equity shareholders (after deducting preference dividends and attributable taxes) by the weighted average number of equity shares outstanding during the year. The weighted average number of equity shares outstanding during the year is adjusted for events if any of bonus issue to existing shareholders and share split. For the purpose of calculating diluted earnings per share, the net profit for the period attributable to equity shareholders and the weighted average number of shares outstanding during the year are adjusted for the effects of all dilutive potential equity shares from the exercise of options on unissued share capital. The number of equity shares is the aggregate of the weighted average number of equity shares and the weighted average number of equity shares, which would be issued on the conversion of all the dilutive potential equity shares into equity shares. Options on unissued equity share capital are deemed to have been converted into equity shares. 14. Contingent Liabilities and Provision Provisions are recognised in respect of present probable obligations, the amount of which can be reliably estimated. Contingent Liabilities are disclosed in respect of possible obligations that may arise from past events but their
59 COMMUNICATIONS Twenty Fourth Annual Report 2009-2010 Tata Communications Limited
SIGNIFICANT ACCOUNTING POLICIES AND NOTES TO ACCOUNTS (Contd.)
existence is confirmed by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the Company. B. NOTES TO ACCOUNTS 1. The Company was incorporated on 19 March, 1986. The Government of India vide its letter No. G-25015/6/86OC dated 27 March, 1986, transferred all the assets and liabilities of the Overseas Communications Service (OCS) (part of the Department of Telecommunications, Ministry of Communications) as appearing in the Balance Sheet as at 31 March, 1986 to the Company with effect from 01 April, 1986. As per the letter no. G-25015/6/86-OC dated 23 October, 2001 of Government of India, Department of Telecommunications, there was no requirement to register a formal transfer deed or deed of sale in the matter of such transfer of assets. During the year 2007-08, the Company changed its name to Tata Communications Limited and the fresh certificate of incorporation consequent upon the change of name was issued by the Registrar of Companies, Maharashtra on 28 January, 2008. 2. Capital reserve includes Rs. 205.22 crores in respect of foreign exchange gains on unutilized proceeds from Global Depository Receipts credited to Capital Reserve in 2000-01 Rs. 203.70 crores and Rs. 1.52 crores in 2001-02. 3. The Board of Directors have recommended a dividend of Rs. NIL (2009: Rs. 4.50) per share for the year ended 31 March, 2010. 4. The Company has an investment of Rs. 35.82 crores (2009: Rs. 28.99 crores) in United Telecom Ltd. Nepal (“UTL”) representing an equity interest of 26.66 percent (2009: 26.66 percent) in the issued and paid-up capital of UTL. In the opinion of the management, having regard to the long gestation period inevitable to the nature of the joint venture’s business and future business projections, there is no other than temporary diminution, in value of the investments. 5. During the year 2008-09, in terms of the agreements entered into between Tata Teleservices Ltd. (“TTSL”), Tata Sons Ltd. (“TSL”) and NTT DoCoMo, Inc. of Japan (Strategic Partner-SP), TSL gave an option to the Company to sell 36,542,378 equity shares in TTSL to the SP, as part of a secondary sale of 253,163,941 equity shares effected along with a primary issue of 843,879,801 shares by TTSL to the SP. Accordingly, the Company realized Rs 424.22 crores on sale of these shares resulting in a profit of Rs 346.65 crores which was reflected as exceptional item in the profit and loss account for the previous year. If certain performance parameters and other conditions are not met, should the SP decide to divest its entire shareholding in TTSL, acquired under the primary issue and the secondary sale, and should TSL be unable to find a buyer for such shares, the Company is obligated to acquire the shareholding of the SP, at the higher of fair value or 50 percent of the subscription purchase price, in proportion of the number of shares sold by the company to the aggregate of the secondary shares sold to the SP, or if the SP divests the shares at a lower price pay a compensation representing the difference between such lower sale price and the price referred to above. Further, in the event of breach of the representations and warranties (other than title and tax) and covenants not capable of specific performance, the Company is liable to reimburse TSL, on a pro rata basis, up to a maximum sum of Rs 548.50 crores. The exercise of the option by SP being dependent on several variables, the liability, if any, in this respect is remote and indeterminable. 6. The Company has an investment of Rs. 474.23 crores (2009: Rs. 474.23 crores) in Equity Shares and Rs.139.32 crores (2009: Rs. 139.32 crores) in preference shares of Tata Communications International Pte. Ltd (“TCIPL”), Rs. 3.29 crores (2009: Rs. 3.29 crores) in Equity Shares and Rs. 118.71 crores (2009: Rs. 118.71 crores) in preference shares of VSNL SNOSPV Pte. Ltd (“SNOSPV”), Rs. 194.47 crores (2009: Rs. 194.47 crores) in Equity Shares and Rs.190.00 crores (2009: Rs. 190.00 crores) in preference shares of Tata Communications Internet Services Ltd (“TCISL”) wholly owned subsidiaries. In the opinion of the management, having regard to the nature of these subsidiaries’ businesses and future business projections, there is no other than temporary diminution, in value of the investments despite the accumulated losses which has significantly eroded the net worth of these subsidiaries.
60 SIGNIFICANT ACCOUNTING POLICIES AND NOTES TO ACCOUNTS (Contd.)
7. As at 31 March, 2010 the proportionate share of pension obligations and payments of Rs. 61.15 crores (2009 : Rs 61.15 crores ) to the erstwhile Overseas Communications Service (“OCS”) employees were recoverable from the Government of India (“the Government”). Pursuant to discussions with the Government, the Company had made a provision of Rs. 53.71 crores (2009 : Rs 53.71 crores) thereby having a net amount due from the Government towards its share of pension obligations of Rs. 7.44 crores (2009 : Rs 7.44 crores). 8. Pursuant to acquisitions of Tyco Global Network (“TGN”) and Teleglobe (“TLGB”), the Company from 1 April, 2006 adopted the Residual Profits Split Method (“RPSM”) for recording transactions pertaining to International Telecommunications Services under its Transfer Pricing Policy. This policy governs the majority of the transactions between the Company and its international subsidiaries. The Company’s subsidiary in the Netherlands is designated as the Central Contracting Party (“CCP”) and Transfer Pricing Administrator (“TPA”). 9. During the year the Company received a favourable order from Income tax Appellate Tribunal (ITAT) pertaining to financial year 1993-94, which was further supported by a favourable legal advice. Consequently the Company has written back the corresponding tax provision of Rs. 280.01 crores. Interest on the above of Rs. 215.56 crores is included in Rs. 218.28 crores of interest on Income tax refund reflected as exceptional item in Profit and loss account. 10. The Board of Directors of the Company at its meeting held on 4 December, 2007 had approved the merger of the Company’s wholly owned subsidiary, VSNL Broadband Limited with effect from 1 March, 2007.The Hon’ble High Court of Judicature at Bombay approved the scheme vide their order dated 3 April, 2009. a) Pursuant to the scheme of merger, profits of VBL for the period 1 March, 2007 to 31 March 2008 amounting to Rs. 2.72 crores (net of tax) has been included in the Company’s opening balance of Profit and Loss Account. b) The excess of the cost of investment held by the Company in VSNL Broadband Limited over the net book value of assets taken over by the Company amounting to Rs. 109.87 crores has been transferred to the Securities Premium Account. 11. On 27 August, 2008, the Arbitration Tribunal (the “Tribunal”) of the International Chamber of Commerce, Hague handed down a final award in the arbitration proceedings brought by Reliance Globalcom Limited (“Reliance”), formerly known as ‘FLAG Telecom’, against the Company relating to the Flag Europe Asia Cable System. The Tribunal directed the Company to pay Rs. 95.60 crores (US$ 21.45 million) as final settlement against US$ 385 million claimed by Reliance. The amount of Rs. 95.60 crores was charged to Profit and Loss Account for the year ended 31 March 2009 and disclosed as an exceptional item. 12. The Company had entered into an agreement with effect from 1 January, 2007 with one of its customers for carriage of NLD traffic for a period of two years. In view of disputes between the parties, the agreement was truncated with effect from July, 2008. Pending resolution of the dispute, the Company had not recorded the amount claimed from the customer as there was no certainty of realizing the amount claimed. The matter was referred to Conciliation and an award of Rs. 29 crores was made leaving the modalities of settlement to the parties. The discussions are to be initiated and negotiated. The result of these negotiations on settlement cannot be reasonably estimated and hence has not been recognized. 13. In January 2008, an amount of Rs. 295 crores was paid to the Department of Telecommunications (DoT) under protest, towards payment of licence fees, interest and penalty demanded by DoT before issue of certain licences to the Company. Against this, the Company carried a provision of Rs. 174. 15 crores for license fees and interest thereon which has been set off against the payment of Rs. 295 crores for the presentation in the financials. The Company has filed the petition in the Honorable Supreme Court of India challenging the judgement of TDSAT relating to the computation of license fee. Additionally, the Company has also filed a petition in the Telecom Disputes Settlement and Appellate Tribunal (TDSAT) challenging applicability of penal provisions under ILD and NLD licence agreements, whereby DoT claimed penalty and interest on penalty amounting to Rs. 115.73 crores (included in aforesaid Rs. 295 crores). Consequently, the amount of Rs.115.73 crores together with the excess license fee paid of Rs. 5.12 crores (Payment of Rs. 295 crores as reduced by Rs. 289.88 crores computed by the Company for license fees, interest thereon and penalty) totalling to Rs. 120.85 crores was reflected as an asset in the books as at 31 March, 2009. During the year, TDSAT has accepted the Company’s position and decided in favour of the Company. However, DoT has filed an appeal in the Honorable Supreme Court of India challenging the judgement of TDSAT relating to the waiver of Penalty and Interest on Penalty. Further, DoT completed the assessment for year ended 31 March, 2006 in the current fiscal and adjusted the aforesaid excess license fee of Rs. 5.12 crores; as a result, the balance amount of Rs. 115.73 crores is reflected as an asset in the books as at 31 March, 2010.
61 COMMUNICATIONS Twenty Fourth Annual Report 2009-2010 Tata Communications Limited
SIGNIFICANT ACCOUNTING POLICIES AND NOTES TO ACCOUNTS (Contd.)
14. Debentures a) Secured Debentures During the year 2008-09, the Company issued Rated Taxable Secured Redeemable Non-convertible Debentures in demat form for cash at par on private placement basis aggregating Rs 1250 Crores. IDBI Trusteeship Services Limited has been appointed as trustee to the debenture issue. i) Nature of Security Rs. 1,000 crores, 11.70% debentures (face value of Rs. 10,00,000 each) are secured by a first legal mortgage and charge on the Company’s immovable property being the free hold land at Mouje Maharajpura, Gujarat and Plant and machinery represented by earth stations, network equipments, Land and sea cables, transmission equipments and other telecom equipments. Rs. 250 crores, debentures (interest ranging from 11.00% to 11.25%, face value of Rs. 10,00,000 each) are secured by a first legal mortgage and charge on the Company’s immovable property being the free hold land at Parambur Barracks, Chennai and Plant and machinery represented by land cable network and equipments. ii) Redemption Terms These debentures are due for redemption as given below- Date of redemption as per 10000, 11.70% 1900, 11.00% 550, 11.20% 50, 11.25% terms of issue Debentures Debentures Debentures Debentures Rs. in Crores 25 November, 2011 400 25 November, 2012 400 25 November, 2013 200 23 July, 2014 190 23 January, 2016 55 23 January, 2019 5 Total 1,000 190 55 5 For facilitating the above redemptions, the Company has created a Debenture Redemption Reserve of Rs 316.07 crores (2009 : Rs 102.50 crores) has been appropriated during the current year. b) Unsecured Debentures During the year, the Company has issued Rated, Unsecured, Taxable, Redeemable Non-convertible Debentures of face value Rs 10,00,000 each, in demat form for cash at par on private placement basis aggregating Rs 700 Crores. i) Redemption Terms Date of redemption as per 4000,7.74% 1500,9.50% 1500,9.85% terms of issue Debentures Debentures Debentures Rs. in Crores 25 March, 2012 400 08 June, 2014 150 02 July, 2019 150 Total 400 150 150 For facilitating the above redemptions, the Company has created a Debenture Redemption Reserve of Rs 38.77 crores has been appropriated during the current year.
62 SIGNIFICANT ACCOUNTING POLICIES AND NOTES TO ACCOUNTS (Contd.)
15. Employee Benefits:
Retirement Benefits
a) Defined Contribution plan
- Provident Fund
The Company makes contribution towards provident fund under a defined contribution retirement benefit plan for qualifying employees. The provident fund is administered by the Trustees of the TATA Communications Employees’ Provident Fund Trust. Under this scheme, the Company is required to contribute a specified percentage of payroll cost to fund the benefits.
The Rules of the Company’s Provident Fund administered by a Trust require that if the Board of Trustees are unable to pay interest at the rate declared for Employees’ Provident Fund by the Government under para 60 of the Employees’ Provident Fund Scheme, 1952 for the reason that the return on investment is less or for any other reason, then the deficiency shall be made good by the Company. Having regard to the assets of the Fund and the return on the investments, the Company does not expect any deficiency in the foreseeable future. There has also been no such deficiency since the inception of the Fund.
Provident fund contributions amounting to Rs.13.45 crores (2009: Rs.11.36 crores) have been charged to the profit and loss account.
b) Defined Benefit Plans
- Gratuity
The Company makes annual contributions under the Employees Gratuity Scheme to a fund administered by Trustees covering all eligible employees. The plan provides for lump sum payments to vested employees at retirement, death while in employment or on termination of employment of an amount equivalent to 15 days salary for each completed year of service or part thereof in excess of six months. Vesting occurs upon completion of five years of service.
- Medical Benefit
The Company reimburses domiciliary and hospitalization expenses not exceeding specified limits incurred by eligible and qualifying employees and their dependent family members under the Tata Communications Employee’s Medical Reimbursement Scheme. The scheme provides for cashless hospitalization where the claims are directly settled by the Company.
- Pension Plan
The Company’s pension obligations relate to certain employees transferred to the Company from the Overseas Communications Service (“OCS”). The Company purchases life annuity policies from an insurance company to settle such pension obligations. During the year the Company has incurred a charge of Rs 7.77 crores (2009 : Rs. 10.51 crores) to meet the additional pension obligation on account of increase in Dearness Allowances.
The details in respect of the status of funding and the amounts recognized in the Company’s financial statements for the year ended 31 March, 2010 for these defined benefit schemes are as under:
63 COMMUNICATIONS Twenty Fourth Annual Report 2009-2010 Tata Communications Limited
SIGNIFICANT ACCOUNTING POLICIES AND NOTES TO ACCOUNTS (Contd.)
(i) Changes in the defined benefit obligation: (Rs. in crores) Defined Benefit Plans Gratuity Medical Benefit (Funded) (Unfunded) As at As at 31 March, 2010 31 March, 2009 31 March, 2010 31 March, 2009 Projected defined benefit obligation, beginning of the year 32.71 27.41 35.68 31.54 Current Service Cost 2.84 2.33 4.45 4.03 Past Service Cost 13.07 - - - Interest Cost 2.58 2.00 2.68 2.52 Liability transferred from / (to) other Companies 0.14 0.46 - - Actuarial (gain) / loss (3.59) 2.00 5.91 6.69 Benefits paid (2.23) (1.49) (5.55) (9.10) Projected benefit obligation at the end of the year 45.52 32.71 43.17 35.68
(ii) Changes in the fair value of plan assets for gratuity: (Rs. in crores) As at As at Particulars 31 March, 2010 31 March, 2009 (Funded) (Funded) Fair value of plan assets, beginning of the year 30.10 30.73 Expected return on plan assets 2.52 2.40 Employer’s contribution 2.51 - Transfer (to)/from other Company 0.14 0.46 Actuarial (loss)/ gain 0.62 (2.00) Benefits paid (2.23) (1.49) Fair value of plan assets at the end of the period 33.66 30.10
(iii) The amounts recognised in the Profit and Loss Account for the year ended 31 March, 2010: (Rs. in crores) Defined Benefit Plans Gratuity Medical Benefits (Funded) (Unfunded) As at As at 31 March, 2010 31 March, 2009 31 March, 2010 31 March, 2009 Current service cost 2.84 2.33 4.45 4.03 Past service cost 13.07 - - - Interest cost 2.58 2.00 2.68 2.52 Expected return on plan assets (2.52) (2.40) - - Net actuarial loss/(gain) recognised in the year (4.21) 4.00 5.91 6.69
Net Gratuity and Medical Benefits Cost 11.76 5.93 13.04 13.24
64 SIGNIFICANT ACCOUNTING POLICIES AND NOTES TO ACCOUNTS (Contd.) iv) The amounts recognized in the Balance sheet is as follows (Rs. in crores) Defined Benefit Plans Gratuity Medical Benefits (Funded) (Unfunded) As at As at 31 March, 31 March, 31 March, 31March, 31March, 31March, 2010 2009 2008 2010 2009 2008 Liability at the end of the year 45.52 32.71 27.41 43.16 35.68 31.54 Fair value of plan assets at the year end (33.65) (30.10) (30.73) - - -
Net (asset)/liability in balance sheet 11.87 2.61 (3.32) 43.16 35.68 31.54
(v) Categories of plan assets as a percentage of total plan assets: Category of assets As at As at 31 March, 2010 31 March, 2009 Percentage Percentage Corporate Bonds - 1.97 State Government Bonds - 8.33 Insurer Managed Funds 100.00 89.70 Total 100.00 100.00
The Company’s policy and objective for plan assets management is to maximize return on plan assets to meet future benefit payment requirements while at the same time accepting a low level of risk. The asset allocation for plan assets is determined based on the investment criteria approved under the Income Tax Act, 1961 and is also subject to other exposure limitations. vi) Principal actuarial assumptions used in accounting for gratuity and medical benefit obligations: (Percentage) Defined Benefit Plans Gratuity Medical Benefits (Funded) (Unfunded) Assumptions As at As at 31 March, 2010 31 March, 2009 31 March, 2010 31 March, 2009 Discount rate 8.25 7.50 8.25 7.50 Expected return on plan assets 8.00 8.00 - - Increase in compensation cost 6.00 6.00 6.00 6.00 Health care cost increase rate - - 2.00 2.00 The estimates of future compensation cost considered in the actuarial valuation take account of inflation, seniority, promotion and other relevant factors.
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SIGNIFICANT ACCOUNTING POLICIES AND NOTES TO ACCOUNTS (Contd.)
vii). Effect of change in Assumed Health Care Cost Trend Rate. A one-percentage-point change in assumed health care cost trend rates would have the following effects: (Rs. in crores) Defined Benefit Plans As at As at 31 March, 2010 31 March, 2009 1 Percentage point 1 Percentage point Increase Decrease Increase Decrease Effect on service cost 0.44 0.48 0.44 0.43 Effect on interest cost 0.26 0.27 0.31 0.31 Effect on post-employment benefit obligation 4.71 4.62 3.89 3.82 The Company expects to contribute Rs. 14.11 crores (2009: Rs. 2.08 crores) towards employer’s contribution for funded defined benefit plans in 2010-11. 16. Cash and cash equivalents represent: As at As at 31 March, 2010 31 March, 2009 Rs. in crores Rs. in crores Cash and Cheques on hand and balances held with scheduled banks 100.33 108.93 Remittances in transit 2.57 0.28 Deposit accounts held with scheduled banks 7.96 263.16 110.86 372.37 Deposits with original maturity over three months (7.92) (7.68) Margin Money held with banks (0.04) - Restricted Cash Balance (0.04) (0.04) Current Account / Deposits held for unpaid dividends (0.60) (0.78) Cash and cash equivalents 102.26 363.87 17. Deferred tax liability: As at As at 31 March, 2010 31 March, 2009 Rs. in crores Rs. in crores Deferred tax liability Difference between accounting and tax depreciation 270.51 261.63 Deferred tax assets Provision for doubtful debts 33.53 67.02 Provision for post-employment medical benefits and leave encashment 8.94 8.83 pursuant to transitional provision of AS 15 Provision for leave encashment 11.98 9.39 Provision for Bonus 5.24 3.96 Expenditure incurred on NLD license fees 19.23 21.47 Unearned income and deferred revenues 12.62 14.28 Others 3.86 3.43 95.40 128.38 Net deferred tax liability 175.11 133.25
Note: Amalgamation of VSNL Broadband Limited with the Company resulted in recognition of net deferred tax liability of Rs. 7.44 crores as on 31 March, 2008 which was adjusted against opening balance of the profit and loss account for the year ended 31 March, 2009.
66 SIGNIFICANT ACCOUNTING POLICIES AND NOTES TO ACCOUNTS (Contd.)
18. Auditors Remuneration Included in operating and other expenses: Year Ended Year ended 31 March, 2010 31 March, 2009 Rs. in crores Rs. in crores Auditors’ remuneration and expenses (i) Audit fees 1.15 1.15 (ii) Tax audit fees 0.25 0.22 (iii) Other professional services 0.41 0.52 (iv) Service tax * 0.22 0.23 Auditors’ remuneration excludes fees of Rs. 7.59 crores (2009: Rs. 14.16 crores) payable/paid for professional services to a firm of chartered accountants in which some partners of the firm of statutory auditors are partners. * Service tax credit has been availed. 19. Managerial Remuneration a) Managerial Remuneration for managing director and non-executive directors. Year Ended Year Ended 31 March, 2010 31 March, 2009 Rs. in crores Rs. in crores Salaries 0.63 0.68 Contribution to provident and other funds 0.09 0.04 Estimated monetary value of perquisites 0.13 0.14 Commission 0.75 0.45 Non-executive directors’ Commission - 0.27 Non-executive directors’ sitting fees 0.17 0.21 1.77 1.79 b) Computation of Net Profit in accordance with Section 309(5) of the Companies Act,1956 Year Ended Year Ended 31 March, 2010 31 March, 2009 Rs. in crores Rs. in crores Profit before taxes 309.33 713.49 Add: Managerial Remuneration 1.77 1.79 Provision for doubtful debts (net) (92.18) 2.41 Provision for doubtful advances 2.80 - Total (A) (87.61) 4.20 Less: Profit on Sale of fixed Assets 3.23 2.06 Profit on Sale of Long term Investments - 346.65 Total (B) 3.23 348.71 Net profit as per Section 309(5) of the Companies Act, 1956 218.49 368.98 Maximum amount permissible for the Managing Director under section 309 of the Companies Act, 1956 10.92 18.45 Remuneration to Managing Director including commission 1.60 1.31 Maximum Commission permissible to Non-executive Directors under section 309 of the Companies Act, 1956 2.18 3.69 Commission to Non-executive Directors - 0.27
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SIGNIFICANT ACCOUNTING POLICIES AND NOTES TO ACCOUNTS (Contd.)
20. Earnings per Share Year Ended Year Ended 31 March, 2010 31 March, 2009 Rs. in crores, Rs. in crores, Net Profit after tax 483.18 515.95 Number of Shares 285,000,000 285,000,000 Basic and Diluted Earning Per Share (Rs.) 16.95 18.10 21. Segment Reporting a) Business Segments The reportable segments for the year ended 31 March, 2010 and 31 March, 2009 are “Wholesale Voice”, “Enterprise and Carrier Data” and “Others”. The composition of the reportable segments is as follows: - Wholesale Voice: includes International and National Voice services. - Enterprise and Carrier Data: includes corporate data transmission services like International Private Leased Circuits (IPLC), Frame Relay (FR), Internet Leased Line Circuits (ILL) and National Private Leased Circuits (NPLC). - Others: includes Virtual Private Network, Data Centre, TV up-linking, Transponder lease, Corporate Internet Telephony (CIT) and other services.
Rs. in crores Year Ended 31 March, 2010 Wholesale Enterprise and Others Total Voice Carrier Data Revenue from Telecommunication and Other Services 1,247.01 1,322.63 648.40 3,218.04 Segment Profits 253.09 1,117.60 362.86 1,733.55 Unallocable expenses (net) 1,627.65 Non Cash Expenses (unallocable) 14.85 Profit before taxes and exceptional items 91.05 Exceptional Expenses/(Income) (net) (218.28) Profit before taxes 309.33 Tax expense (net) (173.85) Profit after taxes 483.18
68 SIGNIFICANT ACCOUNTING POLICIES AND NOTES TO ACCOUNTS (Contd.)
Rs. in crores Year Ended 31 March, 2009 Wholesale Enterprise and Others Total Voice Carrier Data Revenue from Telecommunication Services 1,740.59 1,450.46 558.38 3,749.43 Segment Profits 330.52 1,131.29 341.84 1,803.65 Unallocable expenses (net) 1,336.45 Non Cash Expenses (unallocable) 4.76 Profit before taxes and exceptional items 462.44 Exceptional Expenses/(Income) (net) (251.05) Profit before taxes 713.49 Tax expense (net) 197.54 Profit after taxes 515.95 i) Revenues and expenses, which are directly identifiable to segments, are attributed to the relevant segment. Expenses on rent of satellite channels and landlines, royalty and license fees are allocated on the basis of usage. The segment result is the segment revenues less the segment expenses. Certain costs, including depreciation which are not allocable to segments have been classified as “Unallocable expense”. ii) Telecommunication services are provided utilizing the Company’s assets which do not generally make a distinction between the types of services. As a result, fixed assets are used interchangeably between segments. In the absence of a meaningful basis to allocate assets and liabilities between segments, no allocation has been made. b) Geographical Segments: The secondary reportable segments are Geographical. Revenues have been allocated to countries based on location of the customers and are as follows: Segment revenues by Geographical Market Year Ended Year Ended 31 March, 2010 31 March, 2009 Rs. in crores Rs. in crores India 2,433.75 2,905.84 United Kingdom 140.30 183.41 United States of America 129.31 136.03 Singapore 65.09 97.37 United Arab Emirates 65.23 103.83 Saudi Arabia 43.96 48.97 Others* 340.40 273.98 3,218.04 3,749.43
*Others include amounts recorded as revenues from Tata Communication (Netherlands) BV of Rs 165.06 crores (2009 : Rs. 62.95 crores). Tata Communication (Netherlands) BV is a Central contracting party and a transfer pricing administrator for inter-company transactions between Tata Communications Limited and its international subsidiaries (Refer Note B-8, Schedule 20)
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SIGNIFICANT ACCOUNTING POLICIES AND NOTES TO ACCOUNTS (Contd.)
22. Related Party Disclosures: A. LIST OF RELATED PARTIES AND RELATIONSHIP I. Investing parties (Promoters) 1 Panatone Finvest Limited
2 Tata Sons Limited II. Subsidiaries (Held Directly) 1 Tata Communications Internet Services Limited 2 Tata Communications Banking InfraSolutions Limited (formerly known as Banking ATM InfraSolutions Limited) 3 Tata Communications Transformation Services Limited 4 Tata Communications Lanka Limited 5 Tata Communications Services (America) Inc. 6 Tata Communications International Pte. Ltd. 7 VSNL SNOSPV Pte Ltd 8 S&A Internet Services Private Limited (Date of Acquisition : 27 November, 2009) III Other Subsidiaries (Held Indirectly) 1 Tata Communications (Australia) Pty Limited 2 Tata Communications (Belgium) SPRL 3 Tata Communications Services (Bermuda) Limited 4 Tata Communications (Bermuda) Limited 5 Tata Communications (Canada) ULC 6 VSNL International (IPCO) LLC 7 Tata Communications (US) Inc. 8 VSNL International (ITXC) Corp 9 Tata Communications (America) Inc. 10 VSNL International (Global) Corp. 11 Tata Communications (Middle East) FZ-LLC 12 Tata Communications (UK) Limited 13 Tata Communications (France) SAS 14 Tata Communications Deutschland GmbH 15 Tata Communications (Guam) LLC 16 Tata Communications (Hong Kong) Limited 17 Tata Communications (Hungary) LLC
70 SIGNIFICANT ACCOUNTING POLICIES AND NOTES TO ACCOUNTS (Contd.)
18 Tata Communications (Ireland) Limited 19 TCPoP Communication GmbH (Date of Incorporation: 30 April, 2009) 20 Tata Communications (Taiwan) Limited (Date of Incorporation: 02 November, 2009) 21 Tata Communications (Italy) S.r.l 22 Tata Communications (Japan) KK 23 ITXC IP Holdings S.a r.l 24 Teleglobe International Luxembourg S.a r.l (Under Members’ Voluntary Liquidation) 25 TLBG Luxembourg Holdings Sarl (Under Members’ Voluntary Liquidation) 26 Tata Communications (Nordic) AS 27 VSNL International (Poland) Sp. z oo 28 Tata Communications (Portugal) Unipessoal LDA 29 Tata Communications (Portugal) Instalacao E Manutencao De Redes LDA 30 Tata Communications (Puerto Rico) Inc 31 Tata Communications (Russia) LLC 32 Teleglobe Asia Pte Ltd 33 Videsh Sanchar Nigam Spain Srl 34 Tata Communications (Sweden) AB 35 Tata Communications (Switzerland) GmbH 36 Tata Communications (Netherlands) B.V. 37 VSNL Telecommunications (Bermuda) Ltd (Liquidated vide order dated 24 April, 2009) 38 Teleglobe Bermuda Ltd (Liquidated vide order dated 09 October, 2009) 39 VSNL International (Hong Kong) Limited (Liquidated vide order dated 20 November, 2009) 40 VSNL UK Limited (Liquidated vide order dated 18 October, 2009) 41 Teleglobe International Limited (Liquidated vide order dated 20 October, 2009) IV Joint Venture 1 United Telecom Limited 2 Cochin Submarine Cable Depot (INDIA) Private Limited (Incorporated on 31 December, 2008) V Joint Venture / Associate of wholly owned subsidiary 1 Neotel (Pty) Ltd. (Held through VSNL SNOSPV Pte Ltd.) 2 SEPCO Communications Pty Ltd. (Held through VSNL SNOSPV Pte Ltd.) 3 BitGravity Inc. (Held through Tata Communications International Pte. Ltd.) (Incorporated on 14 December, 2009) VI Key Managerial Personnel Mr. N. Srinath Managing Director and Chief Executive Officer TCL Group
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B. Related party transaction (Rs. in crores) Transactions Investing Subsidiaries Key Joint Joint Total Company Managerial Venture Venture/ Personnel Associates of wholly owned subsidiary
Dividend Paid Panatone Finvest Limited 47.10 - - - - 47.10 52.19 - - - - 52.19 Tata Sons Limited 13.96 - - - - 13.96 10.92 - - - - 10.92 Total 61.06 ----61.06 63.11 - - - - 63.11 BEBP Expenses Tata Sons Limited 7.87 - - - - 7.87 5.66 - - - - 5.66 Total 7.87 - - - - 7.87 5.66 - - - - 5.66 Revenues from Telecommunication services Tata Communications - 165.06 - - - 165.06 (Netherlands) BV - 62.95 - - - 62.95 Tata Communications - 11.90 - - - 11.90 International Pte. Ltd. - 7.60 - - - 7.60
Tata Communications - 0.45 - - - 0.45 (Canada) ULC ------Tata Communications - 8.03 - - - 8.03 (America) Inc. - 5.60 - - - 5.60 Tata Communications - 0.53 - - - 0.53 Deutschland GmbH - 0.48 - - - 0.48 Tata Communications - 5.12 - - - 5.12 (Hongkong) Limited - 2.88 - - - 2.88 Tata Communications - 2.50 - - - 2.50 (UK) Limited - 1.11 - - - 1.11 Tata Communications - 24.58 - - - 24.58 (US) Inc. - 6.33 - - - 6.33 United Telecom Limited - - - 4.38 - 4.38 - - - 2.19 - 2.19
72 SIGNIFICANT ACCOUNTING POLICIES AND NOTES TO ACCOUNTS (Contd.) B. Related party transaction (Contd.) (Rs. in crores) Transactions Investing Subsidiaries Key Joint Joint Total Company Managerial Venture Venture/ Personnel Associates of wholly owned subsidiary Tata Communications - 0.15 - - - 0.15 Lanka Limited - 0.55 - - - 0.55 Tata Communications - 0.30 - - - 0.30 Transformation Services - 0.20 - - - 0.20 Limited Neotel Pty Ltd. - - - - 22.32 22.32 - - - - 49.95 49.95 Tata Communications - 45.13 - - - 45.13 Internet Services Limited - 37.63 - - - 37.63 Tata Communications - 5.77 - - - 5.77 Services (America) Inc. - 1.39 - - - 1.39 Tata Sons Limited 1.16 - - - - 1.16 2.53 - - - 2.53 Tata Communications - 3.34 - - - 3.34 Banking InfraSolutions ------Limited Tata Communications - 0.01 - - - 0.01 (Japan) KK ------Tata Communications - 0.01 - - - 0.01 (Australia) Pty Limited ------S&A Internet - 0.02 - - - 0.02 Services Pvt. Ltd. ------Tata Communications - 0.05 - - - 0.05 (France) SAS ------
Total 1.16 272.95 - 4.38 22.32 300.81 2.53 126.72 - 2.19 49.95 181.39 Network Cost Tata Communications - 7.92 - - - 7.92 (Netherlands) BV - 68.90 - - - 68.90 United Telecom Limited - - - 58.09 - 58.09 - - - 36.99 - 36.99 Tata Communications ------Internet Services Limited - 0.20 - - - 0.20
73 COMMUNICATIONS Twenty Fourth Annual Report 2009-2010 Tata Communications Limited
SIGNIFICANT ACCOUNTING POLICIES AND NOTES TO ACCOUNTS (Contd.) B. Related party transaction (Contd.) (Rs. in crores) Transactions Investing Subsidiaries Key Joint Joint Total Company Managerial Venture Venture/ Personnel Associates of wholly owned subsidiary Neotel Pty Ltd. - - - - 2.82 2.82 ------Total - 7.92 - 58.09 2.82 68.83 - 69.10 - 36.99 - 106.09 Purchase of Fixed Assets Tata Communications - 0.30 - - - 0.30 International Pte. Ltd. ------Tata Communications - 11.56 - - - 11.56 Internet Services Limited ------
Total - 11.86 - - - 11.86 ------Services rendered Tata Communications - 5.59 - - - 5.59 (Netherlands) BV - 5.64 - - - 5.64 Tata Communications - 5.97 - - - 5.97 International Pte. Ltd. - 2.21 - - - 2.21 Tata Communications - 2.99 - - - 2.99 Transformation Services - 1.16 - - - 1.16 Limited Tata Communications - 0.05 - - - 0.05 (UK) Limited - 0.05 - - - 0.05 Tata Communications - 0.04 - - - 0.04 (US) Inc. - 0.03 - - - 0.03 Tata Communications - 8.01 - - - 8.01 Internet Services Limited - 6.48 - - - 6.48 VSNL SNOSPV Pte Ltd. - 1.59 - - - 1.59 - 0.34 - - - 0.34 Tata Communications ------Lanka Limited ------Tata Communications - 0.71 - - - 0.71 Banking InfraSolutions ------Limited Total - 24.95 - - - 24.95 - 15.91 ---15.91
74 SIGNIFICANT ACCOUNTING POLICIES AND NOTES TO ACCOUNTS (Contd.) B. Related party transaction (Contd.) (Rs. in crores) Transactions Investing Subsidiaries Key Joint Joint Total Company Managerial Venture Venture/ Personnel Associates of wholly owned subsidiary Services received Tata Sons Limited 0.01 - - - - 0.01 0.09 - - - - 0.09 Tata Communications - 12.82 - - - 12.82 Transformation Services - 12.30 - - - 12.30 Limited
Total 0.01 12.82 - - - 12.83 0.09 12.30 ---12.39 Equity capital contribution (Refer Cash Flow Statement) Tata Communications ------International Pte. Ltd. - 208.46 - - - 208.46 Tata Communications ------Internet Services Limited - 100.00 - - - 100.00 Tata Communications ------Banking InfraSolutions - 0.05 - - - 0.05 Limited United Telecom Limited - - - 6.83 - 6.83 ------Cochin Submarine - - - 0.04 - 0.04 Cable Depot (India) ------Private Limited
Total - - - 6.87 - 6.87 - 308.51 ---308.51 Preference capital contribution Tata Communications ------Internet Services Limited - 190.00 - - - 190.00 VSNL SNOSPV Pte. Ltd ------118.71 - - - 118.71 Total ------308.71 - - - 308.71
75 COMMUNICATIONS Twenty Fourth Annual Report 2009-2010 Tata Communications Limited
SIGNIFICANT ACCOUNTING POLICIES AND NOTES TO ACCOUNTS (Contd.) B. Related party transaction (Contd.) (Rs. in crores) Transactions Investing Subsidiaries Key Joint Joint Total Company Managerial Venture Venture/ Personnel Associates of wholly owned subsidiary Interest Income Tata Communications - 29.17 - - - 29.17 International Pte. Ltd. - 36.55 ---36.55 Tata Communications - 0.03 - - - 0.03 (Netherlands) BV - 0.12 ---0.12 Tata Communications -@ - - -@ (Bermuda) Limited - 0.31 ---0.31 Tata Communications - 0.03 - - - 0.03 (America) Inc. - @ ---@ Tata Communications ------(Canada) ULC - @ ---@ Tata Communications ------(Guam) LLC. - 0.17 ---0.17 Tata Communications ------(UK) Limited - 0.20 ---0.20 Tata Communications - 0.01 - - - 0.01 (US) Inc. - 0.21 ---0.21 VSNL SNOSPV Pte. Ltd. - 7.43 - - - 7.43 - 4.01 ---4.01 Tata Communications -@ - - -@ Lanka Limited - @ ---@ Videsh Sanchar -@ - - -@ Nigam Spain Srl - 0.06 ---0.06 S&A Internet - 0.09 - - - 0.09 Services Pvt. Ltd. ------Tata Communications - 0.90 - - - 0.90 Banking InfraSolutions - 0.01 ---0.01 Limited
Total - 37.66 - - - 37.66 - 41.64 ---41.64
76 SIGNIFICANT ACCOUNTING POLICIES AND NOTES TO ACCOUNTS (Contd.) B. Related party transaction (Contd.) (Rs. in crores) Transactions Investing Subsidiaries Key Joint Joint Total Company Managerial Venture Venture/ Personnel Associates of wholly owned Dividend Income subsidiary Tata Communications - 4.10 - - - 4.10 Lanka Limited - 3.96 ---3.96 Total - 4.10 - - - 4.10 - 3.96 ---3.96 Loan given / Forex Adjustments Tata Communications - 337.32 - - - 337.32 International Pte. Ltd. - 346.01 ---346.01 Tata Communications - 24.73 - - - 24.73 Banking InfraSolutions - 0.35 ---0.35 Limited S&A Internet Services - 1.05 - - - 1.05 Pvt. Ltd. ------Tata Communications ------Internet Services Limited - 6.22 ---6.22 VSNL SNOSPV Pte. Ltd. - 249.03 - - - 249.03 - 218.37 ---218.37
Total - 612.13 - - - 612.13 - 570.95 ---570.95 Loan repaid Tata Communications ------Internet Services Limited - 4.00 ---4.00 Tata Communications - 0.50 - - - 0.50 Banking InfraSolutions ------Limited Tata Communications - 356.90 - - - 356.90 International Pte. Ltd. - 98.16 ---98.16
Total - 357.40 - - - 357.40 - 102.16 ---102.16 Advances given by the Company VSNL SNOSPV Pte. Ltd. - 6.46 - - - 6.46 - 10.67 ---10.67
77 COMMUNICATIONS Twenty Fourth Annual Report 2009-2010 Tata Communications Limited
SIGNIFICANT ACCOUNTING POLICIES AND NOTES TO ACCOUNTS (Contd.) B. Related party transaction (Contd.) (Rs. in crores) Transactions Investing Subsidiaries Key Joint Joint Total Company Managerial Venture Venture/ Personnel Associates of wholly owned subsidiary Tata Communications - 0.16 - - - 0.16 (Bermuda) Limited - 21.42 - - - 21.42 Tata Communications - 7.08 - - - 7.08 (Netherlands) BV - 6.71 - - - 6.71 Neotel Pty Ltd. - - - - 0.04 0.04 - - - - 0.01 0.01 Tata Communications - 3.03 - - - 3.03 Transformation Services ------Limited Tata Communications - 3.55 - - - 3.55 Internet Services Limited - 510.72 - - - 510.72 Videsh Sanchar Nigam -@ - - -@ Spain Srl - 5.18 - - - 5.18 Tata Communications - 0.18 - - - 0.18 (UK) Limited - 13.16 - - - 13.16 Cochin Submarine Cable - - - 0.13 - 0.13 Depot (India) Private Limited - - - Tata Communications - 3.99 - - - 3.99 (US) Inc - 13.11 - - - 13.11 Tata Communications -@ - - -@ (Hong kong) Limited -@---@ Tata Communications - 0.05 - - - 0.05 Lanka Limited - 0.02 - - - 0.02 Tata Communications - 1.08 - - - 1.08 Banking InfraSolutions ------Limited Tata Communications - 3.06 - - - 3.06 International Pte. Ltd. - 1.90 - - - 1.90 United Telecom Limited - - - 0.01 - 0.01 ------Tata Communications ------(Guam) LLC. - 8.65 - - - 8.65 Tata Communications ------(America) Inc. - 1.61 - - - 1.61
78 SIGNIFICANT ACCOUNTING POLICIES AND NOTES TO ACCOUNTS (Contd.) B. Related party transaction (Contd.) (Rs. in crores) Transactions Investing Subsidiaries Key Joint Joint Total Company Managerial Venture Venture/ Personnel Associates of wholly owned subsidiary Tata Communications ------(Japan) KK - 8.48 - - - 8.48 Tata Communications - 11.07 - - - 11.07 (Canada) ULC ------
Total - 39.71 - 0.14 0.04 39.89 - 601.63 - - 0.01 601.64 Advances repaid to/ taken from the Company/ Forex Adjustments Tata Communications ------International Pte. Ltd. - 2.74 - - - 2.74 Tata Communications - 8.15 - - - 8.15 (Netherlands) BV - 7.35 - - - 7.35 Tata Communications ------(Bermuda) Limited - 21.56 - - - 21.56 Neotel Pty Ltd. ------0.02 0.02 Tata Communications -@ - - -@ (France) SAS ------Tata Communications ------(Guam) LLC. - 8.65 - - - 8.65 Tata Communications Internet Services Limited - 35.83 - - - 35.83 - 765.31 - - - 765.31 Tata Communications - 6.64 - - - 6.64 (Canada) ULC - 11.30 - - - 11.30 Tata Communications - 0.97 - - - 0.97 (America) Inc. - 0.03 - - - 0.03 Tata Communications ------Services (America) Inc -@ - - -@ Tata Communications ------(US) Inc. - 13.76 - - - 13.76 Tata Communications ------(Japan) KK - 8.48 - - - 8.48
79 COMMUNICATIONS Twenty Fourth Annual Report 2009-2010 Tata Communications Limited
SIGNIFICANT ACCOUNTING POLICIES AND NOTES TO ACCOUNTS (Contd.) B. Related party transaction (Contd.) (Rs. in crores) Transactions Investing Subsidiaries Key Joint Joint Total Company Managerial Venture Venture/ Personnel Associates of wholly owned subsidiary Videsh Sanchar ------Nigam Spain Srl - 5.17 ---5.17 Tata Communications - 1.03 - - - 1.03 (UK) Limited - 13.30 ---13.30 Total - 52.62 - - - 52.62 - 857.65 --0.02 857.67
Managerial Remuneration N. Srinath - - 1.60 - - 1.60 --1.31 --1.31 Total - - 1.60 - - 1.60 --1.31 --1.31 Balances Receivables Tata Communications - 79.75 - - - 79.75 (Netherlands) BV - 39.79 - - - 39.79 United Telecom Limited ------0.04 - 0.04 Tata Communications - 0.01 - - - 0.01 (Japan) KK ------Tata Communications - 4.50 - - - 4.50 International Pte. Ltd. - 7.17 ---7.17 Tata Communications - 2.30 - - - 2.30 (America) Inc. - 4.67 ---4.67 Tata Communications - 0.13 - - - 0.13 Deutschland GmbH - 0.12 ---0.12 Tata Communications - 6.69 - - - 6.69 (US) Inc. - 3.34 - - - 3.34 Tata Communications - 1.22 - - - 1.22 Services (America) Inc - 1.14 ---1.14 Tata Communications - 44.39 ---44.39 Internet Services Limited - 52.25 ---52.25 Tata Communications ------Lanka Limited - 0.04 - - - 0.04
80 SIGNIFICANT ACCOUNTING POLICIES AND NOTES TO ACCOUNTS (Contd.) B. Related party transaction (Contd.) (Rs. in crores) Transactions Investing Subsidiaries Key Joint Joint Total Company Managerial Venture Venture/ Personnel Associates of wholly owned subsidiary Neotel Pty Ltd. - - - - 11.27 11.27 ----24.10 24.10 Tata Communications - 2.27 - - - 2.27 Transformation Services - 3.66 ---3.66 Limited Tata Sons Limited 0.07 - - - - 0.07 0.34 ----0.34 Tata Communications - 0.01 - - - 0.01 (Australia) Pty Limited ------Tata Comminications - 4.99 - - - 4.99 (Hong Kong) Limited. ------Tata Communications - 0.01 - - - 0.01 (France) SAS ------Tata Communications - 4.16 - - - 4.16 Banking InfraSolutions ------Limited ------S&A Internet Services - 0.03 - - - 0.03 Pvt. Ltd. ------Total 0.07 150.46 - - 11.27 161.80 0.34 112.18 - 0.04 24.10 136.66 Payables Tata Communications - 2.67 - - - 2.67 Transformation Services - 1.51 ---1.51 Limited. Videsh Sanchar Nigam - 0.18 - - - 0.18 Spain Srl - 0.18 ---0.18 Tata Communications - 7.31 - - - 7.31 (Canada) ULC - 1.62 ---1.62 Tata Communications - 0.44 - - - 0.44 (UK) Limited - 1.36 ---1.36 Tata Communications - 0.18 - - - 0.18 Internet Services Limited ------N. Srinath - - 0.75 - - 0.75 --0.45 --0.45
81 COMMUNICATIONS Twenty Fourth Annual Report 2009-2010 Tata Communications Limited
SIGNIFICANT ACCOUNTING POLICIES AND NOTES TO ACCOUNTS (Contd.) B. Related party transaction (Contd.) (Rs. in crores) Transactions Investing Subsidiaries Key Joint Joint Total Company Managerial Venture Venture/ Personnel Associates of wholly owned subsidiary Tata Communications ------International Pte. Ltd. - 4.41 ---4.41 Tata Communications ------(Hong kong) Limited - 0.06 0.06 United Telecom Limited - - 9.11 - 9.11 - - 9.32 - 9.32 Neotel Pty Ltd. - --2.96 2.96 ----- Tata Sons Limited 7.87 - - - 7.87 6.88 ---6.88 Tata Communications - 0.01 - - - 0.01 Lanka Limited ------Tata Communications - 0.20 - - - 0.20 Banking InfraSolutions ------Limited Total 7.87 10.99 0.75 9.11 2.96 31.68 6.88 9.14 0.45 9.32 - 25.79 Loans Given Tata Communications - 814.60 - - - 814.60 International Pte. Ltd. - 834.17 ---834.17 VSNL SNOSPV Pte Ltd. - 386.32 - - - 386.32 - 137.28 ---137.28 Tata Communications - 24.58 ---24.58 Banking InfraSolutions - 0.35 ---0.35 Limited S&A Internet Services - 1.05 - - - 1.05 Pvt. Ltd. ------Total - 1,226.55 - - - 1,226.55 - 971.80 ---971.80
Advance Receivable Tata Communications - 3.08 - - - 3.08 Transformation Services - 0.06 ---0.06 Limited
82 SIGNIFICANT ACCOUNTING POLICIES AND NOTES TO ACCOUNTS (Contd.) B. Related party transaction (Contd.) (Rs. in crores) Transactions Investing Subsidiaries Key Joint Joint Total Company Managerial Venture Venture/ Personnel Associates of wholly owned subsidiary VSNL SNOSPV Pte.Ltd. 20.77 - - - 20.77 14.31 ---14.31 Tata Communications 0.16 - - - 0.16 (Bermuda) Limited 0.01 0.01 Neotel Pty Ltd. - - - 2.32 2.32 ---2.29 2.29 United Telecom Limited - - 0.01 - 0.01 ---- Tata Communications 2.44 - - - 2.44 International Pte. Ltd. - ---- S&A Internet Services @---@ Pvt. Ltd. - ---- Tata Communications 104.20 - - - 104.20 Internet Services Limited 138.70 ---138.70 Tata Communications 0.61 - - - 0.61 (America) Inc. 1.59 ---1.59 Tata Communications 1.91 - - - 1.91 (Netherlands) BV 2.98 ---2.98 Tata Comminications @---@ (Hong Kong) Limited @ ---@ Tata Communications @---@ Deutschland GmbH -- Tata Communications 4.29 - - - 4.29 (US) Inc. 0.30 ---0.30 Tata Communications 0.08 - - - 0.08 Lanka Limited 0.03 0.03 Tata Communications @---@ Services (America) Inc @ ---@ Videsh Sanchar Nigam 0.01 - - - 0.01 Spain Srl 0.01 ---0.01 Tata Communications - ---- (UK) Limited 0.29 ---0.29 Cochin Submarine Cable - - 0.13 - 0.13 Depot (India) Private Limited ----
83 COMMUNICATIONS Twenty Fourth Annual Report 2009-2010 Tata Communications Limited
SIGNIFICANT ACCOUNTING POLICIES AND NOTES TO ACCOUNTS (Contd.) B. Related party transaction (Contd.) (Rs. in crores) Transactions Investing Subsidiaries Key Joint Joint Total Company Managerial Venture Venture/ Personnel Associates of wholly owned subsidiary Tata Communications 1.08 - - - 1.08 Banking InfraSolutions ------Limited Total - 138.63 - 0.14 2.32 141.09 - 158.28 - 2.29 160.57 Advance Payable Tata Communications ------International Pte. Ltd. - 0.62 ---0.62 Tata Communications - 6.86 - - - 6.86 (Canada) ULC - 11.30 ---11.30 Tata Communications - 0.57 - - - 0.57 (UK) Limited - - - Tata Communications - 0.46 - - - 0.46 (Japan) KK ------Tata Communications -@ - - - - @ (France) SAS ------Total - 7.89 - - - 7.89 - 11.92 11.92 Advance against equity VSNL SNOSPV Pte. Ltd -@ - - - - @ ------Total - @ - - - @ ------Interest Accrued-other deposits VSNL SNOSPV Pte. Ltd 3.24 ---3.24 3.10 - - - 3.10 Tata Communications 10.08 ---10.08 International Pte. Ltd. 20.43 - - - 20.43 S&A Internet Services 0.09 ---0.09 Pvt. Ltd. - ---- Tata Communications 0.90 ---0.90 Banking InfraSolutions 0.01 - - - 0.01 Limited
84 SIGNIFICANT ACCOUNTING POLICIES AND NOTES TO ACCOUNTS (Contd.) B. Related party transaction (Contd.) (Rs. in crores) Transactions Investing Subsidiaries Key Joint Joint Total Company Managerial Venture Venture/ Personnel Associates of wholly owned subsidiary Total - 14.31 ---14.31 23.54 - - - 23.54 Guarantees on behalf of subsidiaries Tata Communications - 2,115.47 ---2,115.47 (Netherlands) BV - 2,389.48 - - - 2,389.48 Tata Communications - 2,827.61 ---2,827.61 International Pte. Ltd. - 1,786.82 - - - 1,786.82 VSNL SNOSPV Pte. Ltd - 479.40 ---479.40 - 673.80 ---673.80 Tata Communications - 22.00 ---22.00 Transformation Services - 22.00 - - - 22.00 Limited Tata Communications - 13.95 ---13.95 (US) Inc. - 15.76 - - - 15.76 Tata Communications - 17.03 ---17.03 (UK) Limited - 18.17 - - - 18.17 Tata Communications - 35.00 ---35.00 Internet Services Limited - 35.00 - - - 35.00 Tata Communications - 2.30 ---2.30 Banking InfraSolutions ------Limited Total - 5,512.76 - - - 5,512.76 - 4,941.03 ---4,941.03 Letter of Comfort on behalf of subsidiaries VSNL SNOSPV Pte. Ltd - 202.55 ---202.55 ------Tata Communications - 27.01 ---27.01 Transformation Services - 30.50 - - - 30.50 Limited Tata Communications - 225.05 ---225.05 (Netherlands) BV ------Tata Communications - 675.15 ---675.15 (Bermuda) Limited ------
85 COMMUNICATIONS Twenty Fourth Annual Report 2009-2010 Tata Communications Limited
SIGNIFICANT ACCOUNTING POLICIES AND NOTES TO ACCOUNTS (Contd.) B. Related party transaction (Contd.) (Rs. in crores) Transactions Investing Subsidiaries Key Joint Joint Total Company Managerial Venture Venture/ Personnel Associates of wholly owned subsidiary Tata Communications - 52.00 - - - 52.00 Banking InfraSolutions Limited ------Tata Communications ------(US) Inc. - 89.48 - - - 89.48 Tata Communications - 45.01 - - - 45.01 International Pte. Ltd. - 50.84 ---50.84 Total - 1,226.77 - - - 1,226.77 - 170.82 ---170.82
Note - @ represents transaction of amount less than Rs. 50,000/- 23. Operating lease arrangements: (a) As lessee: Year ended Year ended 31 March, 2010 31 March, 2009 Rs. in crores Rs. in crores Minimum lease payments under operating leases recognised as expense in the year 18.82 24.06 At the balance sheet date, minimum lease payments under non-cancellable operating leases fall due as follows: Year ended Year ended 31 March, 2010 31 March, 2009 Rs. in crores Rs. in crores Due not later than one year 15.20 17.28 Due later than one year but not later than five years 14.54 18.90 Later than five years 1.17 2.25 30.91 38.43
Operating lease payments represent rentals payable by the Company for certain buildings and satellite channels. (b) As lessor: i) The Company has leased under operating lease arrangements certain Indefeasible Rights of Use (“IRU”) with gross carrying amount and accumulated depreciation of Rs. 84.33 crores (2009: Rs.84.33 crores) and Rs. 27.80 crores (2009: Rs. 22.30 crores ) respectively as at 31 March, 2010. Depreciation expense of Rs. 5.50 crores (2009: Rs. 5.51 crores) in respect of these assets has been charged in the Profit and Loss Account for the Year Ended 31 March, 2010. In case of certain lease agreements aggregating Rs. 331.85 crores ( 2009: Rs. 272.31 crores) for the year ended 31 March, 2010, the gross block, accumulated depreciation and depreciation expense of the assets given on IRU basis is not readily determinable and hence not disclosed. The lease rentals associated with such IRU arrangements for the year ended 31 March, 2010 amounts to Rs. 27.74 crores (2009:Rs. 23.39 crores).
86 SIGNIFICANT ACCOUNTING POLICIES AND NOTES TO ACCOUNTS (Contd.) In respect of such leases, rental income of Rs. 34.59 crores (2009: Rs. 30.24 crores) has been recognized in the profit and loss account for the Year Ended 31 March, 2010. Future lease rental receipts will be recognized in the Profit and Loss Account of subsequent years as follows: Year ended Year ended 31 March, 2010 31 March, 2009 Rs. in crores Rs. in crores Not later than one year 33.81 29.09 Later than one year but not later than five years 132.02 116.38 Later than five years 155.97 145.43 321.80 290.90
ii) The Company has leased certain premises under operating lease arrangements. Future lease rental income in respect of these leases will be recognised in the profit and loss account of subsequent years as follows: Year ended Year ended 31 March, 2010 31 March, 2009 Rs. in crores Rs. in crores Not later than one year 0.01 0.01 Later than one year but not later than five years @ 0.01 Later than five years - - 0.02 0.02
Note - @ represents future lease rental income of amount less than Rs. 50,000/- Lease rental income of Rs. 0.01 crores (2009: Rs. 0.01 crores) in respect of the above leases has been recognised in the profit and loss account for the current year. 24. Provision for Contingencies: Rs. in crores 31 March, 2010 31 March, 2009 Asset Asset Retirement Retirement Obligation Others Total Obligation Others Total
Opening Balance 0.40 9.00 9.40 6.16 9.00 15.16 Addition 0.10 - 0.10 - - - Utilisation (0.01) - (0.01) (4.37) - (4.37) Provision written back (0.23) - (0.23) (1.39) - (1.39) Closing Balance 0.26 9.00 9.26 0.40 9.00 9.40
1. The provision for Asset Retirement Obligation has been recorded in the books of the Company in respect of undersea cables and switches owned by the Company. 2. Others include amounts provided towards claims made by a creditor of the Company.
87 COMMUNICATIONS Twenty Fourth Annual Report 2009-2010 Tata Communications Limited
SIGNIFICANT ACCOUNTING POLICIES AND NOTES TO ACCOUNTS (Contd.) 25. Contingent Liabilities and Capital Commitments As at As at 31 March, 2010 31 March, 2009 Rs. in crores Rs. in crores Guarantees given on behalf of subsidiaries (Refer note 1) 5,512.76 4,941.03 i. Claims for taxes on income (Refer note 2 ) (a) Income tax disputes where the department is in appeal against the Company 322.00 310.61 (b) Income tax disputes where the Company has a favorable decision in other assessment year for the same issue 22.39 22.39 (c ) Income tax disputes other than the above 1,448.89 1,521.78 ii. Claims for other taxes 118.08 49.80 iii. Other claims 495.08 788.71 Notes: (1) Guarantees given on behalf of subsidiaries The guarantees have been provided in the ordinary course of business and no liability on the Company is expected to materialize in this respect. (2) Significant claims by the revenue authorities in respect of income tax matters are in respect of deductions claimed under Section 80-IA of the Income Tax Act, 1961 from Assessment Year 1996-97 onwards have been disallowed by the revenue authorities. The Company has contested the disallowance and has preferred appeals which are pending. (3) The Company has taken appropriate professional advice in respect of the claims / appeals and has taken all necessary steps to protect its interest. Based on expert opinion, no provision is required in respect of these claims / appeals. (4) As on 31 March, 2010, the Company has issued Letters of Comfort for the credit facility agreement in respect of various subsidiaries – Name of Subsidiary Year Ended Year Ended 31 March, 2010 31 March, 2009 Rs. in crores Rs. in crores Tata Communications (US) Inc (TCU) - 89.48 Tata Communications Transformation Services Ltd (TCTSL) 27.01 30.50 Tata Communications International Pte Ltd. (TCIPL) 45.01 50.84 VSNL SNOSPV Ltd 202.55 - Tata Communications (Netherland) Ltd 225.05 - Tata Communications (Bermuda) Ltd 675.15 - Tata Communications Banking InfraSolutions Ltd (TCBIL) 52.00 - The Company has undertaken to the lenders of TCU, TCTSL and TCIPL that it shall retain full management control so long as amounts are due to the lenders. (5) The Company has issued a support letter to Tata Communications International Pte. Limited (TCIPL), for providing financial support enabling, in turn, TCIPL to issue such support letters to certain subsidiaries having negative net worth as at 31 March, 2010 aggregating Rs. 1,508.41 crores (2009 : Rs 1,417.55 crores) in various geographies in order that they remain going concerns with reference to the provisions of applicable insolvency laws in their country of residence.
88 SIGNIFICANT ACCOUNTING POLICIES AND NOTES TO ACCOUNTS (Contd.)
The Company has also issued a support letter to Tata Communications Internet Services Limited (TCISL) for providing financial support so that it remains going concern with reference to the provisions of applicable insolvency laws in the country. The letters of comfort / support mentioned in (4) and (5) above have been provided in the ordinary course of business and no liability on the company is expected to materialize in these respects. (6) Contingent liabilities, if any, in respect of sale of shares of Tata Teleservices Limited has been stated in Note B-5, schedule 20. B. Capital commitments Estimated amount of contracts remaining to be executed on capital account (including loan commitment to wholly owned subsidiaries), not provided for Rs. 2,489.86 crores (2009: Rs. 2,350.08 crores). 26. Value of Imports on C.I.F. basis Year Ended Year Ended 31 March, 2010 31 March, 2009 Rs. in crores Rs. in crores Stores, Spares and others 12.30 11.42 Capital Goods 251.09 458.39 27. Earnings in foreign currencies Year Ended Year Ended 31 March, 2010 31 March, 2009 Rs. in crores Rs. in crores Revenue from telecommunication services 774.31 865.32 Interest income 36.67 41.58 Dividend Income 4.10 3.96 Other income 16.44 22.34
831.52 933.20 28. Expenditure in foreign currencies Year Ended Year Ended 31 March, 2010 31 March, 2009 Rs. in crores Rs. in crores Charges for use of transmission facilities 453.75 790.76 Rent of satellite channels 12.42 24.16 Administrative lease charges 4.94 6.10 Repairs and maintenance 89.52 81.01 Legal and professional fees 7.12 28.21 Settlement of claims - 95.60 Interest 2.21 5.12 Others 16.47 6.36
586.43 1,037.32
89 COMMUNICATIONS Twenty Fourth Annual Report 2009-2010 Tata Communications Limited
SIGNIFICANT ACCOUNTING POLICIES AND NOTES TO ACCOUNTS (Contd.) 29. Value of imported and indigenous stores/spares consumed Year Ended Year Ended 31st March, 2010 31st March, 2009 Rs. in crores Rs. in crores Value Percentage Value Percentage Imported 0.04 0.37 1.45 12.95 Indigenous 11.52 99.63 9.75 87.05
11.56 100.00 11.20 100.00
30. United Telecom Limited (“UTL”) is a Joint Venture between the Company, Mahanagar Telephone Nigam Limited, Telecommunications Consultant India Limited and Nepal Ventures Private Limited. The Company has 26.66 percent equity ownership in UTL. UTL operates basic telephony services in Nepal based on Wireless-in-local loop technology. The Company’s share in income, expenses, assets and liabilities of UTL based on management accounts for the Year Ended 31 March, 2010 and Year Ended 31 March, 2009 are as follows: Year Ended Year Ended 31 March, 2010 31 March, 2009 Rs. In crores Rs. In crores Income 27.13 13.04 Expenses 27.11 13.58 Year Ended Year Ended 31 March, 2010 31 March, 2009 Rs. In crores Rs. In crores Assets 35.93 36.52 Liabilities 15.32 22.48 Contingent liability in respect of claims of taxes and duties Rs. Nil (2009: Rs. Nil). 31. In the previous year, the Company had entered into a Joint Venture (40:60) with Indian Ocean Cableship Pte. Ltd. Singapore for investment in M/s Cochin Submarine Cable Depot (India) Private Limited. During the year, the Company has subscribed to 40,000 shares of face value Rs 10 each amounting to Rs 0.04 crores. 32. Net Dividend remitted to non-resident shareholders in foreign currency The Company has not remitted any amount in foreign currencies on account of dividends during the year and does not have information as to the extent to which remittances, if any, in foreign currencies on account of dividends have been made by/on behalf of non – resident shareholders. The particulars of final dividends for the year ended 31 March, 2009 paid to non – resident shareholders are as under: Year Ended Year Ended 31 March, 2010 31 March, 2009 Number of non-resident shareholders 822 794 Number of shares held by them 26,633,326 23,089,178 Year to which dividend relates 2008-09 2007-08 Amount remitted net of tax (Rs. in crores) 11.98 10.39 33. Micro, Small and Medium Enterprises According to information available with the Management, on the basis of intimation received from suppliers regarding their status under the Micro, Small and Medium Enterprises Development Act, 2006 (MSMED Act), the Company has amounts due to Micro and Small Enterprises under the said Act as at 31 March, 2010 as follows :
90 SIGNIFICANT ACCOUNTING POLICIES AND NOTES TO ACCOUNTS (Contd.)
Year Ended Year Ended 31 March, 2010 31 March, 2009 Rs. in crores Rs. in crores (a) i. Principal amount remaining unpaid to any supplier beyond scheduled date as on 31 March, 2010 0.01 0.64 ii. Interest on (a)(i) above 0.00 0.05 (b) i. The amount of principal paid beyond the appointed date 2.70 12.02 ii. The amount of interest paid beyond the appointed date — — (c) Amount of interest due and payable on delayed payments 0.03 — (d) Amount of interest accrued and due as on 31 March, 2010 0.03 0.05 (e) Total outstanding dues of micro, small and medium enterprises 1.27 0.69 34. Disclosure as required under clause 32 of the Listing Agreement a) Amount of loans and advances in the nature of loans outstanding from subsidiaries during the year ended 31 March, 2010 Name of the Company Outstanding as at Maximum Investment in Investment in 31 March, 2010 amount shares of shares of outstanding the Company subsidiaries during the year of the Company Rs. in crores Rs. in crores No of shares No of shares Tata Communications International Pte Ltd 817.04 1,221.52 - 110,810,000 VSNL SNOSPV Pte.Ltd 407.08 420.60 - 769,333 Tata Communications Lanka Ltd 0.08 0.08 - 13,661,422 Tata Communications Internet Services Limted 104.20 140.02 - 195,004,050 Tata Communications Transformation Services Limited 3.08 3.08 - 500,000 Tata Communications Banking InfraSolutions Limited 25.66 25.66 - 50,000 S&A Internet Services Private Limited 1.06 1.06 - 10,000 b) The details of remuneration to the whole-time director during the year 2009-10 are as follows: (Rs. in crores) Name Salary Perquisites & Commission Allowances Mr. N. Srinath 0.72 0.13 0.75 Total 0.72 0.13 0.75
35. Previous year’s figures have been regrouped and reclassified wherever necessary.
91 COMMUNICATIONS Twenty Fourth Annual Report 2009-2010 Tata Communications Limited
21. Balance Sheet Abstract and Company’s General Business Profile in terms of Part IV of Schedule VI to the Companies Act, 1956. I. Registration Details Registration No. 3 9 2 6 6 State Code 1 1 (REFER CODE LIST) Balance Sheet Date 3 1 0 3 2 0 1 0 Date Month Year II. Capital Raised during the year (Amount in Rs. Crores) Public Issue Right Issue NIL NIL Bonus Shares Private Placement NIL NIL III. Position of Mobilisation and Deployment of Funds (Amount in Rs. Crores) Total Liabilities Total Assets 10094 . 80 10094 .80 Source of Funds Paid-up Capital Reserves & Surplus 285 . 00 6995 .78 Secured Loans Unsecured Loans 1281 . 76 1357 .15 Deferred Tax Liabilities 175 . 11 Application of Funds Net Fixed Assets Investments 4890 . 95 2501 .30
Net Current Assets Misc. Expenditure 2702 . 55 NI L Accumulated Losses NIL IV. Performance of Company (Amount in Rs. Crores) Turnover Total Expenditure 3218 . 04 3292 .41 Profit/Loss Before Tax Profit/Loss After Tax +- 309 . 33 +- 483 .18 (Please tick appropriate box + for Profit, - for Loss) Earning per Share in Rs. Dividend% 16 . 95 NI L
92 V. Generic Names of Three Principal Products/Services of Company (as per monetary terms) Item Code No. (ITC Code)* Product Description T E L E C O M M U N I C A T I O N S SERVICES Item Code No. (ITC Code) Product Description
Item Code No. (ITC Code) Product Description
* Note : For ITC code of products please refer to the publication Indian Trade Classification based on harmonized commodity description and coding system by Ministry of Commerce, Directorate General of Commercial Intelligence & Statistics, Calcutta - 700 001 ANNEXURE I Code List 1 : State Codes
State Code State Name State Code State Name 01 Andhra Pradesh 02 Assam 03 Bihar 04 Gujarat 05 Haryana 06 Himachal Pradesh 07 Jammu & Kashmir 08 Karnataka 09 Kerala 10 Madhya Pradesh 11 Maharashtra 12 Manipur 13 Meghalaya 14 Nagaland 15 Orissa 16 Punjab 17 Rajasthan 18 Tamil Nadu 20 Uttar Pradesh 21 West Bengal 22 Sikkim 23 Arunachal Pradesh 24 Goa 52 Andaman Islands 53 Chandigarh 54 Dadra Islands 55 Delhi 56 Daman & Diu 57 Lakshwadeep 58 Mizoram 59 Pondicherry
For and on behalf of the Board
SUBODH BHARGAVA N. SRINATH Chairman Managing Director & Chief Executive Officer SANJAY BAWEJA SATISH RANADE Chief Financial Officer Company Secretary & Chief Legal Officer MUMBAI DATED: 31 May, 2010
93 COMMUNICATIONS Twenty Fourth Annual Report 2009-2010 Tata Communications Limited osed after Prop ofit before for Provision Profit er Taxation Taxation Taxation Dividend in the (except in case of investment subsidiaries) otal Assets Total Investment Total Pr (2.58) 12.38 14.96 - 4.81 (2.07) - (2.07) - Manutencao De Manutencao Redes LDA USD 95.76 (338.37) 56.50 70.78 - 16.43 0.33 - 0.33 - No. CurrencyLiabilities Details Turnov 8 (Guam) LLC Communications Tata 9 (Japan) Communications KK Tata 10 (Netherlands) Communications BV Tata 11 (Russia) Communications LLC Tata 12 AB (Sweden) Communications Tata 13 (Deutschland) Communications GMBH Tata 14 USD Communications Services (America) Inc Tata 15 USD Communications (Portugal) Instalacao E Tata USD 101.2916 USD USD (Bermuda) Ltd. Communications Tata - USD USD17 9.59 (Puerto Rico) Communications Inc. Tata 532.2018 Pty (Australia) Communications Ltd. Tata 0.00 0.15 16.47 141.02 13,725.8119 0.06 0.00 (Hongkong) Limited Communications Tata 20 13,153.29 Services Communications (Bermuda) Ltd. Tata (5.22) 384.66 51.09 0.0121 (61.47) USD Videsh Sanchar Nigam Spain srl 0.2622 USD 489.74SAS Communications (France) Tata 235.03 USD 34.62 10.23 5.4323 31.88 USD (Italy) Communications srl Tata USD 0.05 1,462.1624 7.93 494.96 0.00 AS (Nordic) Communications Tata 25 (1,507.08) 10.22 1.61 93.35 (Canada) ULC Communications Tata 0.00 (60.57) 0.0526 - 7.68 - (0.75) 3,419.68 VSNL Corporation (ITXC) Intl 27 (0.93) (Hungary) Communications LLC Tata USD 62.74 264.02 - 4,655.35 USD28 4.66 7.60 (UK) Limited Communications Tata - 0.25 - -29 385.12 Zoo Sp. Communications (Poland) Tata 4.42 (10.97) 379.91 USD 164.90 -30 2.50 11.19 USD (America) Communications Inc Tata (60.57) 3.53 USD 8.9231 0.99 - (3.71) (Global) Corp. VSNL International - (3.60) 128.73 68.13 0.27 3.74 11.13 0.06 2.37 218.39 0.15 USD - 91.65 2.34 USD 0.06 (7.37) - (0.12) (17.07) 100.78 USD USD (117.84) 204.17 - 2.55 (302.18) (3.84) - 0.22 - - 1,559.31 0.00 108.25 USD 315.29 - 3.53 75.53 39.38 120.98 - 2.85 (3.71) 0.08 2.71 103.06 - 4.32 20.10 (0.19) 1,638.81 USD 112.80 (103.55) - 274.19 98.24 0.00 (2.97) - 2.34 - 0.42 0.18 0.15 0.06 1,391.09 (302.18) 4.43 0.28 0.95 121.79 - - 0.00 718.48 1,456.76 - - - - 119.56 148.44 9.18 0.08 - 1,401.35 - 2,121.11 - 0.19 8.99 17.31 - - 274.19 - 31.91 (145.16) 15.70 561.38 5.56 8.69 0.07 17.33 - 0.18 2.76 0.95 - (1.08) - - 981.13 11.79 - - - 0.02 - - (0.98) 2,191.64 (132.19) - - (145.16) - - - 15.70 5.56 (5.78) 6.25 - - (0.18) (2.32) - - (1.08) - 27.43 - 0.94 (132.19) (0.98) - - (33.21) - - - - - 0.24 (0.18) - (2.32) 0.94 - - - - 0.24 - Sr.Name of Subsidiary Company New 1 Pte International Reporting Communications Ltd Tata 2 Capital Share (Ireland) Limited Communications Tata 3 (Portugal) Unipessoal LDA Communications Tata 4 Reserves (Middle Communications East) FZ - LLC Tata 5 T USD GMBH (Switzerland) Communications Tata 6 USD IP Holdings Sarl ITXC 7 638.09 USD Communications (Belgium) Sprl Tata USD 6.39 1,007.83 USD 0.00 3,182.59 0.06 (4.22) 1,536.68 (0.12) 2.12 (0.70) USD 2.06 (0.05) 0.44 11.62 0.71 - USD - 3.12 0.55 277.28 1.34 0.08 (25.29) 1.03 - 70.17 - - - 104.17 - - - (25.29) - 33.93 3.85 0.03 (0.12) (0.73) - (0.56) - - - (0.16) - - (0.12 0.03 (0.40) (0.73) (1.99) - - - - - (1.99) - Statement Pursuant to Sec 212(8) of the Companies Act, 1956, relating to subsidiary companies 1956, Act, Pursuant to SecStatement 212(8) of the Companies
94 ter Proposed ofit before for Provision af Profit in the (except estment Total Pr in case of investment subsidiaries) rofit & Loss A/c. rofit & Loss Chief Executive OfficerChief Executive ------Reporting Capital Share ReservesAssets Total Total Inv For and on behalf of the Board For SUBODH BHARGAVAChairman BAWEJASANJAY OfficerFinancial Chief MUMBAI SRINATH N. 2010 31 May, DATED: Secretary Company & Chief Legal Officer RANADE SATISH & Managing Director (In Liquidation) USD Internet ServicesInternet LimitedInfraSolutions Limited Services LimitedTransformation INR(In Liquidation) 385.00 INR INR (368.59) 0.50 0.05 16.41 (10.06) 38.13 - 15.36 38.99 USD 25.37 0.36 - 288.52 - - (43.42) 122.53 5.03 (1.18) 24.34 (9.94) (42.23) 1.85 - 22.49 (9.94) No. Currency LiabilitiesDetails Turnover Taxation Taxation Taxation Dividend 44 Sarl Holdings Luxembourg TGLB P sheet and US$=Rs.47.48 LKR=Rs.0.41 for Balance of US$=Rs.45.01 and LKR=Rs.0.39 for of exchange at the rate Note-Converted Sr. Name of Subsidiary Company 32 LLC VSNL Intl (IPCO) 33 Pte Ltd Asia Teleglobe 34 GmbH Communication TCPoP 35Taiwan Communications Tata 36 Communication US Inc Tata 37 Communications Tata 38 Communications Banking Tata 39 USD USD Communications Tata USD USD40 112.53 0.21 Ltd. Services S&A Internet Pvt. USD41 1.72 VSNL SNOSPV Pte Ltd 0.0442 28.52 Lanka Communications Limited Tata (0.16) 0.0043 (1.02) Sarl. Luxembourg TeleglobeInternational (0.08) 141.04 (199.47) 1.16 0.58 0.07 917.87 0.00 1.11 INR 1,117.35 LKR 0.05 0.12 0.01 USD - 8.24 - - - (0.28) 121.99 - 49.82 - 139.35 - (13.18) 0.83 - (121.92) 58.43 - 4.23 754.96 (0.17) 1.10 0.01 (0.08) 0.37 646.15 - - - (121.92) - 164.84 - - - 4.23 (0.17) - (0.08) 0.01 0.01 96.30 - - - (0.15) 13.23 - - 30.94 1.32 4.42 - 11.91 26.52 (0.15) 4.67 Statement Pursuant to Sec 212(8) of the Companies Act, 1956, relating to subsidiary companies 1956, Act, Pursuant to SecStatement 212(8) of the Companies
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CONSOLIDATED FINANCIAL STATEMENTS 2009-10
96 AUDITORS’ REPORT ON CONSOLIDATED FINANCIAL STATEMENTS TO THE BOARD OF DIRECTORS OF TATA COMMUNICATIONS LIMITED
1) We have audited the attached Consolidated Balance (b) As stated in note B17, Schedule 20, the financial Sheet of TATA COMMUNICATIONS LIMITED (“the statements of certain subsidiaries and joint Company”), its subsidiaries and jointly controlled ventures which represents total assets of Rs. entities (the Company, its subsidiaries and jointly 410.95 crores as at 31 March, 2010, total revenue controlled entities constitute “the Group”) as at 31 of Rs. 11.56 crores and net cash outflow March, 2010, the Consolidated Profit and Loss Account amounting to Rs.3.55 crores for the year then and the Consolidated Cash Flow Statement of the ended and the share in loss of associate of Rs. Group for the year ended on that date, both annexed 0.55 crores for the year then ended have been thereto. The Consolidated Financial Statements incorporated in the consolidated financial include investments in associates accounted on the statements on the basis of unaudited financial equity method in accordance with Accounting statement as provided by the management of Standard 23 (Accounting for Investments in Associates those subsidiaries, joint ventures and associate. in Consolidated Financial Statements) and the jointly controlled entities accounted in accordance with 4) We report that the Consolidated Financial Statements Accounting Standard 27 (Financial Reporting of have been prepared by the Company in accordance Interests in Joint Ventures) as notified under the with the requirements of Accounting Standard 21 Companies (Accounting Standards) Rules, 2006. These (Consolidated Financial Statements), Accounting financial statements are the responsibility of the Standard 23 (Accounting for Investment in Associates Company’s Management and have been prepared on in Consolidated Financial Statements) and Accounting the basis of the separate financial statements and Standard 27 (Financial Reporting of Interests in Joint other information regarding components. Our Ventures) as notified under the Companies responsibility is to express an opinion on these (Accounting Standards) Rules, 2006. Consolidated Financial Statements based on our audit. 5) Subject to the matter referred to in paragraph 3 (b) 2) We conducted our audit in accordance with the above, based on our audit and on consideration of auditing standards generally accepted in India. Those the separate audit reports on the individual financial Standards require that we plan and perform the audit statements of the Company, and the aforesaid to obtain reasonable assurance about whether the subsidiaries and joint ventures and associates, and to financial statements are free of material the best of our information and according to the misstatements. An audit includes examining, on a test explanations given to us, in our opinion, the basis, evidence supporting the amounts and the Consolidated Financial Statements give a true and fair disclosures in the financial statements. An audit also view in conformity with the accounting principles includes assessing the accounting principles used and generally accepted in India: the significant estimates made by the Management, (i) in the case of the Consolidated Balance Sheet, of as well as evaluating the overall financial statement the state of affairs of the Group as at 31 March, presentation. We believe that our audit provides a 2010; reasonable basis for our opinion. (ii) in the case of the Consolidated Profit and Loss 3) (a) We did not audit the financial statements of certain subsidiaries and joint ventures, whose Account, of the loss of the Group for the year financial statements reflect total assets of Rs. ended on that date and 921.80 crores, as at 31 March, 2010, total revenues (iii) in the case of the Consolidated Cash Flow of Rs. 518.46 crores and net cash outflow Statement, of the cash flows of the Group for the amounting to Rs. 80.69 crores for the year then year ended on that date. ended and the share of loss of associate of Rs.146.99 crores for the year then ended have been considered in the Consolidated Financial For S. B. BILLIMORIA & Co Statements. These financial statements have been Chartered Accountants audited by other auditors whose reports have (Registration No.101496W) been furnished to us and our opinion in so far as it relates to the amounts included in respect of P. R. Ramesh these subsidiaries, joint ventures and associate Partner are based solely on the reports of the other (Membership No.070928) auditors. MUMBAI, 31 May 2010
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CONSOLIDATED BALANCE SHEET AS AT 31 MARCH, 2010 Schedule As at As at 31st March 10 31st March 09 Rs. in crores Rs. in crores SOURCES OF FUNDS : SHARE CAPITAL 1 285.00 285.00 RESERVES AND SURPLUS 2 4,249.90 4,821.44 TOTAL SHAREHOLDERS’ FUNDS 4,534.90 5,106.44 MINORITY INTEREST LIABILITY 5.75 4.97 SECURED LOANS 3 2,148.85 1,781.76 UNSECURED LOANS 4 5,159.81 4,883.62 DEFERRED TAX LIABILITY (NET) (Refer Note B21, Schedule 20) 198.12 155.90 TOTAL FUNDS EMPLOYED 12,047.43 11,932.69 APPLICATION OF FUNDS: FIXED ASSETS: 5 (a) Gross Block 15,361.53 12,878.48 (b) Less: Accumulated Depreciation/ Amortisation 5,137.64 3,940.18 (c) Net Block 10,223.89 8,938.30 (d) Capital work-in-progress 1,850.63 2,667.57 12,074.52 11,605.87 GOODWILL (ON CONSOLIDATION) 55.88 57.54 INVESTMENTS 6 1,304.18 1,676.04 CURRENT ASSETS, LOANS AND ADVANCES A. CURRENT ASSETS (a) Inventories 7 41.88 17.83 (b) Sundry Debtors 8 2,187.75 2,862.97 (c) Cash and Bank Balances 9 284.11 875.93 (d) Other Current Assets 10 436.06 391.68 2,949.80 4,148.41 B. LOANS AND ADVANCES 11 3,191.94 2,407.71 6,141.74 6,556.12 Less: CURRENT LIABILITIES AND PROVISIONS (A) Current Liabilities 12 7,117.94 7,474.38 (B) Provisions 13 410.95 488.50 7,528.89 7,962.88 NET CURRENT LIABILITIES (1,387.15) (1,406.76) TOTAL ASSETS (NET) 12,047.43 11,932.69 SIGNIFICANT ACCOUNTING POLICIES AND NOTES TO ACCOUNTS 20 In terms of our report attached For and on behalf of the Board For S.B.BILLIMORIA & CO. Chartered Accountants P.R. RAMESH SUBODH BHARGAVA N. SRINATH Partner Chairman Managing Director & Chief Executive Officer SANJAY BAWEJA SATISH RANADE Chief Financial Officer Company Secretary & Chief Legal Officer MUMBAI MUMBAI DATED: 31 May, 2010 DATED: 31 May, 2010
98 CONSOLIDATED PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED 31 MARCH, 2010 Schedule Year ended Year ended 31st March 10 31st March 09 Rs. in crores Rs. in crores INCOME: REVENUES FROM TELECOMMUNICATION AND OTHER SERVICES 11,025.56 9,963.17 OTHER INCOME 14 119.53 193.98 INTEREST INCOME 15 49.13 49.39 TOTAL INCOME 11,194.22 10,206.54 EXPENDITURE: SALARIES AND RELATED COSTS 16 1,537.12 1,240.18 NETWORK COSTS 17 6,468.99 5,300.22 OPERATING AND OTHER EXPENSES 18 2,007.09 2,056.90 INTEREST EXPENSE 19 569.69 350.69 DEPRECIATION, AMORTISATION AND IMPAIRMENT (Refer Note 4, Schedule 5) 1,510.80 1,102.27 TOTAL EXPENDITURE 12,093.69 10,050.26 PROFIT/ (LOSS) BEFORE TAXES AND EXCEPTIONAL ITEMS (899.47) 156.28 EXCEPTIONAL ITEMS: (a) (Profit)/ Loss on sale of long term Investments (Refer Note B4, Schedule 20) — (362.08) (b) Claim Settlement (Refer Note B6, Schedule 20) — 95.60 (c) Interest on Income Tax Refund (Refer Note B15, Schedule 20) (218.28) — PROFIT/ (LOSS) BEFORE TAXES (681.19) 422.76 TAXES (a) CURRENT TAX 92.85 179.36 (b) DEFERRED TAX EXPENSE 44.77 44.25 (c) FRINGE BENEFIT TAX — 7.12 (d) EXCESS PROVISION FOR TAX WRITTEN BACK (Refer Note B15, Schedule 20) (280.01) — NET PROFIT/ (LOSS) BEFORE MINORITY INTEREST (538.80) 192.03 MINORITY INTEREST (Share of Loss/(Profit) (net)) 88.60 131.78 SHARE IN LOSS OF ASSOCIATE (147.54) (8.01) NET PROFIT/ (LOSS) (597.74) 315.80 BALANCE BROUGHT FORWARD FROM PREVIOUS PERIOD 448.92 444.81 LESS: TAX ADJUSTMENT ON MERGER OF VSNL BROADBAND LTD. — (0.10) LESS: DEFERRED TAX ADJUSTMENT ON MERGER OF VSNL BROADBAND LTD. — (7.44) PROFIT/ (LOSS) BALANCE BEFORE APPROPRIATIONS (148.82) 753.07 APPROPRIATIONS : (a) PROPOSED DIVIDEND (Refer note B3, Schedule 20) — 128.25 (b) TAX ON DIVIDEND — 21.80 (c) GENERAL RESERVE 48.32 51.60 (d) TRANSFER TO DEBENTURE REDEMPTION RESERVE (Refer note B18, Schedule 20) 354.84 102.50 BALANCE CARRIED TO BALANCE SHEET (551.98) 448.92 EARNINGS PER SHARE (EPS) Basic/Diluted earnings per share (Rs.) (20.97) 11.08 (Refer Note B22, Schedule 20) SIGNIFICANT ACCOUNTING POLICIES AND NOTES TO ACCOUNTS 20 In terms of our report attached For and on behalf of the Board For S.B.BILLIMORIA & CO. Chartered Accountants P.R. RAMESH SUBODH BHARGAVA N. SRINATH Partner Chairman Managing Director & Chief Executive Officer SANJAY BAWEJA SATISH RANADE Chief Financial Officer Company Secretary & Chief Legal Officer MUMBAI MUMBAI DATED: 31 May, 2010 DATED: 31 May, 2010
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CONSOLIDATED CASH FLOW STATEMENT FOR THE YEAR ENDED 31ST MARCH, 2010 Year ended Year ended 31st March, 2010 31st March, 2009 Rs. in crores Rs. in crores 1 CASH FLOWS FROM OPERATING ACTIVITIES PROFIT BEFORE TAXES AND EXCEPTIONAL ITEMS (899.47) 156.28 Adjustments for: Depreciation,amortisation and impairment 1,510.80 1,102.27 Loss /(Profit) on sale of fixed assets 1.14 1.55 Interest income (49.13) (49.39) Interest expense 569.69 350.69 Fixed assets written down 10.67 3.37 Provision for Doubtful debts (61.39) 12.13 Bad Debts written off 193.99 208.88 Provision for contingency 1.94 (0.41) Dividend income/profit on sale of current investments (34.48) (59.92) Valuation Gain / (loss) on current investments - (0.08) Loss / (Profit) on sale of long-term investments (0.98) (2.88) OPERATING PROFIT BEFORE WORKING CAPITAL CHANGES 1,242.78 1,722.49 Inventories (21.76) (5.73) Sundry debtors 65.83 (667.86) Other current assets, loans and advances (126.62) (69.34) Restricted cash - (0.04) Current liabilities and provisions 672.45 1,164.50 Cash generated from operations before tax and exceptional items 1,832.68 2,144.02 Compensation paid to Flag - (95.60) Interest on income tax refunds 218.28 - Cash generated from operations before taxes 2,050.96 2,048.42 Income tax (paid)/refunds (498.16) (377.41) NET CASH FROM OPERATING ACTIVITIES 1,552.80 1,671.01 2 CASH FLOWS FROM INVESTING ACTIVITIES Purchase of fixed assets (2,773.75) (3,222.31) Business acquisitions, (Refer Note B30(ii), schedule 20) - (58.02) Amount paid towards Joint Venture with China Enterprise Communications (Refer Note B9, schedule 20) - (59.77) Amount paid towards Investments in Bit Gravity (Refer Note B10, schedule 20) - (48.56) Equity stake purchased in Bit Gravity (Refer Note B10, schedule 20) (6.15) - Sale/ (Purchase) of current investments (net of mutual funds dividend reinvested) (net) 281.75 (247.36) Proceeds from sale of fixed assets 15.65 4.43 Proceeds from sale of long-term investment 0.98 427.10 Dividend income from current investments 0.03 0.14 Fixed deposits (net) 2.57 (10.70) Investment in equity / preference shares in Neotel (Refer Note B8, Schedule 20) (37.35) (61.61) Interest received 13.42 25.18 NET CASH USED IN INVESTING ACTIVITIES (2,502.85) (3,251.48) 3 CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from unsecured loans 3,991.22 2,849.94 Repayment of unsecured loans (3,323.26) (1,891.78) Proceeds from secured loans 307.57 1,692.50 Repayment of secured loans (12.18) (16.26) Dividends paid including dividend tax (150.23) (150.38) Dividends paid to Minority (0.47) (0.45) Interest paid (548.55) (313.56) CASH FLOW FROM FINANCING ACTIVITIES 264.10 2,170.01 NET (DECREASE)/INCREASE IN CASH AND CASH EQUIVALENTS (685.95) 589.54 CASH AND CASH EQUIVALENTS AS AT THE BEGINNING OF THE YEAR 863.42 288.40 (Refer Note B20, Schedule 20) Effect of exchange on cash and cash equivalents 79.90 (14.52) CASH AND CASH EQUIVALENTS AS AT THE END OF THE YEAR 257.37 863.42 (Refer Note B20, Schedule 20) Notes: 1 Figures in brackets represent outflows. 2 Pursuant to the acquisition of 27% stake in Neotel (Pty) Ltd. from Eskom and Transnet in the previous year, an amount of Rs. 73.52 crores receiveable from these shareholders against a binding agreement was adjusted against the carrying value of Investment in Associate during the year ended 31 March, 2009 (Refer Note B8, Schedule 20) In terms of our report attached For and on behalf of the Board For S.B.BILLIMORIA & CO. Chartered Accountants P.R. RAMESH SUBODH BHARGAVA N. SRINATH Partner Chairman Managing Director & Chief Executive Officer SANJAY BAWEJA SATISH RANADE Chief Financial Officer Company Secretary & Chief Legal Officer MUMBAI MUMBAI DATED: 31 May, 2010 DATED: 31 May, 2010
100 SCHEDULES FORMING PART OF THE CONSOLIDATED BALANCE SHEET As at As at 31st March, 2010 31st March, 2009 SCHEDULE - 1 Rs. in crores Rs. in crores SHARE CAPITAL AUTHORISED : 300,000,000 (2009:300,000,000) Equity Shares of Rs.10 each 300.00 300.00
ISSUED, SUBSCRIBED AND PAID UP 285,000,000 (2009: 285,000,000) Equity Shares of Rs.10 each, fully paid up 285.00 285.00
SCHEDULE - 2 RESERVES AND SURPLUS Capital Reserve – Balance at the beginning of the year 217.84 208.16 Add: Capital Reserve on NBSS Acquisition by Neotel (net of Minority share) (Refer note B30 (ii)) — 10.15 Less: Depreciation on Gifted Assets (0.45) (0.60) Add: Translation Adjustments 1.52 0.13 – Balance at the end of the year 218.91 217.84 Securities Premium (Refer Note B14, Schedule 20) – Balance at the beginning of the year 725.01 834.88 Less: Adjustment pursuant to merger of VSNL Broadband Limited — (109.87) – Balance at the end of the year 725.01 725.01 General Reserve – Balance at the beginning of the year 3,378.46 3,326.86 Add: Transferred from Profit and Loss account 48.32 51.60 – Balance at the end of the year 3,426.78 3,378.46 Debenture Redemption Reserve (Refer Note B18, Schedule 20) – Balance at the beginning of the year 102.50 — Add: Transferred from Profit and Loss account 354.84 102.50 – Balance at the end of the year 457.34 102.50 Profit and Loss Account (551.98) 448.92 4,276.06 4,872.73 Exchange Translation Reserve (net) (26.16) (51.29) TOTAL 4,249.90 4,821.44
Notes: 1. Capital reserve includes Rs. 205.22 crores in respect of foreign exchange gains on unutilised proceeds from Global Depository Receipts credited to Capital Reserve Rs. 203.70 crores in 2000-01 and Rs. 1.52 crores in 2001-02. 2. Capital reserve includes Rs. 11.67 crores (2009: 10.15 crores) which represents Group’s share in capital reserve of Joint Venture SEPCO Communications (Pty.) Ltd. arising on acquisition made during 2008-09.
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SCHEDULES FORMING PART OF THE CONSOLIDATED BALANCE SHEET As at As at 31st March, 2010 31st March, 2009 SCHEDULE - 3 Rs. in crores Rs. in crores SECURED LOANS DEBENTURES (Refer Note B18 (A), Schedule 20) 10,000, 11.70% Rated taxable Secured Redeemable Non-convertible Debentures of face value Rs. 10 lakhs each 1,000.00 1,000.00 1,900, 11.00% Rated taxable Secured Redeemable Non-convertible Debentures of face value Rs. 10 lakhs each 190.00 190.00 550, 11.20% Rated taxable Secured Redeemable Non-convertible Debentures of face value Rs. 10 lakhs each 55.00 55.00 50, 11.25% Rated taxable Secured Redeemable Non-convertible Debentures of face value Rs. 10 lakhs each 5.00 5.00
TERM LOANS From Banks Hongkong and Shanghai Banking Corporation Limited (Secured by hypothecation of moveable properties of Rs. 128.00 crores (2009:128.00 crores)) 31.76 38.83 Punjab National Bank (Refer Note) 5.76 9.04 Everest Bank Limited (Refer Note) 0.30 0.47 Everest Bank Limited and Nepal SBI Bank Limited (Refer Note) 2.31 4.20 Consortium led by Nedbank Ltd. (Refer Note) 858.72 475.01 Others — 4.21 TOTAL 2,148.85 1,781.76
Note: Secured against fixed assets of Joint Ventures
SCHEDULE - 4 UNSECURED LOANS DEBENTURES (Refer Note B18 (B), Schedule 20) 4000, 7.74% Unsecured Redeemable Non-convertible Debentures of face value Rs. 10 lakhs each 400.00 — 1500, 9.50% Unsecured Redeemable Non-convertible Debentures of face value Rs. 10 lakhs each 150.00 — 1500, 9.85% Unsecured Redeemable Non-convertible Debentures of face value Rs. 10 lakhs each 150.00 — LOANS (Repayable within one year Rs. 1,682.80 Crores (2009: 654.08 crores)) From Banks 4,184.99 4,742.89 From Others 274.82 140.73 TOTAL 5,159.81 4,883.62
102 2,667.57 11,605.87 1,850.63 12,074.52 Rs. in Crores Rs. Expenses Use (IRUs) for domestic and international telecommunication (IRUs) for circuits of Rs 1,757.71 crores (2009: Use has life of IRUs The respectively. 310.48 crores) Rs. (2009: 494.48 crores and Rs. 1,532.84 crores) Rs. of the life cables or the period of IRU at lower agreements. been estimated Nil) and decreased on Rs. (2009: 1.80 crores increased on account of goodwill amortisation of Rs. Rs. 0.45 crores (2009: Capital reserve of Rs. of depreciation to assets transferred on gifted account of these As a result Nil). Rs. (2009: 0.74 crores deferred of Rs. and depreciation 0.60 crores) 1,102.27 crores) Rs. (2009: 1,510.80 crores to P & L account is Rs. net amount charged adjustments, (Net). 0.07 crores) 3 Depreciation of Plant Gross Block and Accumlated machinery Rights includes Indefeasible of 4 has been 1,102.70 crores) Rs. (2009: 1,510.19 crores assets schedule of Rs. fixed Depreciation as per 5 Rs (2009: 20.14 crores Depreciation of Rs. Depreciation/AmortisationYear Expense includes Prior 6 the previous year. in italics are for Figures 1.82 0.12 0.03 1.97 1.22 0.15 0.06 1.43 0.54 79.41 0.4980.2862.17 20.19 33.48 24.54 100.09 (1.55) 22.28 4.38 112.21 91.09 10.35 35.18 16.22 6.97 2.99 8.00 39.60 (1.95) 2.70 60.49 36.22 26.92 75.99 64.17 21.37 - 1.64 23.01 1.34 0.90 0.12 2.36 20.65 2009 Adjustments 2010 2009 Amortisation Adjustments 2010 2010 267.52 4.07 14.66 286.25 9.88 1.09 (0.16) 10.81 275.44 377.07 83.30397.35 32.29 252.37 492.66 (67.02) 57.11 582.70 14.13 175.89 9.94 83.69 81.18 (1.05) 411.48 258.53 324.17 606.63 26.10 105.73 738.46 243.20 70.74 45.61 359.55 378.91 131.79 49.19 55.25 236.23 56.50 43.04 20.63 120.17 116.06 8,900.08 3,100.11 878.29 12,878.48 2,644.37 1,102.79 193.02 3,940.18 8,938.30 6,874.67 2,626.45 712.69 10,213.81 2,025.55 867.71 110.15 3,003.41 7,210.40 SCHEDULES FORMING PART OF THE CONSOLIDATED BALANCE SHEET THE CONSOLIDATED OF SCHEDULES FORMING PART TOTAL 12,878.48 3,144.99 (661.94) 15,361.53 3,940.18 1,510.19 (312.73) 5,137.64 10,223.89 (including advances for capital for (including advances expenditure (a) LAND 286.25 1.02 (7.93) 279.34 10.81 2.58 0.01 13.40 265.94 (b) LEASEHOLD IMPROVEMENTS(c) BUILDING(d) PLANT AND MACHINERY(e) FURNITURE AND FIXTURES(f) OFFICE EQUIPMENT 100.09(g) COMPUTERS(h) 11.58 VEHICLES MOTOR 10,213.81 112.21 2,685.54 (14.20) 492.66 (488.58) 40.13 97.47 91.09 156.00 12,410.77 (5.52) 39.60 3,003.41 21.71 (32.98) 582.70 1.97 146.82 1,205.19 141.02 615.68 14.09 (7.67) 0.18 (228.29) 36.22 81.18 (8.09) 105.13 (4.00) 3,980.31 (0.37) 14.56 715.63 26.92 49.69 26.51 8,430.46 1.78 258.53 12.63 (12.40) 6.06 47.78 1.43 111.34 63.41 95.29 (10.49) (28.40) 0.20 83.41 520.39 22.49 341.47 (0.23) 82.64 374.16 1.40 0.38 Rs. 6.57 crores (2009 :Rs. 8.22 crores)) (2009 :Rs. 6.57 crores Rs. GRAND TOTAL (a) SOFTWARE 236.23 87.52 (9.30) 314.45 120.17 74.68 (12.00) 182.85 131.60 (b) LICENCE FEES(c) GOODWILL 23.01 738.46 - 0.29 (15.60) (71.70) 7.41 667.05 359.55 2.36 53.93 1.05 (29.93) 0.37 383.55 3.78 283.50 3.63 conveyance is not done and lease deed available. conveyance registered. executed/ 2001. pertains 1.84 crores) on or after 31 March, to assets acquired Rs. (2009: formation. New Delhi not been executed. space at in respect for office crores) of which agreements have Land includes Rs.203.04 crores (2009: Rs.203.04 crores) under lease. This includes: This under lease. crores) Rs.203.04 (2009: crores Land includes Rs.203.04 (i) 0.03 crores) in respect of which Rs. (2009: Land in Srinagar of Rs.0.03 crores Leasehold (ii) in respect 1.21 crores) of which lease agreement has not been Rs. (2009: 0.06 crores Rs. (iii) identified as Surplus crores) land. Rs.0.16 (2009 : 0.16 crores Rs. block of buildings include: Gross (i) 1.84 crores of which Rs. leasehold office space, for 7.79 crores) Rs. (2009: 7.79 crores Rs. (ii) Societies under being of flats 0.44 crores) cost in Co-operative Rs. (2009: 0.44 crores Rs. (iii) 1.03 Rs. 1.03 crores (2009: flats for at Mumbai and Rs. Rs.32.75 crores) (2009: 32.75 crores Rs. TES: 1 FIXED ASSETS TANGIBLE 3 WORK-IN-PROGRESS CAPITAL 2 ASSETS INTANGIBLE SL.ASSETS FIXED NO. GROSS BLOCKApril, 1 Additions Deductions/ 31 March,April, 1 Depreciation/ Deductions/ / AMORTISATION DEPRECIATION ACCUMULATED 31 March, 31 March, NET BLOCK SCHEDULE - 5 NO 1 2
103 COMMUNICATIONS Twenty Fourth Annual Report 2009-2010 Tata Communications Limited
SCHEDULES FORMING PART OF THE CONSOLIDATED BALANCE SHEET As at As at 31st March, 2010 31st March, 2009 SCHEDULE - 6 Rs. in crores Rs. in crores INVESTMENTS Trade Investments - Long Term (At Cost) (Quoted) (Refer Note) 594,177 nos. (2009: 643,377 nos.) fully paid equity shares in Art Technology Group Inc. — — Trade Investments - Long Term (At Cost) (Unquoted) A. Fully Paid Equity Shares (a) Tata Teleservices Ltd. 748.03 748.03 (b) New ICO Global Communications (Holdings) Limited 0.01 0.01 (c) Wmode Inc. 2.55 2.88 B. Convertible Bonds of China Enterprise Netcom Corporation Ltd. 31.51 35.59 (Refer Note B9, Schedule 20) C. Investment in Associates (Refer Note B8 and B10, Schedule 20) (a) Equity Shares in Neotel (at cost) 88.54 90.16 Less: Share in Loss (88.54) (8.01) — 82.15 (b) Preference Shares in Neotel (at cost) 79.51 49.77 Less: Share in Loss (66.46) — 13.05 49.77 (c) TOTAL (a+b) 13.05 131.92 (d) Equity Shares in Bit Gravity (at cost) 5.95 — Less: Share in Loss (0.52) — 5.43 — (e) Convertible Promissory Note and warrants of Bit Gravity. 51.76 58.47 (f) TOTAL (d+e) 57.19 58.47 TOTAL (c+f) 70.24 190.39 TOTAL (A+B+C) 852.34 976.90 Current Investments (Unquoted) Investments In Mutual Funds 451.84 699.14 TOTAL 1,304.18 1,676.04
Note: Market Value of Quoted investments Rs. 11.79 crores (2009: Rs. 8.34 crores)
SCHEDULE - 7 INVENTORIES Equipments for resale 0.08 0.08 Less: Provision for obsolescence (0.08) (0.08) — — Consumable stores and spares 44.41 18.29 Less: Provision for obsolescence (2.53) (0.46) TOTAL 41.88 17.83
104 SCHEDULES FORMING PART OF THE CONSOLIDATED BALANCE SHEET As at As at 31st March, 2010 31st March, 2009 SCHEDULE - 8 Rs. in crores Rs. in crores SUNDRY DEBTORS (UNSECURED) (a) Over six months Considered good 313.13 388.22 Considered doubtful 325.41 360.55 (b) Other debts Considered good 1,874.62 2,474.75 Considered doubtful 16.66 36.02 2,529.82 3,259.54 Less: Provision for doubtful debts (342.07) (396.57) TOTAL 2,187.75 2,862.97
SCHEDULE - 9 CASH AND BANK BALANCES (Refer Note B20, Schedule 20) Cash in hand 0.53 0.94 Cheques in hand 66.18 55.17 Remittances in transit 2.57 0.28 Current accounts with banks 143.00 487.04 Deposit accounts with banks 71.83 332.50 TOTAL 284.11 875.93
SCHEDULE - 10 OTHER CURRENT ASSETS Interest receivable 65.17 29.46 Service tax / VAT recoverable 60.08 107.24 Pension contributions recoverable from Government of India (net of provision of Rs. 53.71 crores (2009: Rs. 53.71 crores)) (Refer Note B5, Schedule 20) 7.44 7.44 Licence fees paid recoverable from Government of India 0.64 0.64 Licence fees paid under protest (Refer Note B13, Schedule 20) 115.73 120.85 Others 187.00 126.05 TOTAL 436.06 391.68
105 COMMUNICATIONS Twenty Fourth Annual Report 2009-2010 Tata Communications Limited
SCHEDULES FORMING PART OF THE CONSOLIDATED BALANCE SHEET As at As at 31st March, 2010 31st March, 2009 SCHEDULE - 11 Rs. in crores Rs. in crores LOANS AND ADVANCES (UNSECURED) Considered good – Loans and Advances to employees 19.48 5.63 – Deposits with public bodies and others 86.89 84.63 – Prepaid expenditure 538.19 524.38 – Advance payment of tax (net of provision for tax) 2,101.50 1,422.08 – Other loans and advances 445.88 370.99 3,191.94 2,407.71 Considered doubtful – Other loans and advances 11.79 8.51 Less: Provision for doubtful advances (11.79) (8.51) TOTAL 3,191.94 2,407.71
SCHEDULE - 12 CURRENT LIABILITIES Sundry Creditors: – Creditors for interconnect charges 1,889.98 1,926.19 – Dues of micro, small and medium enterprises 2.05 0.69 – Others 1,635.13 2,089.07 Unearned income and deferred revenues 2,978.72 2,378.94 Investor Education and Protection Fund - unpaid dividend 0.60 0.78 Government of India current account 20.57 20.57 Interest accrued but not due on loans taken from banks 69.83 48.68 Deposits / Advances from Customers 216.41 662.06 Other liabilities (Refer Note) 304.65 347.40 TOTAL 7,117.94 7,474.38 Note: Includes Rs.13.42 crores overdrawn book balance (2009: Rs. 105.35 crores)
SCHEDULE - 13 PROVISIONS Provisions for employee benefits 304.05 246.38 Provision for proposed dividend — 128.25 Tax on dividend — 21.80 Provision for contingencies (Refer Note B27, Schedule 20) 63.59 42.86 Provision for tax (net of advance taxes) 43.31 49.21 TOTAL 410.95 488.50
106 SCHEDULES FORMING PART OF THE CONSOLIDATED PROFIT AND LOSS ACCOUNT Year ended Year ended 31st March 2010 31st March 2009 SCHEDULE-14 Rs. in crores Rs. in crores OTHER INCOME Dividend income from current investments 0.15 22.52 Profit on sale of current investments (net) 34.33 37.40 Profit from sale of long term investment 0.98 2.88 Rent 13.51 14.84 Exchange gain (net) (16.53) (16.30) Provisions / Liabilites no longer required written back 30.40 23.92 Other 56.69 108.72 TOTAL 119.53 193.98
SCHEDULE-15 INTEREST INCOME On Bank deposits (Tax deducted at source Rs. 0.05 cores (2009: Rs. 1.80 crores)) 9.33 30.94 On Other loans and advances (Tax deducted at source Rs. NIL (2009: Rs. NIL)) 39.80 18.45 TOTAL 49.13 49.39
SCHEDULE - 16 SALARIES AND RELATED COSTS Salaries and bonus 1,302.43 1,115.42 Contribution to provident, gratuity and other funds 156.51 56.34 Staff welfare expenses 78.18 68.42 TOTAL 1,537.12 1,240.18
SCHEDULE-17 NETWORK COSTS Charges for use of transmission facilities 6,279.98 5,090.87 Royalty and licence fee to Department of Telecommunications 127.74 131.89 Rent of satellite channels 25.80 31.47 Rent of landlines 30.52 39.89 Administrative lease charges 4.95 6.10 TOTAL 6,468.99 5,300.22
107 COMMUNICATIONS Twenty Fourth Annual Report 2009-2010 Tata Communications Limited
SCHEDULES FORMING PART OF THE CONSOLIDATED PROFIT AND LOSS ACCOUNT Year ended Year ended 31st March 2010 31st March 2009 SCHEDULE-18 Rs. in crores Rs. in crores OPERATING AND OTHER EXPENSES Consumption of stores 22.53 14.70 Light and power 207.78 173.99 Repairs and Maintenance: – Buildings 30.62 32.76 – Plant and Machinery 429.86 480.05 – Others 22.30 25.88 Bad Debts written off 193.99 208.88 Provision for doubtful debts/(written back) (61.39) 12.13 Advance written off 3.81 - Provision for doubtful advances 3.52 - Rent 236.29 218.17 Rates and taxes 75.68 60.78 Travelling expenses 82.21 77.95 Telephone 48.13 41.27 Printing, postage and stationery 17.90 15.06 Legal and professional fees 110.97 116.76 Advertising and publicity 91.47 67.62 Commissions 49.99 51.64 Insurance 23.96 15.36 Donations 0.36 0.62 Loss on sale of fixed assets (net) 1.14 1.55 Services rendered by agencies 221.83 239.61 Other expenses 194.14 202.12 TOTAL 2,007.09 2,056.90
SCHEDULE - 19 INTEREST EXPENSE Interest on: - Bank Loans 328.21 320.32 - Debentures 167.86 46.06 - Others 135.12 42.14 Less : Interest Expense capitalized (61.50) (57.83) TOTAL 569.69 350.69
108 SIGNIFICANT ACCOUNTING POLICIES AND NOTES TO ACCOUNTS SCHEDULE 20 SIGNIFICANT ACCOUNTING POLICIES AND NOTES TO ACCOUNTS A. SIGNIFICANT ACCOUNTING POLICIES 1. Basis of preparation The consolidated financial statements of Tata Communications Limited (the Company), its subsidiaries and jointly controlled entities (“the Group”) are prepared under the historical cost convention and the requirements of the Companies Act, 1956. The financial statements of certain subsidiaries having a negative net worth have been prepared on a ‘going concern’ assumption and included in these consolidated statement on that basis as the Company has provided a support letter regarding providing financial support to enable those entities continuing as a ‘going concern’ with reference to the provisions of applicable insolvency laws in their country of residence. 2. Principles of consolidation The financial statements of the subsidiary companies used in the consolidation are drawn up to the same reporting date as of the Company. The consolidated financial statements have been prepared on the following basis: i) The financial statements of the Company and its subsidiary companies have been combined on a line-by-line basis by adding together like items of assets, liabilities, income and expenses. Inter-company balances and transactions, and unrealised profits or losses have been fully eliminated. ii) The results of subsidiaries acquired during the year are included in the consolidated profit and loss account from the date of acquisition. iii) The consolidated financial statements include the interest in joint ventures which has been accounted as per the ‘proportionate consolidation’ method as per Accounting Standard 27-‘Financial Reporting of Interests in Joint Ventures’. Unrealised profits and losses have been eliminated to the extent of the Company’s share in the joint ventures. iv) The consolidated financial statements include the interest in associates which has been accounted as per ‘Equity Accounting’ Method as per Accounting Standard 23 – ’Accounting for investments in Associates in Consolidated Financial Statements’. v) The excess of cost to the Company of its investment in a subsidiary company over its share of the equity of the subsidiary company at the date on which the investment in the subsidiary company is made is recognized as ‘Goodwill’ being an asset in the consolidated financial statements. Alternatively, where the share of equity in the subsidiary companies as on date of investment, is in excess of cost of investment of the Company, it is recognised as `Capital Reserve’ and shown under the head `Reserves and Surplus’, in the consolidated financial statements. vi) Minority interest in the net assets of consolidated subsidiaries consists of the amount of equity attributable to the minority shareholders at the dates on which investments are made by the Company in the subsidiary companies and further movements in their share in the equity, subsequent to the dates of investments. vii) Losses applicable to the minority in excess of the minority’s interest in the subsidiaries equity are allocated against the majority interest except to the extent that the minority has a binding obligation and is able to make an additional investment to cover the losses. 3. Use of estimates The preparation of financial statements requires the management of the Company to make estimates and assumptions that affect the reported balances of assets and liabilities and disclosures relating to the contingent liabilities as at the date of the financial statements and reported amounts of income and expenses during the period. Examples of such estimates include allocation of purchase price on acquisition, provisions for doubtful debts and advances, employee benefit obligations, provision for income taxes, provision for cable restoration, impairment of assets, asset retirement obligation and useful lives of fixed assets.
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4. Fixed assets a) Fixed assets are stated at cost less accumulated depreciation. Cost includes freight, duties, taxes, salaries and employee benefits directly related to the construction or development of the asset and all incidental expenses incurred to bring the assets to their present location and condition. b) Fixed assets received as gifts from other Foreign Telecom Carriers / vendors are capitalised and credited to Capital Reserve on the basis of notional cost (cost assessed by customs authorities). Cost includes freight, insurance and customs duty. c) Intangible assets in the nature of Indefeasible Rights of Use (IRU’s) for international and domestic telecommunication circuits are recorded as fixed assets. IRU agreements transfer substantially all the risks and rewards of ownership. d) Jointly owned assets are capitalised in proportion to the Company’s ownership interest in such assets. e) Costs of borrowing related to the acquisition or construction of fixed assets that are attributable to the qualifying assets are capitalized as part of the cost of such asset. A qualifying asset is one which necessarily takes a substantial period to get ready for its intended use. All other borrowing costs are recognized as an expense in the period in which they are incurred in accordance with the Accounting Standard 16 on ‘Borrowing Costs’ notified by the Companies (Accounting Standards) Rules, 2006. f) Consideration for purchase of business in excess of the value of net assets acquired is recognised as goodwill. g) Internally developed computer software, and licence fees have been classified as intangible assets. h) Assets acquired pursuant to an agreement for exchange of similar assets are recorded at the net book value of the asset given up, with an adjustment for any balancing receipt or payment of cash or any other form of consideration. 5. Depreciation Depreciation other than on freehold land and capital work-in-progress is charged over the periods set out below so as to write-off the cost of the asset on a straight line basis over the estimate useful lives, at the following rates: a) Leasehold land Lease period b) Leasehold improvements Lease period c) Buildings 1.64% to 6.67% d) Plant and Machinery (i) Indefeasible Rights of Use (IRU’s) Life of IRU or period of agreement, whichever is lower (ii) Other plant and machinery 4.75% to 33.33% e) Furniture and fixtures 6.33% to 33.33% f) Office equipment 4.75% to 33.33% g) Computers 10.00% to 33.33% h) Motor vehicles 9.50% i) Goodwill on purchase of business 60/120 months j) Intangibles (i) Internally developed computer software 20.00% to 33.33% (ii) License fees 4.00%
110 SIGNIFICANT ACCOUNTING POLICIES AND NOTES TO ACCOUNTS (Contd.)
6. Leases Lease arrangements where the risk and rewards incidental to ownership of an asset substantially vests with the lessor are classified as operating lease. Rental income and rental expenses on assets given or obtained under operating lease arrangements are recognised on a straight - line basis over the term of the relevant lease. The initial direct costs relating to operating leases are recorded as expenses as they are incurred. Assets given under finance lease are recognised at an amount equal to the net investment in the lease and the finance income is based on a constant rate of return on the outstanding net investment. Assets acquired under lease where the Company has substantially all the risks and rewards of ownership are classified as finance lease. Such leases are capitalised at the inception of the lease at lower of the fair value or the present value of the minimum lease payments and a liability is created for an equivalent amount. Each lease rental paid is allocated between the liability and the interest cost so as to obtain a constant periodic rate of interest on the outstanding liability for each year. 7. Impairment At each balance sheet date, the Company reviews the carrying amounts of its fixed assets and goodwill included in each cash generating unit to determine whether there is any indication that those assets suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss. Recoverable amount is the higher of an asset’s net selling price and value in use. If the recoverable amount of the cash generating unit is less than the carrying amount of the unit the impairment loss is allocated first to reduce the carrying amount of any goodwill allocated to the unit and then to the other asset of the unit pro-rata on the basis of the carrying value of each asset in the unit. An impairment loss recognised for goodwill is not reversed in the subsequent period unless there are changes in external events. 8. Asset Retirement Obligation (“ARO”) The Company’s ARO relate to the removal of cable systems and switches when they will be retired. Provision is recognised based on management’s best estimate of the eventual costs that relate to such obligation and is adjusted to the cost of such assets. The estimated costs are based on historical cost information, industry factors and technical estimates received from consortium members of the cable systems. 9. Investments Long-term investments are valued at cost less provision other than temporary diminution in value. Current investments comprising investments in mutual funds are stated at the lower of cost or fair value, determined on an individual investment basis. The acquisition cost of an investment acquired in exchange, or part exchange, for another asset is determined based on the fair value of the asset given up. 10. Inventories Inventories are valued at the lower of cost and net realisable value. Cost is determined on a weighted average basis. 11. Employee Benefits (i) Short-term employee benefits The undiscounted amount of short term employee benefits expected to be paid in exchange for services rendered by employees is recognized during the period when the employee renders the service. These benefits include compensated absences such as paid annual leave and performance incentives payable within twelve months. (ii) Post-employment benefits Contributions to defined contribution retirement benefit schemes are recognized as an expense when employees have rendered services entitling them to the contributions.
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For defined benefit schemes, the cost of providing benefits is determined using the Projected Unit Credit Method, with actuarial valuations being carried out at each balance sheet date. Actuarial gains and losses are recognized in full in the profit and loss account for the period in which they occur. Past service cost is recognized immediately to the extent that the benefits are already vested, and otherwise is amortized on a straight-line basis over the average period until the benefits become vested.
The retirement benefit obligation recognized in the balance sheet represents the present value of the defined benefit obligation as adjusted for unrecognized past service cost, and as reduced by the fair value of scheme assets. Any asset resulting from this calculation is limited to past service cost, plus the present value of available refunds and reductions in future contributions to the scheme.
12. Revenue recognition
a) Revenues from Telephony services are recognised at the end of each month based upon minutes of traffic completed in such month.
b) Revenues from Data services are recognised over the period of the respective arrangements based on contracted fee schedules.
c) Revenues from right to use of fibre capacity provided based on IRU are recognized over the period of such arrangements.
d) Revenues from Internet services are recognized based on usage
e) Dividend from investments is recognized when the right to receive payment is established and no significant uncertainty as to measurability or collectability exists.
f) Transactions with providers of telecommunication services such as buying, selling, swapping and/or exchange of traffic are accounted for as non-monetary transactions depending on the terms of the agreements entered into with such telecommunication service providers.
13. Taxation
Current income tax expense comprises taxes on income from operations in India and foreign tax jurisdictions. Income tax payable in India is determined in accordance with the provisions of the Income Tax Act, 1961.Tax expense relating to overseas operations is determined in accordance with tax laws applicable in countries where such operations are domiciled.
Deferred tax expense or benefit is recognized on timing differences being the difference between taxable income and accounting income that originate in one period and are capable of reversal in one or more subsequent periods. Deferred tax assets and liabilities are measured using the tax rates and tax laws that have been enacted or substantively enacted by the balance sheet date.
Deferred tax assets in respect of unabsorbed depreciation and carry forward tax losses are recognized only to the extent that there is virtual certainty that there will be sufficient future taxable income available to realise these assets. All other deferred tax assets in respect of other timing differences are recognized if there is a reasonable certainty that sufficient future taxable income will be available to realise such assets.
Advance taxes and provisions for current income taxes are presented in the balance sheet after off-setting advance tax and income tax provision arising in the same tax jurisdiction and where the Group intends to settle the asset and liability on a net basis.
The Group offsets deferred tax assets and deferred tax liabilities relating to taxes on income levied by the same governing tax authorities.
112 SIGNIFICANT ACCOUNTING POLICIES AND NOTES TO ACCOUNTS (Contd.)
14. Foreign currency transactions
a) Foreign currency transactions are converted into Indian Rupees at rates of exchange approximating those prevailing at the transaction date. Foreign currency monetary assets and liabilities are translated to Indian Rupees at the closing rate prevailing on the balance sheet date. Exchange differences on foreign currency transactions are recognised in the profit and loss account.
b) Premium or discount on forward contracts is amortised over the life of such contracts and is recognized in the Profit and Loss Account. Forward contracts outstanding as at the balance sheet date are stated at exchange rate prevailing at the reporting date and any gains or losses are recognized in the profit and loss account. Profit or loss arising on cancellation or enforcement/exercise of a forward exchange is recognized in the profit and loss account in the period of such cancellation or enforcement/exercise outstanding as at the balance sheet date are marked-to-market with the values as reported by banks and any gains or losses are recognized in the profit and loss account.
c) For the purpose of consolidation of foreign subsidiaries and joint ventures, income and expenses are translated at average rates and the assets and liabilities are stated at closing rate. The net impact of such change is disclosed under exchange translation reserve.
15. Derivative financial instruments
The Group enters into option contracts and interest rate swaps to manage it’s exposure on foreign exchange rate risk and interest rate risk globally. Exposures to currency and interest rate risk are monitored on an ongoing basis and the Group endeavours to keep the net exposure at acceptable levels.
These derivatives are initially recognized at fair value at the date a derivative contract is entered into and are subsequently re-measured to their fair value at each reporting date. The resulting gain or loss is recognized in profit and loss account immediately.
16. Earning Per Share
Basic earnings per share are calculated by dividing the net profit or loss for the year attributable to equity shareholders (after deducting preference dividends and attributable taxes) by the weighted average number of equity shares outstanding during the year. The weighted average number of equity shares outstanding during the year is adjusted for events of bonus issue if any, to existing shareholders and share split.
For the purpose of calculating diluted earnings per share, the net profit for the period attributable to equity shareholders and the weighted average number of shares outstanding during the year are adjusted for the effects of all dilutive potential equity shares from the exercise of options on unissued share capital. The number of equity shares is the aggregate of the weighted average number of equity shares and the weighted average number of equity shares, which would be issued on the conversion of all the dilutive potential equity shares into equity shares. Options on unissued equity share capital are deemed to have been converted into equity shares.
17. Contingent Liabilities and Provision
Provisions are recognized in respect of present probable obligations, the amount of which can be reliably estimated. Contingent Liabilities are disclosed in respect of possible obligations that may arise from past events but their existence is confirmed by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the Company.
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B. NOTES TO ACCOUNTS
1. Particulars of subsidiaries, associates and joint ventures are as follows:
Percentage of voting power Country of As at 31 As at 31 Incorporation March, 2010 March, 2009 Subsidiaries (Held Directly) Tata Communications Internet Services Limited India 100.00 100.00 Tata Communications Transformation Services Limited India 100.00 100.00 Tata Communications Lanka Limited Sri Lanka 90.00 90.00 S&A Internet Services Private Limited (Date of acquisition: 27 November, 2009) India 100.00 - Tata Communications Services (America) Inc. United States of America 100.00 100.00 Tata Communications International Pte. Ltd Singapore 100.00 100.00 VSNL SNOSPV Pte. Ltd. Singapore 100.00 100.00 Tata Communications Banking InfraSolutions Limited (Formerly known as Banking ATM InfraSolutions Limited) India 100.00 100.00 Subsidiaries (Held Indirectly) Tata Communications (Bermuda) Limited Bermuda 100.00 100.00 Tata Communications (Netherlands) BV Netherlands 100.00 100.00 Tata Communications (Hong Kong) Limited Hong Kong 100.00 100.00 ITXC IP Holdings S.A.R.L. Luxembourg 100.00 100.00 Tata Communications (America) Inc. United States of America 100.00 100.00 Teleglobe Asia Pte. Ltd. Singapore 100.00 100.00 Tata Communications (Canada) ULC Canada 100.00 100.00 Tata Communications (Belgium) S.P.R.L. Belgium 100.00 100.00 Teleglobe International Luxembourg Sarl Under Members’ Voluntary Liquidation Luxembourg 100.00 100.00 Tata Communications (Italy) SRL Italy 100.00 100.00 TLGB Luxembourg Holdings Sarl Under Members’ Voluntary Liquidation Luxembourg 100.00 100.00 Tata Communications (Portugal) Unipessoal LDA Portugal 100.00 100.00 Tata Communications (France) SAS France 100.00 100.00 Tata Communications (Nordic) AS Norway 100.00 100.00 VSNL International (Global) Corp. United States of America 100.00 100.00 Tata Communications (Guam) LLC Guam 100.00 100.00 Tata Communications (Portugal) Instalacao E Manutencao De Redes LDA Portugal 100.00 100.00 Tata Communications (US) Inc. United States of America 100.00 100.00 Tata Communications (Australia) Pty Ltd. Australia 100.00 100.00 Tata Communications Services (Bermuda) Limited Bermuda 100.00 100.00 VSNL International (IPCO) LLC United States of America 100.00 100.00
114 SIGNIFICANT ACCOUNTING POLICIES AND NOTES TO ACCOUNTS (Contd.) Percentage of voting power Country of As at 31 As at 31 Incorporation March, 2010 March, 2009 Tata Communications (Puerto Rico) Inc. Puerto Rico 100.00 100.00 VSNL International (ITXC) Corp. United States of America 100.00 100.00 VSNL International (Poland) Sp.z.o.o Poland 100.00 100.00 Tata Communications (Japan) KK. Japan 100.00 100.00 Videsh Sanchar Nigam Spain Srl Spain 100.00 100.00 Tata Communications (UK) Limited United Kingdom 100.00 100.00 Tata Communications Deutschland GMBH Germany 100.00 100.00 Tata Communications (Middle East) FZ-LLC United Arab Emirates 100.00 100.00 Tata Communications (Hungary) LLC Hungary 100.00 100.00 Tata Communications (Ireland) Limited Ireland 100.00 100.00 Tata Communications (Russia) LLC Russia 100.00 100.00 Tata Communications (Switzerland) GmbH Switzerland 100.00 100.00 Tata Communications (Sweden) AB Sweden 100.00 100.00 TCPoP Communication GmbH (Date of Incorporation: 30 April, 2009) Austria 100.00 - Tata Communications (Taiwan) Limited (Date of Incorporation: 02 November, 2009) Taiwan 100.00 - VSNL Telecommunications (Bermuda) Limited (Liquidated vide order dated 24 April, 2009) Bermuda - 100.00 VSNL UK Limited (Liquidated vide order dated 18 October, 2009) United Kingdom - 100.00 Teleglobe Bermuda Limited (Liquidated vide order dated 9 October, 2009) Bermuda - 100.00 VSNL International (Hong Kong) Limited (Liquidated vide order dated 20 November, 2009) Hong Kong - 100.00 Teleglobe International Limited (Liquidated vide order dated 20 October, 2009) United Kingdom - 100.00 Joint Ventures United Telecom Limited Nepal 26.66 26.66 SEPCO Communications (Pty.) Ltd. South Africa 43.16 43.16 (Held through VSNL SNOSPV Pte LTD) Cochin Submarine Cable Depot (India) Private Limited (Date of Incorporation: 31 December, 2008) India 40.00 - Associates NEOTEL (Pty.) Ltd. South Africa 27.00 27.00 (Held through VSNL SNOSPV Pte LTD) Bit Gravity Inc (Date of acquisition: 14 December, 2009) United States of America 22.86 - (Held through Tata Communications International Pte Limited)
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2. The Company was incorporated on 19 March, 1986. The Government of India vide its letter No.G-25015/6/86OC dated 27 March, 1986, transferred all the assets and liabilities of the Overseas Communications Service (OCS) (part of the Department of Telecommunications, Ministry of Communications) as appearing in the Balance Sheet as at 31 March, 1986 to the Company with effect from 01 April, 1986. As per the letter no. G-25015/6/86-OC dated 23 October, 2001 of Government of India, Department of Telecommunications, there was no requirement to register a formal transfer deed or deed of sale in the matter of such transfer of assets. During the year 2007-08, the Company changed its name to Tata Communications Limited and the fresh certificate of incorporation consequent upon the change of name was issued by the Registrar of Companies, Maharashtra on 28 January, 2008. The Management has changed names of certain subsidiaries and is in the process of changing the names of the other subsidiaries to reflect the name “Tata Communications” in names. 3. The Board of Directors of the Company recommended a dividend of Rs. NIL (2009: Rs. 4.50) per share to its shareholders for the year ended 31 March, 2010. 4. During the year 2008-09, in terms of the agreements entered into between Tata Teleservices Ltd. (“TTSL”), Tata Sons Ltd. (“TSL”) and NTT DoCoMo, Inc. of Japan (Strategic Partner-SP), TSL gave an option to the Company to sell 36,542,378 equity shares in TTSL to the SP, as part of a secondary sale of 253,163,941 equity shares effected along with a primary issue of 843,879,801 shares by TTSL to the SP. Accordingly, the Company realized Rs 424.22 crores on sale of these shares resulting in a profit of Rs 362.08 crores which was reflected as exceptional item in the profit and loss account for the previous year. If certain performance parameters and other conditions are not met, should the SP decide to divest its entire shareholding in TTSL, acquired under the primary issue and the secondary sale, and should TSL be unable to find a buyer for such shares, the Company is obligated to acquire the shareholding of the SP, at the higher of fair value or 50 percent of the subscription purchase price, in proportion of the number of shares sold by the Company to the aggregate of the secondary shares sold to the SP, or if the SP divests the shares at a lower price pay a compensation representing the difference between such lower sale price and the price referred to above. Further, in the event of breach of the representations and warranties (other than title and tax) and covenants not capable of specific performance, the Company is liable to reimburse TSL, on a pro rata basis, up to a maximum sum of Rs 548.50 crores. The exercise of the option by SP being dependent on several variables, the liability, if any, in this respect is remote and indeterminable. 5. As at 31 March, 2010 the proportionate share of pension obligations and payments of Rs. 61.15 crores (2009: Rs 61.15 crores) to the erstwhile Overseas Communications Service (“OCS”) employees were recoverable from the Government of India (“the Government”). Pursuant to discussions with the Government, the Company had made a provision of Rs. 53.71 crores (2009: Rs 53.71 crores) thereby having a net amount due from the Government towards its share of pension obligations of Rs. 7.44 crores (2009: Rs 7.44 crores). 6. On 27 August, 2008, the Arbitration Tribunal (the “Tribunal”) of the International Chamber of Commerce, Hague handed down a final award in the arbitration proceedings brought by Reliance Globalcom Limited (“Reliance”), formerly known as ‘FLAG Telecom’, against the Company relating to the Flag Europe Asia Cable System. The Tribunal directed the Company to pay Rs. 95.60 crores (US$ 21.45 million) as final settlement against US$ 385 million claimed by Reliance. The amount of Rs. 95.60 crores was charged to Profit and Loss Account for the year ended 31 March 2009 and disclosed as an exceptional item. 7. On January 16, 2010, the Group through its UK subsidiary completed its purchase of business and assets of Cosmos business of British Telecommunications PLC (“BT”) for a cash consideration of Rs. 14.62 crores (GBP 2 million). BT is in the business of development and supply of the product, together with the provision of equipment and professional services exclusively relating to the Product. The entire amount of consideration is attributable to the Mosaic (Software) platform and hence there is no Goodwill/Capital Reserve involved in the transaction. 8. On January 19, 2009 the Group entered into an agreement with Eskom and Transnet (two South African state owned enterprises) to acquire their 27% interest in Neotel, the second telecommunications operator in South Africa for a consideration of Rs. 135.13 crores which is valued at Rs 132.60 crores (2009: Rs 139.93 crores) as on balance sheet date in the form of Rs 88.54 crores (2009: Rs 90.16 crores) in equity shares and Rs 44.06 crores (2009: Rs 49.77 crores) in preference shares. During the year the Company has further subscribed to preference shares in Neotel which is valued at Rs 35.45 crores.
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9. In fiscal 2009, the Group through its Hong Kong subsidiary had advanced an amount of Rs. 59.77 crores ($ 14 Million) towards the investment in the joint-venture represented by two bonds of Rs. 15.04 crores ($3.5 million) each (valued at Rs. 31.51 crores and Rs. 35.59 crores in 2010 and 2009 respectively), subscribed on June 16, 2008 in China Enterprise Communications Limited’s (CEC) Hong Kong subsidiary viz. China Enterprise Netcom Corporation Ltd., and by paying an amount of Rs. 29.69 crores (US $ 7 million) into an escrow account on August 13, 2008. The bonds were to be redeemed and paid to the Company’s Hong Kong subsidiary by CEC’s Hong Kong subsidiary upon approval of the Joint Venture and closure of the transaction, while the amount in escrow was to be released to CEC in partial satisfaction of the purchase price of the shares in CEC. The bonds have been valued at Rs. 31.51 crores (2009: Rs. 35.59 crores) as on balance sheet date and have been classified under investments and the amount paid into escrow has been valued at Rs. 31.51 crores (2009: Rs. 35.59 crores) as on balance sheet date and has been classified under Loans and Advances in the financials. The parties to the agreement are at an advanced stage for terminating the agreement and the above amount of Rs. 63.02 crores (US $ 14 million) will be paid back to the Company. 10. On August 6, 2008, the Group through its Dutch subsidiary subscribed to a convertible promissory note and warrants issued by Bit Gravity Inc., a non public company, for a cash consideration of Rs. 48.56 crores ($11.5 million) valued at Rs 51.76 crores (2009: Rs 58.47 crores) as on balance sheet date. The convertible notes carry interest at 5% per annum. The notes are convertible to Bit Gravity’s common stock at the same price as that issued to other investors 30 days before the Company’s exercise of the conversion option. In the event that no common stocks have been issued 30 days before conversion, preferred stocks will be issued at fair values. The warrants can be exercised to obtain Bit Gravity’s common stock at the same price as that issued to other investors 30 days prior to the date of Company’s exercise. In the event no common stock has been issued 30 days before the exercise of warrants, preferred stocks will be issued at fair value. In addition to above, on December 14, 2009, Company has acquired an equity interest of 22.86% for a consideration of Rs 6.15 crores ($1.3 million) valued at Rs 5.95 crores in Bit Gravity. Hence, the Company has accounted for this investment as investment in associate. Under the terms of Stock purchase agreement dated December 14, 2009 entered with seller, The Company received an option to acquire same number of shares at same price. This option is required to be exercised within 6 months of stock purchase agreement. 11. In the previous year the Company entered into a Joint Venture (40:60) with Indian Ocean Cableship Pte Limited Singapore (IOCPL) for investment in M/s Cochin Submarine Cable Depot (India) Private Limited. During the year the Company subscribed to 40,000 shares of face value Rs 10 each amounting to Rs 0.04 crores. 12. During the year the Company acquired 100% equity interest in S&A Internet Services Private Limited for a consideration of Rs 0.01 crores. Goodwill on consolidation arising on account of this is Rs 0.14 crores. 13. In January 2008, an amount of Rs. 295 crores was paid to the Department of Telecommunications (DoT) under protest, towards payment of licence fees, interest and penalty demanded by DoT before issue of certain licences to the Company. Against this, the Company carried a provision of Rs. 174.15 crores for license fees and interest thereon which has been set off against the payment of Rs. 295 crores for the presentation in the financials. The Company has filed the petition in the Honorable Supreme Court of India challenging the judgement of TDSAT relating to the computation of license fee. Additionally, the Company has also filed a petition in the Telecom Disputes Settlement and Appellate Tribunal (TDSAT) challenging applicability of penal provisions under ILD and NLD licence agreements, whereby DoT claimed penalty and interest on penalty amounting to Rs. 115.73 crores (included in aforesaid Rs. 295 crores). Consequently, the amount of Rs.115.73 crores together with the excess license fee paid of Rs. 5.12 crores (Payment of Rs. 295 crores as reduced by Rs. 289.88 crores computed by the Company for license fees, interest thereon and penalty) totalling to Rs. 120.85 crores was reflected as an asset in the books as at 31 March, 2009. During the year, TDSAT has accepted the Company’s position and decided in favour of the Company. However, DoT has filed an appeal in the Honorable Supreme Court of India challenging the judgement of TDSAT relating to the waiver of Penalty and Interest on Penalty. Further, DoT completed the assessment for the year ended 31 March, 2006 in the current fiscal and adjusted the aforesaid excess license fee of Rs. 5.12 crores; as a result, the balance amount of Rs. 115.73 crores is reflected as an asset in the books as at 31 March, 2010.
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14. The Board of Directors of the Company at its meeting held on 4 December, 2007 approved the merger of the Company’s wholly owned subsidiary, VSNL Broadband Limited (VBL) with effect from 1 March, 2007. The Hon’ble High Court of Judicature at Bombay approved the scheme vide their order dated 3 April, 2009. The excess of the cost of investment held by the Company in VBL over the net book value of assets taken over by the Company amounting to Rs. 109.87 crores has been transferred to the Securities Premium Account. 15. During the year the Company received a favourable order from Income tax Appellate Tribunal (ITAT) pertaining to financial year 1993-94, which was further supported by a favourable legal advice. Consequently the Company has written back the corresponding tax provision of Rs. 280.01 crores. Interest on the above of Rs. 215.56 crores is included in Rs. 218.28 crores of interest on Income tax refund reflected as exceptional item in Profit and loss account. 16. The Company had entered into an agreement with effect from 1 January, 2007 with one of its customers for carriage of NLD traffic for a period of two years. In view of disputes between the parties, the agreement was truncated with effect from July, 2008. Pending resolution of the dispute, the Company had not recorded the amount claimed from the customer as there was no certainty of realizing the amount claimed. The matter was referred to conciliation and an award of Rs. 29 crores was made leaving the modalities of settlement to the parties. The discussions are to be initiated and negotiated. The result of these negotiations on settlement cannot be reasonably estimated and hence has not been recognized. 17. Financial Statements for the following companies considered in the consolidated financial statements are based on management accounts and are therefore unaudited: (Rs. in crores) Subsidiaries Total Assets Total Revenues Cash flows included in included in included in Consolidation Consolidation Consolidation VSNL SNOSPV Pte Ltd. 376.91 - (2.32) S&A Internet Services Pvt. Ltd. 0.87 0.01 0.03 Total 377.78 0.01 (2.29)
Joint Ventures Share in Total Share in Total Share in Cash Assets included in Revenues included in flows included in Consolidation Consolidation Consolidation United Telecom Ltd 33.01 11.55 (1.29) Sepco (Pty.) Ltd. (Standalone) (0.02) - 0.02 Cochin Submarine Cable Depot (India) Pvt. Ltd. 0.18 - 0.01 Total 33.17 11.55 (1.26) Associate Share in loss included in consolidation Bit Gravity Inc. 0.55
18. A) Secured Debentures During the year 2008-09, the Company issued Rated Taxable Secured Redeemable Non-convertible Debentures in demat form for cash at par on private placement basis aggregating to Rs 1250 Crores. IDBI Trusteeship Services Limited has been appointed as trustee to the debenture issue. Nature of Security Rs. 1,000 crores, 11.70% debentures (face value of Rs. 10,00,000 each) are secured by a first legal mortgage and charge on the Company’s immovable property being the free hold land at Mouje Maharajpura, Gujarat and Plant and machinery represented by earth stations, network equipments, Land and sea cables, transmission equipments and other telecom equipments.
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Rs. 250 crores, debentures (interest ranging from 11.00% to 11.25%, face value of Rs. 10,00,000 each) are secured by a first legal mortgage and charge on the Company’s immovable property being the free hold land at Parambur Barracks, Chennai and Plant and machinery represented by land cable network and equipments. Redemption Terms These debentures are due for redemption as given below- Date of redemption 10000, 11.70% 1900, 11.00% 550, 11.20% 50, 11.25% as per terms Debentures Debentures Debentures Debentures of issue Rs. in Crores 25 November, 2011 400 25 November, 2012 400 25 November, 2013 200 23 July, 2014 190 23 January, 2016 55 23 January, 2019 5 Total 1,000 190 55 5 For facilitating the above redemptions, the Company has created a Debenture Redemption Reserve of Rs 316.07 crores (2009: Rs 102.50 crores) has been appropriated during the current year. B) Unsecured Debentures During the year, the Company has issued Rated, Unsecured, Taxable, Redeemable Non-convertible Debentures of face value Rs 10,00,000 each, in a demat form for cash at par on a private placement basis aggregating Rs 700 Crores. Redemption Terms Date of redemption 4000, 7.74% 1500, 9.50% 1500, 9.85% as per terms Debentures Debentures Debentures of issue Rs. in Crores 25 March, 2012 400 08 June, 2014 150 02 July, 2019 150 Total 400 150 150 For facilitating the above redemptions, the Company has created a Debenture Redemption Reserve of Rs.38.77 crores has been appropriated during the current year. 19. Employee Benefits: (A) Domestic Retirement Benefits (a) Defined Contribution plan - Provident Fund The Company makes contribution towards provident fund to a defined contribution retirement benefit plan for qualifying employees. The provident fund is administered by the Trustees of the Tata Communications Employees’ Provident Fund Trust. Under this scheme, the Company is required to contribute a specified percentage of payroll cost to fund the benefits. For certain subsidiaries contribution is paid to Provident Fund Commissioner.
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The Rules of the Company’s Provident Fund administered by a Trust require that if the Board of Trustees are unable to pay interest at the rate declared for Employees’ Provident Fund by the Government under para 60 of the Employees’ Provident Fund Scheme, 1952 for the reason that the return on investment is less or for any other reason, then the deficiency shall be made good by the Company. Having regard to the assets of the Fund and the return on the investments, the Company does not expect any deficiency in the foreseeable future. There has also been no such deficiency since the inception of the Fund. On account of provident fund a sum of Rs. 17.23 crores (2009: Rs. 14.46 crores) has been charged to the profit and loss account. (b) Defined Benefit Plans - Gratuity The Company makes annual contributions for Employee’s Gratuity scheme to a fund administered by trustees covering all eligible employees. The plan provides for lump sum payment to vested employees at retirement, death while in employment or on termination of employment in an amount equivalent to 15 days salary payable for each completed year of service or part thereof in excess of six months. Vesting occurs upon completion of five years of service. For certain subsidiaries gratuity plan is unfunded. - Medical Benefit The Company reimburses domiciliary and hospitalisation expenses incurred by eligible and qualifying employees and their dependent family members not exceeding certain specified limits under the Tata Communication employee’s medical reimbursement scheme. The scheme provides for cashless hospitalisation where the claims are directly reimbursed by the Company. - Pension Plan The Company’s pension obligation is in respect of certain employees transferred to the Company from the Overseas Communications Service (OCS). The Company purchases life annuity policies from an insurance company to settle such pension obligation. During the year the Company purchased additional annuity of Rs 7.77 crores (2009: Rs. 10.51 crores) to meet the additional pension obligation on account of increase in Dearness Allowance. The details in respect of status of funding and the amounts recognized in the Company’s financial statement as at 31 March, 2010 and 2009 for these defined benefit schemes are as under: (i) Changes in the defined benefit obligation: Defined Benefit Plans Gratuity Gratuity Medical Benefit (Funded) (Unfunded) (Unfunded) As at 31 As at 31 As at 31 March, 2010 March, 2010 March, 2010 Rs. in crores Rs. in crores Rs. in crores Projected defined benefit obligation, beginning of the year (1 April, 2009) 33.35 1.36 35.68 Current Service Cost 2.92 0.54 4.45 Past Service Cost 13.21 0.60 - Interest Cost 2.64 0.14 2.68 Liability transferred from other companies 0.14 0.11 - Others (0.27) - - Actuarial (gain) / loss (3.78) 0.27 5.90 Benefits paid (2.26) (0.07) (5.54) Projected benefit obligation at the end of the year 45.95 2.95 43.17
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Defined Benefit Plans Gratuity Gratuity Medical Benefit (Funded) (Unfunded) (Unfunded) As at 31 As at 31 As at 31 March, 2009 March, 2009 March, 2009 Rs. in crores Rs. in crores Rs. in crores Projected defined benefit obligation, beginning of the year (1 April, 2008) 27.93 0.80 31.54 Current Service Cost 2.50 0.40 4.03 Interest Cost 2.04 0.04 2.52 Liability transferred to other companies 0.46 - - Actuarial (gain) / loss 2.01 0.20 6.69 Benefits paid (1.59) (0.08) (9.10) Projected benefit obligation at the end of the year 33.35 1.36 35.68
(ii) Changes in the fair value of plan assets for gratuity: Particulars As at 31 As at 31 March, 2010 March, 2009 (Funded) (Funded) Rs. in crores Rs. in crores Fair value of plan assets, beginning of the year 30.29 30.82 Expected return on plan assets 2.56 2.41 Employer’s contribution 2.76 0.15 Transfer from other company 0.14 0.46 Actuarial (loss)/ gain 0.60 (1.99) Benefits paid (2.26) (1.56)
Fair value of plan assets at the end of the year 34.09 30.29
(iii) The amounts recognised in the profit and loss account for the year ended 31 March, 2010 and 2009 Defined Benefit Plans Gratuity Gratuity Medical Benefit (Funded) (Unfunded) (Unfunded) Year ended 31 Year ended 31 Year ended 31 March, 2010 March, 2010 March, 2010 Rs. in crores Rs. in crores Rs. in crores Current service cost 2.92 0.54 4.45 Past service cost 13.21 0.60 - Interest cost 2.64 0.14 2.68 Expected return on plan assets (2.56) - - Net actuarial loss/(gain) recognised in the year (4.38) 0.27 5.90 11.83 1.55 13.03
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Defined Benefit Plans Gratuity Gratuity Medical Benefit (Funded) (Unfunded) (Unfunded) Year ended 31 Year ended 31 Year ended 31 March, 2009 March, 2009 March, 2009 Rs. in crores Rs. in crores Rs. in crores Current service cost 2.50 0.40 4.03 Interest cost 2.04 0.04 2.52 Expected return on plan assets (2.41) - - Net actuarial loss/(gain) recognised in the year 3.94 0.27 6.69
6.07 0.71 13.24
(iv) The amounts recognized in the Balance sheet is as follows Defined Benefit Plans Gratuity Gratuity Medical Benefits (Funded) (Unfunded) (Unfunded) Year ended 31 Year ended 31 Year ended 31 March, 2010 March, 2010 March, 2010 Rs. in crores Rs. in crores Rs. in crores Present value of funded obligations 45.95 - - Fair value of plan assets (34.09) - - Present value of unfunded obligations - 2.95 43.17 Net (asset)/liability in balance sheet 11.86 2.95 43.17
Defined Benefit Plans Gratuity Gratuity Medical Benefits (Funded) (Unfunded) (Unfunded) Year ended 31 Year ended 31 Year ended 31 March, 2009 March, 2009 March, 2009 Rs. in crores Rs. in crores Rs. in crores Present value of funded obligations 33.35 - - Fair value of plan assets (30.29) - - Present value of unfunded Obligations - 1.36 35.68
Net (asset)/liability in balance sheet 3.06 1.36 35.68
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Defined Benefit Plans Gratuity Gratuity Medical Benefits (Funded) (Unfunded) (Unfunded) Year ended 31 Year ended 31 Year ended 31 March, 2008 March, 2008 March, 2008 Rs. in crores Rs. in crores Rs. in crores Present value of funded obligations 27.93 - - Fair value of plan assets (30.82) - - Present value of unfunded Obligations - 0.80 31.54
Net (asset)/liability in balance sheet (2.89) 0.80 31.54
(v) Categories of plan assets as a percentage of total plan assets: Category of assets As at 31 As at 31 March, 2010 March, 2009 Corporate Bonds - 1.96% State Government Bonds - 8.28% Insurer Managed Fund 100.00% 89.76% Total 100.00% 100.00%
The Company’s policy and objective for plan assets management is to maximize return on plan assets to meet future benefit payment requirements while at the same time accepting a low level of risk. The asset allocation for plan assets is determined based on investment criterion approved under the Income Tax Act, 1961 and is also subject to other exposure limitations. (vi) Principal actuarial assumptions used in accounting for gratuity and medical benefit obligations: Gratuity Gratuity Medical Benefits (Funded) (Unfunded) (Unfunded) Assumptions As at 31 As at 31 As at 31 March, 2010 March, 2010 March, 2010 Discount rate 8.25% 8.00% – 8.25% 8.25% Expected return on plan assets 8.00% - - Increase in compensation cost 6.00% 6.00% 6.00% Health care cost increase rate - - 2.00% Gratuity Gratuity Medical Benefits (Funded) (Unfunded) (Unfunded) Assumptions As at 31 As at 31 As at 31 March, 2009 March, 2009 March, 2009 Discount rate 7.50% – 8.00% 7.75% 7.50% Expected return on plan assets 8.00% -- Increase in compensation cost 6.00% – 7.00% 5.00% 6.00% Health care cost increase rate - - 2.00% The estimates of future compensation cost considered in actuarial valuation take account of inflation, seniority, promotion and other relevant factors.
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(vii) Effect of change in Assumed Health Care Cost Trend Rate. A one-percentage-point change in assumed health care cost trend rates would have the following effects: 31 March, 2010 31 March, 2009 1 Percentage point 1 Percentage point Increase Decrease Increase Decrease Rs. in crores Rs. in crores Rs. in crores Rs. in crores Effect on service cost 0.44 0.48 0.44 0.43 Effect on interest cost 0.26 0.27 0.31 0.31 Effect on post-employment benefit obligation 4.71 4.62 3.89 3.82
As the present value of the plan assets is less than the present value of funded obligations, the Company expects to contribute Rs 14.19 crores to its funded defined benefit plans in 2010-11. (B) International (a) Defined Contribution plans The Group makes contribution to defined contribution retirement benefit plans under the provisions of section 401(k) of the Internal Revenue Code for USA employees, a Registered Retirement Savings Plan (RRSP) for Canadian employees and a Group Stakeholder Pension plan (GSPP) for UK employees. An amount of Rs. 12.34 crores (2009: Rs. 11.50 crores) is charged to Profit and loss account for the year ended 31 March, 2010. In addition to above the Group has made a contribution of Rs. 11.42 crores (2009: Rs 8.14 crores) in respect of Sepco, a joint venture with the Group. (b) Defined Benefit Pension Plans Pension On 13 February, 2006 the Group assumed Teleglobe’s contributory and non-contributory defined benefit pension plans covering certain of its Canadian employees, designed in accordance with conditions and practices in Canada. In addition, the Group assumed Teleglobe’s unfunded Supplemental Employee Retirement Plan (“SERP”) maintained for certain senior Canadian executives as part of the acquisition closed on 13 February, 2006. Health and Life insurance The Group also assumed a post-retirement health care and life insurance plan for its current retirees and future retirees in the purchase of Teleglobe. The details in respect of status of funding and the amounts recognised in the Company’s financial statement as at 31 March, 2010 for these defined benefit schemes are as under:
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(i) Changes in the defined benefit obligation: Pension Plans Health care and Life insurance Plans Non- Contributory contributory SERP As at As at As at As at 31 March, 31 March, 31 March, 31 March, 2010 2010 2010 2010 Rs. in crores Rs. in crores Rs. in crores Rs. in crores Projected defined benefit obligation, beginning of the year (1 April, 2009) 283.70 238.02 7.84 7.33 Current Service cost 1.70 5.88 0.34 0.10 Interest cost 23.55 20.04 0.70 0.60 Benefits paid (22.65) (21.09) - (0.95) Actuarial (gain)/loss 73.79 81.77 3.50 (0.04) Effect of foreign exchange rate changes 26.96 23.02 0.79 0.66
Projected benefit obligation at the end of the year 387.05 347.64 13.17 7.70
Pension Plans Health care and Life insurance Plans Non- Contributory contributory SERP As at As at As at As at 31 March, 31 March, 31 March, 31 March, 2009 2009 2009 2009 Rs. in crores Rs. in crores Rs. in crores Rs. in crores Projected defined benefit obligation, beginning of the year (1 April, 2008) 351.30 297.46 11.17 8.41 Current Service cost 2.03 8.08 0.45 0.13 Interest cost 20.54 17.68 0.69 0.49 Benefits paid (21.89) (21.18) (0.21) (0.96) Actuarial (gain) / loss (81.39) (75.14) (4.68) (1.05) Effect of foreign exchange rate changes 13.11 11.12 0.42 0.31
Projected benefit obligation at the end of the year 283.70 238.02 7.84 7.33
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(ii) Changes in the fair value of plan assets for pension plans Pension Plans Non- Non- Contributory Contributory Contributory contributory As at 31 As at 31 As at 31 As at 31 March, 2010 March, 2010 March, 2009 March, 2009 Rs. in crores Rs. in crores Rs. in crores Rs. in crores Fair value of plan assets, beginning of the year 440.95 317.06 460.90 321.79
Actual return on plan assets 25.37 18.59 25.82 18.29
Contributions - 17.52 - 15.42
Benefits paid (22.65) (21.09) (21.89) (21.18)
Actuarial gain / (loss) 17.11 12.48 (40.66) (28.92)
Effect of foreign exchange rate changes 40.17 29.12 16.78 11.66
Fair value of plan assets, end of the year 500.95 373.68 440.95 317.06
(iii) The components of pension expense recognized in the Profit and Loss account for the year ended 31 March, 2010 and 2009: Year ended 31 Year ended 31 March, 2010 March, 2009 Rs. in crores Rs. in crores Current service cost 8.02 10.69 Interest cost 44.89 39.40 Actual return on plan assets (43.96) (44.11) Net Actuarial loss/(gain) recognized 125.62 (92.68) Effect of foreign exchange rate changes (Net) (39.03) 34.65 95.54 (52.05)
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(iv) The amounts recognized in the Balance sheet is as follows: Pension Plans Health care and Life insurance Plans Non- Contributory contributory SERP Year ended Year ended Year ended Year ended 31 March, 31 March, 31 March, 31 March, 2010 2010 2010 2010 Rs. in crores Rs. in crores Rs. in crores Rs. in crores Present value of funded obligations 387.05 347.64 - - Fair value of plan assets (500.95) (373.68) - - Present value of unfunded obligations - - 13.17 7.70 Net (asset)/liability in balance sheet (113.90) (26.04) 13.17 7.70
Pension Plans Health care and Life insurance Plans Non- Contributory contributory SERP Year ended Year ended Year ended Year ended 31 March, 31 March, 31 March, 31 March, 2009 2009 2009 2009 Rs. in crores Rs. in crores Rs. in crores Rs. in crores Present value of funded obligations 283.70 238.03 - - Fair value of plan assets (440.95) (317.06) - - Present value of unfunded obligations - - 7.84 7.33 Net (asset)/liability in balance sheet (157.25) (79.03) 7.84 7.33
Pension Plans Health care and Life insurance Plans Non- Contributory contributory SERP Year ended Year ended Year ended Year ended 31 March, 31 March, 31 March, 31 March, 2008 2008 2008 2008 Rs. in crores Rs. in crores Rs. in crores Rs. in crores Present value of funded obligations 351.30 297.46 - - Fair value of plan assets (460.90) (321.79) - - Present value of unfunded obligations - - 11.17 8.41 Net (asset)/liability in balance sheet (109.60) (24.33) 11.17 8.41
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(v) Categories of plan assets as a percentage of total plan assets: Category of assets As at 31 As at 31 March, 2010 March, 2009 Government Bonds 76.00% 76.00% Equity securities 19.00% 19.00% Short term investments 5.00% 5.00% Total 100.00% 100.00%
The Company uses an active management style to manage short-term securities, Canadian equities and international equities. Canadian bonds, US equities and the asset mix are managed passively. To accomplish this, the Company has entrusted this task to a professional investment manager. The management mandate defines the targeted asset allocation and the parameters for evaluating the manager performance.
(vi) The assumptions used for the pension plans and the other benefit plans on a weighted-average basis are as follows: Assumptions As at 31 As at 31 March, 2010 March, 2009 Discount rate used for benefit costs 8.00% 5.75% Discount rate used for benefit obligations 5.75% 8.00% Expected long-term return on plan assets 5.50% 5.50% Inflation 2.25% 2.50% Rate of compensation increase 3.25% 3.50%
(vii) The health care cost trend rate has a significant effect on the amounts reported. The assumed health care trend rate used to determine the accumulated post-retirement benefit obligation calculated as at 31 March, 2010 is 9.30% (2009:9.32%). A one-percentage-point change in assumed health care cost trend rates would have the following effects: 31 March, 2010 31 March, 2009 1 Percentage point 1 Percentage point Increase Decrease Increase Decrease Rs. in crores Rs. in crores Rs. in crores Rs. in crores
Effect on service cost 0.02 0.01 0.03 0.02 Effect on interest cost 0.04 0.04 0.04 0.04 Effect on post-employment benefit obligation 0.61 0.54 0.47 0.42 The Group expects to contribute Rs. 21.52 crores (2009: Rs. 18.94 crores) to its defined benefit plans in 2010-11.
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20. Cash and cash equivalents represent :- As at 31 As at 31 March, 2010 March, 2009 Rs. in crores Rs. in crores Cash and Cheques on hand and balances held with banks 209.71 543.15 Remittances in transit 2.57 0.28 Deposit accounts held with banks 71.83 332.50 284.11 875.93 Less: Deposits with original maturity over three months (9.09) (11.65) Less: Current Account / Deposits held for unpaid dividends (0.60) (0.78) Less: Deposit accounts held as margin money (17.01) (0.04) Less: Other Restricted Cash (0.04) (0.04) Cash and cash equivalents 257.37 863.42
21. Deferred tax: As at 31 As at 31 March, 2010 March, 2009 Rs. in crores Rs. in crores Deferred tax liability/(assets) (Net) Difference between accounting and tax depreciation 357.43 363.25 Provision for Leave Encashment (12.17) (9.39) Provision for doubtful debts (33.53) (67.02) Provision for Bonus (5.24) (3.96) Expenditure incurred on NLD and EGO license fees (19.22) (21.46) Unearned income / deferred revenues (72.44) (83.86) Provisions for post employment benefit and Leave encashment pursuant to the transitional provisions of AS-15 (8.94) (8.84) Others (7.77) (12.82) Net Deferred Tax Liability 198.12 155.90
Note: Amalgamation of VSNL Broadband Limited with the Company resulted in recognition of net deferred tax liability of Rs. 7.44 crores as on 31 March, 2008 which was adjusted against opening balance of the profit and loss account for the year ended 31 March 2009.
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22. Earnings per Share Rs. in Crores except Number of shares and Earnings per share data Year ended Year ended 31 March 2010 31 March 2009 Net Profit after tax (597.74) 315.80 Weighted Number of Shares 285,000,000 285,000,000 Basic and Diluted Earnings per share Rs. (20.97) Rs. 11.08 23. Segment Reporting Business Segments The reportable segments for the year ended 31 March, 2010 and 31 March, 2009 are “Wholesale Voice”, “Enterprise and Carrier Data” and “Others”. The composition of the reportable segments is as follows: - Wholesale Voice: includes International and National Voice services. - Enterprise and Carrier Data: includes corporate data transmission services like International Private Leased Circuits (IPLC), Frame Relay (FR), Internet Leased Line Circuits (ILL) and National Private Leased Circuits (NPLC). - Others: includes Global Roaming, Internet, Virtual Private Network, Data Center, TV up-linking, Transponder lease Corporate Internet Telephony (CIT) and other services. Year ended 31 March, 2010 Rs. in crores Wholesale Enterprise Others Total Voice and Carrier Data Revenues from Telecommunications and Other Services 6,282.72 3,298.40 1,444.44 11,025.56 Segment Results 1,176.93 2,362.41 1,017.23 4,556.57
Unallocable expenses (net) (5,310.83) Non Cash Expenses (Unallocable) (145.21) Profit/(Loss) before taxes and exceptional items (899.47) Exceptional Items 218.28 Profit/(Loss) before taxes (681.19) Tax (expense)/income 142.39 Profit/(Loss) after taxes (538.80) Minority interest – Share of Loss (Net) 88.60 Share in Loss of Associates (147.54) Net Profit/(Loss) (597.74)
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Year ended 31 March, 2009 Rs. in crores Wholesale Enterprise Others Total Voice and Carrier Data Revenues from Telecommunications and Other Services 5,696.38 2,982.65 1,284.14 9,963.17 Segment Results 1,494.92 2,171.13 996.90 4,662.95 Unallocable expenses (net) (4,282.70) Non Cash Expenses (Unallocable) (223.97) Profit/(Loss) before taxes and exceptional items 156.28 Exceptional Items 266.48 Profit/(Loss) before taxes 422.76 Tax (expense)/income (230.73) Profit/(Loss) after taxes 192.03 Minority interest – Share of Loss (Net) 131.78 Share in Loss of Associates (8.01) Net Profit/(Loss) 315.80 i) Revenues and expenses, which are directly identifiable to segments, are attributed to the relevant segment. Expenses on rent of satellite channels and landlines, and royalty and license fees are allocated on the basis of usage. Expenses on Leased Circuits acquired for Backbone and Access is allocated on the basis of revenue. Segment result is segment revenues less segment expenses. Certain costs, including depreciation which are not allocable to segments have been classified as “unallocable expense”. ii) Telecommunication services are provided utilizing the Group assets which do not generally make a distinction between the types of services. As a result, fixed assets are used interchangeably between segments. In the absence of a meaningful basis to allocate assets and liabilities between segments, no allocation has been made. Geographical Segment: Segment revenues by Geographical Market
Year ended Year ended 31 March, 2010 31 March, 2009 Rs. in crores Rs. in crores India 2,850.86 3,242.30 United States of America 1,936.25 1,788.06 United Kingdom 1,172.20 676.11 Canada 427.51 397.17 Germany 355.68 314.10 South Africa 526.76 293.09 Balance c/f 7,269.26 6,710.83
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Year ended Year ended 31 March, 2010 31 March, 2009 Rs. in crores Rs. in crores
Balance b/f 7,269.26 6,710.83 Saudi Arabia 176.09 211.02 Singapore 204.45 191.11 Bermuda 129.17 132.97 Hong Kong 178.73 115.90 Spain 137.05 124.21 France 125.21 137.74 United Arab Emirates 84.03 109.93 Netherlands 94.76 82.86 Others 2,626.81 2,146.60 11,025.56 9,963.17 24. Related Party Disclosures (a) List of related parties and relationship: I. Investing party • Panatone Finvest Limited • Tata Sons Limited II. Key Managerial Personnel • N.Srinath - Managing Director and Chief Executive Officer • Vinod Kumar - Managing Director (Tata Communications International Pte. Ltd.) and Director of Tata Communications Limited. III. Joint Ventures • United Telecom Ltd. • SEPCO Communications (Pty.) Ltd. • (including its direct and indirect subsdiaries - Neotel (Pty.) Ltd. and Neotel Business Support Services (Pty.) Ltd. • Cochin Submarine Cable Depot (India) Private Limited IV. Associates • Neotel (Pty.) Ltd • Bit Gravity Inc.
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(b) Related party transactions (Rs. in crores) Key Joint Total Investing Managerial Venture / Company Personnel Associate Transactions Dividend Paid Panatone Finvest Limited 47.10 - - 47.10 52.19 - - 52.19 Tata Sons Limited 13.96 - - 13.96 10.92 - - 10.92 Total 61.06 - - 61.06 63.11 - - 63.11 BEBP Expenses Tata Sons Limited 10.28 - - 10.28 15.47 - - 15.47 Total 10.28 - - 10.28 15.47 - - 15.47 Revenues from Telecommunication services Tata Sons Limited 1.16 - - 1.16 2.53 - - 2.53 United Telecom Limited - - 3.22 3.22 - - 1.60 1.60 Bit Gravity Inc. - - 2.74 2.74 - - -- Neotel (Pty.) Ltd. - - 46.98 46.98 - - 41.69 41.69 Total 1.16 - 52.94 54.10 2.53 - 43.29 45.82 Network Cost United Telecom Limited - - 42.60 42.60 - - 27.13 27.13 Bit Gravity Inc. - - 17.74 17.74 - - -- Neotel (Pty.) Ltd. - - 35.57 35.57 - - 11.12 11.12 Total - - 95.91 95.91 - - 38.25 38.25
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SIGNIFICANT ACCOUNTING POLICIES AND NOTES TO ACCOUNTS (Contd.) (Rs. in crores) Key Joint Total Investing Managerial Venture / Company Personnel Associate Services received Neotel (Pty.) Ltd. - - 0.55 0.55 - - -- Tata Sons Limited 0.01 --0.01 0.09 - - 0.09 Total 0.01 - 0.55 0.56 0.09 - - 0.09 Interest Income SEPCO Communications (Pty.) Ltd. - - 12.25 12.25 --7.63 7.63 Bit Gravity Inc. - - 0.81 0.81 ---- Neotel (Pty.) Ltd. - - 18.65 18.65 --3.06 3.06 Total - - 31.71 31.71 - - 10.69 10.69 Loan given - SEPCO Communications (Pty.) Ltd. - - 62.31 62.31 - - 49.09 49.09 Neotel (Pty.) Ltd. - - 42.05 42.05 - - 131.58 131.58 Total - - 104.36 104.36 --180.67 180.67 Advances given by the Company - Cochin Submarine Cable Depot (India) Private Limited - - 0.08 0.08 ---- Neotel (Pty.) Ltd. ------0.01 0.01 Total - - 0.08 0.08 - - 0.01 0.01 Advances repaid by the Company Neotel (Pty.) Ltd. ------0.01 0.01 Total ------0.01 0.01 Managerial Remuneration - 8.68 - 8.68 - 8.90 - 8.90 Total - 8.68 - 8.68 - 8.90 - 8.90
134 SIGNIFICANT ACCOUNTING POLICIES AND NOTES TO ACCOUNTS (Contd.) (Rs. in crores) Key Joint Total Investing Managerial Venture / Company Personnel Associate Balances Receivables Tata Sons Limited 0.08 - - 0.08 0.34 --0.34 United Telecom Limited ------0.03 0.03 Neotel (Pty.) Ltd. - - 66.80 66.80 - - 27.17 27.17 Bit Gravity Inc - - 2.49 2.49 - - -- SEPCO Communications (Pty.) Ltd. - - 23.91 23.91 - - 10.04 10.04 Total 0.08 - 93.20 93.28 0.34 - 37.24 37.58 Payables Neotel (Pty.) Ltd. - - 28.24 28.24 - - 2.77 2.77 Managerial Remuneration - 0.75 - 0.75 - 0.45 - 0.45 Bit Gravity Inc - - 7.99 7.99 - - -- United Telecom Limited - - 6.68 6.68 - - 6.84 6.84 Tata Sons Limited 11.22 - - 11.22 16.68 - - 16.68 Total 11.22 0.75 42.91 54.88 16.68 0.45 9.61 26.74 Loans Given SEPCO Communications (Pty.) Ltd. - - 132.30 132.30 --69.99 69.99 Neotel (Pty.) Ltd. - - 173.64 173.64 --131.58 131.58 Total --305.94 305.94 --201.57 201.57 Advance Receivable Cochin Submarine Cable Depot (India) Private Limited - - 0.08 0.08 ---- Neotel (Pty.) Ltd. - - 1.32 1.32 - - 1.30 1.30 Total - - 1.40 1.40 - - 1.30 1.30 Note: 1) Figures in italic are in respect of the previous year 2) The un-eliminated portion of transactions and balances with joint ventures has been disclosed for purpose of related party disclosures.
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25. Operating lease arrangements: (a) As lessee: Year ended Year ended 31 March, 2010 31 March, 2009 Rs. in crores Rs. in crores Minimum lease payments under operating leases recognized as expense in the year 409.95 355.38
At the balance sheet date, minimum lease payments under non- cancellable operating leases fall due as follows: Year ended Year ended 31 March, 2010 31 March, 2009 Rs. in crores Rs. in crores Due not later than one year 411.27 295.17 Due later than one year but not later than five years 854.19 731.04 Later than five years 633.25 447.25 1,898.71 1,473.46
Operating lease payments represent rentals payable by the Company for certain buildings, satellite channels, office equipments, computer equipments and certain circuit capacities. The minimum future lease payments have not been reduced by minimum operating sublease rentals of Rs. 11.40 crores (2009: Rs 22.17 crores) due in the future under non-cancellable subleases for certain buildings, which primarily commenced in January 2002 and extend until 31 July, 2011. Rs. 9.02 crores (2009: Rs. 8.60 crores) was recognized in the current year as minimum sublease rental against the same. (b) As lessor: (i) The Company has leased under operating lease arrangements certain Indefeasible Right of Use (IRU) with gross carrying amount and accumulated depreciation of Rs. 50.45 crores (2009: Rs. 50.45 crores) and Rs. 18.25 crores (2009: Rs. 14.89 crores) respectively as at 31 March, 2010. Depreciation expense of Rs. 3.36 crores (2009: Rs. 3.36 crores) in respect of these assets has been charged in the profit and loss account for the year ended 31 March, 2010. In case of certain lease arrangements aggregating to Rs. 331.85 crores (2009: Rs. 272.31 crores) for the year ended 31 March, 2010, the gross block, accumulated depreciation and depreciation expenses of the assets given on IRU basis is not readily determinable and hence not disclosed. The lease rentals associated with such IRU arrangements for the year ended 31 March, 2010 amounts Rs. 27.74 crores (2009: Rs. 23.39 crores). In respect of the above, rental income of Rs. 31.74 crores (2009: Rs. 27.39 crores) has been recognised in the profit and loss account for the year ended 31 March, 2010. Future lease rental receipts will be recognized in the profit and loss account of subsequent years as follows: Year ended Year ended 31 March, 2010 31 March, 2009 Rs. in crores Rs. in crores Not later than one year 30.96 26.24 Later than one year but not later than five years 120.62 104.98 Later than five years 138.90 124.65 290.48 255.87
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(ii) The Company has leased certain premises under operating lease arrangements. Future lease rental income in respect of these leases will be recognized in the profit and loss account of subsequent years as follows: Year ended Year ended 31 March, 2010 31 March, 2009 Rs. in crores Rs. in crores Not later than one year 0.01 0.01 Later than one year but not later than five years - 0.01 Later than five years - - 0.01 0.02
Lease rental income of Rs. 0.01 crores (2009: Rs. 0.01 crores) in respect of the above leases has been recognized in the profit and loss account for the current year. 26. Finance Lease arrangements: (a) As Lessee As on 31 March, 2010, assets under finance leases with gross carrying amount and accumulated depreciation of Rs. 85.42 crores (2009: Rs. 95.08 crores) and Rs. 56.77 crores (2009: Rs. 49.51 crores) respectively, are included in the total fixed assets. The net carrying amount of each class of asset under finance leases is as follows: Gross carrying Accumulated Net carrying amount Depreciation amount As at 31 March, As at 31 March, As at 31 March, 2010 2009 2010 2009 2010 2009 Rs. in crores Rs. in crores Rs. in crores Building 1.84 1.84 0.19 0.16 1.65 1.69 Plant and Machinery 65.70 73.04 41.90 36.00 23.80 37.04 Furniture and Fixtures 4.26 4.81 1.77 1.51 2.49 3.30 Computers 13.62 15.39 12.91 11.84 0.71 3.55 85.42 95.08 56.77 49.51 28.65 45.58 Minimum lease payments and the corresponding present value are as follows: Minimum lease Present Value Difference representing payments (“MLP”) of (“MLP”) Interest Year ended 31 March, Year ended 31 March, Year ended 31 March, 2010 2009 2010 2009 2010 2009 Rs. in crores Rs. in crores Rs. in crores Not later than one year - 0.30 - 0.30 -- Later than one year but not later than five years ------Later than five years ------0.30 - 0.30 - -
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27. Provision for Contingencies: 31 March, 2010 31 March, 2009 Rs. in crores Rs. in crores Asset Asset Retirement Retirement Obligation Obligation (“ARO”) Others Total (“ARO”) Others Total Balance as at beginning of the year 33.86 9.00 42.86 20.41 9.00 29.41 Provision made during the year 2.18 - 2.18 1.12 - 1.12 Payment made during the year - - - (4.23) - (4.23) Liability incurred in current year 22.73 - 22.73 14.11 - 14.11 Effect of change in foreign exchange rate (gain)/ loss (3.94) - (3.94) 3.98 - 3.98 Provisions no longer required written back (0.24) - (0.24) (1.53) - (1.53)
Balance as at end of the year 54.59 9.00 63.59 33.86 9.00 42.86
Notes: 1) The provision for ARO has been recorded in the books of the Group in respect of undersea cables and switches owned by the Group. 2) Others include amounts provided towards claims made by creditors of the Group.
28. Contingent Liabilities and Capital Commitments Contingent Liabilities: As at As at 31 March, 2010 31 March, 2009 Rs. in crores Rs. in crores i. Claims for taxes on income (Refer Note 1) (a) Income tax disputes where the department is in appeal against the Company 322.00 314.70 (b) Income tax disputes where the Company has a favourable decision in other assessment year for the same issue 22.39 22.39 (c) Income tax disputes other than the above 1,489.67 1,544.18 ii. Claims for other taxes 118.08 51.46 iii. Other claims 575.12 888.82
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Notes: (1) Significant claims by the revenue authorities in respect of income tax matters are in respect of: (a) Significant claims by the revenue authorities in respect of income tax matters are in respect of deductions claimed under Section 80 IA of the Income Tax Act, 1961 from Assessment years 1996-97 onwards have been disallowed by the revenue authorities. The Company has contested the disallowance and has preferred appeals which are pending. (b) The Company has taken appropriate professional advice in respect of the claims / appeals and has taken all necessary steps to protect its interest. Based on expert opinion, no provision is required in respect of these claims / appeals. (2) Contingent liabilities, if any, in respect of sale of shares of Tata Teleservices Limited has been stated in Note B-4, schedule 20. (3) In April 2010, the Company voluntarily disclosed to the U.S. Department of Justice and the U.S. Securities and Exchange Commission the results of an internal investigation conducted by outside counsel for the Company relating to the activities of a reseller of one of the Company’s subsidiaries, Tata Communications International Pte Ltd. The internal investigation found evidence that the reseller may have offered and made improper payments to officials of a government purchaser in a Southeast Asian country in connection with the resale of the Company’s products. The investigation also found evidence that the Company’s sales consultant in the country was aware of the reseller’s potentially improper activities. Such activities may have violated the U.S. Foreign Corrupt Practices Act. The investigation did not reveal any prior involvement or knowledge regarding these activities by any officer or director of the Company or its subsidiary. The Company has taken remedial action, including terminating its relationship with the sales consultant and with the reseller. The Company cannot predict the ultimate consequences of these matters at this time, nor can we reasonably estimate the potential liability, if any, related to these matters. However, based on the facts currently known, we do not believe that these matters will have a material adverse effect on our business, financial condition, results of operations or cash flow. (4) As part of its normal ongoing review of ITXC Corp.’s (“ITXC”) operations in connection with the post-merger integration of Teleglobe, a predecessor in interest to VSNL Telecommunications (Bermuda) Ltd, and ITXC, Teleglobe had identified potential instances of non-compliance with the United States Foreign Corrupt Practices Act (“FCPA”) relating to ITXC’s operations in certain African countries prior to its merger with Teleglobe, consummated on 31 May, 2004. Teleglobe voluntarily notified the Securities Exchange Commission (SEC) and the U.S. Department of Justice (the “DOJ”) of the matter, and the Company has been cooperating fully with the SEC and the DOJ. The SEC had previously advised Teleglobe that it was conducting an informal inquiry into the matter. Teleglobe has been informed that the SEC issued a formal order of investigation on 15 February, 2005 concerning ITXC’s possible violations of the FCPA and possible related violations of the securities laws. On 27 July, 2005, the SEC issued a subpoena to Teleglobe for documents relating to its investigation. The Company cannot predict the extent to which the SEC, the DOJ or any other governmental authorities will pursue administrative, civil or criminal proceedings, the imposition of fines or penalties or other remedies or sanctions. The Company has not identified, and does not believe it is likely that, any material adjustment to its financial statements is or will be required in connection with the results of this investigation, although it is possible that a monetary penalty, if any, may be material to its results of operations in the period in which it is imposed. The subsidiaries of the Company in various geographies are routinely party to suits for collection, commercial disputes, claims from customers and/or suppliers over reconciliation of payments for voice minutes, circuits, Internet bandwidth and/or access to the public switched telephone network, leased equipment, and claims from estates of bankrupt companies alleging that we received preferential payments from such companies prior to their bankruptcy filings. While management currently believes that resolving such suits and claims, individually or in aggregate, will not have a material adverse impact on the Company’s financial position, the
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FCPA investigations noted above are subject to inherent uncertainties and management’s view of this matter may change in the future. Were an unfavorable final outcome to occur, such an outcome could have a material adverse impact on the Company’s financial position and results of operations for the period in which the effect becomes reasonably estimable. Capital commitments Estimated amount of contracts remaining to be executed on capital account and not provided for Rs. 2,413.22 crores (2009: Rs. 3,081.94 crores). Capital Commitment towards associate is Rs 121.32 crores (2009: Rs 235.02 crores) As per the Equity Joint Venture (EJV) Agreement entered between the Group through its Hong Kong subsidiary and the shareholders of CEC additional amount of Rs.30.86 crores (US$ 6.5 million) will be payable to CEC subject to audit and regulatory approvals. 29. United Telecom Limited (UTL) is a Joint Venture between the Company, Mahanagar Telephone Nigam Limited, Telecommunications Consultant India Limited and Nepal Ventures Private Limited. The Company has 26.66 percent equity ownership in UTL. UTL operates basic telephony services in Nepal based on Wireless-in-local loop technology. The Company’s share in income, expenses, assets and liabilities based on the uniform accounting policy adopted by the Company and after inter-company eliminations based on management accounts for the year ended 31 March, 2010 and 31 March, 2009 are as follows: As at As at 31 March, 2010 31 March, 2009 LIABILITIES: Rs. in crores Rs. in crores 1 Reserves and Surplus (30.03) (25.77) 2 Secured Loan 8.37 13.72 3 Unsecured Loan 6.95 8.76
ASSETS : 4 Fixed Assets (a) Gross Block 47.28 41.77 (b) Less: Accumulated Depreciation 20.21 15.80 (c) Net Block 27.07 25.97 (d) Capital work-in-progress 6.54 - 33.61 25.97 5 A. Current Assets (a) Inventories 1.15 0.78 (b) Sundry Debtors 4.58 5.84 (c) Cash and Bank Balances 1.82 3.11 (d) Other Current Assets 0.66 1.96 8.21 11.69 B. Loans And Advances 1.34 12.42 9.55 24.11 6 Less: Current Liabilities 10.15 17.57 7 Net Current assets (0.60) 6.54
140 SIGNIFICANT ACCOUNTING POLICIES AND NOTES TO ACCOUNTS (Contd.) Year ended Year ended 31 March, 2010 31 March, 2009 Rs. in crores Rs. in crores 1 Traffic Revenue 11.55 2.9 2 Other Income - 0.06 3 Interest Income 0.09 0.22 Total Income 11.64 3.18 EXPENDITURE 4 Salaries and Related Costs 0.86 0.73 5 Network Costs 13.20 1.46 6 Operating and Other Expenses 4.23 3.85 7 Interest Expense 1.82 2.13 8 Depreciation 4.79 3.4 Total Expenditure 24.90 11.57 INCOME CONTINGENT LIABILITIES (i) Claims for other Taxes - - (ii) Other Claims - - - -
30. As at 31 March, 2010, the Company through it’s wholly owned subsidiary, VSNL SNOSPV Pte. Ltd., has 43.16 percent (2009: 43.16 percent) ownership in the issued and paid-up share capital of the Joint Venture SEPCO Communications (Pty.) Ltd. (Sepco). (i) SEPCO is an investment company which has acquired 51 percent controlling stake in the issued and paid-up share capital of Neotel (Pty.) Ltd, the licensed second network operator in South Africa. The Company’s share in income, expenses, assets and liabilities based on the uniform accounting policy adopted by the Company and after inter-company eliminations for the year ended 31 March, 2010 and 31 March, 2009 are as follows: As at As at 31 March, 2010 31 March, 2009 LIABILITIES: Rs. in crores Rs. in crores 1 Reserves and Surplus (641.63) (145.23) 2 Secured Loan 858.71 479.22 3 Unsecured Loan 274.73 140.74 ASSETS 4 Fixed Assets (a) Gross Block 805.90 401.84 (b) Less: Accumulated Depreciation 194.37 83.90 (c) Net Block 611.53 317.94 (d) Capital work-in-progress 161.21 159.85 772.74 477.79 5 A. Current Assets (a) Inventories 30.74 15.41 (b) Sundry Debtors 108.26 64.26 (c) Cash and Bank Balances 33.16 99.80 (d) Other Current Assets 123.40 65.22 295.55 244.69 B. Loans And Advances 69.30 25.97 364.85 270.66
141 COMMUNICATIONS Twenty Fourth Annual Report 2009-2010 Tata Communications Limited
SIGNIFICANT ACCOUNTING POLICIES AND NOTES TO ACCOUNTS (Contd.) As at As at 31 March, 2010 31 March, 2009 Rs. in crores Rs. in crores 6 Less: Current Liabilities and provisions (a) Current Liabilities 257.35 159.62 (b) Provisions 25.84 14.19 283.19 173.81 7 Net (Current Liabilities)/Assets 81.66 96.85
Year ended Year ended 31 March, 2010 31 March, 2009 INCOME Rs. in crores Rs. in crores 1 Traffic Revenue 453.61 245.06 2 Other Income (18.36) 1.82 3 Interest Income 5.24 8.15 Total Income 440.49 255.03 EXPENDITURE 4 Salaries and Related Costs 116.18 84.87 5 Network Cost 256.27 124.36 6 Operating and Other Expenses 194.78 136.28 7 Interest Expenses 150.96 73.08 8 Depreciation 96.82 61.7 Total Expenditure 815.01 480.29 CONTINGENT LIABILITIES Rs. in crores Rs. in crores (i) Claims for other Taxes - - (ii) Other Claims - - - -
(ii) On 1st April 2008, Neotel Business Support Systems Pty. Ltd. (a wholly owned subsidiary of Neotel) purchased “Transtel” the telecommunications arm of Transnet Pty Ltd for a consideration of Rs. 134.43 crores. The Capital Reserve arising on this transaction was Rs. 53.02 crores. (2009: Rs. 46.08 crores) Group’s share in the consideration and capital reserve is Rs. 58.02 crores and Rs. 11.67 crores (2009: Rs 10.15 crores) respectively. 31. In the previous year the Company entered into a joint venture (40:60) with Indian Ocean Cableship Pte Limited Singapore (IOCPL) for investment in M/s Cochin Submarine Cable Depot (India) Private Limited. During the year the Company subscribed to 40,000 shares of face value Rs 10 each amounting to Rs 0.04 crores and the said joint venture has been included in consolidated financial statements, however Balance Sheet and Profit & Loss of Cochin Submarine Cable Depot (India) Private Limited has not been disclosed separately as the amounts involved are not significant. 32. Previous year’s figures have been regrouped and reclassified wherever necessary. For and on behalf of the Board
SUBODH BHARGAVA N SRINATH Chairman Managing Director & Chief Executive Officer SANJAY BAWEJA SATISH RANADE Chief Financial Officer Company Secretary & Chief Legal Officer MUMBAI DATED: 31 May, 2010
142 BOARD OF DIRECTORS
Mr. Subodh Bhargava
Mr. Subodh Bhargava, born in 1942, holds a Degree in Mr. Bhargava has been closely associated with technical Mechanical Engineering from the University of Roorkee. and management education in India. He was the Chairman He started his career with Balmer Lawrie & Co., Kolkata of the Board of Apprenticeship Training and Member of before joining the Eicher group of companies in Delhi in the Board of Governors of the University of Roorkee; the 1975. On March 31, 2000, he retired as the Group Chairman Indian Institute of Foreign Trade, New Delhi; Indian Institute and Chief Executive and is now the Chairman Emeritus, of Management, Indore; the Entrepreneurship Eicher group. Development Institute of India, Ahmedabad. He is the past President of CII and the Association of Indian He is currently on the Board of Governors of IIM (Lucknow) Automobile Manufacturers; and the Vice President of the and other Institutions for Engineering and Business Tractor Manufacturers Association. Over several years, he Management Education; the Centre for Policy Research; has been a key spokesperson for Indian industry, Member, Technology Development Board, Ministry of contributing to and influencing government policy while Science & Technology, Govt. of India. simultaneously working with industry to evolve new responses to the changing environment. He has been conferred with the first IIT Roorkee Distinguished Alumnus Award in 2005 by Indian Institute He was a member of the Insurance Tariff Advisory of Technology, Roorkee. Mr Bhargava is the Chairman of Committee, the Economic Development Board of the Tata Communications Limited and also Wartsila India government of Rajasthan. He was also the chairman of the Limited and Director on the boards of several Indian National Accreditation Board for Certifying Bodies (NABCB) Corporates such as Tata Steel Limited; Tata Motors Limited; under the aegis of the Quality Council of India (QCI). Power Finance Corporation Ltd.; Larsen & Toubro Ltd. etc.
Mr. N. Srinath
Mr. N. Srinath, born in 1962, has a degree in Mechanical telecom service in the state of Andhra Pradesh. In April Engineering from IIT (Chennai) and a Management Degree 1999, he took over as the Chief Operating Officer of Tata from IIM (Kolkata), specialising in Marketing and Systems. Teleservices responsible for Sales, Networks and Since joining the Tata Administrative Services in 1986, Mr. Information Technology. From late 2000 till February 2002, Srinath has held positions in Project Management, Sales & he was the Chief Executive Officer of Tata Internet Services, Marketing and Management in different Tata companies a start-up Internet services business serving retail and in the ICT sector over the last 24 years. enterprise customers. Thereafter, he moved to Tata Communications Limited (then VSNL) as a whole-time On completing his probation with the TAS in 1987, Mr. director in charge of operations. Srinath joined Tata Honeywell, a start-up in the business of process control systems, as Project Executive working Mr. Srinath has received several recognitions in the telecom till late 1988 on securing various statutory approvals and industry. He was named the ‘Telecom CEO of the Year’ in funding necessary for the project. He then moved to Tata Asia by the leading publishing group Telecom Asia in the Industries as Executive Assistant to the Chairman, an 2006 edition of their awards. The Institute of Economic assignment he handled till March 1992. In that period, he Studies (IES), a research oriented organisation, conferred was also part of the team that set up Tata Information its Udyog Rattan Award on Mr. Srinath in November 2006. Systems (later Tata IBM). From June 1992 to February 1998 In 2008 and 2009, Mr. Srinath was named as the world’s he handled a number of assignments in Tata Information eighth most influential telecom personality by the Global Systems Limited in Sales & Marketing to enterprise Telecoms Business magazine as well as the ‘Telecom Person customers in the banking, retail, petroleum and process of the Year’ by the India-based Voice and Data magazine manufacturing sectors. in 2008. In March 1998, Mr. Srinath returned to Tata Industries as Since February 2007 Mr. Srinath has been the Managing General Manager (Projects) responsible for overseeing the Director of Tata Communications Limited & CEO of the project implementation of Tata Teleservices fixed line Tata Communications global group of companies.
143 COMMUNICATIONS Twenty Fourth Annual Report 2009-2010 Tata Communications Limited
Mr. Kishor A. Chaukar Mr. Kishor A. Chaukar, born in 1947, currently the Managing Mr. Chaukar is a member of the Group Corporate Centre, Director of Tata Industries Limited (TIL), is a post-graduate which is engaged in strategy formulation at the House of in management from the Indian Institute of Management Tata. He also chairs the Tata Council for Community at Ahmedabad. Initiatives (TCCI) - the nodal forum of the Group on matters related to corporate sustainability. TIL is the smaller of the two principal holding companies of the Tata Group, India’s largest and best-known Mr. Chaukar is a member of the Board and Advisory Board conglomerate. TIL acts as the new projects promotion arm of several national and international organizations in the of the Group, and spearheads the entry of the Group in Corporate Sustainability and Human Rights space, viz. the emerging, high-tech and sunrise sectors of the Global Reporting Initiative – Amsterdam Shell Foundation economy. Breathing Space India Advisory Board – New Delhi, and the Tata Memorial Centre – Mumbai. In his capacity as Managing Director of TIL, Mr. Chaukar is Mr. Chaukar was previously the managing director of ICICI responsible for enhancing the value and interest of TIL in Securities & Finance Company Ltd. (July 1993 to October TIL divisions and in companies where TIL has made 1998), and a member of the Board of Directors of ICICI Ltd. investments and/or has sponsored. One of the tasks from February 9, 1995 to October 15, 1998. His other performed in the quest for this value enhancement is to experiences include a long stint in Bhartiya Agro Industries provide strategic direction to these companies. Foundation, an NGO engaged in rural development.
Mr. P.V. Kalyanasundaram Mr. Kalyanasundaram has played a leading role in various public activities. As the managing trustee of the Green Mr. P.V. Kalyanasundaram was born in 1958. He received a Peace World Charitable Trust, Chennai, he took an active Bachelor of Arts degree in history, from the New College, part in the various welfare measures organized by the trust. Chennai in 1977, followed by a Bachelor of Law degree from Madras Law College in 1982. These include organizing free eye camps to treat poor people. An advocate by profession, Mr. Kalyanasundaram was a legal advisor for Pallavan Transport Corporation, Chennai, Between 2000 and 2004, Mr. Kalyanasundaram was the a government of Tamil Nadu undertaking, as well as a legal chairman and trustee, Pachayappa’s Trust, Chennai. In that advisor to the Chennai Metropolitan Water Supply and position, he managed several educational institutions, Sewerage Board. He was also a trustee of the Jawaharlal including seven colleges and six schools, and looked after Nehru Port Trust, Mumbai, and a member of the Censor immovable properties. Board, Chennai.
Dr. V.R.S. Sampath Dr. V.R.S Sampath born in 1956, is an advocate and editor • Conflict Transformation of the International Civilian of Sattakadir, a law jornal published in Chennai. He is an Peace Keeping and Peace Building Program, arbitrator and mediator specially trained from Canada and Information Dissemination Program, in Austria. Austria. He is currently an empanelled advocate to both Canara Bank and Indian Overseas Bank. He is an • Peace Building and Conflict Resolution Program, The Independent Director of Arani Agro Oil Industries Limited, Canadian International Institute of Applied Hyderabad, a joint venture project of India and Malaysia. Negotiations, Ottawa, Canada. He studied Master of Arts in History, Master of Law in • Human Rights and Development Law Program, International Law and Comparative Constitutional Law. Institute of Social Studies, The Hague, The Netherlands. After that, he was engaged in research programme on • Social Work and Mental Health Program, Social Work Judicial History and awarded Director of Philosophy (Ph.D) and Youth Leadership Program in California State by the University of Madras. He holds a Post Graduate University, Long Beach, USA. Diploma in Tourism. Dr. Sampath has been nominated for the following Dr. Sampath has participated in the following International Government Committees: Certificate programmes:
144 • Member of the Board of Governors of Indian Council committees and is the chairman of various non- of Forestry Research and Education, Ministry of governmental organizations. He is a member of the Indian Environment and Forests, Govt. of India. Council of Arbitration and other professional associations.
• Member of Disciplinary Committee of the Institute of Dr. Sampath is an advisor for many educational institutions Cost and Work Accountants of India, Ministry of in India and abroad. Corporate Affairs, Government of India. He regularly organizes seminars and workshops on various • Member of Tamil Nadu State Library book selection professional programmes and development issues. He is committee of Govt. of Tamil Nadu. (A grade an author of many books of law, history, public affairs and Committee). tourism.
• Member of the best Tamil book selection committee Dr. Sampath has travelled to many countries to participate Govt. of Tamilnadu. in seminars, workshops and conferences on law, human rights, social work, corporate governance, etc. Dr. Sampath has served on various government
Mr. Amal Ganguli professional career, he has dealt with a variety of clients including US AID, World Bank, ADB, NTPC, Alcatel, GE, Mr. Amal Ganguli, born in 1939, is a fellow member of the Hindustan Lever, STC, Hewlett Packard and IBM. Institute of Chartered Accountants of India and the Institute of Chartered Accountants of England and Wales Mr. Ganguli is a member of the Board of Directors of several and a member of the New Delhi Chapter of The Institute companies such as Hughes Communications India Limited, of Internal Auditors, Florida, USA. He was the Chairman Tube Investments of India Limited, HCL Technologies and Senior Partner of Pricewaterhouse Coopers (PWC), Limited, New Delhi Television Limited, Century Textiles and India till his retirement on 31 March 2003. Besides his Industries Limited, Aricent Technologies (Holdings) Ltd, qualifications in the area of accounting and auditing, Mr. AVTEC Ltd, ICRA Ltd, Tata Communications Limited, Maruti Ganguli is a fellow of the British Institute of Management Suzuki India Ltd and Triveni Engineering and Industries and alumnus of IMI, Geneva. Limited. Mr. Ganguli, trained in the UK to become a Chartered Mr. Ganguli is a member of Audit Committees of HCL Accountant. He was encoded as a Partner to PWC, UK/USA Technologies Limited, Century Textiles and Industries for a year in 1972-73. During his career spanning over 40 Limited, Tube Investments of India Limited and ICRA Ltd. years, Mr. Ganguli’s range of work included International He is chairman of the Audit Committee of Aricent Tax advice and planning, cross border investments, Technologies (Holdings) Ltd, New Delhi Television Ltd, Tata Corporate mergers and re-organizations, financial Communications Limited and Maruti Suzuki Ltd. and a evaluation of projects, management, operational and member of Remuneration Committees of Tube Investments statutory audit and consulting projects funded by of India Limited and New Delhi Television Limited. International funding agencies. In the course of his
Mr. Vinod Kumar As president and managing director of Tata Mr. Kumar has a wide range of cross-functional experience Communications International Pte. Ltd., a subsidiary of Tata in the telecommunications industry. He also has an Communications Limited, and Chief Operating Officer, Mr. impressive track record in developing business strategies Kumar is responsible for expanding Tata Communications and creating fast growth organizations. He was previously roadmap and charter into the global communications Senior Vice-President of Asia Netcom and responsible for market. Mr. Kumar is also responsible for the Global Data all aspects of generating top-line growth, including and Mobility Services line of business and oversees the strategy formulation, product marketing and sales. He was Engineering, IT and Operations functions for the Company. actively involved in all aspects of the financial restructuring,
145 COMMUNICATIONS Twenty Fourth Annual Report 2009-2010 Tata Communications Limited
and eventual asset sale of Asia Global Crossing to China account management and operations. Netcom, resulting in the formation of Asia Netcom. Mr. Kumar born in 1965, completed his coursework for a In 1999, Mr. Kumar joined WorldCom Japan as Chief Masters in Business Administration from The American Executive Officer and prior to that, he held various senior University. He also graduated with honors in Electrical and positions in Global One in the United States and Asia where Electronic Engineering at the Birla Institute of Technology he has had major responsibilities in market management, sales, marketing, product management, multinational and Science in India.
Mr. S. Ramadorai
Mr. S. Ramadorai, born in 1944, Vice-Chairman of Tata In recognition of Mr. Ramadorai’s commitment and Consultancy Services Limited (TCS), has been associated dedication to the IT industry he was awarded the Padma with TCS for the past 38 years. He took over as CEO of TCS Bhushan in January 2006. In April 2009, he was awarded in 1996 when TCS’s revenues were at $160 million and has the CBE (Commander of the Order of the British Empire) since led the company through some of its exciting phases, by her Majesty Queen Elizabeth II for his contribution to including its going public in 2004. In October 2009, he the Indo British economic relations. stepped down as CEO, leaving a $6 billion global IT services His academic credentials include a Bachelors degree in company to his successor and is now the Vice Chairman of Physics from Delhi University (India), a Bachelor of the company. Engineering degree in Electronics and Telecommunications from the Indian Institute of Science, Bangalore (India) and Mr. Ramadorai is on the Boards of a number of companies a Masters degree in Computer Science from the University and educational institutions – Tata Industries, Hindustan of California - UCLA, USA. In 1993, Mr. Ramadorai attended Unilever Limited, Bombay Stock Exchange and the MIT the Sloan School of Management’s highly acclaimed Senior Sloan School of Management (EMSAB). Executive Development Program. Mr. A.K. Srivastava Mr. A.K. Srivastava was born in 1951. Mr. Srivastava is a telecommunications industry in Operations/Projects Bachelor of Science and has a Master’s Degree in Science Management/Licensing and Regulations. besides being a Graduate from the Institution of Electronics Mr. Srivastava is currently the Deputy Director General and Telecommunication Engineers (IETE). (Access Service), Department of Telecommunications, Mr. Srivastava joined the Government of India service in Government of India. He is also a Government nominee 1973. Thereafter, Mr. Srivastava has worked in Department director on the boards of ITI Ltd. and HTL Ltd. of Telecom, ONGC, TCIL and has a wide experience in the
Mr. Arun Gandhi
Mr. Arunkumar Ramanlal Gandhi born in 1943, is a director Mr. Gandhi has been assisting the Tata Group in acquiring on the Board of Directors of Tata Sons Ltd and is a member diverse assets and companies across the globe. This has of the Group Corporate Centre of the Tata Companies. He enabled the Tata Group to acquire critical assets, resources is a fellow member of the Institute of Chartered and access to world class R&D facilities. Accountants in England and Wales and the Institute of Chartered Accountants of India. He is an associate member In the course of his professional career, Mr. Gandhi has of the Chartered Institute of Taxation, London. worked on numerous mergers and acquisitions, both crossborder and domestic transactions. Prior to joining Tata Sons, he was with M/s N. M. Raiji & Co., Chartered Accountants. He joined the firm as a partner in Mr. Gandhi has been a member of various committees July 1969 and in 1993 became a senior partner. The firm constituted by industry forums and regulatory bodies such has more than 60 years of professional standing. He joined as SEBI’s Takeover Panel Exemption Committee and the Tata Sons Limited as an Executive Director on 18th August Institute of Chartered Accountants of India’s Accounting 2003 and continued in that position till 17th August 2008. Standards Board among various others.
146 Dr. Ashok Jhunjhunwala Dr. Ashok Jhunjhunwala, born in 1953, received his B.Tech “Excellence in Science and Technology” for the year 2002, degree from IIT, Kanpur, and his MS and Ph.D degrees from Shri Om Prakash Bhasin Foundation Award for Science & the University of Maine. From 1978 to 1981, he was with Technology for the year 2004, Awarded Jawaharlal Neheru Washington State University as Assistant Professor. Since Birth Centenary Lecture Award by INSA for the year 2006, 1981, he has been teaching at IIT, Madras, where he leads IBM Innovation and Leadership Forum Award by IBM for the Telecommunications and Computer Networks group the year 2006, awarded Honorary Doctorate by the institute (TeNeT). This group works with industry in the of Blekinge Institute of Technology Sweden and Excellence development of technologies relevant in India. It has in Science and Technology Award, recently awarded “Bharat incubated several technology companies which work in Asmita Vigyaan Tantragyaan Shresththa Award” for the best partnership with TeNeT group to develop Telecom and Banking products for Indian Urban and Rural Markets. He use of Science & Technology through innovation by MIT chairs Rural Technology Business Incubator (RTBI) at IIT Group of Institutions. He is a Fellow of World Wireless Madras and Mobile Payment Forum of India (MPFI). Research Forum, IEEE and Indian academies including INAE, IAS, INSA and NAS. Dr. Ashok Jhunjhunwala has been awarded the Padma Shri in the year 2002. He has been awarded Shanti Swarup Dr. Jhunjhunwala is a Director in the Board of State Bank Bhatnagar Award in 1998, Dr, Vikram Sarabhai Research of India, TTML, Polaris, 3i Infotech, Sasken, Tejas, IDRBT and Award for the year 1997, Millennium Medal in Indian Exicom. He is a member of Prime Minister’s Scientific Science Congress in the year 2000 and H.K. Firodia for Advisory Committee.
Mr. Manish Sinha Born in 1967, Mr. Manish Sinha has been DDG (LF) since the incumbent operator i.e. BSNL in India. He has also dealt May 2008 in the Licensing Division of Department of with issues relating to evaluation of license conditions, Telecommunications, Government of India, where he has especially those related to the issues of international long 19 years experience in the Telecom Department. He has distance network. His current work is to render financial spent a decade in the Operating Division of the advice on all licensing issues that arise in DOT. His main Department of Telecom, and has worked in the finance responsibility is in the arena of determination, collection area of the Department. From 1996 to 1999, he dealt with and assessment of license fee that are paid by the various policy matters and procurement for the Telecom Sector. telecom licensees to the government of India. He holds He has also been instrumental in setting up the Banking specialized degrees in financial management from IGNOU Operations and Treasury Functions in the organization of and an MBA in public policy from the University of Birmingham.
147
Tata Communications Limited Registered office : VSB, M.G. Road, Fort, Mumbai - 400 001.
TWENTY FOURTH ANNUAL GENERAL MEETING - 6 AUGUST, 2010 AT 1100 HRS.
ATTENDANCE SLIP
I, Mr/Mrs./Miss...... LF/Client ID. No ...... hereby record my presence at the 24th Annual General Meeting of Tata Communications Limited at the M. C. Ghia Hall, Kalaghoda, Mumbai - 400 001.
...... Signature of the Shareholder or Proxy
Notes: 1. Please fill this Attendance Slip and hand it over at the entrance of the hall. 2. SHAREHOLDERS ARE REQUESTED TO BRING THEIR COPIES OF THE NOTICE DOCUMENT WITH THEM.
Tata Communications Limited Registered office : VSB, M.G. Road, Fort, Mumbai - 400 001. PROXY
I/We ...... (LF/Client ID. No...... ) (Address)...... being a Member/Members of Tata Communications Limited, do hereby appoint ...... of ...... or/failing him ...... of ...... as my/our proxy in my/our absence to attend and vote for me/us on my/our behalf at the 24th Annual General Meeting of the Company to
be held at 1100 Hrs on Friday, the 6th August, 2010, and at any adjournment thereof.
IN WITNESS whereof I/We have set my/our hand/hands this...... day of...... 2010.
Please affix 1.00 Re. Revenue Stamp (Signature of the Shareholder across the stamp) Note : 1. A member entitled to attend and vote is entitled to appoint a proxy to attend and vote instead of himself, and a proxy need not be a Member. 2. A One Rupee Revenue Stamp should be fixed to this and it should then be signed by the Member. ¡ 3. The instrument appointing the proxy and the power of attorney or other authority, if any, under which it is signed, or a copy of that power of authority duly certified by a notary or other proper authority, shall be deposited at the Registered Office of the Company not later than forty-eight hours before the time for the holding of the Meeting, in default, the instrument of proxy shall not be treated as valid.
NOTES NOTES Sweden
Finland
Iceland
Norway Russia
Hudson Bay Baltic Estonia Gulf of Alaska Canada Sea
Denmark Latvia North Sea Sea of London U. K. FrankfurtLithuania Okhotsk Belarus Ireland Netherlands Poland
Germany Belgium Ukraine Lux. Montreal Czech. Rep. Slovakia Kazakhstan
Austria Hungary France Switz. Slovenia Romania Croatia Mongolia Italy Aral Sea
Herndon Uzbekistan Japan Bulgaria Black Sea Kyrgyzstan Sea of Neuilly-sur-SeineGreece Spain Azerbaijan Japan United States Turkey Turkmenistan (East Sea) Pacific Azores Portugal Tajikistan South Korea
Malta Yellow China Sea Mediterranean Sea Syria New Delhi Atlantic Tunisia Iran Afghanistan Matawan Madrid Morocco Iraq Jordan East Kuwait China Algeria Sea Nepal Libya Mumbai Pakistan Kolkata Saudi Mexico Gulf The Bahamas Western Arabia Hong Kong Egypt Qatar of Mexico Sahara Burma
U. A. E. Bangladesh Cuba Arabian India Dominican Oman Sea Republic Mauritania Haiti Jamaica Laos Niger Bay of Bengal Antigua Mali Yemen South China Belize Chad Guadeloupe Cape Thailand Sea Dominica Honduras Verde Guatemala Senegal Eritrea Vietnam Martinique Abu Dhabi Caribbean Sea St. Lucia Gambia Sudan Chennai Nicaragua St. Vincent Philippines Guam El Salvador Grenada Burkina Faso Pune Cambodia Djibouti Ocean Guinea Bissau Guinea Costa Ghana Benin Rica Trinidad and Tobago Nigeria Cote d'Ivoire Ethiopia Sri Lanka Panama Sierra Leone Palau Venezuela Central African Micronesia Liberia Republic Guyana Cameroon Colombia Suriname Somalia Malaysia Equatorial Guinea Uganda Kenya Kiribati Sao Tome & Principe Ecuador Gabon Dem. Rep. Of Congo Ocean Congo Tanzania Indian Singapore Indonesia Solomon Papua New Islands Guinea East Timor Peru Comoros Brazil Angola Zambia Bolivia Vanuatu Fiji
French Polynesia Zimbabwe Ocean Mozambique Namibia Mauritius Paraguay Botswana New OFFICE LOCATIONS Caledonia Madagascar Chile Australia
South Africa
Uruguay Great Australian Ocean Bight Tasman Sea Argentina Corporate Office Sydney Registered Office New Zealand Regional Office
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