www.tatacommunications.com 2007-2008 22nd Annual Report

Tata Communications Limited VSB, MG Road, Fort, Mumbai 400001 India Beaufort Sea Kara Sea Baffin Bay

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India Middle East Europe Tata Communications & North Africa Tata Communications LVSB Kashinath Dhuru Marg Tata Communications Exchange Tower, Suite 7.03 Prabhadevi Mumbai 400028 Hamdan Street, 2 Harbour Exchange Square Tel +91 22 6657 8765 City Center Building London, E14 9GE Fax +91 22 6639 5162 Block – A, 2nd Floor, England Offi ce # 204 Tel +44 20 7519 4610 Asia P.O. Box 41660 Fax +44 20 7519 4609 Tata Communications Abu Dhabi, 5 Shenton Way United Arab Emirates Tata Communications #34–10 UIC Building Tel +971 2 626 6223 131 Avenue Charles de Gaulle Singapore 068808 Fax +971 2 627 2624 92200 Neuilly sur Seine Tel +65 6551 3600 France Fax +65 6423 0315 North America Tel +33 1 41 43 4200 Tata Communications Fax +33 1 41 43 4200 Tata Communications 12010 Sunset Hills Road, 2402 Bank of America Tower 4th Floor Tata Communications 12 Harcourt Road Central Reston, Virginia 20190 Avenida de Europa 4, Bajo A Hong Kong USA Parque Empresarial “La Moraleja” Tel +852 3693 8888 Tel +1 703 547 5900 28108 Alcobendas Fax +852 3690 2022 Fax +1 703 547 6555 Madrid, Spain Tel +34 916 57 48 90 Australia Tata Communications Fax +34 916 62 06 79 Tata Communications 90 Matawan Rd – 3rd Floor King Street Wharf Matawan, NJ 07747 Suite 503, 35 Lime Street USA Sydney NSW 2000 Australia Tel + 1 732 888 6700 Tel +61 2 9299 2014 Fax + 1 732 888 6809 Fax +61 2 9299 2019 Tata Communications 1555 Rue Carrie-Derick Montréal (Québec) Canada, H3C 6W2 Tel +1 514 868 7272 www.tatacommunications.com Fax +1 514 868 7234 © 2008 Tata Communications Ltd. All Rights Reserved. Tata Communications Limited TWENTY SECOND ANNUAL REPORT 2007-08

CONTENTS

Corporate Details ...... 2 Notice ...... 3 Directors’ Report ...... 7 Report on Corporate Governance ...... 18 Declaration by CEO regarding Company’s Code of Conduct and CEO/CFO Certification ...... 32 Secretarial Responsibility Statement ...... 33 Auditors’ Certificate on Corporate Governance ...... 34 Auditors’ Report ...... 35 Balance Sheet ...... 38 Profit & Loss Account ...... 39 Cash Flow Statement ...... 40 Schedules ...... 41 Notes to the Accounts ...... 54 Section 212 of the Companies Act, 1956, related to Subsidiary Companies 81 Consolidated Accounts Auditors’ Report on Consolidated Financial Statements ...... 85 Consolidated Balance Sheet...... 86 Consolidated Profit & Loss Account ...... 87 Consolidated Cash Flow Statement ...... 88 Consolidated Schedules ...... 89 Consolidated Notes to the Accounts ...... 95 Board of Directors ...... 122

Annual General Meeting on Saturday, 2 August 2008, 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 2008)

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) Mr. H. P. Mishra (Government Nominee)

Mr. Satish Ranade Company Secretary & Chief Legal Officer Mr. Rajiv Dhar Chief Financial Officer REGISTERED OFFICE VSB, Mahatma Gandhi Road, Fort, Mumbai – 400 001. CORPORATE OFFICE LVSB, Kashinath Dhuru Marg, Prabhadevi, Mumbai – 400 028.

BANKERS Bank of America Citibank Inc. Deustche Bank HDFC Bank Ltd. Hongkong & Shanghai Banking Corporation Indian Overseas Bank State Bank of India Axis Bank Ltd. 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 Satam Estate, 3rd Floor, Above Bank of Baroda, Chakala Andheri (East), Mumbai - 400 099.

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2 \\ceps6\D\Sales\Mohan\Tata Communication AR 2008 ------???/SBC/7-7/ NOTICE NOTICE is hereby given that the Twenty Second Annual General Meeting of Tata Communications Limited will be held at 1100 hours on Saturday, 2 August 2008, at MC Ghia Hall, Bhogilal Hargovindas Building, Second Floor, 18/20 Kaikhushru Dubash Road Marg, 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 2008, 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 declare dividend for the financial year 2007-2008.

3. 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.

4. 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.

5. 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

6. To appoint Mr. Arun Gandhi as a Director liable to retire by rotation in respect of whom a notice under the provisions of section 257 of the Companies Act, 1956 has been received by the Company from a member signifying his intention to propose Mr. Arun Gandhi as a candidate for the office of director.

7. 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 2008-2009 on such remuneration as may be mutually agreed upon between the Board of Directors and the Auditors, plus reimbursement of service tax, traveling 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 2009) wherever in India or abroad.”

By Order of the Board of Directors

Satish Ranade Company Secretary & Chief Legal Officer Dated: 4 July 2008 Registered Office : VSB, M.G. Road, Fort, Mumbai - 400 001.

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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 all items except item Nos.1 to 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. 5. This may be taken as notice of declaration of dividend for 2007-2008 in accordance with Article 93 of Articles of Association of the Company in respect of dividend for that year when declared. 6. Registers of members and transfer books of the Company shall remain closed from 26 July 2008 to 2 August 2008 (both days inclusive) for the purpose of ascertaining eligibility to dividend. 7. The dividend as recommended by the Board of Directors, if declared at this Annual General Meeting, shall be paid on or after Thursday the 7 August 2008. (i) to those shareholders whose names appear on the Company’s Register of Members after giving effect to all valid share transfers in physical form lodged with the Registrar & Transfer Agents (R&T Agents) of the Company on or before Friday, 25 July 2008. (ii) in respect of shares held in electronic form, to those “deemed members” whose names appear in the statements of beneficial ownership furnished by National Securities Depository Limited (NSDL) and Central Depository Services (India) Limited (CDSL) as at the end of business on Friday, 25 July 2008. In respect of shares held in demat mode, the dividend will be paid on the basis of beneficial ownership as per details to be furnished by NSDL and CDSL for this purpose. 8. 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 2001 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 as given in the table below.

Date of Balance as on Dividend Remarks Transfer to AGM/Board 30th June 2008 for the year Investor Education & Protection Fund 27 September 2001 1,587,100.00 2000-01 Final Dividend 27 Oct 2008 14 December 2001 1,226,859.30 2001-02 Interim Dividend 13 Jan 2009 20 August 2002 2,040,444.00 2001-02 Final Dividend 19 Sept 2009 2 September 2003 1,411,259.50 2002-03 Final Dividend 2 Oct 2010 2 September 2004 805,635.00 2003-04 Final Dividend 2 Oct 2011 14 September 2005 1,060,479.00 2004-05 Final Dividend 14 Oct 2012 13 September 2006 901,219.50 2005-06 Final Dividend 14 Oct 2013 2 August 2007 819,004.00 2006-07 Final Dividend 2 Sept 2014 Total 9,852,000.30 9. 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. 10. Members are requested to notify any change in their addresses immediately, in any event not later than Friday, 25 July 2008, so as to enable us to dispatch the dividend warrants at the correct addresses: a) In case of physical shares to the R & T Agents, M/s Sharepro Services India Private Limited, Satam Estate, 3rd Floor, Above Bank of Baroda, Chakala, Andheri East, Mumbai-400 099. b) In case of shares held in demat form to their depositary participants (DPs).

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4 CEPS 6\D\SALES\MOHAN\TATA COMMUNICATION AR 2008\NOTICE 08.PMD\AMD\3-7/pravin/5.7/ Annexure to the Notice dated 4 July 2008

The Statement of Material Facts pursuant to Section 173 (2) of the Companies Act, 1956.

In respect of Item No. 6

Mr. Arun Gandhi was appointed as an additional Director on the Board with effect from 10 September 2007 under Article 66B of the Articles of Association of the Company. Pursuant to the provisions of Section 260 of the Companies Act of 1956 and under the said Article, Mr. Arun Gandhi holds office up to the date of the forthcoming Annual General Meeting. Mr. Arun Gandhi is eligible for appointment as a Director of the Company and the Company has, pursuant to section 257 of the Companies Act of 1956, received a notice in writing proposing his candidature for appointment. If appointed, Mr. Arun Gandhi will act as a non-executive Director liable to retire by rotation.

Necessary details regarding Mr. Gandhi and his brief resume has been given in the Annexure attached to the Notice. Keeping in view the experience and expertise, his appointment as Director of the Company is recommended.

None of the Directors other than Mr. Arun Gandhi is concerned or interested in the above Resolution.

In respect of Item No.7

M/s. S.B. Billimoria & Co., Chartered Accountants, were appointed as Statutory Auditors of the Company at the Twenty First Annual General Meeting held on 2 August 2007 and hold office till the conclusion of this 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 the provisions of Section 224A of the Companies Act, 1956.

None of the Directors are interested in the resolution.

By Order of the Board of Directors

Satish Ranade Company Secretary & Chief Legal Officer Dated: 4 July 2008 Registered Office : VSB, M.G. Road, Fort, Mumbai - 400 001.

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COMMUNICATIONS Twenty Second Annual Report 2007-2008 Tata Communications Limited

Details of Directors Seeking Appointment/Re-Appointment at the 22nd Annual General Meeting

Particulars Mr. PV Kalyanasundaram Dr. VRS Sampath Mr. Amal Ganguli Mr. Arun Gandhi Date of Birth 25-Feb-58 12-Aug-56 17-Oct-39 15-Mar-43 Date of Appointment 14-Sep-05 14-Sep-05 17-Jul-06 10-Sep-07 Qualifications Bachelor of Arts degree in Bachelor of Arts degree in Fellow of the Institute of Fellow member of the History from the New history from the Presidency Chartered Accountants in Institute of Chartered College, Chennai, Bachelor College, Bachelor of Law England and Wales, Fellow Accountants in England and of Law degree from Madras degree from Madras Law of Institute of Chartered Wales and the Institute of Law College College, Master of Law Accountants of India, Fellow Chartered Accountants of Degree and a PHD from the of British Institute of India. He is an associate University of Madras. Management, member of member of the Chartered Masters of Arts degree in New Delhi Chapter of Institute of Taxation, London. 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 Accounting and Audit Functional Area Directorships held in other NIL 1 9 7 Public Companies (excluding foreign and private companies) Memberships/Chairmanships NIL 1 9 5 of Committees in other Public Companies Shareholding NIL NIL NIL NIL

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DIRECTORS’ REPORT Dear Shareholders, The directors are pleased to present the 22nd annual report Internationally, your Company remains one of the top three and audited accounts of Tata Communications Limited for providers of international wholesale voice services and the financial year ended 31 March 2008. wholesale Voice over Internet Protocol (VoIP) services. It is one of the largest providers of submarine cable capacity FINANCIAL PERFORMANCE in the world, is a global Tier-1 Internet Services Provider During the year under review, 2007-08, your Company (ISP) and is a major player in the growing global IP Transit earned a total revenue of Rs. 34.65 billion compared to Rs. market. Your Company also offers telecommunication services through a subsidiary in Sri Lanka and joint 39.58 billion during the previous year. Profit before tax for ventures in Nepal and South Africa. Tata Communications

the year was Rs. 4.49 billion, against Rs. 7.12 billion in the is the only Indian telecom company identified by the previous year. Profit after tax was Rs. 3.04 billion compared Boston Consulting Group as one of the new global to Rs. 4.68 billion in the previous year. challengers. On a consolidated basis, for 2007-08, the Company’s total During the year under review, your Company strengthened income was Rs. 85.37 billion, with an EBIDTA of Rs. 8.45 its position in international wholesale voice services and billion and profit before tax and exceptional items of Rs. grew its carrier and enterprise data businesses. The global 1.60 billlion. demand for bandwidth has surged, given increasing The audited annual accounts for the year 2007-08 have broadband penetration, the popularity of rich media digital been drawn up taking into account the court order content and expansion into emerging markets. Tata Communications aims to leverage its TGN network, which approving the hive off of the retail business unit with effect is one of the most recent and advanced submarine cable from 1 March 2007. and Internet Protocol (IP) networks, to meet the demand Dividend for converged IP solutions. Your Company is actively involved in the creation of additional submarine cable The directors are pleased to recommend a dividend of systems connecting emerging markets in Asia, the Middle Rs.4.50 per share (Rs.4.50 per share for the previous year) East and Africa to Europe, to meet the demands of for the financial year ended 31 March 2008. The amount consumer broadband and enterprise customers over the available for appropriation is Rs. 20.76 billion, out of which next five to eight years. the Company proposes to transfer Rs. 332.72 million to general reserves, leaving Rs. 18.92 billion to the balance OPERATIONAL REVIEW sheet. Your Company operates under three main business “TATA COMMUNICATIONS” segments globally – Wholesale Voice, Enterprise and Carrier Data and Other Services. During the year 2007-08, the Company changed its name Wholesale Voice to Tata Communications Limited. The Company also signed the Brand Equity and Business Promotion Agreement (BEBP • International Long Distance (ILD) Agreement) with Tata Sons Limited, the owners of ILD voice services were traditionally your Company’s intellectual property rights for the brand name / corporate core business. Tata Communications remains one of name ‘Tata’. India’s leading providers of international voice communication services. Your Company also has several During the year 2007-08, the Company completed the hundred direct and bilateral relationships with leading integration of its major international acquisitions, TGN and international voice telecommunication providers and Teleglobe, giving the Company expanded global reach and carries over 23 billion minutes of international ability to deliver IP-leveraged communications solutions wholesale voice traffic on an annualised basis. to businesses and consumers worldwide. On 13 February Over the last five years, the international telephony 2008, the Company launched its new identity and the market in India has been under pressure due to brand “Tata Communications” integrating the former VSNL, increasing competition, falling rates and lower VSNL International, Teleglobe and CIPRIS brands margins. During the year under review there was worldwide. further reduction in tariffs and interconnect rates, increasing the downward pressure on revenues. OVERVIEW Therefore, globally your Company continues to focus Over the last few years, your Company, steadfastly pursuing on increasing volumes and thus revenues, while its strategy, has successfully completed large international cutting costs to improve margins. Your Company acquisitions and invested heavily in communications believes that its strategic advantage in this business networks in India and outside. As a result, your Company comes from its carrier relationships supported by the has emerged as one of the top players worldwide in its volumes, reach, and robust state-of-the-art technology major business segments, with operations in 38 countries. and networks, which are difficult to replicate.

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COMMUNICATIONS Twenty Second Annual Report 2007-2008 Tata Communications Limited

• National Long Distance (NLD) geographies. As voice, data and video communications Your Company has a strong national network converge; the demand for enterprise data services is infrastructure and interconnect agreements with all growing worldwide. By developing differentiated basic and cellular mobile service operators in India to services and offering competitive pricing, your carry NLD traffic to and from their networks. However, Company is tapping these large and lucrative global Tata Communications is dependent on getting traffic markets. from these access providers, many of whom have Tata Communications offers a very wide range of acquired their own NLD licenses. Meanwhile, direct telecommunication solutions that can be seamlessly customer access mechanisms such as the Carrier integrated across products and geographies and Access Code (CAC), have not yet been implemented. extensively customised. In addition to international and The telecom regulator has recently initiated a national private leased circuits (IPLCs and NPLCs), your consultation process for the implementation of CAC. Company offers a wide range of Ethernet Services, Any such implementation will enable Tata Internet Protocol (IP) and managed services Communications to enter the retail long distance encompassing Internet telephony, Multi Protocol Label market. Switching based Virtual Private Networks (MPLS VPNs), Enterprise and Carrier Data Internet access, managed hosting, messaging and other collaboration and conferencing services, managed • Carrier Data security services and other professional services. Tata Communications is one of the world’s leading The Company continues to expand its MPLS VPN and wholesale providers of data, IP and mobile signalling Ethernet services throughout the main global markets. services. Your Company leverages its TGN submarine The expansion is being carried out through direct cable network to provide high-speed bandwidth entry into new markets as well as through connectivity to other telecom carriers and ISPs partnerships with regional / local operators. To further worldwide. The TGN network extends across the strengthen its customer value proposition, Tata Atlantic and Pacific Oceans and also connects Communications partners with Tata Group company locations within Europe and India to Singapore. Your Tata Consultancy Services Limited (TCS) and other Company is now supplementing this network with software and systems integration companies, for two new cables. TGN-Intra Asia will connect Singapore integrated joint product and service offerings. Your to Hong Kong and Japan, via the Philippines and Company also markets its services through indirect Vietnam. TGN-Eurasia will connect Mumbai to Western channels catering to the small and medium enterprise Europe via Egypt. In addition, your Company is playing market in India. an important role in the creation of other cable systems that connect India to the Middle East, Africa After recent amendments to telecom licences, IP VPN and Europe. services are to be provided under the ILD and NLD licences. The wireless as well as fibre last-mile network Tata Communications also operates one of the world’s leading IP networks and provides wholesale IP transit can now be used to provide services under the NLD licence. NLD service providers are also now allowed services to tier-2 ISPs and regional carriers. Your to make their own arrangements for laying the last Company is one of the few ISPs that has a strong position in all the major regions, including North mile for providing leased circuits and for connecting Closed User Groups. This amendment removes a major America, Europe, Asia and Africa. The Company is also hurdle to Tata Communications’ leased services and introducing other value-added services, like Content Delivery Networks (CDN) to leverage its existing the Company is actively expanding its fibre and wireless access network based on the new Wi-Max position with the ISP market segment. technology, to provide its own last mile connectivity Tata Communications is a leading provider of mobile to its enterprise customers. signalling services to mobile operators worldwide. Its offerings include signal conversion and managed Other Services roaming services. In addition, the Company is In the retail space, Tata Communications remains a premier introducing new, innovative services such as mobile Internet Service Provider, offering connectivity, messaging, messaging and M-commerce (cross-border transfer of Internet telephony and a wide variety of content services. money) in partnership with mobile operators and Your Company is also a key player in India’s rapidly growing banks. and high potential broadband sector. • Enterprise Data • Broadband In addition to being a leading player in the Indian As reported last year, your Board had decided to hive data market, your Company also serves enterprises off the retail business unit into its wholly owned globally, providing worldwide connectivity through its subsidiary VSNL Internet Services Ltd. (VISL), to simplify own network, or assisted by partners in different the structure and to enable possible future value

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unlocking in the retail business. A comprehensive given your Company’s contributions towards pushing scheme of arrangement was filed last year for aggressive growth for wireless broadband. transferring the retail business undertakings of Tata Communications Ltd. to VISL and amalgamating Direct • Innovation Internet Limited with VISL. The Hon’ble High Courts Your Company has been a leader in offering at Mumbai and Delhi have now approved this scheme. integrated and innovative Internet services. It Accordingly, the retail business unit stands hived off continued its progress during the year by adding a with effect from 1 March 2007. The name of VISL has slew of access products, applications and content subsequently changed to Tata Communications services across its access products namely, Internet Services Ltd. broadband, dialup and Wi-Fi. Some of the innovative Broadband penetration in India is expected to grow services launched during the year include rapidly over the next few years. The Department of international Wi-Fi roaming, web conferencing, Telecommunications (DoT) had announced 2007 as photos printing, latest movie catalogues. the ‘Year of Broadband’. However, the non-availability New Stream Of Business - Outsourcing Services of good quality last mile networks continues to impede broadband growth. To overcome the last mile To help reduce the total cost of operations and to take connectivity problem, your Company is rolling out advantage of opportunities in the outsourcing business, wireless networks based on Wi-Max technology. Your Tata Communications incorporated a 100% subsidiary, Tata Company has already commercially launched wireless Communications Transformation Services Ltd (TCTS). TCTS broadband services in Bangalore in December 2007 will provide outsourcing services to other communication with encouraging customer feedback. With an service providers, namely, client relationship management ambitious rollout plan, your Company shall soon services, services engineering and design services, extend these services to other select cities as well. procurement network management, etc. TCTS has set up For the wireline broadband service, the focus was on one unit in a special economic zone (SEZ) and another acquiring customers on high revenue generating one within a software technology park (STPI). plans. Therefore, Tata Communications continues to As the global telecom business becomes more competitive be one of the highest ARPU (average revenue per and margins come under pressure, several carriers are user) per month broadband service providers. seeking to create more efficient back-end operations, Wireless Fidelity or Wi-Fi enables computers, PDAs and supported by scalable, low cost delivery models. Your other computing devices to use high speed Internet Company is leveraging its experience and global scale to without any wires or cables, at places that are Wi-Fi offer a variety of high-end operations outsourcing services enabled, called hotspots. Your Company provides out of its delivery centres in India. Over a period of time, broadband public access through Wi-Fi hotspots. With this business promises to be a major avenue of growth for close to 500 hotspots, Tata Communications is India’s your Company. leading Wi-Fi hotspot provider spread across segments such as airports, hotels, coffee shops, restaurant chains, Technical Services Agreement with Neotel hospitals, educational institutes, railway stations, even As reported earlier, the Government of South Africa had stores. Tata Communications clocked a growth of over selected Tata Communications as the strategic partner to 200% in the hotspot space and has been successful participate as the second network operator (SNO) in that in major new site acquisitions. country, to provide telecom services in competition with Tata Communications is actively engaged in Wi-Max the incumbent carrier. South Africa has issued a licence to industry initiatives and has been an active member this SNO, called Neotel Proprietary Ltd, to provide a broad of the Wi-Max Forum, where it has been recently range of telecommunications services (except mobile upgraded to a principal member status. It has also services). Neotel has launched its voice and enterprise been very actively involved with industry and services in that country. During the past year, Tata professional bodies in devising product specifications Communications signed a technical services agreement and requirements for the Indian markets. to provide technical support services to Neotel, to assist it Tata Communications is also the only Indian ISP to be in rolling out its services in South Africa. a member of the Wireless Broadband Alliance (WBA). Joint Venture with CEC In less than two years, your Company has achieved the distinction of chairing this prestigious Your Company has entered into a joint venture agreement international association, which has an impressive with the shareholders of China Enterprise Communications member list including industry leaders like British Limited (CEC), according to which the Company will be Telecom, France Telecom, Korea Telecom, StarHub, acquiring a 50% equity interest in CEC subject to the Swisscom Mobile and T-Mobile. It was a fast-track path approvals of the requisite governmental and regulatory for Tata Communications into this international forum, bodies in China.

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CEC is a value-added telecommunications services and Tata Communications feels that the compensation is integrated IT solutions provider headquartered in Beijing, inadequate as the losses, as estimated by independent China. CEC was recently awarded a nationwide IP VPN agencies at that time, were quantified at a much higher service license by China’s Ministry of Information Industry value. The Company had been pursuing the GoI to consider (MII), the first telecom valued-added service license granted additional compensation and to ensure that the claim was to a non-facilities based service provider. CEC has network not barred by limitation, filed a claim in the Mumbai High reach throughout China, with no regional restrictions on Court in 2005. its service capabilities. CEC provides VPN connectivity Flag Arbitration Matter services to 347 cities in China. FLAG commenced an ICC arbitration against the Company CEC’s reach in China complements the Company’s VPN in December 2004 based on a dispute arising out of the presence in 120 Indian cities and 19 other major business Construction and Maintenance Agreement (C&MA) capitals in North America, Europe and Asia. governing the FLAG Europe-Asia (FEA) cable system. By a This joint venture is the first of its kind in the Chinese 2:1 majority, the ICC Arbitration Tribunal gave a First Partial telecom sector, after China’s entry into the WTO. It will Award in May 2006 granting FLAG access and allowing leverage key synergies between the Company’s high upgradation. The Company has complied fully with this performance global IP network with CEC’s extensive IP VPN Award. coverage in Greater China, providing seamless connectivity In February 2007, FLAG filed a damages claim with the to the world’s most dynamically growing economic regions. same Tribunal based on its finding in the First Partial Award. Customer Service Your Company submitted a detailed defence rejecting any liability for damages. The Tribunal has not yet come out Tata Communications has made significant progress with a verdict. towards transforming itself into a customer-focused organisation. The customer service team’s mission is to Following receipt of the First Partial Award, in September support the entire customer life cycle from service delivery 2006, the Company filed proceedings in the Netherlands to service assurance, including retention and growth. Court seeking to set aside the First Partial Award on several grounds. The Netherlands Court issued its judgment on To support its global operations, the Company is defining 19 March 2008 rejecting the Company’s application. The and implementing stringent service delivery standards that judgment of the Netherlands Court is potentially subject adhere to global best practices. In addition, Tata to two levels of appeal. Based on legal advice, the appeal Communications has created a dedicated team to support is arguable and the Company has filed an appeal in the its carrier partners. Centralised 24 x 7 call centres in India higher court in the Netherlands. support Tata Communications’ global wholesale and Surplus Land enterprise businesses. Two other outsourced call centres support retail and broadband customers. Under the terms of the share purchase and shareholders’ agreements signed between the Government of India and During the year, your Company has progressed towards the strategic partner (parties) at the time of disinvestment creating a global Customer Service and Operations by the Government in 2002, it was agreed that certain organisation, establishing standardized processes and identified lands would be demerged into a separate establishing strict internal and external service level company. It was further provided that if for any reason the targets. Company cannot hive off or demerge the land into a Premature Termination of Monopoly and separate entity, alternative courses as stipulated in the Compensation share purchase and shareholders’ agreement would be explored. A draft scheme of demerger was presented to The Company continues to pursue its claim for the Board in April 2005, and the parties are examining the compensation consequent to premature termination of its legality and feasibility of implementing the scheme. The ILD monopoly. The Government of India (GoI) had allowed land identified for demerger at different locations measures other players into the ILD business from 1 April 2002, 773.13 acres, and carries a book value (as indicated in the terminating Tata Communications’s exclusivity two years accounts) of Rs.1.64 million. ahead of schedule. It gave Tata Communications a • Land to Employees Co-operative Housing Society compensation package and had given an assurance prior to disinvestment that it would consider additional VSNL Employees Co-operative Housing Society, compensation if found necessary on a detailed review, Chennai had moved the Hon’ble Delhi High Court when undertaken. However, in February 2002, just before seeking directions to the Company, Government of the disinvestment of the Company, the GoI unilaterally India (GoI) and the strategic partner in respect of their granted a further dispensation as full and final settlement long pending issue of transfer of 32.5 acres of land of every sort of claim against the preponing of the ILD situated at Padianallur, Chennai to the Society. The demonopolisation. said piece of 32.5 acres of land forms a part of the

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surplus land and, therefore, the Company submitted recognised in international markets. During the year, the before the Hon’ble High Court, its custodial position Company earned several prestigious international by virtue of the SHA in respect of the surplus land. recognitions for the first time, including: The Hon’ble High Court after hearing the matter o Atlantic ACM Excellence in Wholesale 2008. decided in favour of the Society. The matter was appealed by the Government of India for review of o Frost & Sullivan #1 Enterprise Data Services Provider the decision which was finally dismissed by the in India 2007. division bench of Hon’ble High Court. Thereafter, with o Best Wholesale Carrier at the Telecom World Middle the due approval of the Board, in order to comply East 2007. with the orders of the Hon’ble Delhi High Court, the o Best Pan-Asian Wholesale Provider at the Capacity Company has proceeded to transfer the said land to Global Awards 2007. the Society as per the orders of the Hon’ble Delhi High Court. o Telecom magazine Tele.net’s award for Best Long Distance Operator. HUMAN RESOURCES o Tele.net’s award for the Best Internet and Broadband Human Resources continues to be a prime focus area Operator. within Tata Communications. The Company constantly Tata Communications’s CEO Mr. N Srinath was named the reviews its HR practices and policies in order to keep pace with market changes and has embarked on a range of ‘Telecom CEO of the Year’ by the leading publishing group initiatives to create a positive work environment, ample Telecom Asia in the 2006 edition of their awards. The Institute of Economic Studies (IES), a research oriented opportunities for career growth and development and to support managers in enhancing motivation and organisation, also conferred its Excellence Award on Tata engagement levels within their teams. Communications and its Udyog Rattan Award on Mr N. Srinath in November 2006. Tata Communications Group had 5,147 employees on 31 INTERNAL INITIATIVES March 2008, against 4,401 on 31 March 2007. Of these, 1,008 (1,200 last year) were located outside India. Your Company continues with various internal initiatives such as organisation restructuring, profit enhancement, The Company has a structured process for recruiting and cost optimisation, quality programmes, customer care and orienting new recruits and training its workforce in both information technology to compete effectively, improve technical and non-technical areas. The compensation and organisational flexibility and respond quickly to customers. employee benefit practices of Tata Communications aim Some important initiatives are: to be market driven, attractive and innovative, adapted to suit geographic requirements. The Company continued to • Business Excellence maintain harmonious relationships with employees across Your Company has been re-inventing its business the globe. model and transforming itself in tandem with market The Company conducts annual employee satisfaction and regulatory changes. To help drive the surveys and based on the findings, takes up various steps transformation, Tata Communications is implementing to enhance employee engagement and satisfaction. the Tata Business Excellence Model (TBEM), a framework that lays down best practices in areas like Tata Communications has adopted the Code for Affirmative leadership, strategy, customer and market focus, Action and is working with reputed national level bodies knowledge management, human resources, process and non-governmental agencies to provide support in the management planning, customer service and social areas of education, employability and entrepreneurship responsibility. development specifically focused on the socially and Your Company has increased the number of economically disadvantaged sections in the country at employees engaging themselves in these activities large and specifically the SC & ST communities. Tata and has created a strong, quality/TBEM literate Communications continued its partnership with Dr Reddy’s workforce. Among the important achievements are: Foundation (DRF) through the Telecom Training Academy the Company is the first telecom service provider in that has been set up to provide internship opportunities the world to obtain the TL 9000 certification; the first in different vocational skills required for the telecom telecom company in India to obtain the ISO 14001 industry. The Academy focuses on development of students certification for environment management; and the from economically weaker sections of society, especially first telecom service provider in India and the world candidates who are completing their Diploma / ITI courses to obtain the BS 7799 and the ISO 27001 certifications from rural and smaller towns. The Academy has about 160 respectively for information security. interns at various stages of the internship programme. Your Company has initiated an exercise to streamline AWARDS AND RECOGNITION internal processes across all its entities globally and The Company’s transformational initiatives are being institutionalise a culture of continuous improvement.

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COMMUNICATIONS Twenty Second Annual Report 2007-2008 Tata Communications Limited

The internal audit and revenue assurance teams Fixed Deposits actively contribute to sustaining process improvement Tata Communications has not accepted nor does it hold efforts. Senior management regularly tracks any public deposits. implementation of ideas for improvement. STATUTORY INFORMATION AND DISCLOSURES • Compliance with section 404 of Sarbanes Oxley Act, 2002 Particulars of Employees The provisions of Section 217(2A) of the Companies Act, Pursuant to it’s listing on the New York Stock 1956, read with the Companies (Particulars of Employees) Exchange, Tata Communications was required to Rules, 1975, require the Company to provide certain details comply with section 404 of the Sarbanes Oxley Act about the employees who were in receipt of remuneration by March 2008. This Act lays down requirements for of not less than Rs.24,00,000 during the year ended 31 internal control over financial reporting. For the March 2008 or not less than Rs.2,00,000 per month during current fiscal, in addition to management’s own any part of the said year. The Company had 144 such assessment of the effectiveness of such internal employees employed during the year ended 31 March control, the Company’s external auditors are also 2008. However, as per the provisions of section 219(1)(b)(iv) required to issue an opinion on whether effective of the Companies Act, 1956, the Directors’ Report being internal control over financial reporting was sent to the shareholders does not include this annexure. maintained in all material respects by management. Any shareholder interested in obtaining a copy of the Tata Communications is confident of being able to annexure may write to the deputy company secretary at get the certification of being compliant with these the Company’s registered office. stringent requirements. R & D, Technology Absorption and Foreign Exchange • Revenue Assurance and Cost Reduction Earnings Tata Communications’ Revenue Assurance function There are no particulars to be disclosed pertaining to the aims to prevent revenue leakages and ensure robust year under review, in respect of Research & Development internal controls and IT processes that keep pace with (R&D) and technology absorption as required under increasing business complexities, thus moving towards Companies (Disclosure of Particulars in the Report of the zero tolerance of revenue leakages. A Revenue Board of Directors) Rules, 1988. For the purpose of Form ‘C’ Assurance charter and manual have been formulated under the said rules, foreign exchange earnings were to further structure these activities. equivalent to Rs.10.35 billion and foreign exchange outgo was equivalent to Rs.7.83 billion. Tata Communications continues with its ongoing cost Auditors’ Report reduction exercise and has successfully completed several cost reduction projects as a part of its There are no qualifications in the report of the statutory continuous improvement activities. auditors for the year 2007-08. Subsidiaries • Enterprise Risk Management The statement pursuant to section 212 of the Companies Tata Communications has established an enterprise- Act, 1956 containing details of the Company’s subsidiaries, wide risk management (ERM) framework to optimally is attached. The consolidated financial statements of the identify and manage risks, as well as to comply with Company and its subsidiaries, prepared in accordance with clause 49 of the SEBI Listing Agreement. In line with accounting standard 21 (AS 21) prescribed by the Institute your Company’s commitment to deliver sustainable of Chartered Accountants of India, form part of the annual value, this framework aims to provide an integrated report and accounts. and organised approach for evaluating and managing risks. The output of this ERM exercise also forms the These documents will be provided on request to any basis of Company’s annual internal audit programme. shareholder wishing to have a copy, on receipt of such request by the deputy company secretary at the • Risk-based Internal Audit Company’s registered office. These documents will also be available for inspection by any shareholder at the Your Company’s internal audit team has adopted the Company’s registered office. ‘risk-based’ audit approach. The risk assessments The Board of Directors performed under the ERM exercise and for compliance with section 404 of the Sarbanes Oxley Act (SoX), form The Tata Communications Board presently consists of key inputs for the annual audit plans for each business eleven Directors. Mr. S. Ramadorai joined the Board on 28 and functional unit. This approach also ensures June 2007. Mr. Ishaat Hussain resigned from the Board on optimal synergy between internal audit and the SoX 26 June 2007. Mr. A.K. Srivastava, DDG (AS), DoT, was compliance process. appointed as permanent (non-retiring) government

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nominee director on the Board with effect from 31 July Management of Business Ethics (MBE) 2007 in casual vacancy caused due to the resignation of Consistent with the Group’s policy, Tata Communications Mr. N. Parameswaran, government nominee director. is systematically implementing the Tata Code of Conduct. Mr. Arun Gandhi joined the Board on 10 September 2007. Tata Communications has put in place an organisational Mr. H.P. Mishra, DDG (WPF), DoT, was appointed as structure and a process to implement and improve ethical permanent (non-retiring) government nominee director on standards and practices, and began implementing the Tata the Board with effect from 22 October 2007 in casual Code of Conduct in 2003-04. Tata Communications vacancy caused due to the resignation of Mr. Pankaj conducts regular seminars, ethics awareness campaigns Agarwala, government nominee director. Dr. Mukund Rajan, and workshops to sustain the momentum and to Director, resigned from the Board with effect from 24 June strengthen ethical values and practices among various 2008. stakeholders. In accordance with the provisions of the Companies Act, DIRECTORS’ RESPONSIBILITY STATEMENT 1956 and the Companies Articles of Association, Mr. PV Pursuant to Section 217(2AA) of the Companies Act, 1956, Kalyanasundaram, Dr. V.R.S Sampath and Mr. Amal Ganguli the Directors, based on the representations received from retire by rotation at the ensuing annual general meeting the operating management, confirm that: and being eligible, offer themselves for reappointment. • In the preparation of the annual accounts, the In accordance with the provisions of the Companies Act, applicable accounting standards have been followed 1956 and the Companies Articles of Association, Mr. Arun and there are no material departures; Gandhi holds office only up to this annual general meeting; • They have consulted the Statutory Auditors in the notices under the provisions of section 257 of the selection of the accounting policies and have applied Companies Act, 1956 have been received by the Company them consistently and made judgements and from a member signifying his intention to propose Mr. Arun estimates that are reasonable and prudent so as to Gandhi as a candidate for the office of Director. give a true and fair view of the state of affairs of the Company at the end of the financial year and of the For details about the Directors, please refer to Point 2 of profit of the Company for that period; the Report on Corporate Governance. • They have taken proper and sufficient care, to the None of the Company’s Directors are disqualified from best of their knowledge and ability, for the being appointed as a Director as specified in Section 274 maintenance of adequate accounting records in of the Companies Act, 1956 as amended by the Companies accordance with the provisions of the Companies Act, (Amendment) Act, 2000. 1956, for safeguarding the assets of the Company and for preventing and detecting fraud and other Corporate Governance irregularities; Pursuant to Clause 49 of the listing agreements with the • They have prepared the annual accounts on a going stock exchanges, a Management Discussion and Analysis, concern basis. Corporate Governance Report and Auditors’ Certificate regarding compliance with conditions of corporate ACKNOWLEDGMENTS governance form a part of the directors’ report. The Directors would like to express their thanks for the hard work and dedication of every employee. The Directors Corporate Sustainability Initiatives appreciate the support of various Ministries and As a member of the Tata Group, Tata Communications is departments of the Government of India, the Department committed to the Group’s philosophy of improving the of Telecommunications and I&B Ministry. The Directors are quality of life in the communities we serve. Tata also grateful to the Company’s stakeholders and partners Communications has a Corporate Social Responsibility including its customers, shareholders, bankers, solicitors, (CSR) Policy and is a member of the Tata Council for suppliers and foreign telecom administrations for their Community Initiatives (TCCI). The Company fosters an support. internal culture of volunteerism and contributes to the socio-economic development of the communities it On behalf of the Board of Directors operates in, through financial and other assistance to various causes and organisations. Subodh Bhargava Tata Communications is sensitive towards environmental, Dated: 26 June 2008 Chairman ecological and biodiversity concerns arising out of its operations. Towards that end, Tata Communications has Registered Office : also become the first telecom service provider in India to VSB, M.G. Road, Fort, obtain ISO 14001 Certification. Mumbai - 400 001.

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COMMUNICATIONS Twenty Second Annual Report 2007-2008 Tata Communications Limited

ANNEXURE 1: MANAGEMENT DISCUSSION AND ANALYSIS INDUSTRY ANALYSIS Indian Telecom Market REGULATORY DEVELOPMENTS Your Company was the incumbent international telecom Final Phasing Out Of ADC services provider till the year 2002, when this segment Effective 1 April 2007, the TRAI (Telecom Regulatory was opened for competition. Over the last decade and Authority of India) had revised the access deficit charge since 2002 in particular, the Indian telecom industry has (ADC - a component of the Interconnection Usage Charges changed significantly with all its segments opening up to or IUC, that makes up for below-cost monthly rentals and competition. This market is now highly competitive, local call charges for fixed telephones) in preparation for complex and evolving rapidly, with numerous service finally phasing out the ADC. offerings including fixed-line, mobile, Internet, long In March 2008, the TRAI amended the IUC regulation distance and various data services. effective 1 April 2008. This regulation deals with, among India’s telecom market is growing rapidly and by 2010, other things, the ADC payable by private service providers telecom is expected to be a Rs.1380 billion sector, to Bharat Sanchar Nigam Ltd (BSNL – the incumbent access contributing 5.4% to India’s gross domestic product (GDP). provider). The TRAI recommended the continuation of According to the latest figures from the Telecom support to BSNL’s rural wire line network through the Regulatory Authority of India (TRAI), during 2007-08 India’s Universal Service Obligation Fund (USOF) established by mobile subscriber base increased approximately 58%, from the Government of India, instead of through the ADC mechanism. According to this regulation, the ADC has been 165.11 million to 261.09 million, while the fixed subscriber reduced to nil w.e.f. 1 October 2008. During the period 1 base declined approximately 3.26% from 40.75 million to April 2008 to 30 September 2008, the ADC payable would 39.42 million. During the year, the broadband subscriber be @ Rs. 0.50 per minute on incoming international calls base grew by approximately 67%, from 2.34 million to 3.90 only. ADC as a percentage of aggregated Adjusted Gross million Revenue (AGR) has been completely abolished with effect Telecom Market Internationally from 1 April 2008. The industry scenario worldwide shows that the wholesale Cable Landing Facilities voice international market is becoming a business of scale, The TRAI issued the International Telecommunication given consistent pressures on prices and margins. Average Access to Essential Facilities at Cable Landing Stations prices for international voice calls are 70% lower than they Regulations, 2007 (5 of 2007) in June 2007. As reported were 10 years ago. Until recently, wholesale operators have earlier, even before the recommendations were accepted, been able to count on a steady rise in voice traffic to help your Company had established uniform practices and offset the negative financial effects of lower prices and procedures for such access facilitation at its main cable margins. This scenario is now changing. station locations. Mobile traffic is the fastest growing and most lucrative International Regulatory Scenario international traffic. However, recently growth has begun The regulatory scenario elsewhere in the world where slowing down in most segments (except mobile and your Company had operations so far, is fairly stable and broadband). Slower volume growth hurts carriers’ revenues no policy changes are generally seen in those and will almost certainly force further consolidation in the geographies. The telecom scenario in China and other international long distance market. The most pressing promising countries in the eastern part of the world will driver is profitability, which is largely dictated by the size continue to develop. of a company’s operations. All of that is leading some AGR in TDSAT carriers to outsource or sell their international voice assets. However, given its size, your Company is well positioned The Association of Unified Telecom Service Providers of to benefit from that market trend. India, Cellular Operators Association of India and some individual telecom service providers have challenged, Wholesalers are continuing to shift their emphasis away before the Hon’ble Telecom Disputes Settlement And from TDM voice and towards value-added IP services, Appellate Tribunal (TDSAT), the definition of ‘gross revenue’ including the growth of voice over IP, gaming and video and ‘adjusted gross revenue’ (AGR) as applied by the content transmission. Large wholesalers like Tata Department of Telecom for levying licence fees as being Communications are well positioned to address the portal unfair and beyond the scope and powers of the DoT. It market where computer-based voice services are a key was represented that the present definition of AGR has reason for the slowdown in international voice growth. certain anomalies, such as that it encompassed several Also, international wholesale could be in line for better additional revenue streams that were unrelated to the times, boosted by new applications and services. activities under the licence.

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The TDSAT in its order dated 7 July 2006 remitted the the DoT issuing ILD licences to new players, some of who matter to the TRAI to make comprehensive were Tata Communications’ customers earlier. This recommendations on the individual components of competition is expected to shrink the Company’s revenue that can be considered part of AGR. The TRAI in addressable market and hence affect this business September 2006 recommended that certain income should adversely. not be included in the AGR viz. (i) income from dividend, National Long Distance (NLD) (ii) capital gains on account of profit on sale of assets and Increased mobile penetration has resulted in significant securities; (iii) gains from foreign exchange fluctuations; growth in the NLD traffic within India. The Company’s share (iv) reversal of provisions; (v) income from property rent if of NLD traffic has grown by over 32% from 5.3 billion not connected to establishing, maintaining and working minutes in 2006-07 to 7 billion minutes in 2007-08. The of telecommunication and (vi) receipts from the USO. increased competition through the issue of new NLD The TDSAT rendered its final verdict on 30 August 2007. licences, along with other regulatory initiatives, has reduced The Company is not satisfied with the verdict on two the gap between NLD and local tariffs. Continued shrinkage issues, viz. (i) the date of applicability of the TDSAT verdict, in the Company’s addressable market and falling tariffs is which according to the Company should be effective from expected to affect this business. the date from which license fee based on revenue sharing regime came into effect and (ii) the deductibility of However, while increased competition in the long distance charges passed on to other service providers for leasing space affects your Company’s business, it also opens up bandwidth, port charges, etc, which has been disallowed opportunities to share the Company’s network infrastructure with new licensees. The regulator has by the TDSAT. recently permitted sharing of active infrastructure and this The Company has challenged the TDSAT’s order of 30 opens up new avenues for your Company. August 2007 in the Hon’ble Supreme Court of India on The regulator has initiated a consultation process for the these two issues. The Department of Telecom has also introduction of Internet Telephony in the NLD sector. challenged the TDSAT’s order in the Hon’ble Supreme Court Depending upon the manner and timing of the of India, where the matter is currently sub judice. implementation of such regulatory changes, this may open The Company has also filed a petition in the TDSAT on the up new opportunities for the Company in the NLD business matter of applicability of penal provisions under ILD and area, albeit at lower margins. NLD license agreements, where the matter is currently Enterprise Data Services under hearing. The Indian corporate segment has been growing at a very Transfer Pricing Mechanism healthy rate, with enterprise data volumes growing almost Your Company has 48 subsidiaries in 23 countries. Each 100%. In the past financial year, even after adjusting for subsidiary discharges its functions, owns its assets, bears the 35-40% price drop, the industry growth in revenue its risk and reaps its rewards. Similarly, each subsidiary is terms has been a healthy 20-30%. There are two key drivers expected to discharge its statutory obligation including for the growth in this business. First, the increased use of paying taxes on its income. Considering the vast network networking and Information Technology to improve that is owned by the entities in the Tata Communications business productivity is leading to greater demand for Group, the global reach of the services, the operational communication services within India. Second, there is interdependence between the group entities, cross significant growth from both Indian and international continental location of customers, and other value drivers clients in terms of connectivity and managed services in the business, the Residual Profit Split Method (RPSM) needs in new geographies to keep up with their global was chosen and is being implemented as the global business expansion. Banking and financial services, transfer pricing methodology for determining inter- information technology and business process outsourcing/ company prices for international telecommunication call centres are some examples of high growth sectors. related services. RPSM is one of the acceptable methods Internet and Broadband Services prescribed under the Indian tax regulations as well as in The broadband market in India is nascent and fast growing. many of the other jurisdictions where formal transfer The Department of Telecommunications (DoT) had pricing regulations currently exist. announced 2007 as the ‘Year of Broadband’. However, the SERVICES growth in broadband subscribers has been slower than International Long Distance (ILD) the growth in mobile subscribers. The predominant reasons are the limited access to last mile networks that limits the During 2007-08, globally, Tata Communications handled ability to serve retail customers; and the inability to 21.94 billion minutes of voice traffic, a growth of 11% over demonstrate an adequate value proposition except to the previous year. Traffic to and from India has grown from enterprises and a small group of individuals. To overcome about 5.2 billion minutes in 2006-07 to about 6.98 billion the last mile connectivity problem, your Company is rolling in the year under review, with a total revenue of nearly out its own wireless networks based on Wi-Max USD 1.13 billion. Competition in India has increased with technologies.

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COMMUNICATIONS Twenty Second Annual Report 2007-2008 Tata Communications Limited

ORGANISATIONAL RESTRUCTURING the case at present. Consolidating Subsidiaries However, implementation of the CAC regime has not fallen Your Company currently has 48 direct and indirect into place so far, due to technical and other reasons. The subsidiaries. As reported earlier, a process has been initiated delay in implementation of the CAC regime is a cause of to reduce this number to about 30 through appropriate concern for Tata Communications. The Company hopes that restructuring. The aim is to have one entity in each country this regime, which is essential to the survival of stand- to the extent possible. With the launch of the new brand alone ILD and NLD operators and is a fair entitlement of ‘Tata Communications’, the name of the parent and the subscribers seeking competitive service options, will be names of the top layer subsidiaries have been changed to implemented at the earliest. The regulator has recently reflect this new global brand. The process of changing the initiated a consultation process for Carrier Selection, which names of all the customer facing subsidiaries is expected includes Call-by-Call Carrier Selection (CS) and Carrier Pre- to be completed during the financial year 2008-09. Selection (CPS). The regulator is also exploring the option of the issue of calling cards by long distance operators Global Structure (NLDOs/ILDOs). Tata Communications has now substantially structured Regulatory Environment and Tariffs itself into global business units and global support functions, to best enable it to be a global integrated multi- Most of the services of Tata Communications in India are business telecom player. These initiatives are far reaching operated under licences issued by the DoT, and the in their scope and the impact they will have on the Company is subject to the terms and conditions included Company’s business. They cover projects to improve therein. As India continues to liberalise its telecom sector, customer experience, define and create a common it is possible that there may be interpretational differences company culture, tighten corporate identity and branding on the guidelines and licence conditions. This may make it and implement the next generation network architecture necessary for Tata Communications to defend its position, for converged services, among others. in case of any notice from, or proceedings by, the regulator or licensor. RISKS AND CONCERNS The TRAI has recommended norms for a Unified Licensing Like all businesses, Tata Communications is exposed to Regime (ULR), which the DoT is considering. If certain risks and concerns in the course of its business: implemented, these norms may increase competitive End Customer Ownership pressures. An important concern for the Company in its voice There have been significant changes in the NLD and ILD business continues to be the lack of direct access to end licenses recently. The entry fees for these licences have customers. Tata Communications is dependent on cellular been substantially reduced to Rs.25 million each, which and basic telecommunication service providers to route has already led to a number of new players entering the the national long distance and international calls of their field. customers through Tata Communications. Some of these Pursuant to the Press Note No. 3 dated 19 April 2007 issued operators are also competitors of Tata Communications in by the Department of Industrial Policy and Promotion, the long distance and other markets. This risk is further Ministry of Commerce and Industry, the Government of increased by the new licenses issued for NLD and ILD India has set aside its earlier Press Note No. 5 dated 3 services, further shrinking the Company’s addressable November 2005. Certain stringent guidelines earlier market. It would be a serious disadvantage to Tata imposed in the 2005 note regarding remote access have Communications to not have access to a large enough been relaxed in the present note. This will enable the market to compete for business. Tata Communications has efficient monitoring and maintenance of international been pursuing implementation of Direct Customer Access networks. either through the CAC regime or through services like The tariffs charged by telecommunication service providers calling cards. in India, including Tata Communications, are subject to TRAI Delay in Implementation of CAC Regime regulations. Tata Communications periodically renegotiates The Carrier Access Code (CAC) regime was to have been interconnect agreements with various domestic mobile implemented as per the TRAI recommendations in phases service operators and basic telecom service providers and for different segments of the long distance sector, with settlement rates with international carriers, resulting in the the final implementation of carrier pre selection (CPS) to revision of rates from time to time depending on market be completed by December 2003. Carrier selection gives conditions. Such revisions could be adverse and could have subscribers the option to either pre-select a long distance a material effect on Tata Communications’ operations and carrier for all ILD calls, or choose a provider for each call by financial condition. dialling a carrier access code before making a call. The TRAI has recently started a consultation process for Customers can then freely choose their long distance issues related to Internet telephony. Use of Internet carrier based on competitiveness and quality, rather than telephony for calling Public Switched Telephone Networks the choice being made for them by access operators, as is /Public Land Mobile Networks in the NLD sector may lead

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to a steep fall in NLD rates and margins. The manner and could have a material adverse effect on the Company’s timing of implementation of the new Internet telephony short-term business and prospects. Tata Communications’ framework is likely to impact the Company’s NLD business operations and investments as well as rights to undersea significantly. cable capacity extending to other countries, exposes the The Grey Market and the IUC Regime Company to risks inherent in international operations. These include: Effective 1 October 2008 the TRAI has completely abolished the ADC built into the interconnection usage charge (IUC) • General economic, social and political conditions; regime to govern inter-operator settlements for calls • The difficulty of enforcing agreements and collecting passed between different networks. There is no assurance receivables through certain foreign legal systems; that abolishing this ADC will completely eliminate the grey • Foreign currency exchange rates fluctuations, which market, or that volumes of legitimate carriers like Tata could adversely affect our results of operations and Communications would be favourably impacted. the value of our international assets and investments Increasing Competition although the Company partially hedges its foreign The de-regulation of the Indian telecom market exposes exchange risk; the Company to increased competition: • Foreign earnings may be subject to withholding • The Internet Service Provider (ISP) business is intensely requirements or the imposition of tariffs, exchange competitive and has a large number of players. controls or other restrictions; • ISPs are allowed to provide Internet telephony calls • Difficulties and costs of compliance with foreign laws overseas. Though the quality of such service may not and regulations that impose restrictions on our be comparable to traditional ILD calls, it may impact investments and operations, with penalties for non Tata Communications’ ILD business, as also the compliance, including loss of licenses and monetary Company’s own Internet telephony services. fines; • Tata Communications operates in the markets for • Difficulties in obtaining licenses or interconnection national long distance and broadband services, where arrangements on acceptable terms, if at all; and there are several potential and existing competitors. • Changes in India and U.S. laws and regulations relating Relaxation of licensing conditions and granting of the to foreign trade and investment. new licences for NLD and ILD services by the INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY Department of Telecommunications is likely to intensify competition in these sectors. Tata Communications has a well-developed internal control system and has also implemented the SAP system for • New ILD licensees, like BSNL, Vodafone etc, have accounting. Internal control systems including for the established direct connectivity with foreign carriers, newly acquired businesses are continuously being and increased competition is likely to impact the reviewed and improved. The financial powers at various Company’s business adversely, particularly in the Gulf management levels are clearly defined in the delegation region. of powers. Technical and financial operations are controlled • The DoT is likely to permit resale of leased services by state-of-the-art technology and systems. The accounts soon, which will further intensify the competition. of the Company are subjected to statutory audit. In the international markets, the market pricing for CAUTIONARY STATEMENT international wholesale voice telecommunications services continues to decline, reaching downward to the cost of Statements in the directors’ report and management transmission and far-end termination rates, resulting in discussion and analysis describing the Company’s lower per-unit net revenue. This trend continues to objectives, projections, estimates and expectations may be adversely impact the net income earned from the voice ‘forward-looking statements’ within the meaning of business internationally. applicable securities laws and regulations. Actual results International Operations could differ substantially or materially from those A large part of Tata Communications’ operations is now in expressed or implied. Important factors that could make a international markets. Integrating acquisitions and difference to the Company’s operations include economic managing operations in diverse international locations is conditions affecting demand/supply and price conditions very critical to the success of Tata Communications’ plans. in the domestic and overseas markets in which the Similarly, the Company is operating in multi-jurisdictions Company operates, changes in government regulations, and changes in local regulations may adversely affect the policies, tax laws and other incidental factors. Further, the operations of the Tata Communications group in those Company retains the flexibility to respond to fast-changing countries. market conditions and business imperatives. Therefore, the Company may need to change any of the plans and Changing Economic Conditions projections that may have been outlined in this report, Downturns in the Indian, regional and global economies depending on market conditions.

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COMMUNICATIONS Twenty Second Annual Report 2007-2008 Tata Communications Limited

REPORT ON CORPORATE GOVERNANCE FOR THE YEAR 2007-08 (In accordance with clause 49 of the listing agreement with Indian stock exchanges)

Corporate governance is about promoting corporate it has to comply with the stringent rules and regulations fairness, transparency and accountability. The corporate of the Sarbanes-Oxley Act, 2002 (SOX). The Company governance structure specifies the distribution of rights believes that achieving SOX compliance will inter-alia and responsibilities of the board, managers, shareholders enhance its financial reporting structure. and other stakeholders, and spells out the rules and procedures for making decisions on corporate affairs. The Company communicates regularly with its shareholders through bulletins, presentations and 1. CORPORATE GOVERNANCE PHILOSOPHY AND meetings with analysts and investors. PRACTICE 2. BOARD OF DIRECTORS As a part of the Tata Group, the Company has a fair, transparent and ethical governance practices. The The Company is managed exclusively by and under the Company has adopted a Code of Conduct for its employees directions of the Board. The composition of the Board is including the Managing Director. In addition, the Company governed by the applicable laws and regulations and the has adopted a Code of Conduct for its Non-Executive Articles of Association of the Company. The powers Directors. Both these Codes are available on the Company’s delegated by the Board to the Managing Director and by website. the Managing Director to the subordinate officers are The Company believes that total business risk elimination documented in the Delegation of Powers (DoP). The DoP is never possible but can be minimized by consistently is revised periodically. developing and following the best practices of Corporate Governance. To this end, the Company focuses on Ten out of eleven directors are non-executive directors, developing and implementing higher standards of forming more than half of the total number of directors. accountability to enable optimum returns to all The Company has four independent directors and one stakeholders. The Company is installing new state-of-the executive director. art systems including integrated financial accounting and budgeting systems and through a systematic process of None of the directors hold directorships in more than the training and development has increased the quality of its permissible number of companies under the applicable personnel. provisions. Similarly, none of the directors on the board’s sub-committees hold membership of more than ten The Company’s operations and accounts are audited at committees of boards, nor is any director a chairman of three levels: an internal audit; a statutory audit by an Indian more than five committees of boards. accounting firm under Indian accounting requirements and their restatement by an internationally recognised The names and categories of the directors on the board, accounting firm according to US GAAP. The Company is in their attendance at board meetings during the year and compliance with the requirements of the revised guidelines at the last annual general meeting, and the number of on corporate governance stipulated under Clause 49 of directorships and committee memberships held by them the Listing Agreements with the Stock Exchanges. Besides, in other companies as of 31 March 2008 (with Directorships the Company being listed on the New York Stock Exchange, updated as of 30 June 2008 are given below:

Attendance No. of Directorships No. of Committee Positions No. of Shares Board Meetings at the last AGM in Public Companies held in Public Companies held as on Name Category during the tenure (02.08.2007) Including Tata Comm including Tata Comm 31 March 2008 Held Attended Chairman Member Chairman Member Directors in Office Mr. Subodh Bhargava Independent 11 11 Yes 2 10 4 7 NIL [Chairman] Non Executive Mr. N. Srinath Not Independent 11 11 Yes 1 4 0 1 NIL Executive Mr. Kishor A. Chaukar Not Independent 11 11 Yes 2 11 2 2 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 Public Companies held in Public Companies held as on Name Category during the tenure (02.08.2007) Including Tata Comm including Tata Comm 31 March 2008 Held Attended Chairman Member Chairman Member Directors in Office

Mr. P.V. Kalyanasundaram Independent 11 10 Yes 0 1 0 1 NIL Non Executive Dr. V.R.S. Sampath Independent 11 11 Yes 0 2 0 2 NIL Non Executive Mr. Amal Ganguli Independent 11 7 Yes 0 10 5 5 NIL Non Executive Mr. Vinod Kumar Not Independent 11 7 Yes 0 2 NIL NIL NIL Non Executive Mr. S. Ramadorai Not Independent 9 4 Yes 2 11 1 3 NIL [Director: w.e.f. Non Executive 28 June 2007] Mr. A.K. Srivastava1 Not Independent 9 4 Yes NIL 3 NIL 1 NIL [Director: w.e.f. Non Executive 31 July 2007] Mr. Arun Gandhi Not Independent 7 2 NA NIL 8 1 4 NIL [Director: w.e.f. Non Executive 10 September 2007] Mr. H.P. Mishra1 Not Independent 7 6 NA NIL 1 NIL 1 NIL [Director: w.e.f. Non Executive 22 October 2007] Directors served during the year

Mr. Ishaat Hussain Not Independent 2 2 NA 1 11 3 6 NIL [Until 26 June 2007] Non Executive Mr. Pankaj Agrawala 1 Not Independent 4 2 No NIL 2 NIL 3 NIL [Until 22 October 2007] Non Executive Mr. N. Parameswaran 1 Not Independent 2 1 NA NIL 2 NIL NIL NIL [Until 19 July 2007] Non Executive Dr. Mukund Rajan Not Independent 11 11 Yes NIL 3 NIL 1 15 [Until 24 June 2008] Non Executive

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 2007-08. (f) The detailed resume of each director and the details of the directors proposed to be appointed / reappointed at the 22nd 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 11 board meetings were held are as follows: 3&4 April 2007 26 May 2007 31 July 2007 2 August 2007 22 October 2007 31 October 2007 4 December 2007 14 December 2007 27 January 2008 13 February 2008 14 March 2008

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COMMUNICATIONS Twenty Second Annual Report 2007-2008 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 Chartered Accountants in England and Wales, Fellow of members. The Chairman of the Committee is Institute of Chartered Accountants of India, Fellow of British Mr. Kishor Chaukar. Mr. Subodh Bhargava and Institute of Management, Member of New Delhi Chapter Mr. A.K. Srivastava are the other members on the Committee. Mr. Satish Ranade, Company Secretary of Institute of Internal Auditors, Florida, USA. Mr. Amal and Chief Legal Officer is the Remuneration Ganguli became the Chairman of the Audit Committee Committee’s Convener. Two meetings of the w.e.f. 19 October 2006. Remuneration Committee were held on 3 April The other members of the committee are Mr. Subodh 2007 and 26 May 2007. Bhargava, Independent Director, Mr. P.V. Kalyanasundaram, Independent Director and Mr. H.P. Mishra, Government The broad terms of reference of the Remuneration Committee are to review the Nominee Director. Mr. Satish Ranade, Company Secretary performance of the Whole-time Directors, after and Chief Legal Officer is the audit committee’s Secretary. considering the Company’s performance and Mr. Pankaj Agrawala, Government Nominee Director, ceased recommend to the Board remuneration including to be a director of the Company w.e.f. 22 October 2007 salary, perquisites and commission to be paid to and consequently ceased to be a member of the Audit the Company’s Whole-time Directors within the Committee from that date. Mr. H.P. Mishra, Government overall ceilings approved by the shareholders. Nominee Director became a member of the Audit Committee w.e.f. 30 October 2007. b) Remuneration Policy The audit committee has adequate powers and detailed For the financial year 2007-08, the Company terms of reference to play an effective role as required under proposes to pay remuneration to the non- the provisions of the Companies Act, 1956 and clause 49 of executive directors (NEDs) by way of commission Company’s listing agreement with the stock exchanges. at a rate not exceeding 1% per annum of the Attendance at the Audit Committee Meetings profits of the Company (computed in accordance with Section 309(5) of the Companies Act, 1956). Name No. of Audit Committee The distribution of commission amongst the Meetings during 2007-08 NEDs is placed before the Board. The commission Held during Attended to NEDs is proposed to be distributed broadly Tenure on the basis of their attendance and contribution at the Board and Committee meetings as well as Mr. Amal Ganguli the time spent on operational matters other than [Chairman] 6 6 at the meetings. Mr. Vinod Kumar, Director who Mr. Subodh Bhargava 6 6 is in employment of a subsidiary of the Company Mr. P.V. Kalyanasundaram 6 5 is not paid sitting fees or commission. Mr. H.P. Mishra The Company paid sitting fees of Rs.10,000/- per [Member w.e.f. meeting to the non-executive directors for 30 October 2007] 2 2 attending the meetings of the Board and Mr. Pankaj Agrawala committees. [Member until 22 October 2007] 4 1 The Company pays remuneration by way of salary, perquisites and allowances (fixed component) Mr. Ishaat Hussain 2 2 [Special Invitee till and commission (variable component) to the whole time director. Salary is paid within the 27 June 2007] range approved by the shareholders. Annual At the Annual General Meeting held on 2 August 2007, increments, recommended by the Remuneration the Chairman of the Audit Committee, Mr. Amal Ganguli Committee are approved by the Board. Within was present. During the last financial year, the Audit the prescribed ceiling, the perquisites package is Committee held six meetings and not more than four approved by the remuneration committee. months had elapsed between any two meetings. The dates Commission is calculated with reference to net of meetings of the Audit Committee are as follows: profits of the Company in a particular financial year and is determined by the Board of Directors 4 May 2007 25 May 2007 30 July 2007 at the end of the financial year based on the 1 August 2007 30 October 2007 27 January 2008 recommendations of the remuneration

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committee, subject to overall ceilings stipulated 5. INVESTOR GRIEVANCE COMMITTEE in Sections 198 and 309 of the Companies Act, 1956. Specific amount payable to the whole-time The committee consists of three members. The Chairman director is based on the performance criteria laid of the Committee is Mr. Kishor A. Chaukar who is the down by the Board which broadly takes in to Managing Director of Tata Industries Limited. The other account the profits earned by the Company for members are Dr. V.R.S. Sampath, Independent Director and that year. Mr. A.K. Srivastava, nominee Director of the Government. Mr. Satish Ranade, Company Secretary and Chief Legal c) The details of commission to be paid to the non- Officer is the Investor Grievance Committee’s secretary. executive directors for the year 2007-08 are as Mr. Pankaj Agrawala, Government Nominee Director, ceased follows: to be a director of the Company w.e.f. 22 October 2007 (Amount in Rs.’000) and consequently ceased to be a member of the Committee from that date. Mr. A.K. Srivastava, Government Name of the Director Commission Sitting Fees Nominee Director became a member of the Committee Mr. Subodh Bhargava during the year. During the last financial year, the [Chairman] 613.90 190 Committee held four meetings on 26 May 2007, 31 July Mr. Kishor A. Chaukar 293.60 220 2007, 31 October 2007 and 27 January 2008. Mr. P.V. Kalyanasundaram 266.90 150 The details of grievances received from the shareholders Dr. V.R.S. Sampath 266.90 190 during the year and their status on 31 March 2008 is given below: Mr. Amal Ganguli 347.00 140 Mr. Vinod Kumar NIL NIL Sr. Nature of Complaints No. of Complaints Mr. S. Ramadorai 71.20 40 No. Received Pending Mr. A.K. Sivastava 1. SEBI/Stock Exchange [Director: w.e.f. Complaint NIL NIL 31 July 2007] 80.10 50 2. Direct/Miscellaneous/ Mr. Arun Gandhi Other Complaint 4 NIL [Director: w.e.f. 10 September 2007] 35.60 20 TOTAL 4 NIL Mr. H.P. Mishra This committee has been delegated the powers to approve [Director: w.e.f. the issue of Duplicate Share Certificates and approve 22 October 2007] 169.00 110 transfer/transmission of shares not exceeding 500 shares Mr. Ishaat Hussain per folio. The Registrar and Transfer Agents have been [Until 27 June 2007] 71.20 40 authorised to issue Duplicate Share Certificates and Mr. Pankaj Agrawala approve transfer/transmission up to a maximum of 500 [Until 22 October 2007] 71.20 50 shares per folio, limited only to routine day-to-day work. As the shares of the Company are under compulsory Mr. N. Parameswaran dematerialized trading for all investors, this delegation is [Until 19 July 2007] 17.80 10 considered adequate. All the shares received for transfer Dr. Mukund Rajan till 31 March 2008 has been duly processed. [Until 24 June 2008] 195.70 110 2500.10 1320 6. ETHICS AND COMPLIANCE COMMITTEE * Mr. Vinod Kumar being the managing director and In accordance with the Securities and Exchange Board of employee of an International subsidiary of the Company, India (Prohibition of Insider Trading) Regulations, 1992, as no sitting fees/commission is deemed payable to him. amended, the Board of Directors of the Company adopted the “Tata Communications Code Of Conduct For Prevention d) The details of remuneration to the whole-time of Insider Trading and Code of Corporate Disclosure director during the year 2007-08 are as follows: Practices” to be followed by “Directors”, “Designated (Amount in Rs.’000) Employees”, “Designated Persons” and “Insiders”. The code is based on the principle that Directors, Designated Name Salary Perquisites & Commission* Employees, Designated Persons and Insiders should not Allowances have undue advantage over other shareholders, in their Mr. N. Srinath 5640.96 1337.29 4500 personal security transactions, due to their possible advance knowledge of Price Sensitive Information. The Total 5640.96 1337.29 4500 code, therefore, seeks to ensure timely and adequate * Commission payable will be paid only after the date of disclosure of Price Sensitive Information to the investor the Annual General Meeting. community by the Company to enable them to take

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COMMUNICATIONS Twenty Second Annual Report 2007-2008 Tata Communications Limited

informed investment decisions with regard to the convener of the Committee. Mr. Pankaj Agrawala, Company’s securities. Government Nominee Director, ceased to be a director of In terms of the said code, an Ethics and Compliance the Company w.e.f. 22 October 2007 and consequently Committee was constituted in 2003. The present ceased to be a member of the Committee from that date. committee consists of three members. The Chairman of Mr. H.P. Mishra, Government Nominee Director became a the committee is Mr. Kishor A. Chaukar, who is the member of the Committee during the year. Managing Director of Tata Industries Limited, Dr. V.R.S. Sampath, Independent Director and Mr. H.P. Mishra, Four meetings of the committee were held during the year Government Nominee Director are the members. Mr. Satish 2007-08 on 26 May 2007, 31 July 2007, 31 October 2007 Ranade, Company Secretary and Chief Legal Officer is the and 27 January 2008.

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 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, Kalaghoda, Mumbai - 400 001. (3 special resolutions). 2 August 2007 The 21st Annual General Meeting was held at All the resolutions were put to 1100 hours at MC Ghia Hall, Bhogilal Hargovindas vote by show of hands and were Building, Second Floor, 18/20 Kaikhushru Dubash Marg, carried unanimously. Kalaghoda, Mumbai 400001. There were Eight resolutions (4 special and 4 ordinary). 13 September 2006 The 20th Annual General Meeting was held at All the resolutions were put to 1100 hours at MC Ghia Hall, Bhogilal Hargovindas vote by show of hands and were Building, Second Floor, 18/20 Kaikhushru Dubash carried unanimously. Marg, Kalaghoda, Mumbai 400001. There were Ten resolutions (2 special and 8 ordinary). 1 March 2006 An Extraordinary General Meeting was held at Both the resolutions were put to 1500 hours at Birla Matushri Sabhagar, New Marine vote by show of hands and were Lines, Mumbai 400020. There were two resolutions, carried unanimously. both of which were Special. 14 September 2005 The 19th Annual General Meeting was held at All the resolutions were put to vote 1100 hours at Birla Matushri Sabhagar, New Marine by show of hands and were carried Lines, Mumbai – 400020. There were Six resolutions unanimously. (1 special and 5 ordinary).

8 DISCLOSURES iii) SECRETARIAL AUDIT i) There were no significant related-party transactions A qualified practicing Company Secretary carried out of the Company with its promoters, directors or quarterly secretarial audit to reconcile the total management, their subsidiaries or relatives that may admitted capital with National Securities Depository have potential conflict with the interest of the Limited (NSDL) and Central Depository Services (India) Company at large. Note number B.17 of the Notes on Limited (CDSL) and the total issued and listed capital. Accounts may also be referred to in this respect. No The audits confirm that the total issued/paid-up non-compliance notice has been issued and no capital is in agreement with the total number of shares penalties or strictures have been imposed on the in physical form and the total number of Company by SEBI, any stock exchange or any statutory dematerialized shares held with NSDL and CDSL. authority on any matter related to capital markets iv) The Company fulfilled the following non-mandatory during the last three years. requirements: ii) The Company has adopted a Whistle Blower Policy a. The Company has setup a Remuneration and has established necessary mechanisms for Committee. Please see the paragraph on employees to report concerns about unethical Remuneration Committee. behaviour. No person has been denied access to the b. The Auditor’s Report on the financial statements Audit Committee. of the Company is unqualified.

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9. DISCLOSURE REQUIRED BY CLAUSE 32 OF THE LISTING AGREEMENT Amount of loans and advances in the nature of loans outstanding from subsidiaries during the year ended 31 March 2008 Name of the Company Outstanding Maximum Investment in Investment as at amount shares of the in shares of 31 March, 2008 outstanding Company subsidiaries of during the year the Company Rs. in crores Rs. in crores No. of shares No. of Shares Subsidiaries (i) VSNL Broadband Ltd. ---- (ii) Tata Communications Services (America )Inc. (formerly VSNL America Inc. ) ---- (iii) Tata Communications Lanka Ltd. (formerly VSNL Lanka Ltd.) ---- (iv) Tata Communications International Pte Ltd. (formerly VSNL International Pte Ltd.) 428.77 443.58 - - (v) VSNL SNOSPV Pte. Ltd ---- (vi) VSNL Internet Services Ltd. ( See note 1) ---- (vii) Tata Communications - 1.29 - - Transformation Services Ltd. (formerly VSNL Global Services Ltd.)

Subsidiaries of Tata Communications International Pte Ltd. No. of Shares VSNL Telecommunications (Bermuda) Ltd. (in liquidation) 1,200,000 Tata Communications (Netherlands) BV (formerly VSNL Netherlands BV) 16,718,000 Tata Communications(Bermuda) Ltd. (formerly VSNL International (Bermuda) Ltd.) 1,200,000 Tata Communications (Japan) K.K (formerly VSNL International Japan K.K) 300 Tata Communications (Hong Kong) Ltd. (formerly VSNL HongKong Ltd.) 1 Tata Communications (Australia) Pty Ltd. (formerly known as VSNL International (Australia) Pty Ltd.) 555,001 VSNL International (Puerto Rico) Inc. 1,000 Teleglobe Asia Pte Ltd. 100,000 Teleglobe Asia Data Transport Pte Ltd. 2 Teleglobe Global Japan YK. 120 Teleglobe Netherlands BV 22 TLGB Luxemburg Holdings Sarl. (In liquidation) 500 TLGB Netherlands Holdings BV. 18 Subsidiaries of Tata Communications (Netherlands) B.V VSNL International (Portugal) Instalacao E Manutencao De Redes Lda. 12,447,000 Tata Communications (US) Inc. (Formerly known as VSNL International (US) Inc.) 3000 Tata Communications (UK) Limited (formerly known as VSNL Telecommunications (UK) Limited) 6,500,002 VSNL France SAS 1,847,000 Videsh Sanchar Nigam Spain Srl. 413,006 VSNL Portugal Unipessoal Lda. 1,055,000 VSNL Belgium BVBA 186 Tata Communications Deutschland GMBH (formerly known as VSNL Germany GMBH) 1 VSNL International (Sweden) AB 1000

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Subsidiaries of Tata Communications (UK) Limited No. of Shares VSNL UK Limited (In liquidation) 1 Teleglobe International Limited (In liquidation) 8,416,801 Subsidiary of Teleglobe Netherlands BV Tata Communications (Italy) SRL (formerly known as VSNL International (Italy) SRL.) 10,000 Tata Communications (Canada) ULC (formerly known as Teleglobe Canada ULC) 402 VSNL International (Poland) Sp.z.o.o. 1000 Tata Communications (Nordic) AS (formerly known as VSNL International (Nordic) AS) 1000 Subsidiaries of Tata Communications Bermuda Limited ITXC IP Holdings SARL. 500 Tata Communications Services (Bermuda) Limited (formerly known as VSNL International (GBRM) Ltd.) 12,000 ITXC Global Hong Kong Limited (In liquidation) 1,180,000 Subsidiaries of Tata Communications (Hong Kong) Limited VSNL International (Hong Kong) Limited (In liquidation) 10,000 Subsidiary of TLGB Netherlands Holdings B.V VSNL International(ITXC) Corp. 1,000 Subsidiaries of VSNL Belgium BVBA Teleglobe International Belgium SPRL 100 Subsidiaries of VSNL International (ITXC) Corp. Tata Communications (America) Inc. (formerly known as Teleglobe America Inc.) 100 VSNL International (Global) Corp. 100 Subsidiary of VSNL Telecommunications Bermuda Limited Teleglobe Bermuda Limited – (in Liquidation) 1,200,000 Subsidiaries of Tata Communications (US) Inc. VSNL International (Guam) LLC NA Subsidiaries of Tata Communications America Inc VSNL International IPCO LLC NA Subsidiaries of VSNL Portugal Unipessoal Lda. VSNL International (Portugal) Instalacao E Manutencao De Redes Lda. 12,447,000

Note 1. The High Courts of Bombay and Delhi approved the merger of Direct Internet Limited into its subsidiary VSNL Internet Services Limited. The courts also approved the Scheme of Arrangements to transfer the Company’s Retail Business Undertakings to its wholly owned indirect subsidiary, VSNL Internet Services Ltd. Accordingly, pursuant to the orders of the courts, effective from 1 March 2007 Direct Internet Limited ceases to exist and VSNL Internet Services Limited becomes wholly owned direct subsidiary of Tata Communications Limited. Note 2. The Company has subscribed to the Capital clause of Memorandum of Association of a new company M/s Banking ATM Infrasolutions Limited which is intended to be 100% owned subsidiary of Tata Communications Limited.

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10 MEANS OF COMMUNICATION • Cash flow constraints Company’s quarterly results are ordinarily published • Contractual constraints in the Financial Express and Loksatta among • Legal constraints others, and are also hosted on Company’s • Tax considerations website: www.tatacommunications.com. The Company’s • Return considerations press releases, details of significant developments and investor updates are also made available on the website. The board recommends dividends at its discretion. The The Company generally holds a press conference/investors’ factors that may be considered by the Board before making meet after the half-yearly results are taken on record by any recommendations for the dividend include, but are the board relating to the period ending 30 September and not limited to, future expansion plans and capital 31 March every year. requirements, profits earned during the financial year, overall financial conditions, cost of raising funds from The management discussion and analysis forms part of alternate sources, liquidity and cash flow position and the directors’ report and is included in the annual report applicable taxes including tax on dividend as well as for the year 2007-08. Segmental information may be exemptions under tax laws available to various categories referred to in Note number B.16 of the Notes on Accounts. of investors from time to time, and money market 11 SHAREHOLDER INFORMATION conditions. DATE AND VENUE OF THE AGM DIVIDEND PAYMENT The twenty second annual general meeting of the The dividend as recommended by the Board of Directors, Company will be held at 1100 hours on Saturday, 2 August if declared at this Annual General Meeting, shall be paid 2008, at MC Ghia Hall, Bhogilal Hargovindas Building, on or after Thursday the 7 August 2008. Second Floor, 18/20 Kaikhushru Dubash Road Marg, Kalaghoda, Mumbai - 400001. (i) to those shareholders whose names appear on the Company’s Register of Members after giving effect to FINANCIAL CALENDAR all valid share transfers in physical form lodged with Fiscal year ending : 31 March 2008 the Registrar & Transfer Agents (R&T Agents) of the Company on or before Friday, 25 July 2008. Annual General Meeting : 2 August 2008 (ii) in respect of shares held in electronic form, to those KEY FINANCIAL REPORTING DATES FOR THE FINANCIAL “deemed members” whose names appear in the YEAR 2007-08 statements of beneficial ownership furnished by First quarter ending 30 June 2008 : On or before National Securities Depository Limited (NSDL) and 31 July 2008 Central Depository Services (India) Limited (CDSL) as at the end of business on Friday, 25 July 2008. In Second quarter ending : On or before respect of shares held in demat mode, the dividend 30 September 2008 31 October 2008 will be paid on the basis of beneficial ownership as Third quarter ending : On or before per details to be furnished by NSDL and CDSL for this 31 December 2008 31 January 2009 purpose. Fourth quarter ending : On or before BANK DETAILS 31 March 2009 30 April, 2009 or if audited, on or In order to provide protection against fraudulent before 30 June 2009. encashment of dividend warrants, members are requested to provide, if they have not already provided, their bank BOOK CLOSURE DATES FOR THE PURPOSE OF DIVIDEND account numbers, bank account type and names and The Company’s register of members and share transfer addresses of bank branches, quoting folio numbers, to the books will remain closed from 26 July 2008 to 2 August R&T agents (in case of physical shareholding) to enable 2008 (both days inclusive) for the purpose of ascertaining them to incorporate the same on the dividend warrants. eligibility to shareholders to receive the final dividend as In case of dematerialised holding the bank account details may be declared for the year ended 31 March 2008. should be intimated and updated with the shareholder’s Depository Participant. DIVIDEND POLICY LISTING ON STOCK EXCHANGES IN INDIA AND LISTING Company believes in enhancing shareholders returns every FEES year and in line with this company has constantly endeavored to maintain the Dividend Payout Ratio at The Company’s shares are listed on the stock exchanges broadly same levels every year. However, there are various at Mumbai (BSE) and National Stock Exchange (NSE) in constraints that may impact on a firm’s decision to pay India. Annual listing fees as due to each of the above stock out earnings in the form of dividends. exchanges for 2007-2008 have been paid.

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COMMUNICATIONS Twenty Second Annual Report 2007-2008 Tata Communications Limited

LISTING ON STOCK EXCHANGE OUTSIDE INDIA CUSTODIAN FOR THE DEPOSITORY IN INDIA The Company’s ADRs are listed on the New York Stock ICICI Bank Limited, Securities Markets Services, 1st Floor, Exchange (NYSE) and have been traded on the NYSE since Empire Complex, 414 Senapati Bapat Marg, Lower Parel, 15 August 2000. The annual listing fee payable to the NYSE Mumbai – 400013. Telephone: 91-22-6667 2026, 6667 2030 is being paid regularly. Facsimile: 91-22-6667 2779/2740. STOCK CODE DEPOSITORY BANK FOR ADR HOLDERS Bombay Stock Exchange : 500483 nd The Bank of New York, 101, Barclays Street, 22 Floor West, National Stock Exchange : TATACOMM New York, NY 10286, Telephone: +1 (212) 815 8365, Facsimile: +1 (212) 571 3050. New York Stock Exchange : TCL ISIN No. for equity shares : INE151A01013 Local Address : The Bank of New York, Express Towers, 12th Floor, Nariman Point, Mumbai 400 021, Telephone: ISIN No. for ADRs : US8765641050 (022) 2204 4941/43, Facsimile: (022) 2204 4942. CUSIP No. for ADRs : 876564105

STOCK MARKET DATA RELATING TO SHARES LISTED IN INDIA Monthly high and low quotations and volume of shares traded at BSE & NSE for 2007-2008 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-07 455.00 389.50 191200 454.50 385.00 613900 21.80 18.20 87200

May-07 499.90 438.20 160900 497.80 439.00 520100 23.79 20.96 77800

Jun-07 487.50 442.35 91600 486.90 446.00 335300 23.79 21.52 62900

Jul-07 507.00 446.00 94500 506.20 445.00 289900 24.89 21.45 91700

Aug-07 457.00 360.50 110800 457.90 359.00 351100 22.75 16.29 133000

Sep-07 459.50 392.25 75600 460.75 382.00 298500 23.00 19.02 118800

Oct-07 600.00 433.60 235300 600.00 433.25 881500 32.00 22.09 234300

Nov-07 642.30 462.05 284000 643.00 455.60 884100 33.49 22.02 195900

Dec-07 776.00 585.50 286000 775.00 560.00 1055400 40.36 28.90 165400

Jan-08 783.00 441.00 123100 783.00 420.05 643900 38.43 24.00 290200

Feb-08 554.00 420.00 90200 566.00 438.00 394700 27.15 22.08 163300

Mar-08 579.85 440.00 89100 580.00 447.00 387000 30.78 21.80 119000

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Closing Share Price at BSE V/S Sensex Close

900 25000

800

700 20000

600 15000 500 Sensex 400 10000 300 Closing Share Price at BSE Price Closing Share 200 5000 100

0 0 2-Jul-07 1-Jun-07 9-Jan-08 2-Apr-07 7-Dec-07 7-Feb-08 8-Nov-07 9-Aug-07 3-May-07 10-Oct-07 10-Sep-07 10-Mar-08

BSE Closing Share Price Sensex Close

Closing Share Price at NSE V/S Nifty Close

900 7000

800 6000

700 5000 600 4000

500 Nifty

400 3000

300 Closing Share Price at NSE Price Closing Share 2000 200 1000 100

0 0 2-Jul-07 1-Jun-07 9-Jan-08 2-Apr-07 7-Dec-07 7-Feb-08 8-Nov-07 9-Aug-07 3-May-07 10-Oct-07 10-Sep-07 10-Mar-08

NSE Closing Share Price Nifty Close

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COMMUNICATIONS Twenty Second Annual Report 2007-2008 Tata Communications Limited

ADR Closing Price at NYSE V/S NYSE Composite Index

45 12000

40 10000 35

30 8000

25 6000 20

15 4000 NYSE Composite Index Composite NYSE

ADR Closing Price at NYSE (USD) at NYSE ADR Closing Price 10 2000 5

0 0 2-Jul-07 1-Jun-07 9-Jan-08 2-Apr-07 7-Dec-07 7-Feb-08 8-Nov-07 9-Aug-07 3-May-07 10-Oct-07 10-Sep-07 10-Mar-08

ADR Closing Price Close NYSE Composite Index

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.

DISTRIBUTION OF SHAREHOLDING

Number of Shareholders Number of ordinary shares held 31.03.2008 31.03.2007

1 to 500 50882 58054

501 to 1000 1335 1206

1001 to 10000 1310 1507

Over 10000 153 156

Total 53680 60923

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CATEGORIES OF SHAREHOLDERS AS OF 31 MARCH

Category Number of Voting Strength Number of Shares Held Shareholders (Percentage)

2008 2007 2008 2007 2008 2007

PROMOTERS

Tata Group

Panatone Finvest Limited 2 2 40.70 40.70 115988857 115988857

Tata Sons Limited 2 2 8.51 8.51 24260497 24260497

The Tata Power Company Limited 1 1 0.90 0.90 2575837 2575837

Tata Iron & Steel Company Limited 0 0 0.00 0.00 0 0

Tata Industries Limited 0 0 0.00 0.00 0 0

Central Government 1 1 26.12 26.12 74446885 74446885

NON-PROMOTERS

Indian Public Financial Institutions 61 76 12.74 11.22 36457943 31988206

Indian Nationalised Banks 15 13 0.12 0.12 364678 341893

Foreign Financial Institutions 72 62 1.77 2.83 5056092 8076944

Foreign companies (shares held by The Bank of New York as depository for ADRs) 2 2 5.67 6.18 16152446 17608384

Non-resident individuals / Overseas Corporate Bodies 194 555 0.02 0.05 66677 149617

Other Indian Bodies Corporate 1315 1412 0.91 0.81 2617031 2306837

Others 52015 58797 2.42 2.56 7013057 7256043

Total 53680 60923 100 100 285000000 285000000

Dematerialisation of Shares and Liquidity Approx 99.91% of the Company’s share capital available in the market is dematerialised as on 31 March 2008. 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 8076223 ADRs (each representing two ordinary share of the Company) are outstanding as of 31 March 2008. In respect of these ADRs, the option to convert into shares is alive.

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COMMUNICATIONS Twenty Second Annual Report 2007-2008 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 10million 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

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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 10.04.2002 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 08.06.2002 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, Bangalore, 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 VSB, Mahatma Gandhi Road, to: 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 Satam Estate, 3rd Floor, Corporate Office Above Bank of Baroda, Chakala, Andheri (East), LVSB, Kashinath Dhuru Marg Mumbai - 400 099. Prabhadevi Mumbai – 400 028. Tel : (022) 6772 0300 Tel : +91 22 6657 8765 Fax : (022) 2837 5646 Fax : +9122 6639 5162 E-mail : [email protected] Email : [email protected] Website : www.tatacommunications.com Any queries relating to financial statements of the Company may be addressed to: Compliance Officer Mr. Satish Ranade Investor Relations Cell Company Secretary & Chief Legal Officer Tata Communications Limited LVSB Kashinath Dhuru Marg, Prabhadevi, VSB, MG Road, Mumbai - 400 028. Fort, Mumbai - 400 001. Tel : +91 22 6657 8765 Tel : +91 (22) 66578765 Fax : +91 22 6659 1962 Fax: +91 (22) 66395162 Email : [email protected] Email: [email protected]

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COMMUNICATIONS Twenty Second Annual Report 2007-2008 Tata Communications Limited

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, 2008, 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 N. Srinath Date: 17 June 2008 Managing Director

CHIEF EXECUTIVE OFFICER (CEO) AND CHIEF FINANCIAL OFFICER (CFO) CERTIFICATION FOR THE YEAR 2007-08 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 significant fraud of which we have become aware.

Place: Mumbai Rajiv Dhar N. Srinath Date: 17 June 2008 Chief Financial Officer Managing Director

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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) filled 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 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 requirements of the listing agreement entered into with the stock exchanges in India and the 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 : 17 June 2008 & Chief Legal Officer

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COMMUNICATIONS Twenty Second Annual Report 2007-2008 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) (formerly Videsh Sanchar Nigam Limited), for the year ended on 31 March, 2008, 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 exami- nation 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

P. R. RAMESH Partner Membership No: 70928 Mumbai, 30 June, 2008

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34 CEPS 6/D:/Sales/Mohan/Tata Communication AR 2008/File Main Secretarial 2008.pmd/NSS/2/7/SBC/7-7/ 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, Profit and Loss COMMUNICATIONS LIMITED (“the Company”) Account and Cash Flow Statement dealt with by (formerly Videsh Sanchar Nigam Limited) as at this report comply with the accounting standards 31 March, 2008, and also the Profit and Loss Account referred to in sub-section (3C) of Section 211 of and the Cash Flow Statement of the Company for the the Companies Act, 1956; year ended on that date annexed thereto. These financial statements are the responsibility of the (v) on the basis of written representations received Company’s Management. Our responsibility is to from the directors, as on 31 March, 2008, and express an opinion on these financial statements taken on record by the Board of Directors, we based on our audit. report that none of the directors is disqualified as on 31 March, 2008 from being appointed as a 2. We conducted our audit in accordance with auditing director in terms of clause (g) of sub-section (1) standards generally accepted in India. Those standards of Section 274 of the Companies Act, 1956; and require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit (vi) in our opinion and to the best of our information includes examining, on a test basis, evidence and according to the explanations given to us, supporting the amounts and disclosures in the the said accounts give the information required financial statements. An audit also includes assessing by the Companies Act, 1956, in the manner so the accounting principles used and significant required and give a true and fair view in estimates made by management, as well as evaluating conformity with the accounting principles the overall financial statement presentation. We generally accepted in India: believe that our audit provides a reasonable basis for our opinion. (a) in the case of the Balance Sheet, of the State of Affairs of the Company as at 3. As required by the Companies (Auditor’s Report) 31 March, 2008; Order, 2003 (CARO) issued by the Central Government of India in terms of sub-section (4A) of Section 227 of (b) in the case of the Profit and Loss Account, of the Companies Act, 1956, we enclose in the Annexure the profit for the year ended on that date; a statement on the matters specified in paragraphs 4 and and 5 of the said Order to the extent applicable. (c) in the case of the Cash Flow Statement, of 4. Further to our comments in the Annexure referred to the cash flows for the year ended on that in paragraph 3 above, we report that: date. (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; For S. B. BILLIMORIA & CO. (ii) in our opinion, proper books of account as Chartered Accountants required by law have been kept by the Company so far as it appears from our examination of those books; P.R.RAMESH Partner (iii) the Balance Sheet, Profit and Loss Account and Membership No: 70928 Cash Flow Statement dealt with by this report are in agreement with the books of account; Mumbai, 17 June, 2008

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ANNEXURE TO THE AUDITORS’ REPORT (Referred to in paragraph 3 of our report of even date)

(i) (a) The Company has maintained proper records (iv) In our opinion and according to the information and showing full particulars including quantitative explanations given to us, there is adequate internal details and situation of fixed assets. control system commensurate with the size of the Company and the nature of its business for the (b) According to the information and explanations purchase of inventory and fixed assets. The internal given to us, the fixed assets were physically control systems for rendering of certain enterprise verified by the Management in accordance with data services need to be suitably strengthened. the programme of verification, which in our During the course of our audit, we have not opinion, provides for physical verification of all observed any continuing major weakness in the fixed assets at reasonable intervals having internal control systems. regard to the size of the Company and nature of its assets. The material differences identified (v) (a) To the best of our knowledge and belief and pursuant to the physical verification have been according to the information and explanations duly adjusted in the books of account. Having given to us, we are of the opinion that the regard to the size of the operations of the transactions that need to be entered into the Company and on the basis of explanations register maintained under Section 301 of the received, in our opinion, the net unadjusted Companies Act, 1956 have been so entered. differences were not significant. (b) In our opinion and having regard to our (c) The fixed assets disposed off during the year, in comments in paragraph (v) (a) above, and our opinion, do not constitute substantial part according to the information and explanations of the fixed assets of the Company and such given to us, transactions made in pursuance of disposal has, in our opinion, not affected the contracts or arrangements entered in the going concern status of the Company. register maintained under Section 301 of the (ii) (a) As explained to us, the stocks of stores and Companies Act, 1956 and exceeding the value spares have been verified during the year by of Rupees five lakhs in respect of any party the Management in accordance with the during the year have been made at prices which programme of verification. In our opinion, the are reasonable having regard to prevailing frequency of verification is reasonable. market prices at the relevant time, where such market prices are available. (b) In our opinion and according to the information and explanations given to us, the procedures (vi) In our opinion and according to the information and of physical verification of stocks followed by the explanations given to us, the Company has not Management are reasonable and adequate in accepted deposits from the public to which the relation to the size of the Company and the provisions of Section 58A, 58AA or any other relevant nature of its business. provisions of the Companies Act, 1956 are applicable during the period covered by our audit report. (c) In our opinion and according to the information and explanations given to us, the Company is (vii) In our opinion, the Company has an internal audit maintaining proper records of inventory. The system commensurate with the size and nature of discrepancies noticed on verification between its business. the physical stocks and the book records were (viii) We have broadly reviewed the books of account and not material having regard to the size of the records maintained by the Company relating to operations of the Company. telecommunication activities pursuant to the Rules (iii) According to the information and explanations given made by the Central Government for the to us, the Company has not taken or granted any maintenance of cost records under Section 209 (1) loans secured or unsecured from or to companies, (d) of the Companies Act, 1956 and, are of the firms or other parties covered by the register opinion that prima facie, the prescribed accounts and maintained under Section 301 of the Companies Act, records have been made and maintained. We have 1956. not, however, made a detailed examination of the

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36 CEPS 6\D\SALES\MOHAN\TATA COMMUNICATION AR 2008\TC MAIN ACCOUNT 08.PMD\AMD\1-7/SBC/3-7/4-7/vk7-7\AMD\8-7 records with a view to determining whether they (xiv) In our opinion and according to the information and are accurate or complete. explanations given to us, the Company is not dealing in or trading in shares, securities, debentures and (ix) (a) According to the information and explanations other investments. Accordingly, the provisions of given to us, the Company is generally regular clause 4 (xiv) of the Companies (Auditor’s Report) in depositing with appropriate authorities Order, 2003 are not applicable to the Company. undisputed statutory dues including provident (xv) In our opinion and according to the information and fund, investor education and protection fund, explanations given to us, the terms and conditions income tax, sales tax, wealth tax, service tax, on which the Company has given guarantee for customs duty, excise duty, cess and other loans taken by others from banks or financial material statutory dues applicable to it. The institutions are not prima facie prejudicial to the Company has received exemption from the interest of the Company. operation of Employees’ State Insurance Act, 1948. (xvi) To the best of our knowledge and belief and according to the information and explanations given (b) According to the information and explanations to us, in our opinion, term loans availed by the given to us, no undisputed amounts payable in Company were prima facie applied by the Company respect of income tax, wealth tax, sales tax, during the year for the purpose for which the loans service tax, customs duty, excise duty and cess were obtained. were in arrears, as at 31 March, 2008 for a period (xvii) According to the information and explanations given of more than six months from the date they to us, and on an overall examination of the Balance became payable. Sheet of the Company, funds raised on short-term (c) According to the information and explanations basis have prima facie not been used during the given to us, details of dues of sales tax which year for long-term investment. have not been deposited on account of any (xviii) According to the information and explanations given dispute are given below: to us, the Company has not made any preferential allotment of shares to parties and companies Particulars Period to which Forum where Amount the amount relates the dispute is in Rs. covered in the register maintained under Section pending crores 301 of the Companies Act, 1956. Sales Tax 2005-06 to 2007-08 Dy. Commissioner 0.51 (xix) In our opinion and according to the information and (x) The Company does not have accumulated losses. explanations given to us, the Company has not The Company has not incurred cash losses during issued any secured debentures during the period the financial year covered by our audit and the covered by our report. Accordingly, the provisions immediately preceding financial year. of clause 4 (xix) of the Companies (Auditor’s Report) Order, 2003 are not applicable to the Company. (xi) In our opinion and according to the information and (xx) During the period covered by our audit report, the explanations given to us, the Company has not Company has not raised any money by way of public defaulted in repayment of dues to a financial issue. institution, bank or debenture holder. (xxi) To the best of our knowledge and belief and (xii) The Company has not granted any loans and according to the information and explanations given advances on the basis of security by way of pledge to us, no material instances of fraud on or by the of shares, debentures and other securities during Company has been noticed or reported during the the year. Accordingly, the provisions of clause 4 (xii) course of our audit. of the Companies (Auditor’s Report) Order, 2003 are For S. B. BILLIMORIA & CO. not applicable to the Company. Chartered Accountants (xiii) In our opinion, the Company is not a chit fund or a P.R.RAMESH nidhi/mutual benefit fund/society. Accordingly, the Partner provisions of clause 4 (xiii) of the Companies Membership No: 70928 (Auditor’s Report) Order, 2003 are not applicable to the Company. Mumbai, 17 June, 2008

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BALANCE SHEET AS AT 31 MARCH, 2008 As at Schedule 31 March, 2007 Rs. in crores Rs. in crores FUNDS EMPLOYED: 1 SHARE CAPITAL 1 285.00 285.00 2 RESERVES AND SURPLUS 2 6,262.34 6,074.50 3 TOTAL SHAREHOLDERS’ FUNDS 6,547.34 6,359.50 4 UNSECURED LOANS 3 777.80 197.61 5 DEFERRED TAX LIABILITY (NET) 84.13 71.68 (Refer Note B13, Schedule 19) 6 TOTAL FUNDS EMPLOYED 7,409.27 6,628.79 APPLICATION OF FUNDS: 7 FIXED ASSETS: 4 (a) Gross Block 4,352.65 4,582.98 (b) Less: Accumulated Depreciation/Amortisation 1,363.75 1,428.81 (c) Net Block 2,988.90 3,154.17 (d) Capital work-in-progress 543.77 340.44 3,532.67 3,494.61

8 INVESTMENTS 5 2,103.77 2,673.58 9 CURRENT ASSETS, LOANS AND ADVANCES A. CURRENT ASSETS (a) Inventories 6 5.45 4.72 (b) Sundry Debtors 7 1,063.13 955.19 (c) Cash and Bank Balances 8 79.63 104.31 (d) Other Current Assets 9 437.57 104.75 1,585.78 1,168.97 B. LOANS AND ADVANCES 10 2,428.23 1,147.75 4,014.01 2,316.72 10 Less:CURRENT LIABILITIES AND PROVISIONS (a) CURRENT LIABILITIES 11 1,989.90 1,585.69 (b) PROVISIONS 12 251.28 270.43 2,241.18 1,856.12 11 NET CURRENT ASSETS [ (9) less (10)] 1,772.83 460.60 12 TOTAL ASSETS (NET) 7,409.27 6,628.79 SIGNIFICANT ACCOUNTING POLICIES AND NOTES TO ACCOUNTS 19 As per 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

RAJIV DHAR SATISH RANADE Chief Financial Officer Company Secretary & Chief Legal Officer MUMBAI MUMBAI DATED: 17 June, 2008 DATED: 17 June, 2008

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38 CEPS 6\D\SALES\MOHAN\TATA COMMUNICATION AR 2008\TC MAIN ACCOUNT 08.PMD\AMD\1-7/SBC/3-7/4-7/vk7-7\AMD\8-7 PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED 31 MARCH , 2008 Schedule Year ended 31 March, 2007 Rs. in crores Rs. in crores INCOME: 1 REVENUES FROM TELECOMMUNICATION SERVICES 3,283.30 3,746.16 2 OTHER INCOME 13 166.04 202.74 3 INTEREST INCOME 14 15.99 9.44 4 TOTAL INCOME 3,465.33 3,958.34 EXPENDITURE: 5 SALARIES AND RELATED COSTS 15 242.43 243.69 6 NETWORK COSTS 16 1,852.67 1,908.80 7 OPERATING AND OTHER EXPENSES 17 568.14 663.07 8 INTEREST EXPENSE 18 39.60 6.91 9 DEPRECIATION AND AMORTISATION (Net of transfer from Capital Reserve) 301.31 391.33 10 TOTAL EXPENDITURE 3,004.15 3,213.80 PROFIT BEFORE TAXES AND EXCEPTIONAL ITEMS 461.18 744.54 11 EXCEPTIONAL ITEMS: (a) Expenditure on Voluntary Retirement Schemes/ Voluntary Separation Schemes — 23.86 (b) Fixed Assets written-off 11.20 8.05 PROFIT BEFORE TAXES 449.98 712.63 12 TAXES (a) CURRENT TAX 114.15 229.97 (b) DEFERRED TAX EXPENSE 26.65 8.40 (c) FRINGE BENEFIT TAX 4.72 5.70 PROFIT AFTER TAXES 304.46 468.56 13 BALANCE BROUGHT FORWARD FROM PREVIOUS YEAR 1,742.91 1,471.26 ADD: ADJUSTMENT FOR LOSSES FOR RETAIL BUSINESS UNDERTAKING (Refer note B9, Schedule 19) 37.50 — LESS: TAX ADJUSTMENT ON RETAIL BUSINESS UNDERTAKING (Refer note B9, Schedule 19) 9.25 — AMOUNT AVAILABLE FOR APPROPRIATIONS 2,075.62 1,939.82 14 APPROPRIATIONS : (a) PROPOSED DIVIDEND (Refer note B3, Schedule 19) 128.25 128.25 (b) TAX ON DIVIDEND 21.80 21.80 (c) GENERAL RESERVE 33.27 46.86 BALANCE CARRIED TO BALANCE SHEET 1,892.30 1,742.91 EARNINGS PER SHARE (EPS) 15 Basic/Diluted earnings per share, excluding exceptional items(Rs.) (Refer note B16, Schedule 19) 10.94 17.18 16 Basic/Diluted earnings per share, including exceptional items (Rs.) (Refer note B16, Schedule 19) 10.68 16.44 SIGNIFICANT ACCOUNTING POLICIES AND NOTES TO ACCOUNTS 19 As per 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 RAJIV DHAR SATISH RANADE Chief Financial Officer Company Secretary & Chief Legal Officer MUMBAI MUMBAI DATED: 17 June, 2008 DATED: 17 June, 2008

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39 CEPS 6\D\SALES\MOHAN\TATA COMMUNICATION AR 2008\TC MAIN ACCOUNT 08.PMD\AMD\1-7/SBC/3-7/4-7/vk7-7\AMD\8-7 COMMUNICATIONS Twenty Second Annual Report 2007-2008 Tata Communications Limited

CASH FLOW STATEMENT FOR THE YEAR ENDED 31 MARCH, 2008 Year ended Year ended 31 March 2008 31 March 2007 Rs. in crores Rs. in crores CASH FLOWS FROM OPERATING ACTIVITIES 1 PROFIT BEFORE TAXES AND EXCEPTIONAL ITEMS 461.18 744.54 Adjustments for: Depreciation and amortisation 301.31 391.33 (Profit)/loss on sale of fixed assets (1.58) (11.34) Interest income (15.99) (9.44) Interest expense 39.60 6.91 Fixed assets written down 1.20 - Interest on Income Tax Refund (16.66) (6.34) Dividend income on current investments (29.98) (57.13) Profit on sale and revaluation gain on current investment (14.09) (1.13) Profit on sale of long term investment (1.89) - Exchange difference on cash and cash equivalents 0.04 0.07 OPERATING PROFIT BEFORE WORKING CAPITAL CHANGES 723.14 1057.47 Inventories (0.73) (0.92) Sundry debtors (107.94) (217.62) Other current assets (320.63) (13.20) Loans and advances (25.55) (18.60) Current liabilities and provisions 414.49 54.99 Cash generated from operations before tax and exceptional items 682.78 862.12 Income tax (paid) (396.36) (288.15) Interest on income tax refunds 16.66 6.34 Cash generated from operations before exceptional items 303.08 580.31 Expenditure on voluntary retirement schemes/voluntary separation schemes - (21.11) NET CASH FROM OPERATING ACTIVITIES 303.08 559.20 2 CASH FLOWS FROM INVESTING ACTIVITIES Purchase of fixed assets (728.16) (839.62) Investments in equity share capital of subsidiaries - (94.97) Advance paid against equity share capital (221.51) (7.27) Investments in preference share capital of subsidiaries - (31.02) Sale of current investments (net of mutual funds dividend re-invested) (net) 617.05 85.02 Proceeds from sale of fixed assets 5.14 42.12 Sale of investments in subsidiaries 2.72 - Loans to subsidiaries (net) (399.17) 160.01 Dividend income from current investments 3.27 15.97 Fixed deposits (net) - 11.17 Interest received 3.97 10.76 NET CASH USED IN INVESTING ACTIVITIES (716.69) (647.83) 3 CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from unsecured loans (net) 580.19 99.36 Dividends paid including dividend tax (150.21) (146.14) Interest paid (40.84) (6.01) NET CASH FLOW FROM / (USED IN) FINANCING ACTIVITIES 389.14 (52.79) NET INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS (24.47) (141.42) CASH AND CASH EQUIVALENTS AS AT THE BEGINNING OF THE YEAR 103.04 244.53 (Refer note B12, Schedule 19) Effect of exchange on cash and cash equivalents (0.04) (0.07) CASH AND CASH EQUIVALENTS AS AT THE END OF THE YEAR 78.53 103.04 (Refer note B12, Schedule 19) Notes : 1. Figures in brackets represent outflows. 2. Advance paid for equity investment in United Telecom Limited of Rs. 5.67 crs and to VSNL SNOSPV Pte. Ltd. of Rs. 1.60 crs have been converted into equity during the year ended 31 March, 2008 3. Loans to Tata Communications International Pte. Ltd. of Rs. 90.98 crs have been converted into equity during the year ended 31 March, 2007 As per 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

RAJIV DHAR SATISH RANADE Chief Financial Officer Company Secretary & Chief Legal Officer MUMBAI MUMBAI DATED: 17 June, 2008 DATED: 17 June, 2008

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40 CEPS 6\D\SALES\MOHAN\TATA COMMUNICATION AR 2008\TC MAIN ACCOUNT 08.PMD\AMD\1-7/SBC/3-7/4-7/vk7-7\AMD\8-7 SCHEDULES FORMING PART OF THE BALANCE SHEET

SCHEDULE - 1 As at As at 31 March, 2008 31 March, 2007 SHARE CAPITAL Rs in crores Rs in crores AUTHORISED : 300,000,000 (2007:300,000,000) Equity Shares of Rs.10 each 300.00 300.00 ISSUED, SUBSCRIBED AND PAID UP 285,000,000 (2007: 285,000,000) Equity Shares of Rs.10 each, fully paid-up 285.00 285.00 Notes: 1) 60,000,000 (2007: 60,000,000) shares have been fully paid up, pursuant to a contract without payment being received in cash 2) 210,000,000 (2007: 210,000,000) shares have been allotted as fully paid bonus shares by capitalisation of General Reserve 3) 15,000,000 (2007:15,000,000) 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 (a) CAPITAL RESERVE (Refer Note B2, Schedule 19) Balance at the beginning of the year 208.91 205.81 Add: Assets gifted during the year — 3.73 208.91 209.54 Less : Depreciation on assets gifted transferred to Profit and Loss account (0.62) (0.63) 208.29 208.91 (b) SECURITIES PREMIUM ACCOUNT Balance at the beginning of the year 834.88 834.88 (c) GENERAL RESERVE Balance at the beginning of the year 3,287.80 3,264.22 Add: Transferred from profit and loss account 33.27 46.86 Add/(Less): Adjustments pursuant to transitional provision of Accounting Standard - 15 (Refer Note B11, Schedule 19) 5.80 (23.28) 3,326.87 3,287.80 (d) PROFIT AND LOSS ACCOUNT Balance carried forward 1,892.30 1,742.91 6,262.34 6,074.50 SCHEDULE - 3 UNSECURED LOANS Short - Term Loans From Banks 427.80 197.61 Other Loans From Banks 350.00 — 777.80 197.61

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41 CEPS 6\D\SALES\MOHAN\TATA COMMUNICATION AR 2008\TC MAIN ACCOUNT 08.PMD\AMD\1-7/SBC/3-7/4-7/vk7-7\AMD\8-7 COMMUNICATIONS Twenty Second Annual Report 2007-2008 Tata Communications Limited ) 2007 3494.61 Rs. 601.34 crores Rs. (Rs. in crores) (Rs. 0.21 0.41 340.44 125.98 99.77 543.77 es (2007: Rs. 193.97 crores) Rs. es (2007: 3,532.67 26.94 22.62 28.97 respectively representing the value of the value representing respectively Scheme of Arrangement to hive-off the to hive-off Scheme of Arrangement )and Rs. 601.34 crores (2007: 601.34 crores )and Rs. dance with the terms of the approval of the of the approval dance with the terms ) 14.33 33.94 29.87 ation circuits Rs. 180.00 cror circuits Rs. ation (0.32) 0.94 (19.36) 124.03 Rs. 1,557.75 crores Rs. tisation Adjustments 2008 2008 Expense 23.21 6.03 (2.30) of gross block and corresponding reduction in accumulated depreciation aggregating reduction depreciation and corresponding in accumulated of gross block (2007: 1,557.75 crores Rs. 956.41 crores was debited The net reduction in carrying Rs. aggregating cost respectively. in accor Account to Securities Premium to persuant assets as on 1.04.2007 transferred B9 of Schedule 19. no. note Refer RBU of the company. for the previous year. in italics are Figures on account of increase in liabilities consequent to fluctuations in foreign exchange fluctuations in foreign to of increase in liabilities consequent on account rates telecommunic domestic and international Bombay. at and the High Court of Judicature shareholders 308.82 crores and Rs. 675.50 crores includes Rs. 5 includes reduction in cost Deduction/adjustments ended 31 March for 2004, the year 7 3 0.50 crores) Rs. and machinery/ capital are NIL (2007: to plant work-in-progress Additions 4 (IRUs) Rights for of Use and machinery of Indefeasible includes the net block Plant 6 depreciation & Amortisation Deduction/adjustments under Gross Block and Accumulated 1.15 1.19 0.07 48.27 13.41 2.20 (1.28 Rs. 259.44 41.28 4.13250.01 - 114.24 45.41 29.15 214.03 218.16 Adjustment 2008 2007 Amor 6.44 (9.06) 49.56 t of which agreements have not been have t of which agreements SCHEDULES FORMING PART OF THE BALANCE SHEET OF SCHEDULES FORMING PART 1.79 - (0.19) 1.60 1.11 0.12 (0.04) 1.19 0.41 0.68 1.60 - (0.45) 2007 78.23 135.1647.87 -38.79 213.39 4.36 6.85 (0.05) 4.46 (2.36) 52.18 2.63 43.28 17.42 12.36 - 5.82 7.09 2.36 (0.03) 206.30 (1.31) 23.21 73.77 13.41 28.97 29.87 30.45 26.43 43.28 7.68 (2.69) 259.44 - -195.43 259.44 35.16113.14 (16.58) 37.15 214.01 - 4.13 104.45 - - 24.64 113.14 41.28 (14.85) 41.25 218.16 114.24 22.43 222.29 99.77 90.98 - 63.68 49.46 71.89 3,364.94 394.90 (73.90) 3,685.94 872.884,099.63 329.84 576.43 (38.01) 1,164.71 (93.08) 2,521.23 4,582.98 2,492.06 1,091.08 391.97 (54.24) 1,428.81 3,154.17 3,008.55 ) for flats at Mumbai and Rs. 1.03 crores (2007: (2007: 1.03 crores Mumbai and Rs. at ) flats for ) being cost of flats in Co-operative Societies under of flats in Co-operative ) being cost ) in respect of which conveyance is not done ) in respect of which conveyance ) for leasehold office space, of which Rs. 1.84 crores of which Rs. space, leasehold office ) for ) in respect of which lease agreement has not been ) in respect of which lease agreement ) identified as surplus land. crores

] TURES 52.18 Rs. 33.52 crores Rs. Rs. 0.26 Rs. Rs. 0.44 crores Rs. Rs. 1.21 crores Rs. Rs. 0.16 crores Rs. Rs. 7.79 crores Rs. )for office space at New Delhi New in respec at space office )for : Rs. 11.98 crores) Rs. : Total 4,582.98 530.96 (761.29) 4,352.65 1,428.81 301.93 (366.99) 1,363.75 2,988.90 3,154.17 (2007 GRAND TOTAL PROGRESS [including advances for [including advances capital expenditure 15.22 crores Rs. : executed. 1.00 crores (2007: Rs. 1.84 crores) pertains to assets acquired on or after pertains assets acquired 1.84 crores) 31 March 2001. to Rs. (2007: formation. executed/ registered executed/ block of buildings include: Gross Land includes Rs.198.99 crores under lease. This includes: This under lease. Land includes Rs.198.99 crores (h) GOODWILL 113.14 - (113.14) - 63.68 - (63.68) - - 49.46 SL.NO. FIXED ASSETS(a) LAND BLOCK GROSS 1 April, Additions 213.39 Deductions/March, 31 - 1 April, Depreciation/ Deductions/DEPRECIATION/AMORTISATION ACCUMULATED March, 31 -March, 31 213.39March, 31 NET BLOCK 7.09 2.63 - 9.72 203.67 206.30 (c) PLANT AND MACHINERY 3,685.94 433.78 (588.89)(g) 3,530.83 VEHICLES MOTOR 1,164.71 257.72 (280.05) 1,142.38 2,388.45 2,521.23 (d) FURNITURE AND FIX (i) WORK-IN- CAPITAL (b) BUILDING(e) OFFICE EQUIPMENT 259.44(f) COMPUTERS - 214.01 - 83.06 (47.06) SCHEDULE - 4 FIXED ASSETS (ii) (2007 : 0.44 crores Rs. (iii) (2007: 32.75 crores Rs. (iv) (2007: 0.16 crores Rs. 2 (i) (2007: 7.79 crores Rs. (ii) in respect of which lease deed is not available Land in Srinagar Leasehold (iii) (2007: 1.21 crores Rs. 1 (i) crores ( 2007: Rs.0.03 NOTES

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42 CEPS 6\D\SALES\MOHAN\TATA COMMUNICATION AR 2008\TC MAIN ACCOUNT 08.PMD\AMD\1-7/SBC/3-7/4-7/vk7-7\AMD\8-7 SCHEDULES FORMING PART OF THE BALANCE SHEET SCHEDULE - 5 Number of shares As at As at 31 March, 2008 31 March, 2007 INVESTMENTS Rs. in crores Rs. in crores I. TRADE INVESTMENTS (At Cost) A. Fully Paid Equity Shares (Unquoted) (a) Tata Teleservices Ltd. 952,812,000 1,011.32 1,011.32 (Equity shares of Rs 10 each) (Refer Note B4, Schedule 19) (b) New ICO Global Communications (Holdings) Limited 180,373 0.01 0.01 (Class A common stock of US$ 0.01 each) (c) United Telecom Limited - Joint Venture 4,638,840 28.99 23.33 (906,440 equity shares of NRS 100 each subscribed during the year) (Refer Note B5, Schedule 19) B. Investment in Subsidiary Companies (i) Fully Paid Equity Shares (Unquoted) (a) Tata Communications Lanka Limited (Formerly known as VSNL Lanka Limited) 13,661,422 7.41 8.24 (1,517,936 Equity shares of LKR 10 each sold during the year) (b) Tata Communications International Pte. Ltd (Formerly known as VSNL International Pte. Ltd) 60,000,000 265.77 265.77 (Equity shares of US$ 1 each) (c) Tata Communications Services (America) Inc. (Formerly known as VSNL America Inc.) 3,000 1.31 1.31 (Equity shares of US$ 0.01 each) (d) VSNL SNOSPV Pte. Ltd 769,333 3.28 1.68 (367,678 equity shares of US$ 1.00 each subscribed during the year) (e) VSNL Broadband Ltd 70,000,000 202.09 202.09 (Equity shares of Rs. 10 each) (f) Direct Internet Limited — — 94.46 (Equity shares of Rs. 10 each) (Refer Note B9, Schedule 19) (g) VSNL Internet Services Limited (Formerly known as DIL Internet Limited) 348,050 94.47 0.01 (Equity shares of Rs. 10 each) (Refer Note B9, Schedule 19) (h) Tata Communications Transformation Services Limited (Formerly known as VSNL Global Services Limited) 500,000 0.50 0.50 (Equity shares of Rs. 10 each) (ii) Fully Paid Preference Shares (Unquoted) (a) Tata Communications International Pte. Ltd (Formerly known as VSNL International Pte. Ltd) 30,955,250 139.32 139.32 (Cumulative convertible redeemable Preference Shares of US$1 each) 1,754.47 1,748.04

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43 CEPS 6\D\SALES\MOHAN\TATA COMMUNICATION AR 2008\TC MAIN ACCOUNT 08.PMD\AMD\1-7/SBC/3-7/4-7/vk7-7\AMD\8-7 COMMUNICATIONS Twenty Second Annual Report 2007-2008 Tata Communications Limited

SCHEDULE - 5 No of Units As at As at 31 March, 2008 31 March, 2007 INVESTMENTS (Contd.) Rs. in crores Rs. in crores II. OTHERS INVESTMENTS IN MUTUAL FUNDS ( Unquoted) (a) Liquid Dividend Plan (including dividend reinvestment) ABN AMRO Long Term Floater-Weekly Dividend — — 41.27 Birla Sunlife Cash Manager Institutional Plan- Daily Dividend — — 25.01 Deutsche Credit Opportunity Fund- Weekly Dividend Reinvestment Liquid Plus 4,119,609 4.14 — Grindlays Liquidity — — 25.01 HDFC Cash Managemant Call Plan Daily Dividend Reinvestment — — 25.03 HSBC Liquid Plus — — 37.77 ICICI Prudential Sweep Cash Plan- Daily Dividend — — 15.01 JM Money Manager Super Plus Plan Daily Dividend Reinvestment — — 34.71 LIC MF Liquid Fund-Dividend Plan 22,772,826 25.00 — Principal Liquid Institutional Premium Plan Daily Dividend Reinvestment 10,001,210 10.00 — Principal Liquid Plus Regular Plan Daily Dividend Reinvestment 20,042,697 20.08 — Prudential Flexible Income Plan- Daily Dividend Reinvestment 33,235,312 35.14 — Prudential Liquid Institutional Plan 526454 — — 23.79 Reliance Liquid Plus Daily Dividend Option — — 20.05 Standard Chartered Arbitrage Fund-Monthly Dividend Reinvestment — — 10.14 Tata Liquid Daily Dividend Reinvestment March 06 — — 50.03 Templeton Floating Reinvestment Income Fund Long Term Quarter Dividend Reinvestment — — 35.94 (b) Fixed Maturity Plan ABN AMRO Fixed Maturity Plan- Yearly Growth — — 10.00 ABN AMRO Fixed Maturity Plan-17 Months Growth 10,001,612 10.00 10.00 ABN AMRO Quarterly Fixed Term Plan Series 6 — — 20.00 Birla Fixed Term Plan 16 Months 20,000,000 20.00 20.00 HDFC Fiixed Maturity Plan 16 Months-December 06 25,003,996 24.99 24.99 HSBC 15 Months Fixed Maturity Plan 0107 — — 10.00 HSBC Fixed Term Plan- Series 21-15 Months 15,000,000 15.00 15.00 HSBC Fixed Term Series-22-Institutional Growth 10,001,678 10.00 — ING Fixed Maturity Fund - 28-Growth 15,000,000 15.00 — JM 3 Months Fixed Maturity Plan January 07 — — 10.00 Kotak 16 Months Fixed Maturity Plan Series 1 10,000,000 10.00 10.00 Kotak 3 Months Fixed Maturity Plan January 07 — — 10.00 Kotak Fixed Maturity Plan 3 Months Series 13 — — 25.00 LIC 3 Months Fixed Maturity Plan January 07 — — 10.00 LIC Mutual Fund Fixed Maturity Plan Series 15 — — 29.50 Principal 540 Days Fixed Maturity Plan 15,002,472 14.98 14.98 Principal PNB Fixed Maturity Plan 385 Days-Series III — — 25.00 Prudential Fixed Maturity Plan 15 Months Growth 0207 10,000,000 10.00 10.00 Prudential Fixed Maturity Plan 18 Months - Series 34 20,000,000 19.99 19.99

44

44 CEPS 6\D\SALES\MOHAN\TATA COMMUNICATION AR 2008\TC MAIN ACCOUNT 08.PMD\AMD\1-7/SBC/3-7/4-7/vk7-7\AMD\8-7 SCHEDULE - 5 No of Units As at As at 31 March, 2008 31 March, 2007 INVESTMENTS (Contd.) Rs. in crores Rs. in crores Prudential ICICI Fixed Maturity Plan Series 37-3 Months Plan A — — 25.00 Prudential ICICI Fixed Maturity Plan- Series 34-17 Months Plan 15,000,000 15.00 15.00 Reliance Fixed Maturity Plan 1006 — — 24.98 Reliance Fixed Horizon Fund II -16 Months Fixed Maturity Plan 20,000,000 19.97 19.97 Standard Chartered 1 Year Fixed Maturity Plan 10 06 — — 10.00 Standard Chartered 3 Months Quarterly Fixed Maturity Plan 0107 — — 10.00 Standard Chartered Fixed Maturity Plan Quarter Series 2 — — 20.00 Sundaram 16 Months Fixed Maturity Plan Series- 21 15,000,000 15.00 15.00 Tata 13 Months Fixed Maturity Plan 0306 — — 10.00 Tata 16 Months Fixed Maturity Plan Series 7 Scheme D-IP 10,000,000 10.00 10.00 Tata 18 Months Fixed Maturity Plan- Growth — — 10.00 Tata 2 Quarterly Fixed Maturity Plan Series 9 Scheme P- Periodic Dividend — — 10.00 Tata 3 Months Fixed Maturity Plan 0107 — — 15.22 Tata Fixed Horizon Fund (Fixed Maturity Plan) Series 6 Scheme C -13 Months Growth 10,000,000 10.00 10.00 Tata Fixed Horizon Fund Series-6 13 Months — — 15.00 Tata Fixed Horizon Fund- Yearly — — 10.00 Tata Fixed Horizon Fund-Series 7- Scheme B Growth-13 Months 25,000,000 25.00 25.00 UTI 16 Months Fixed Maturity Plan -Series II-Plan 16-Growth 10,000,000 10.00 10.00 UTI Fixed Maturity Plan Quarterly March 07 — — 20.01 UTI Fixed Maturity Plan Yearly — — 10.00 UTI Quarterly Fixed Maturity Plan 0107 — — 12.14 349.29 925.54 2,103.77 2,673.58

(1) Book Value of unquoted investments 2,103.77 2,673.58 (2) All investments other than investments in Mutual Funds are long-term investments

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45 CEPS 6\D\SALES\MOHAN\TATA COMMUNICATION AR 2008\TC MAIN ACCOUNT 08.PMD\AMD\1-7/SBC/3-7/4-7/vk7-7\AMD\8-7 COMMUNICATIONS Twenty Second Annual Report 2007-2008 Tata Communications Limited 4.13 15,000,00010,001,678 15.00 10.00 10,001,612 10.00 20,000,000 20.00 25,003,996 24.99 0.47 20,472,704 20.47 - - 0.06 25,060,411 25.07 - - 0.01 25,019,744 25.02 - - 11.36 11,361,701 11.36 - - 10.11 10,083,359 10.11 - - 20.39 20,387,499 20.39 - - 10.07 100,660 10.07 - - 143.79 143,789,919 143.79 - - 128.18 1,279,598 128.18 ------32,467 0.03 24,033,755 25.06 - - 52,111,74086,972,172 52.11 52,111,74015,000,000 87.01 86,972,172 52.11 15.00 87.01 - - - - - 15,000,000 - 15.00 94,214,056 94.28 94,214,056 94.28 - - 85,497,345 85.50 85,497,345 85.50 - - 223,489,404 223.93 223,489,404 223.93 - - 224,495,321 224.94 224,495,321 224.94 - - 10.00 - - 10,000,000 10.00 - - 34.71 76,595,172 76.61 111,303,387 111.32 - - 10.00 ------20,387,499 - 149,634,652 149.76 149,634,652 149.76 - - - - 399,957 40.00 399,957 40.00 - - - - 34,006,934 34.12 29,887,325 29.99 4,119,609 41,267,431 41.27 97,674,286 97.66 138,941,717 138.93 - - 24,001,287 25.03 37,767,813 37.77 25,211,449 25.24 62,979,262 63.01 - - 10,000,000 10.00 - - 10,000,000 10.00 - - 10,001,678 10.00 Balance as on 01.04.2007Balance during Purchases the year Sold during the year Balance as on 31.03.2008 t - - 10,167,548 10.17 10,167,548 10.17 - - ividend 25,001,403 25.01 59,008 1 - - 10,000,000 10.00 10,000,000 10.00 - - vestment - - 1,279,598 vestment wth 10,001,612 Reinvestment - - Daily Dividend - - e-Investment - - 10,083,359 estment - - 143,789,919 Plan 1) wth 10,000,000 ember 06 25,003,996 24.99 Growth - - 11,361,701 th Gro Plan- Daily D nths 15,000,000 15.00 idend Reinvestmen lan- Dividend - - dend - - 100,660 Weekly Dividend ly Gro y Series Plan 6 - - 15,301,605 15.30 15,301,605 15.30 - - Reinvestment - - - Quarterly Plan - Quarterly lan 0107 ly Dividend Rein terly Plan Plan terly aily Dividend Rein aily Dividend Dividend Reinv Dividend lus Plan Daily Dividend lus Plan nths 20,000,000 20.00 lan Series 7 (Q y Plan 0107 y Plan turity P Plan -17 Mon Plan 16 Months-Dec Monthly Divi Plan Series 6 20,000,000 20.00 472,704 Series 28 - t - - 1,068,415 106.85 1,068,415 106.85 - - ty Plan-Year rtnightly Dividend R Plan - - 11,180,103 11.18 11,180,103 11.18 - - Series 21-15 Mo ies 29 - - rm - - 25,123,404 25.54 25,123,404 25.54 - - y 25,009,725 25.01 10,019 Plan 16 Mo Plan Reinvestment 34,708,214 Reinvestment - - 59,434,532 59.53 59,434,532 59.53 - - ReinvestmentReinvestment - - - 88,527,926 - 87,325,789 88.58 88,527,926 87.35 87,325,789 88.58 87.35 - - - - ReinvestmentReinvestmentDividend Reinvestmen - - - 76,279,066 - 76.52 1,174,862 76,279,066 117.51 76.52 1,174,862 117.51 - - - - Reinvestment. - - Reinvestment Liquid Plus Reinvestment Reinvestment - - 35,439,642 35.51 35,439,642 35.51 - - ABN AMRO Fixed Term Term ABN AMRO Fixed Fund-Quar Interval ABN AMRO Scheme NameScheme Dividend Floater-Weekly Term ABN AMRO Long Maturi ABN AMRO Fixed units No.of in crores Rs. units No.of in crores Rs. units No.of in crores Rs. units No.of in crores Rs. D Plan Mgmt Call HDFC Cash ABN AMRO Cash Fund Daily Fund ABN AMRO Cash HSBC Liquid Plus HSBC Fixed Term Plan- Term HSBC Fixed JM High Liquid Institutional Plan Daily Dividend JM Money Manager Super P HSBC 15 Months Fixed Ma Fixed HSBC 15 Months Ser Term HSBC Fixed Institutional Plus Daily Dividend HSBC Liquid Cash Fund Plan Vysya Liquid Institutional Premium ING Liquid Plus-Institutional Plan Daily Dividend Vysya ING Maturity ING Fixed Fund Maturit JM 3 Months Fixed Birla Cash Plus Institutional Premium P Birla Institutional Premium Cash Plus ABN AMRO Fixed Maturity ABN AMRO Fixed Term ABN AMRO Q Fixed BirlaTerm Fixed - Series 5 Maturity Fund JM Fixed ABN Flexi Short Term Plan-Series-C-Div Term ShortABN Flexi ABN AMRO Quarterly Fixed Maturit Quarterly ABN AMRO Fixed Birla Sunlife Liquid Plus-DividendBirla Sunlife Birla Short Term Plan Fo Plan Term Birla Short Birla Sunlife Cash Manager Institutional BirlaCash Sunlife DBS Chola Freedom Income -Daily Dividend -Daily Income DBS Chola Freedom DBS Chola Fixed Maturity P Maturity DBS Chola Fixed DBS Chola Liquid Institutional Plus Daily DividendDBS Chola Liquid Institutional Plus Daily RegularPlan DWS MoneyPlus Fund Rate Fund DSP Merrill Floating Lynch Daily Dividend DSP Merrill Liquidity Institutional Plan Lynch Institutional Plan-Daily Cash Plus DSP Merrill Lynch Bond Fund DSP Strategic DSP Strategic Bond Fund- Week Bond Fund- DSP Strategic Deutsche Insta Cash Plus- Institutional Plan- Daily Dividend Daily Institutional Plan- Deutsche Insta Cash Plus- Deutsche Credit Opportunity Fund-Weekly Dividend OpportunityDeutsche Credit Fund-Weekly DWS Insta Cash-Super Institutional-Daily Dividend Te ShortGrindlays Liquidit Grindlays Liquid Plus Grindlays MaturityPlan HDFC Fixed (3) bought and sold during 2007-08 the year Investment Current

46

46 CEPS 6\D\SALES\MOHAN\TATA COMMUNICATION AR 2008\TC MAIN ACCOUNT 08.PMD\AMD\1-7/SBC/3-7/4-7/vk7-7\AMD\8-7 10,000,000 10.00 15,002,472 14.98 15,000,000 15.00 10,000,00020,000,000 10.00 19.99 20,000,000 19.97 15,000,000 15.00 25,000,000 25.00 7.05 - - 7.05 7,042,862 3.52 18,525,190 18.53 - - 0.040.47 10,038,200 20,471,715 10.04 20.47 - - - - 35.73 33,866,165 35.73 - - 83.47 83,171,496 83.47 - - 420.13 420,129,675 420.13 - - 191.72 191,604,289 191.72 ------100,782 10.10 599,987 60.13 - - 20,448,024 25.00 20,448,024 25.00 - - 91,309,413 96.55 58,074,102 61.40 33,235,312 35.15 15,233,799 15.23 15,233,799 15.23 - - 134,028,509 134.04 124,027,298 124.04 10,001,210 10.00 219,520,155 221.61 219,520,155 221.61 - - 191,604,289 - 15,243,478- 42,108,038 15.24 15,243,478 42.16 42,108,038 15.24 42.16 - - - - 25.00 457,511 0.46 25,457,511 25.46 - - 24.98 - - 25,000,000 24.98 - - 10.00 10.14 35,427,996 36.27 45,566,044 46.41 - - 10.00 - - 10,000,000 10.00 - - - - 505,579,440 555.13 482,806,614 530.13 22,772,826 25.00 - - 9,509,022 10.00 9,509,022 10.00 - - - - 5,971,104 10.00 5,971,104 10.00 - - - - 94,001,121 94.03 94,001,121 94.03 - - 200,452 20.05 808,628 80.99 1,009,081 101.04 - - 10,000,000 10.00 10,000,000 23,786,72415,009,303 23.79 491,079,905 15.01 3,515,887 491.10 514,866,629 514.89 - - 25,000,000 15,000,000 15.00 10,000,000 10,000,00020,002,485 10.00 20.00 38,200 469,230 Balance as on 01.04.2007Balance during Purchases the year Sold during the year Balance as on 31.03.2008 A 25,000,000 25.00 - - 25,000,000 25.00 - - lan 20,000,000 19.97 A - - 15,000,000 15.00 15,000,000 15.00 - - Months 25,000,000 25.00 nth Plan 15,000,000 15.00 Series 2 0207 34 20,000,000 19.99 turity P Reinvestment - - 10 06 0407 - - Series ries 21 13 25,000,000 Growth Growth Plan Plan estment - - 33,866,165 ies 37 3 Months Plan ies 37 3 Months Plan -Dividend Reinvestment - Series 169953 - - ividend Reinvestment - Plan Quarterly Dividend Option ies 38- 3 Month Plan ies 38- 3 Month Plan 385 Days-Series III 25,000,000 25.00 - - 25,000,000 25.00 - - 15 29,500,000 29.50 - - 29,500,000 29.50 - - lan SERIES 1 estment - - 83,171,496 Months Fixed Ma Months Fixed rity Plan Serity Plan aily Dividend Option aily Dividend vestment 0306vestment 499,205 50.03 Plan-Series 34-17 Mo Plan-Series 07 - - 7,042,862 estment - - 420,129,675 Dividend Option Dividend xed Maturityxed ividend Option rity Plan 10,001,721 10.00 - - 10,001,721 10.00 - - ies 7-Scheme B Growth-13 ies 7-Scheme B Growth-13 lan 18 Months - turity P Plan 15 Months Plan lan 1006 ividend Reinv al Fund 0807al Fund - - ash Plan lan Series end Reinv lan 3 Months ment APR rity P Reinvestment - - 10,165,550 10.17 10,165,550 10.17 - - Dividend Reinvest Reinvestment - - 20,042,697 20.08 - - 20,042,697 20.08 Reinvestment - - 25,713,130 25.71 25,713,130 25.71 - - Reinvestment - - Reinvestment 10,138,048 Reinvestment - - Plan 0107 Plan - Quarterly Series 9 - - - 10.04 10,038,200 10.04 - - Scheme NameScheme Vi Institutional Dividend Series Maturity Fund JM Fixed Kotak Equity Arbitrage-D units No.of in crores Rs. units No.of in crores Rs. units No.of in crores Rs. units No.of in crores Rs. Kotak Fixed Maturity P Kotak Fixed Kotak 3 Months Fixed Matu Kotak Fixed 3 Months MaKotak 16 Months Fixed Kotak Liquid Institutional Plan Folio Folio Kotak Liquid Institutional Plan LIC 3 Months Maturity Fixed Plan Maturity P LIC MF Fixed LIC MF FMP Series 27 - 3 Month Plan 10,000,000 10.00 - - 10,000,000 10.00 - - LIC MF Liquid Fund-Dividend Plan LIC MF Liquid Fund-Dividend LIC Liquid Plus Dividend Reinv LIC Liquid Plus D Floater-Daily Term Long Principal Plan-Daily Maturity Flexi Fund- Rate Floating Principal Daily Dividend Liquid Plus Regular Plan Principal Plan Maturity PNB Fixed Principal Principal 540 Days Maturity Fixed Plan 15,002,472 14.98 Reliance Liquid Plus Daily D Reliance Liquid Plus Dividend # Q Series III- IP Plan Fund Horizon Fixed Reliance OpportunitiesSBI Arbitrage Fund- D Fund- SBI Magnum Insta Cash Prudential ICICI Fixed Maturity ICICI Fixed Prudential Principal Liquid Institutional Premium Plan Daily Dividend Plan Liquid Institutional Premium Principal Plan- Daily Dividend Flexible Income Prudential Standard Chartered Arbitrage Fund-Monthly Dividend Fund-Monthly Chartered Arbitrage Standard Prudential Fixed Maturity P Fixed Prudential Maturity Plan Ser ICICI Fixed Prudential Prudential Fixed Maturity Fixed Prudential Prudential Liquid Institutional Plan526454 Prudential Prudential Fixed Maturity Ser Plan Fixed Prudential ICICI Prudential Sweep C Sweep ICICI Prudential Ii-16 Horizon Fund Fixed Reliance Sundaram Liquid Super Institutional Plan Daily Dividend Institutional Plan Daily Sundaram Liquid Super Reliance Liquidity Fund Reliance Quarterly Interv Matu Fixed Reliance Sundaram 16 Month Fixed Matu Sundaram 16 Fixed Month Sundaram Liquid Plus- Daily Sundaram Liquid Plus- Fi Year CharteredStandard 1 Standard CharteredStandard Quarterly 3 Maturity Months Fixed Standard Chartered Fixed Maturity Chartered Standard Fixed CharteredStandard Quarterly Maturity Plan Fixed Horizon Fund-Ser Fixed Tata Tata Floater Fund Divid Fund Floater Tata Tata Fixed HorizonYearly Fixed Fund- Tata 18 Maturity Month Fixed Tata Plan- Growth Dividend Rein Liquid Daily Tata 10,000,000 10,000,000 10.00 10.00 - - - 10,000,000 - 10,000,000 10.00 10.00 - - - -

47

47 CEPS 6\D\SALES\MOHAN\TATA COMMUNICATION AR 2008\TC MAIN ACCOUNT 08.PMD\AMD\1-7/SBC/3-7/4-7/vk7-7\AMD\8-7 COMMUNICATIONS Twenty Second Annual Report 2007-2008 Tata Communications Limited 10,000,000 10.00 10,000,000 10.00 10,000,000 10.00 0.24 10,237,400 10.24 - - 0.37 35,109,324 36.31 - - 0.46 20,474,906 20.47 - - 10.75 10,061,174 10.75 - - 300.30 2,694,424 300.30 ------41,703 0.05 15,265,095 15.27 - - 101,117 10.28 101,117 10.28 - - 9,823,383 10.11 9,823,383 10.11 - - 10,061,174 14,985,726 15.2010,201,065 14,985,726 10.20 15.20 10,201,065 10.20 - - - - 15,091,228 15.09 15,091,228 15.09 - - 145,201,637 145.46 145,201,637 145.46 - - - 60,449,470 60.66 60,449,470 60.66 - - - 15,000,000 15.00 15,000,000 15.00 - - 15.00 - - 15,000,000 15.00 - - 35.94 352,665 10.00 925.54 6,459.64 7,035.89 349.29 ------3,828,415 390.29 3,828,415 390.29 - - - - 12,145,755 12.15 12,145,755 12.15 - - 10,000,000 10.00 - - 10,000,000 10.00 - - 10,000,000 10.00 15,223,393 15.22 10,000,00012,143,084 10.00 12.14 - - - 10,000,000 - 12,143,084 10.00 12.14 - - - - 10,000,000 Balance as on 01.04.2007Balance during Purchases the year Sold during the year Balance as on 31.03.2008 New - - 2,694,424 D - - 10,170,193 10.17 10,170,193 10.17 - - rowth H - - 10,071,075 10.07 10,071,075 10.07 - - Reinvestment - - 900,953 90.37 900,953 90.37 - - einvestment - - i-Plan 16-G i-Plan einvestment - - wth 10,000,000 10.00 Months 15,000,000 0306 einvestment +B133- einvestment 0107 Reinvestment - 9 Scheme C 1 MONT lan 0107 nal - Daily Income Option nal - Daily Plan SeriesPlan 11 Scheme Plan - Plan APlan - Plan-Series I ty Plan ty Plan Plan -April 07 Plan Option - - nths Gro und-Monthly Plan-1 - - ty Plan Maturity P und Series-6 13 lan Yearly d - - 166,053,481 166.18 166,053,481 166.18 - - Dividend estment 34,756,659 -Institutional Plan Reinvestment - - 10,165,417 10.17 10,165,417 10.17 - - - Dividend - - - Periodic Dividend 10,000,000 10.00 237,400 Series 6 Scheme C -13 Mo -Dividend ReinvestmentDividend Reinv - - 15,257,788 15.26 15,257,788 15.26 - - Weekly DividendWeekly - Weekly Dividen Reinvestment Institutional Plan- Daily Super Dividend R - - - - 3,144,887 314.57 3,144,887 314.57 - - Reinvestment - - 105,328 10.53 105,328 10.53 - - Scheme NameScheme Maturi 13 Months Fixed Tata Maturity Series 7 Scheme D Plan 16 Month Fixed Tata units No.of in crores Rs. units No.of in crores Rs. units No.of in crores Rs. units No.of in crores Rs. Institutional Dividend UTI Quarterly Interval Plan-Iii - Fund UTI Spread Total Tata Dynamic Bond Fund - Option A- One Month Plan Dynamic Bond Fund Tata Tata Fixed Horizon Fund Series Horizon Fund Fixed Tata Horizon F Fixed Tata Tata 2 Quarterly Fixed Maturity Plan Series 9 Scheme P Maturity Plan 2 Quarterly Fixed Tata Tata Fixed Horizon Fund (Fixed Maturity Plan) Maturity (Fixed Fund Horizon Fixed Tata Tata Dynamic Bond Fund-Dividend R Dynamic Bond Fund-Dividend Tata Dividend Fund-Daily Floater Tata Series 10 Scheme 1 Fund Horizon Fixed Tata Maturity Quarterly Fixed Tata Series 11 Scheme E Fund Horizon Fixed Tata Manager # SHIP-DailyTreasury Dividend Tata Quarterly Term Long Fund Rate Income Floating Templeton - - Tata Liquid Ship- Daily Dividend R Daily Dividend Liquid Ship- Tata 3 Months Fixed Tata Templeton Short Term Income Fund Institutional Plan Income Fund Term Short Templeton Super Institutional Plan Fund- Floater Term Long Templeton Quarterly Interval Templeton Treasury Management Templeton Account Daily Dividend Fund Rate Floating Term Long Templeton UTI Fixed Income Interval F Income Interval UTI Fixed Maturity P UTI Fixed UTI Liquid Cash PlanUTI Institutio Liquid Cash Maturity Fixed UTI 16 Month UTI Money Market Fund Daily Dividend Reinvestment Liquid Reinvestment Daily Dividend UTI Money Market Fund Maturi UTI Quarterly Fixed UTI Liquid Plus - Institutional Plan- Daily Dividend UTI Liquid Plus - Institutional Plan- MaturityUTI Fixed Quarterly Plan March 07 Maturity UTI Quarterly Fixed 20,013,802 20.01 461,104

48

48 CEPS 6\D\SALES\MOHAN\TATA COMMUNICATION AR 2008\TC MAIN ACCOUNT 08.PMD\AMD\1-7/SBC/3-7/4-7/vk7-7\AMD\8-7 SCHEDULES FORMING PART OF THE BALANCE SHEET As at As at SCHEDULE - 6 31 March, 2008 31 March, 2007 INVENTORIES Rs. in crores Rs. in crores Equipment for resale 0.08 0.31 Less: Provision for obsolescence (0.01) (0.01) 0.07 0.30 Consumable stores and spares 5.38 4.42 5.45 4.72 SCHEDULE - 7 SUNDRY DEBTORS (a) Over six months (Unsecured) Considered good 290.76 161.56 Considered doubtful 187.81 162.83 478.57 324.39 Less: Provision for doubtful debts (187.81) (162.83) 290.76 161.56 (b) Other debts (unsecured) Considered good 772.37 793.63 1,063.13 955.19 SCHEDULE - 8 CASH AND BANK BALANCES (a) Cash in hand 0.07 0.03 (b) Cheques in hand 17.63 33.66 (c) Remittances in transit 17.26 9.09 (d) Current accounts with Scheduled Banks 44.67 36.53 (e) Deposit accounts with Scheduled Banks — 25.00 79.63 104.31 SCHEDULE - 9 OTHER CURRENT ASSETS (a) Interest receivable (note1) 14.48 2.46 (b) Service tax recoverable 39.37 41.73 (c) Pension contributions recoverable from Government of India (net of provision of Rs. 53.71 crores; 2007: Rs. 53.71 crores) (Refer note B7, Schedule 19) 7.44 7.44 (d) NLD licence fees reimbursement recoverable from Government of India (Refer note B30, Schedule 19) 79.96 52.16 (e) Licence fees paid under protest (Refer note B29, Schedule 19) 295.00 — (f) Others 1.32 0.96 437.57 104.75 Note: (1) Interest receivable includes interest due from subsidiaries of Rs. 11.49 crores (2007: Rs. 0.38 crores)

49

49 CEPS 6\D\SALES\MOHAN\TATA COMMUNICATION AR 2008\TC MAIN ACCOUNT 08.PMD\AMD\1-7/SBC/3-7/4-7/vk7-7\AMD\8-7 COMMUNICATIONS Twenty Second Annual Report 2007-2008 Tata Communications Limited

SCHEDULES FORMING PART OF THE BALANCE SHEET As at As at SCHEDULE - 10 31 March, 2008 31 March, 2007 LOANS AND ADVANCES Rs. in crores Rs. in crores (a) Unsecured - Considered good (i) Prepaid expenditure 42.86 38.02 (ii) Staff advances (note 1) 7.25 6.49 (iii) Deposits a) Public bodies 6.73 4.79 b) Others 34.50 14.67 (iv) Advance recoverable in cash or kind for value to be received 72.44 71.93 (v) Advance payment of tax (net of provision for tax) 1,205.16 954.10 (vi) Advance towards equity investments in subsidiaries and joint ventures 221.51 7.27 (vii) Loans and advances to subsidiaries and joint ventures 836.95 50.48 (viii) Others 0.83 — 2,428.23 1,147.75 (b) Unsecured - Considered doubtful Other loans and advances 7.61 8.51 Less: Provision for doubtful advances (7.61) (8.51) 2,428.23 1,147.75

Notes: (1) Staff Advances includes loans due by an officer of the Company Rs. 0.01 crores (2007:Rs. 0.01 crores) (Maximum amount due at any time during the year is Rs. 0.01 crores (2007: Rs. 0.02 crores) (2) Loans and advances to subsidiary companies and joint venture a) Tata Communications International Pte Ltd (Formerly known as VSNL International Pte. Ltd.) 429.00 28.37 b) VSNL Telecommunications(Bermuda) Limited 0.15 1.67 c) VSNL SNOSPV Pte.Ltd 3.19 3.10 d) Neotel (Pty)Ltd 2.75 6.38 e) Tata Communications (Netherlands) BV (Formerly known as VSNL Netherlands BV) 3.62 1.07 f) VSNL Broadband Limited 3.16 0.94 g) Tata Communications Lanka Ltd (Formely known as VSNL Lanka Ltd.) 0.01 0.12 h) Tata Communications (UK) Limited (Formerly known as VSNL Telecommunications (UK) Limited) 0.44 0.02 i) Tata Communications (US) Inc. (Formerly known as VSNL International (US) Inc.) 0.95 0.24 j) VSNL Internet Services Limted (Formerly known as DIL Internet Limited) 393.07 — k) Tata Communications Transformation Services Limited (formerly known as VSNL Global Services Limited) 0.61 8.57

50

50 CEPS 6\D\SALES\MOHAN\TATA COMMUNICATION AR 2008\TC MAIN ACCOUNT 08.PMD\AMD\1-7/SBC/3-7/4-7/vk7-7\AMD\8-7 SCHEDULES FORMING PART OF THE BALANCE SHEET As at As at SCHEDULE - 11 31 March, 2008 31 March, 2007 CURRENT LIABILITIES Rs. in crores Rs. in crores (a) Sundry Creditors: (i) Creditors for interconnect charges 704.12 414.78 (ii) Dues of micro, small and medium enterprises (Refer note B28, Schedule 19) 0.19 0.21 (iii) Others (note 3) 500.07 399.54 (b) Deferred revenues and advance received from customers 380.28 389.45 (c) Liability towards Investors Education and Protection Fund under Section 205C of the Companies Act 1956 (not due): Unpaid dividend (Note 1) 1.12 1.28 (d) Government of India Current Account 20.57 20.57 (e) Provision for taxes (net of advance taxes) 8.70 8.70 (f) Other liabilities (note 2) 373.89 348.96 (g) Interest accrued but not due on short term bank loans 0.96 2.20 1,989.90 1,585.69 Notes: (1) Dividends are not due and outstanding for a period exceeding seven years. (2) Includes Rs. 26.92 crores overdrawn book bank balance (2007: Rs. 11.25 crores) (3) Sundry creditor- others includes due to subsidiary companies and joint venture a) VSNL Broadband Limited 5.25 9.66 b) Tata Communications (Canada) ULC (Formerly known as Teleglobe Canada ULC) 1.42 1.64 c) Tata Communications Lanka Ltd (Formely known as VSNL Lanka Ltd.) 0.02 0.07 d) Tata Communications Services (America) Inc (Formerly known as VSNL America Inc.) 2.19 0.29 e) Tata Communications (US) Inc. (Formerly known as VSNL International (US) Inc) 1.60 0.30 f) Videsh Sanchar Nigam Spain Srl. 0.18 — g) Tata Communications (Hongkong) Limited (Formerly known as VSNL Hong Kong Limited) 3.59 — h) Tata Communications International Pte Ltd (Formerly known as VSNL International Pte. Ltd.) 1.97 — i) VSNL Internet Service Ltd (Formerly known as DIL Internet Limited) 0.51 — j) United Telecom Limited 7.16 4.66

SCHEDULE - 12 PROVISIONS (a) Provisions for employee benefits 86.07 101.64 (b) Provision for proposed dividend 128.25 128.25 (c) Tax on dividend 21.80 21.80 (d) Provision for contingencies (Refer Note B20, Schedule 19) 15.16 18.74 251.28 270.43

51

51 CEPS 6\D\SALES\MOHAN\TATA COMMUNICATION AR 2008\TC MAIN ACCOUNT 08.PMD\AMD\1-7/SBC/3-7/4-7/vk7-7\AMD\8-7 COMMUNICATIONS Twenty Second Annual Report 2007-2008 Tata Communications Limited

SCHEDULES FORMING PART OF THE PROFIT AND LOSS ACCOUNT SCHEDULE-13 Year ended Year ended 31 March, 2008 31 March, 2007 OTHER INCOME Rs. in crores Rs. in crores

(a) Dividend Income from current Investments 29.98 57.13 (b) Profit on sale of of current investments (net) 14.02 1.13 (c) Profit on sale of fixed assets (net) 1.58 11.34 (d) Profit from sale of long term investment 1.89 - (e) Rent 18.43 11.16 (f) Exchange gain (net) - 5.07 (g) Provisions no longer required - written back 18.76 74.44 (h) Interest on Income Tax Refund 16.66 6.34 (i) Others 64.72 36.13 166.04 202.74

SCHEDULE-14 Year ended Year ended 31 March, 2008 31 March, 2007 INTEREST INCOME Rs. in crores Rs. in crores (a) On Bank Deposits 0.12 0.06 (Tax deducted at source Rs. 0.03 crores, 2007:Rs. 0.01 crores) (b) On Other Loans and Advances 15.87 9.38 (Tax deducted at source Rs. 2.22 crores 2007: Rs. 1.10 crores) 15.99 9.44 Note: (1) Interest income includes Rs. 14.36 crores (2007: Rs. 9.00 crores) from subsidiaries. Tax Deducted at source on such income is Rs. 2.18 crores (2007: Rs. 1.05 crores)

SCHEDULE - 15 SALARIES AND RELATED COSTS (a) Salaries and related costs 195.94 202.52 (b) Contributions to provident,gratuity and other funds 10.07 10.65 (c) Staff welfare expenses 36.42 30.52 242.43 243.69 SCHEDULE-16 NETWORK COSTS (a) Charges for use of transmission facilities (net of excess provision written back Rs. Nil (2007: Rs. 17.56 crores) 1,659.43 1,701.38 (b) Royalty and licence fee to Department of Telecommunications 101.80 111.33 (c) Rent of satellite channels 29.18 58.19 (d) Rent of landlines 57.04 28.07 (e) Administrative lease charges 5.22 9.83 1,852.67 1,908.80

52

52 CEPS 6\D\SALES\MOHAN\TATA COMMUNICATION AR 2008\TC MAIN ACCOUNT 08.PMD\AMD\1-7/SBC/3-7/4-7/vk7-7\AMD\8-7 SCHEDULES FORMING PART OF THE PROFIT AND LOSS ACCOUNT Year ended Year ended 31 March, 2008 31 March, 2007 Rs. in crores Rs. in crores SCHEDULE - 17 OPERATING AND OTHER EXPENSES (a) Consumption of stores 10.63 14.09 (b) Light and power 63.12 43.09 (c) Repairs and Maintenance: (i) Buildings 7.28 12.45 (ii) Plant and Machinery 111.90 137.51 (iii) Others 8.12 9.77 (d) Bad Debts written off 11.87 24.60 (e) Provision for doubtful debts 29.04 44.20 (f) Provision for doubtful advances — 1.13 (g) Rent 42.19 34.08 (h) Rates and taxes 7.10 8.14 (i) Travelling expenses 23.42 22.65 (j) Telephone and telex 9.93 14.40 (k) Printing, postage and stationery 2.79 3.61 (l) Legal and professional fees 90.53 46.05 (m) Advertising and publicity 4.45 47.43 (n) Commissions 9.47 29.87 (o) Services rendered by agencies 53.96 103.66 (p) Insurance 9.82 11.95 (q) Donations 0.08 0.08 (r) Exchange loss (net) 7.07 — (s) Prior period adjustments (net) 2.00 5.25 (t) Other expenses 63.37 49.06 568.14 663.07 SCHEDULE-18 INTEREST EXPENSE (a) Interest paid on short - term bank loan (note 1) 36.97 6.89 (b) Other Interest 2.63 0.02 39.60 6.91

Note: (1) Interest paid on short - term bank loan includes interest on fixed loans of Rs. 35.44 crores (2007: Rs. 6.19 crores)

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53 CEPS 6\D\SALES\MOHAN\TATA COMMUNICATION AR 2008\TC MAIN ACCOUNT 08.PMD\AMD\1-7/SBC/3-7/4-7/vk7-7\AMD\8-7 COMMUNICATIONS Twenty Second Annual Report 2007-2008 Tata Communications Limited

SCHEDULE 19 SIGNIFICANT ACCOUNTING POLICIES AND NOTES TO ACCOUNTS 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 lives of fixed assets. 3. Fixed assets a) 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. b) Fixed assets received as gifts from other Foreign Telecom Carriers 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 (IRUs) for international and domestic telecommunication circuits are classified under fixed assets. IRU agreements in respect of these intangibles 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) Borrowing costs that are attributable to the acquisition or construction of the qualifying assets are capitalized as part of the cost of such assets. A qualifying assets is one which necessarily takes substantial period to get ready for intended use. All other borrowing costs are recognized as an expenses 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 f) Assets acquired pursuant to an agreement for exchange of similar assets are recorded at the net book value of the assets given up, with an adjustment for any balancing receipt or payment of cash or any other form of consideration. 4. Depreciation Depreciation is provided on the straight line basis (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 equipment 11.88% d. Overhead fibre cables 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 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 lease. Rental income and rental expense 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 expense as they are incurred.

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54 CEPS 6\D:\Sales\Mohan\Tata Communication AR 2008\TC Main Notes 08.pmd --- Sagam\1-7-skg-2-7/SBC/3-7/Sagam/4-7/SBC/5-7/vk7-7 SIGNIFICANT ACCOUNTING POLICIES AND NOTES TO ACCOUNTS (Contd.) 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 discounted amount of short term employee benefit 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. (ii) Post-employment benefit plans Contributions to defined contribution retirement benefit schemes are recognised as an expense when employees have rendered service 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 recognised in full in the Profit and Loss Account for the period in which they occur. Past service cost is recognised immediately to the extent that the benefits are already vested, and otherwise is amortised on a straight-line basis over the average period until the benefits become vested. The retirement benefit obligation recognised in the balance sheet represents the present value of the defined benefit obligation as adjusted for unrecognised 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 a) Revenues from Telephony services are recognised at the end of each month based upon minutes of incoming 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 networks. b) Revenues from Data services are recognised over the period of arrangement based on contracted fee schedules. c) Revenues from right to use of fibre capacity provided based on IRU are recognised over the period of such arrangements. d) Revenues from Internet Telephony services are recognised 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 collectibility exists. f) Transactions relating to exchange or swapping of capacities, which results in insignificant or no consideration represent the exchange of productive assets not held for sale in the ordinary course of business. Such exchanges do not result in the culmination of the earnings process and hence the Company does not recognize any revenue for these types of transactions.

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55 CEPS 6\D:\Sales\Mohan\Tata Communication AR 2008\TC Main Notes 08.pmd --- Sagam\1-7-skg-2-7/SBC/3-7/Sagam/4-7/SBC/5-7/vk7-7 COMMUNICATIONS Twenty Second Annual Report 2007-2008 Tata Communications Limited

SIGNIFICANT ACCOUNTING POLICIES AND NOTES TO ACCOUNTS (Contd.) g) 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 a) 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 difference between taxable income and accounting income that originate in one period and are capable of reversing in one or more subsequent periods. b) 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. c) 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 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 and upfront premium payable on option contracts is amortised over the life of such contracts and is recognised 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 recognised in the Profit and Loss Account. Profit or loss arising on cancellation or enforcement/exercise of a forward exchange and option contracts is recognised in the Profit and Loss Account in the period of such cancellation or enforcement/exercise option contracts outstanding as at the balance sheet date are marked-to- market with the values as reported by banks and any gains or losses are recognised in the Profit and Loss Account.

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 1 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 (2007: Rs. 205.22 crores) in respect of foreign exchange gains on unutilised proceeds from Global Depository Receipts credited to Capital Reserve in a previous year. 3. The Board of Directors have recommended a dividend of Rs. 4.50 (2007: Rs. 4.50) per share for the year ended 31 March, 2008. 4. The Company has an investment of Rs. 1,011.32 crores in Tata Teleservices Ltd.(“TTSL”) representing an equity interest of 15.01 percent (2007: 15.61 percent) in the issued and paid-up capital of TTSL. TTSL has accumulated losses, which have significantly eroded its net worth. In the opinion of the management, having regard to the long gestation period inevitable to the nature of its business, there is no permanent diminution in value of the investment.

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56 CEPS 6\D:\Sales\Mohan\Tata Communication AR 2008\TC Main Notes 08.pmd --- Sagam\1-7-skg-2-7/SBC/3-7/Sagam/4-7/SBC/5-7/vk7-7 SIGNIFICANT ACCOUNTING POLICIES AND NOTES TO ACCOUNTS (Contd.) 5. The Company has an investment of Rs. 28.99 crores (2007: Rs. 23.33 crores) in United Telecom Ltd. Nepal (“UTL”) representing an equity interest of 26.66 percent in the issued and paid-up capital of UTL. UTL has accumulated losses, which have significantly eroded its net worth. In the opinion of the management, having regard to the long gestation period inevitable to the nature of its business and future business projections, there is no permanent diminution in value of the investment. 6. During the year, there has been a refinement in the method of determining provision for doubtful debts for outstanding customer balances in the Enterprise and Carrier Data Business. Had the earlier method been followed for determining such provision, the charge for provision for doubtful debts would have been higher by Rs. 68.76 crores and consequently the profit for the year and Sundry Debtors balances would have been lower by Rs. 68.76 crores. 7. As at 31 March, 2007 proportionate share of pension obligation and payments to erstwhile OCS employees of Rs. 61.15 crores 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 thereby having a net amount due from the Government towards its share of pension obligation of Rs. 7.44 crores. 8. Pursuant to acquisitions of Tyco Global Network (TGN) and Teleglobe (TLGB), the Company w.e.f. 1 April, 2006 adopted “Residual Profits Split Method” (RPSM) for recording transactions pertaining to International Telecommunications Services under its Transfer Pricing Policy. This policy governs majority of the transactions between the Company and its international subsidiaries. The Company’s subsidiary in Netherlands is designated as the Central Contracting Party (CCP) and Transfer Pricing Administrator (TPA). During the year, the Management has changed the presentation of pricing adjustment from gross Network Cost and gross Revenue from Telecommunication services to net Network Cost or net Revenues from Telecommunication Services determined on a quarterly basis. Consequently, the previous year’s balance of Revenue from Telecommunication Services and Network Costs have been regrouped and reclassified to make them comparable. 9. The Board of Directors of the Company in their meeting held on 14 March, 2007 had approved a Scheme of Arrangement (“Scheme”) to hive-off its Retail Business Undertaking (RBU) to its wholly owned subsidiary, VSNL Internet Services Ltd (VISL) (formerly known as DIL Internet Limited) and also the amalgamation of Direct Internet Limited (parent company of VISL) into VISL both to take effect from 1 March, 2007 (the ``Consolidated Scheme’’). The High Court of Judicature at Bombay and Delhi approved the Consolidated Scheme vide their orders dated 25 April 2008 and 27 May 2008 respectively. These approvals would be filed with the respective Registrar of Companies as required and pursuant to the Consolidated Scheme, the transaction would be completed as at the appointed date i.e. 1 March, 2007 for consideration of Rs. 286.66 crores as per details given below: Particulars As on 1st March 2007 Net Fixed Assets 367.44 Capital work in progress 42.90 Deferred Tax Assets 1.38 Net Current Assets (125.06) Net Asset Value 286.66 The transaction would be completed within the stipulated period of three months from the date of approval i.e. 27 May, 2008. The impact of RBU hive-off on the Company for the month March 2007 and for the year ended 31 March 2008 as effected in these financial statements are as given below: For the year ended 31 March 2008 For the month of March 2007 Loss before taxes 123.15 37.50 Tax Adjustments 32.48 9.25 Net Loss 90.67 28.25* * This has been adjusted against the opening reserves. As the Financial Statements for the previous year ended 31 March, 2007 includes RBU, they are not strictly comparable with the figures for the year ended 31 March, 2008. 10. 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 with effect from 1 March, 2007. Pending necessary statutory approvals and the merger becoming effective no adjustments have been carried out in the financial statements for the proposed merger.

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57 CEPS 6\D:\Sales\Mohan\Tata Communication AR 2008\TC Main Notes 08.pmd --- Sagam\1-7-skg-2-7/SBC/3-7/Sagam/4-7/SBC/5-7/vk7-7 COMMUNICATIONS Twenty Second Annual Report 2007-2008 Tata Communications Limited

SIGNIFICANT ACCOUNTING POLICIES AND NOTES TO ACCOUNTS (Contd.) 11. Employee Benefits: During the previous year ended 31 March, 2007, consequent to the early adoption of Accounting Standard 15 ’’Employee Benefits” (AS -15), an amount of Rs. 23.28 crores (net of tax of Rs. 11.82 crores) have been adjusted against General Reserve as on 01 April, 2006 as per transitional provisions of the standard. During the current year in view of the Guidance on implementing AS – 15, the Company has considered certain entitlements to earned leave as a long term employee benefit. This has resulted in a reduction in the net liability in respect of employee benefits as on 1 April, 2007, of Rs. 5.80 crores (net of tax of Rs. 2.99 crores). This amount has been adjusted to the opening balance of General Reserve as on 1 April, 2007. 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. On account of provident fund a sum of Rs. 8.88 crores (2007: Rs. 8.99 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. - 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 Communications employee’s medical reimbursement scheme. The scheme provides for cashless hospitalisation where the claims are directly settled/reimbursed by Tata Communications. - 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 3.49 crores to meet the additional pension obligation on account of increase in Dearness Allowances. The details in respect of funded status and the amounts recognised in the Company’s financial statement as at 31 March, 2008 for these defined benefit schemes are as under: (i) Changes in the defined benefit obligation: Defined Benefit Plans Gratuity Medical Benefit (Funded) (Unfunded) As at As at 31 March, 2008 31 March, 2008 Rs. in crores Rs. in crores Projected defined benefit obligation, beginning of the year (1 April, 2007) 29.42 28.48 Current Service Cost 2.45 4.23 Interest Cost 2.00 2.28 Liability transferred to other companies (1.36) - Actuarial (gain) / loss (3.81) 0.67 Benefits paid (1.29) (4.12) Projected benefit obligation at the end of the year 27.41 31.54

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58 CEPS 6\D:\Sales\Mohan\Tata Communication AR 2008\TC Main Notes 08.pmd --- Sagam\1-7-skg-2-7/SBC/3-7/Sagam/4-7/SBC/5-7/vk7-7 SIGNIFICANT ACCOUNTING POLICIES AND NOTES TO ACCOUNTS (Contd.) (ii) Changes in the fair value of plan assets for gratuity: Particulars As at 31 March, 2008 (Funded) Rs. in crores Fair value of plan assets, beginning of the year (1 April, 2007) 30.03 Expected return on plan assets 2.33 Employer’s contribution - Transfer to other company (1.36) Actuarial (loss)/ gain 1.02 Benefits paid (1.29) Fair value of plan assets at the end of the year 30.73

(iii) The amounts recognised in the Profit and Loss Account for the year ended 31 March, 2008: Defined Benefit Plans Gratuity Medical Benefits (Funded) (Unfunded) Year ended Year ended 31 March, 2008 31 March, 2008 Rs. in crores Rs. in crores Current service cost 2.45 4.23 Interest cost 2.00 2.28 Expected return on plan assets (2.33) - Net actuarial loss/(gain) recognised in the year (4.83) 0.67 Net Gratuity and Medical Benefits Cost (2.71) 7.18

iv) The amounts recognized in the Balance sheet is as follows Defined Benefit Plans Gratuity Medical Benefits (Funded) (Unfunded) Year ended Year ended 31 March, 2008 31 March, 2008 Rs. in crores Rs. in crores Liability at the end of the year 27.41 - Fair value of plan assets at the end of the year (30.73) - Present value of unfunded Obligations - 31.54 Net (asset)/liability in balance sheet (3.32) 31.54

(v) Categories of plan assets as a percentage of total plan assets: Category of assets As at 31 March, 2008 Government of India Bonds 8.33% Corporate Bonds 6.57% Special Deposits Scheme 5.37% State Government Bonds 8.27% Insurer Managed Funds 65.11% Others 6.35% Total 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.

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59 CEPS 6\D:\Sales\Mohan\Tata Communication AR 2008\TC Main Notes 08.pmd --- Sagam\1-7-skg-2-7/SBC/3-7/Sagam/4-7/SBC/5-7/vk7-7 COMMUNICATIONS Twenty Second Annual Report 2007-2008 Tata Communications Limited

SIGNIFICANT ACCOUNTING POLICIES AND NOTES TO ACCOUNTS (Contd.) (vi) Principal actuarial assumptions used in accounting for gratuity and medical benefit obligations: Gratuity Medical Benefits (Funded) (Unfunded) Assumptions As at As at 31 March, 2008 31 March, 2008 Discount rate 8% 8% Expected return on plan assets 8% - Increase in compensation cost 6% 6% Health care cost increase rate - 2% The estimates of future compensation cost considered in actuarial valuation take account of inflation, seniority, promotion and other relevant factors. 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, 2008 1 Percentage point Increase Decrease Rs. in crores Rs. in crores Effect on service cost 3.88 4.28 Effect on interest cost 2.38 1.96 Effect on post-employment benefit obligation 28.78 31.93

As the present value of the planned assets is in excess of the present value of funded obligations, the company does not expect to contribute to its funded defined benefit plans in 2008-09.

12. Cash and cash equivalents represent:- As at As at 31 March, 2008 31 March, 2007 Rs. in crores Rs. in crores Cash and Cheques on hand and balances held with scheduled banks 62.37 70.22 Remittances in transit 17.26 9.09 Deposit accounts held with scheduled banks - 25.00 79.63 104.31

Deposits with original maturity over three months - - Current Account / Deposits held for unpaid dividends (1.10) (1.27) Cash and cash equivalents 78.53 103.04

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60 CEPS 6\D:\Sales\Mohan\Tata Communication AR 2008\TC Main Notes 08.pmd --- Sagam\1-7-skg-2-7/SBC/3-7/Sagam/4-7/SBC/5-7/vk7-7 SIGNIFICANT ACCOUNTING POLICIES AND NOTES TO ACCOUNTS (Contd.) 13. Deferred tax liability: As at As at 31 March, 2008 31 March, 2007 Rs. in crores Rs. in crores Deferred tax liability Difference between accounting and tax depreciation 210.27 202.38 Deferred tax assets Provision for doubtful debts 65.22 54.81 Provision for leave encashment 5.12 5.39 Expenditure on VRS/VSS 4.87 13.36 Expenditure incurred on NLD license fees 23.26 24.80 Unearned income and deferred revenues 15.64 16.83 Provision for post-employment medical benefits and leave encashment pursuant to transitional provision of AS-15 8.83 11.82 Others 3.20 3.69 126.14 130.70 Net deferred tax liability 84.13 71.68 14. Included in operating and other expenses: Year ended Year ended 31 March, 2008 31 March, 2007 Rs. in crores Rs. in crores Auditors’ remuneration and expenses (i) Audit fees 1.10 1.10 (ii) Tax audit fees 0.20 0.20 (iii) Other professional services 0.39 0.42 (iv) Service tax * 0.21 0.21 Auditors’ remuneration excludes fees of Rs 6.00 crores (2007: Rs.0.45 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. 15. Managerial Remuneration a) Managerial Remuneration for managing director and non-executive directors. The above is inclusive of : Year ended Year ended 31 March, 2008 31 March, 2007 Rs. in crores Rs. in crores i. Salaries 0.53 0.42 ii. Contribution to provident and other funds 0.03 0.02 iii. Estimated monetary value of perquisites 0.13 0.06 iv. Commission 0.70 0.63 v. Non-executive directors’ sitting fees 0.14 0.16 1.53 1.29

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61 CEPS 6\D:\Sales\Mohan\Tata Communication AR 2008\TC Main Notes 08.pmd --- Sagam\1-7-skg-2-7/SBC/3-7/Sagam/4-7/SBC/5-7/vk7-7 COMMUNICATIONS Twenty Second Annual Report 2007-2008 Tata Communications Limited

SIGNIFICANT ACCOUNTING POLICIES AND NOTES TO ACCOUNTS (Contd.) b) Computation of Net Profit in accordance with Section 309(5) of the Companies Act,1956 Year ended Year ended 31 March, 2008 31 March, 2007 Rs. in crores Rs. in crores Profit before taxes as per Profit and Loss Account 449.98 712.63 Add: Managerial Remuneration 1.53 1.29 Profit on Sale of Fixed Assets (Net) 1.58 11.34 Provision for doubtful debts (net) 29.04 44.20 Provision for doubtful advances - 1.13 Net profit as per Section 309(5) of the Companies Act, 1956 482.13 770.59 c) Commission (i) Managing Director 0.45 0.35 (ii) Non-executive Directors 0.25 0.28 16. Earnings Per Share Rs. in crores, except Number of Shares and Earnings per share data Year ended Year ended 31 March, 2008 31 March, 2007 Profit before taxes and exceptional items 461.18 744.54 Income tax expense on profit excluding exceptional items 149.32 254.81 Profit after tax excluding exceptional items 311.86 489.73 Exceptional (expense)/ income (net) (11.20) (31.91) Income tax benefit/(expense) on exceptional items 3.80 10.74 Net Profit after tax and exceptional items 304.46 468.56

Number of Shares 285,000,000 285,000,000 Earnings per share excluding exceptional items 10.94 17.18 Earnings per share including exceptional items 10.68 16.44

17. Segment Reporting a) Business Segments The reportable segments for the year ended 31 March, 2008 and 31 March, 2007 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 and other services.

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62 CEPS 6\D:\Sales\Mohan\Tata Communication AR 2008\TC Main Notes 08.pmd --- Sagam\1-7-skg-2-7/SBC/3-7/Sagam/4-7/SBC/5-7/vk7-7 SIGNIFICANT ACCOUNTING POLICIES AND NOTES TO ACCOUNTS (Contd.) Year ended 31 March, 2008 Rs. in crores Wholesale Enterprise and Others Total Voice Carrier Data Revenues from Telecommunications Services 1695.40 1226.19 361.71 3,283.30 Segment Profits 198.90 1059.25 128.12 1,386.27 Unallocable expenses (net) 925.09 Profit before taxes and exceptional items 461.18 Exceptional Expenses 11.20 Profit before taxes 449.98 Tax expense 145.52 Profit after taxes 304.46 Year ended 31 March, 2007 Rs. in crores Wholesale Enterprise and Others Total Voice Carrier Data Revenues from Telecommunications Services 1,994.29 1,307.56 444.31 3,746.16 Segment Profits 486.72 1,070.42 146.67 1,703.81 Unallocable expenses (net) 959.27 Profit before taxes and exceptional items 744.54 Exceptional Expenses 31.91 Profit before taxes 712.63 Tax expense 244.07 Profit after taxes 468.56 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 fee are allocated on the basis of usage. 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 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 Segment: Segment revenues by Geographical Market Year ended 31 March, 2008 Rs. in crores India 2,493.48 United Kingdom 181.54 Saudi Arabia 159.24 United States of America 148.48 Singapore 120.12 United Arab Emirates 97.66 Others* 82.78 3,283.30

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63 CEPS 6\D:\Sales\Mohan\Tata Communication AR 2008\TC Main Notes 08.pmd --- Sagam\1-7-skg-2-7/SBC/3-7/Sagam/4-7/SBC/5-7/vk7-7 COMMUNICATIONS Twenty Second Annual Report 2007-2008 Tata Communications Limited

SIGNIFICANT ACCOUNTING POLICIES AND NOTES TO ACCOUNTS (Contd.) Segment revenues by Geographical Market Year ended 31 March, 2007 Rs. in crores India 2,301.57 United Kingdom 153.15 United States of America 302.08 Saudi Arabia 222.45 United Arab Emirates 211.34 Singapore 93.61 Others* 461.96 3,746.16

* Tata Communications (Netherlands) BV (formerly known as VSNL Netherlands BV) is a Central contracting party and a transfer pricing administrator for inter-company transactions between Tata Communications Ltd. and its international subsidiaries (Refer Note B8, Schedule 19). Other include amounts recorded as revenues from Tata Communications (Netherlands) BV of Rs. 58.16 crores (2007: Rs. 185.23 crores). 18. Related Party Disclosures: (a) List of related parties and relationship: I. Investing party • Panatone Finvest Limited II. Subsidiaries (Held directly) • Tata Communications International Pte Ltd (Formerly known as VSNL International Pte. Ltd.) • VSNL Broadband Limited • Tata Communications Transformation Services Limited (formerly known as VSNL Global Services Limited) • VSNL Internet Services Ltd. (formerly known as DIL Internet Limited) • VSNL SNOSPV Pte Ltd. • Tata Communications Lanka Limited (formerly known as VSNL Lanka Ltd.) • Tata Communications Services (America) Inc. (Formerly known as VSNL America Inc.) III. Other Subsidiaries (Held indirectly) • VSNL UK Limited (In liquidation) • VSNL Telecommunications (Bermuda) Limited (in liquidation) • Tata Communications (Netherlands) BV (formerly known as VSNL Netherlands BV) • Tata Communications (Bermuda) Limited (formerly known as VSNL International Bermuda Limited) • Tata Communications (Japan) KK. (Formerly known as VSNL International Japan K.K.) • Tata Communications (Hongkong) Limited (Formerly known as VSNL Hong Kong Limited) • Tata Communications (US) Inc. (Formerly known as VSNL International (US) Inc.) • Tata Communications (UK) Limited (formerly known as VSNL Telecommunications (UK) Limited) • VSNL France SAS • Videsh Sanchar Nigam Spain Srl. • VSNL Portugal Unipessoal Lda.

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64 CEPS 6\D:\Sales\Mohan\Tata Communication AR 2008\TC Main Notes 08.pmd --- Sagam\1-7-skg-2-7/SBC/3-7/Sagam/4-7/SBC/5-7/vk7-7 SIGNIFICANT ACCOUNTING POLICIES AND NOTES TO ACCOUNTS (Contd.) • VSNL Belgium BVBA • Tata Communications Deutschland GMBH (formerly known as VSNL Germany GMBH) • VSNL International (Portugal) Instalacao E Manutencao De Redes Lda. • VSNL International (Guam) LLC • Teleglobe Bermuda Limited – (in Liquidation) • ITXC IP Holdings SARL. • Teleglobe International Limited (In liquidation) • VSNL International (Hong Kong) Limited (In liquidation) • Tata Communications (Australia) Pty Ltd. (formerly known as VSNL International (Australia) Pty Ltd.) • Tata Communications Services (Bermuda) Limited (formerly known as VSNL International (GBRM) Ltd.) • VSNL International (Puerto Rico) Inc. • Teleglobe Asia Pte Ltd. • Teleglobe Asia Data Transport Pte Ltd. • Teleglobe Global Japan YK. • Teleglobe International Luxemberg SARL. (In liquidation) • Teleglobe Netherlands BV • Tata Communications (Italy) SRL (formerly known as VSNL International (Italy) SRL.) • TLGB International Germany GMBH. • Teleglobe International Belgium SPRL. • Tata Communications (Canada) ULC (formerly known as Teleglobe Canada ULC) • VSNL International (Poland) Sp.z.o.o. • Tata Communications (Nordic) AS (formerly known as VSNL International (Nordic) As.) • TLGB Luxemburg Holdings Sarl. (In liquidation) • TLGB Netherlands Holdings BV. • VSNL International (ITXC) Corp. • Tata Communications (America) Inc. (formerly known as Teleglobe America Inc.) • VSNL International (IPCO) LLC. • VSNL International (Global) Corp. • ITXC Global Hong Kong Limited (In liquidation) • VSNL International (Sweden) AB IV. Joint Venture • United Telecom Limited V. Joint Venture of wholly owned subsidiary • SEPCO Communications Pty. Ltd. • Neotel (Pty) Ltd.– subsidiary of SEPCO

VI. Key Managerial Personnel • N.Srinath - Managing Director and Chief Executive Officer • Vinod Kumar - Director of Tata Communications Ltd. and Managing Director of Tata Communications International Pte Ltd.

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65 CEPS 6\D:\Sales\Mohan\Tata Communication AR 2008\TC Main Notes 08.pmd --- Sagam\1-7-skg-2-7/SBC/3-7/Sagam/4-7/SBC/5-7/vk7-7 COMMUNICATIONS Twenty Second Annual Report 2007-2008 Tata Communications Limited

SIGNIFICANT ACCOUNTING POLICIES AND NOTES TO ACCOUNTS (Contd.) (b) Related party transactions (Rs. in crores) Investing Subsidiaries Key Joint Joint Total Company Managerial Venture Venture Personnel of wholly owned Transactions subsidiary Dividend Paid Panatone Finvest Limited 52.19————52.19 52.08————52.08 Total 52.19————52.19 52.08————52.08 Revenues from Teleco- mmunication services Tata Communications Netherlands BV — 58.16———58.16 — 185.23———185.23 Tata Communications International Pte. Ltd. —9.59———9.59 — 16.39———16.39 Tata Communications UK Limited —2.22———2.22 —6.49———6.49 Tata Communications Services (America) Inc —3.42———3.42 —6.01———6.01 United Telecom Limited — — — 6.38 — 6.38 — — — 4.08 — 4.08 Neotel (Pty) Ltd. ————27.02 27.02 —————— VSNL Internet Services Limited — 11.56———11.56 —6.94———6.94 Others — 23.50———23.50 — 24.11———24.11 Total — 108.45 — 6.38 27.02 141.85 — 245.17 — 4.08 — 249.25 Network Cost Tata Communications Netherlands BV — 77.97———77.97 — 58.72———58.72 United Telecom Limited — — — 28.57 — 28.57 — — — 16.82 — 16.82 Others —6.20———6.20 —4.95———4.95 Total — 84.17 — 28.57 — 112.74 — 63.67 — 16.82 — 80.49

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66 CEPS 6\D:\Sales\Mohan\Tata Communication AR 2008\TC Main Notes 08.pmd --- Sagam\1-7-skg-2-7/SBC/3-7/Sagam/4-7/SBC/5-7/vk7-7 SIGNIFICANT ACCOUNTING POLICIES AND NOTES TO ACCOUNTS (Contd.) (b) Related party transactions (Contd.) (Rs. in crores) Investing Subsidiaries Key Joint Joint Total Company Managerial Venture Venture Personnel of wholly owned subsidiary Purchase of Fixed Assets Videsh Sanchar Nigam Spain Srl. —0.18———0.18 —————— Total — 0.18———0.18 —————— Sale of Fixed Assets Tata Communications (US) Inc. —0.20———0.20 —————— Tata Communications International Pte. Ltd. —0.13———0.13 —————— Total — 0.33———0.33 — ————— Services rendered Tata Communications Netherlands BV —4.84———4.84 —2.95———2.95 VSNL Broadband Limited —1.95———1.95 —0.75———0.75 Tata Communications International Pte. Ltd. —0.34———0.34 —0.11———0.11 Tata Communications Transformation Services Ltd. —3.69———3.69 —0.10———0.10 Neotel (Pty) Ltd. —————— ————1.551.55 Others —5.51———5.51 —0.15———0.15 Total — 16.33———16.33 — 4.06 — — 1.55 5.61

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67 CEPS 6\D:\Sales\Mohan\Tata Communication AR 2008\TC Main Notes 08.pmd --- Sagam\1-7-skg-2-7/SBC/3-7/Sagam/4-7/SBC/5-7/vk7-7 COMMUNICATIONS Twenty Second Annual Report 2007-2008 Tata Communications Limited

SIGNIFICANT ACCOUNTING POLICIES AND NOTES TO ACCOUNTS (Contd.) (b) Related party transactions (Contd.) (Rs. in crores) Investing Subsidiaries Key Joint Joint Total Company Managerial Venture Venture Personnel of wholly owned subsidiary Services received VSNL Broadband Limited —2.61———2.61 —5.25———5.25 Total — 2.61———2.61 —5.25———5.25 Equity capital contribution (Refer Note 2 to Cash Flow Statement) VSNL SNOSPV Pte Ltd. —1.60———1.60 —————— United Telecom Limited — — — 5.67 — 5.67 —————— Tata Communications International Pte. Ltd. —————— — 90.99———90.99 Total — 1.60 — 5.67 — 7.27 — 90.99———90.99 Preference capital contribution Tata Communications International Pte. Ltd. —————— — 31.01———31.01 Total —————— — 31.01———31.01 Interest Income Tata Communications International Pte. Ltd. — 14.36———14.36 —6.82———6.82 Tata Communications Services (America) Inc —————— —1.45———1.45 VSNL Telecommunications (Bermuda) Limited —————— —0.41———0.41 Others —0.21———0.21 —0.32———0.32 Total — 14.57———14.57 —9.00———9.00

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68 CEPS 6\D:\Sales\Mohan\Tata Communication AR 2008\TC Main Notes 08.pmd --- Sagam\1-7-skg-2-7/SBC/3-7/Sagam/4-7/SBC/5-7/vk7-7 SIGNIFICANT ACCOUNTING POLICIES AND NOTES TO ACCOUNTS (Contd.) (b) Related party transactions (Contd.) (Rs. in crores) Investing Subsidiaries Key Joint Joint Total Company Managerial Venture Venture Personnel of wholly owned subsidiary Loan given Tata Communications International Pte. Ltd. — 500.21———500.21 — 254.16 — — — 254.16 Others —————— —1.29———1.29 Total — 500.21———500.21 — 255.45 — — — 255.45 Loan repaid Tata Communications International Pte. Ltd. — 99.69———99.69 — 388.67 — — — 388.67 Others —1.29———1.29 — 25.18———25.18 Total — 100.98———100.98 — 413.85 — — — 413.85 Advances given by the Company VSNL SNOSPV Pte. Ltd. —0.47———0.47 — 20.20———20.20 Tata Communications International Pte. Ltd. —0.35———0.35 — 10.01———10.01 Tata Communications Transformation Services Ltd. —————— —7.28———7.28 VSNL Telecommunications (Bermuda) Limited —0.31———0.31 —5.37———5.37 United Telecom Limited —————— ———5.67 — 5.67 Tata Communications Netherlands BV —3.62———3.62 —3.18———3.18 VSNL Broadband Ltd. —2.22———2.22 —0.94———0.94 Neotel (Pty) Ltd ————0.25 0.25 ————3.023.02 Others —1.47———1.47 —4.79———4.79 Total — 8.44 — — 0.25 8.69 — 51.77 — 5.67 3.02 60.46

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69 CEPS 6\D:\Sales\Mohan\Tata Communication AR 2008\TC Main Notes 08.pmd --- Sagam\1-7-skg-2-7/SBC/3-7/Sagam/4-7/SBC/5-7/vk7-7 COMMUNICATIONS Twenty Second Annual Report 2007-2008 Tata Communications Limited

SIGNIFICANT ACCOUNTING POLICIES AND NOTES TO ACCOUNTS (Contd.) (b) Related party transactions (Contd.) (Rs. in crores) Investing Subsidiaries Key Joint Joint Total Company Managerial Venture Venture Personnel of wholly owned subsidiary

Advances repaid by the Company Tata Communications International Pte. Ltd. —0.27———0.27 — 19.90———19.90 VSNL Telecommunications (Bermuda) Limited —1.73———1.73 — 18.74———18.74 VSNL SNOSPV Pte. Ltd —0.05———0.05 — 18.20 18.20 Tata Communications Services (America) Inc —————— — 10.96———10.96 Others — 1.44 — — 4.21 5.65 —6.13———6.13 Total — 3.49 — — 4.21 7.70 — 73.93———73.93 Managerial Remuneration N. Srinath — — 1.14 — — 1.14 — — 0.86 — — 0.86 Total — — 1.14 — — 1.14 — — 0.86 — — 0.86 Balances Receivables Tata Communications Netherlands BV — 72.46———72.46 — 126.51———126.51 United Telecom Limited — — — 0.43 — 0.43 — — — 0.50 — 0.50 Tata Communications International Pte. Ltd. —————— —2.07———2.07 Tata Communications Services (America) Inc ——————

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70 CEPS 6\D:\Sales\Mohan\Tata Communication AR 2008\TC Main Notes 08.pmd --- Sagam\1-7-skg-2-7/SBC/3-7/Sagam/4-7/SBC/5-7/vk7-7 SIGNIFICANT ACCOUNTING POLICIES AND NOTES TO ACCOUNTS (Contd.) (b) Related party transactions (Contd.) (Rs. in crores) Investing Subsidiaries Key Joint Joint Total Company Managerial Venture Venture Personnel of wholly owned subsidiary —1.82———1.82 Tata Communications UK Limited —3.96———3.96 —2.63———2.63 Neotel Pty Ltd. ————23.23 23.23 —————— Others — 19.96———19.96 — 15.77———15.77 Total — 96.38 — 0.43 23.23 120.04 — 148.80 — 0.50 — 149.30 Provision for doubtful receivables Tata Communications (America) Inc. —————— — 0.10 ———0.10

Total —————— —0.10———0.10 Bad Debts written back United Telecom Limited —————— — — — 1.40 — 1.40 Total ———— — — — — — 1.40 — 1.40 Payables VSNL Broadband Limited —5.06———5.06 —9.66———9.66 Teleglobe Canada ULC —1.42———1.42 —1.64———1.64 Tata Communications (Hong Kong) Ltd. —3.59———3.59 ————— Tata Communications Services America Inc —2.19———2.19 ————— N. Srinath — — 0.45 — — 0.45

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71 CEPS 6\D:\Sales\Mohan\Tata Communication AR 2008\TC Main Notes 08.pmd --- Sagam\1-7-skg-2-7/SBC/3-7/Sagam/4-7/SBC/5-7/vk7-7 COMMUNICATIONS Twenty Second Annual Report 2007-2008 Tata Communications Limited

SIGNIFICANT ACCOUNTING POLICIES AND NOTES TO ACCOUNTS (Contd.) (b) Related party transactions (Contd.) (Rs. in crores) Investing Subsidiaries Key Joint Joint Total Company Managerial Venture Venture Personnel of wholly owned subsidiary — — 0.50 — — 0.50 United Telecom Limited — — — 7.16 — 7.16 — — — 4.66 — 4.66 Others —4.28———4.28 —0.66———0.66 Total — 16.54 0.45 7.16 — 24.15 — 11.96 0.50 4.66 — 17.12 Loans Given Tata Communications International Pte. Ltd. — 440.25———440.25 — 28.30———28.30 Others —————— —1.30———1.30 Total — 440.25———440.25 — 29.60———29.60 Advance Receivable Tata Communications Transformation Services Ltd. —0.61———0.61 —7.28———7.28 VSNL SNOSPV Pte.Ltd. —3.28———3.28 3.10———3.10 VSNL Telecommunications (Bermuda) Limited 0.14———0.14 —1.67———1.67 Tata Communications International Pte. Ltd. —0.15———0.15 —0.07———0.07 Neotel(Pty)Ltd ————1.32 1.32 ————6.386.38 Tata Communications Internet Services Ltd. — 393.07———393.07 —————— Others —8.16———8.16 —2.38———2.38 Total — 405.41 — — 1.32 406.73

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72 CEPS 6\D:\Sales\Mohan\Tata Communication AR 2008\TC Main Notes 08.pmd --- Sagam\1-7-skg-2-7/SBC/3-7/Sagam/4-7/SBC/5-7/vk7-7 SIGNIFICANT ACCOUNTING POLICIES AND NOTES TO ACCOUNTS (Contd.) (b) Related party transactions (Contd.) (Rs. in crores) Investing Subsidiaries Key Joint Joint Total Company Managerial Venture Venture Personnel of wholly owned subsidiary — 14.50 — — 6.38 20.88 Advance against equity United Telecom Limited —————— — — — 5.67 — 5.67 VSNL SNOSPV Pte. Ltd — 13.04———13.04 —1.60———1.60 Tata Communications International Pte. Ltd. — 208.47———208.47 —————— Total — 221.51———221.51 — 1.60 — 5.67 — 7.27 Guarantees on behalf of subsidiaries Tata Communications Netherlands BV — 1,880.94 — — — 1,880.94 — 2,133.95———2,133.95 Tata Communications International Pte. Ltd. — 360.90———360.90 —0.72———0.72 VSNL SNOSPV Pte. Ltd — 52.02———52.02 —————— Tata Communications Transformation Services Ltd. — 22.00———22.00 —————— Others — 25.35———25.35 — 38.23———38.23 Total — 2,341.21 — — — 2,341.21 — 2,172.90———2,172.90 Letter of Comfort on behalf of subsidiaries Tata Communications (US) Inc — 200.10———200.10 — 217.75 — — — 217.75 Tata Communications Transformation Services Ltd. — 24.01———24.01 —————— VSNL Broadband Limited — 60.00———60.00 — 60.00———60.00 Total — 284.11———284.11 — 277.75 — — — 277.75 Note: Figures in italics are in respect of the previous year

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SIGNIFICANT ACCOUNTING POLICIES AND NOTES TO ACCOUNTS (Contd.)

19. Operating lease arrangements: (a) As lessee: Year ended Year ended 31 March, 2008 31 March, 2007 Rs. in crores Rs. in crores Minimum lease payments under operating leases recognized as expense in the year 49.12 57.31 At the balance sheet date, minimum lease payments under non- cancellable operating leases fall due as follows: Year ended Year ended 31 March, 2008 31 March, 2007 Rs. in crores Rs. in crores Due not later than one year 40.78 30.70 Due later than one year but not later than five years 42.13 43.43 Later than five years — 1.16 82.91 75.29

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 IRU’s with gross carrying amount and accumulated depreciation of Rs. 84.33 crores (2007: Rs. 84.33 crores) and Rs. 16.79 crores (2007: Rs. 11.29 crores) respectively as at 31 March, 2008. Depreciation expense of Rs. 5.50 crores (2007: Rs. 5.50 crores) in respect of these assets has been recognised in the Profit and Loss Account for the year ended 31 March, 2008. In case of certain lease agreements aggregating to Rs. 198.97 crores for the year ended 31 March, 2008, 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, 2008 amounts to Rs. 15.33 crores. In respect of the above, rental income of Rs. 22.13 crores (2007: Rs. 10.97 crores) has been recognised in the Profit and Loss Account for the year ended 31 March, 2008. Future lease rental receipts will be recognised in the Profit and Loss Account of subsequent years as follows: Year ended Year ended 31 March, 2008 31 March, 2007 Rs. in crores Rs. in crores Not later than one year 24.84 6.85 Later than one year but not later than five years 99.36 27.41 Later than five years 155.09 55.62 279.29 89.88

(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, 2008 31 March, 2007 Rs. in crores Rs. in crores Not later than one year 0.71 1.21 Later than one year but not later than five years 0.49 0.01 Later than five years 0.39 0.03 1.59 1.25 Lease rental income of Rs. 1.80 crores (2007: Rs. 4.09 crores) in respect of the above leases have been recognised in the Profit and Loss Account for the year ended 31 March, 2008.

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20. Provision for Contingencies: Asset Others Total Retirement Obligation (“ARO”) Rs. in crores Rs. in crores Rs. in crores Balance as on 1 April, 2007 6.16 12.58 18.74 Provision made during the year — — — Provisions no longer required written back — (3.58) (3.58) Balance as at 31 March, 2008 6.16 9.00 15.16 Notes: 1) Provision for ARO has been recorded in the books of the company in respect undersea cables and switches owned by the company 2) Others include amounts provided towards claims made by a creditor of the Company. 21. Contingent Liabilities and Capital Commitments: A. Contingent Liabilities: As at As at 31 March, 2008 31 March, 2007 Rs. in crores Rs. in crores Guarantees given on behalf of subsidiaries 2,341.21 2,172.18 i. Claims for taxes on income (Refer Note 1) (a) Income tax disputes where the department is in appeal against the Company 94.15 198.47 (b) Income tax disputes where the Company has a favourable decision in other assessment year for the same issue 2.43 6.52 (c) Income tax disputes other than the above 1,405.85 1,655.30 ii. Claims for other taxes 0.53 6.15 iii. Other claims 727.45 540.94 Notes: (1) Significant claims by the revenue authorities in respect of income tax matters are in respect of: (a) 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. (b) Reimbursement by the Department of Telecommunications (DoT) of income tax paid by the Company on the DoT levy during 1994-95, that was taxed by the revenue authorities. The Commissioner of Income Tax (Appeals) has upheld the disallowance. The Company is in appeal with the Income Tax Appellate Tribunal. (c) The Company has taken necessary expert opinion and no further provisions are required. (2) A claim of Rs.6,003.00 crores (US $ 1,500 million) was made in the US Federal District Court of the Southern District of New York against the Company by a former strategic business alliance associated during the course of one of the acquisitions effected by the Company. This claim was settled out of court and the same has been borne by the group entities considered beneficiaries in the settlement. Consequently, there is no charge for the settlement in these financial statements.

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SIGNIFICANT ACCOUNTING POLICIES AND NOTES TO ACCOUNTS (Contd.)

(3) As on 31st March 2008, the Company has issued Letters of Comforts for credit facility agreements, aggregating to Rs. 200.10 crores (US $ 50 million) and Rs. 60.00 crores and Rs. 24.01 crores (US$ 6 million) availed by VSNL International (US) In. (“VIU”), a wholly owned subsidiary of TCIPL, VSNL Broadband Limited (“VBL”) and TATA Communications Transformation Services Ltd. (TCTSL) respectively. The Company has undertaken to the lenders of VIU, VBL and TCTSL that it shall retain full management control in VIU and VBL so long as amounts are due to the lenders. (4) The Company has issued a support letter to Tata Communications International Pte Limited (TCIPL), regarding providing financial support enabling, in turn, TCIPL to issue such support letters to certain subsidiaries having negative networth as at 31 March, 2008 the aggregating to Rs. 1,594.71 crores in various geographies in order that they remain a going concern with reference to the provisions of applicable insolvency laws in their country of residence. (5) In May 2006, an Arbitration Tribunal of the International Chamber of Commerce (ICC) issued a ruling on certain issues in a matter initiated by FLAG Telecom Group Limited (FLAG) in December 2004. The matter concerned the interpretation of certain provisions of the Construction and Maintenance Agreement (C&MA) governing the FLAG Europe Asia (FEA) cable system to which FLAG and the Company, and various other parties, are signatories. The Arbitration Tribunal by a majority decision ordered the Company to grant FLAG access to the Mumbai cable landing station of the FEA cable system for the purposes of installation, inspection, testing, training and other functions so as to equip capacity of the FEA cable system to any level. This award of the tribunal is complied with. In September 2006, the Company filed a Writ in the Netherlands court to seek to set aside the award of the ICC Arbitration Tribunal which writ was not granted.The Company has since filed appeal in the higher court in the Netherlands. During February 2007, the Company was in receipt of a communication from FLAG to the Arbitration Tribunal of the ICC seeking monetary relief of about Rs. 1,624.81 crores ( US $ 406 million ) plus interest in the Arbitration in relation to the aforesaid dispute which was subsequently revised to Rs. 1,540.77 crores (US$ 385 million). The Tribunal held a hearing on the question of damages in The Hague during October/November 2007. The Company rebutted FLAG’s claim as a matter of principle and in detail. The Tribunal is currently preparing its Award on damages which is expected during FY 2008-09. B. Capital commitments Estimated amount of contracts remaining to be executed on capital account and not provided for Rs. 568.40 crores (2007: Rs. 353.04 crores). The Company has subscribed the capital clause of Memorandum of Association of a new company M/s Banking ATM Infrasolutions Limited which is intended to be 100% owned subsidiary of Tata Communications Limited. 22. Value of Imports on C.I.F. basis Year ended Year ended 31 March, 2008 31 March, 2007 Rs. in crores Rs. in crores Stores and Spares 1.14 6.32 Capital Goods 312.77 234.06 23. Earnings in foreign currencies Year ended Year ended 31 March, 2008 31 March, 2007 Rs. in crores Rs. in crores i. Revenues from telecommunications services 1001.71 1,739.05 ii. Interest income 14.58 9.00 iii. Other income 18.98 11.07 1,035.27 1,759.12

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76 CEPS 6\D:\Sales\Mohan\Tata Communication AR 2008\TC Main Notes 08.pmd --- Sagam\1-7-skg-2-7/SBC/3-7/Sagam/4-7/SBC/5-7/vk7-7 SIGNIFICANT ACCOUNTING POLICIES AND NOTES TO ACCOUNTS (Contd.)

24. Expenditure in foreign currencies Year ended Year ended 31 March, 2008 31 March, 2007 Rs. in crores Rs. in crores i. Charges for use of transmission facilities 652.76 917.76 ii. Rent of satellite channels 25.33 57.56 iii. Administrative lease charges 5.22 9.83 iv. Repairs and maintenance 60.90 69.75 v. Legal and professional fees 32.97 11.75 vi. Others 6.24 7.12

783.42 1,073.77

25. Value of imported and indigenous stores/spares consumed Year ended Year ended 31 March, 2008 31 March, 2007 Rs. in crores Rs. in crores

Value % Value %

Imported 1.14 10.72 6.32 44.85 Indigenous 9.49 89.28 7.77 55.15

10.63 100.00 14.09 100.00

26. 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 for the year ended 31 March, 2008 and 31 March, 2007 are as follows: Year ended Year ended 31 March, 2008 31 March, 2007 Rs. in crores Rs. in crores

Income 13.75 8.80 Expenses 13.65 7.65

As at As at 31 March, 2008 31 March, 2007 Rs. in crores Rs. in crores

Assets 41.15 37.53 Liabilities 26.82 28.46 Contingent liability in respect of claims of taxes and duties Rs. Nil (2007: Nil).

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SIGNIFICANT ACCOUNTING POLICIES AND NOTES TO ACCOUNTS (Contd.)

27. 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, 2007 paid to non – resident shareholders, for which dividends were declared during the year, are as under: Year ended Year ended 31 March, 2008 31 March, 2007 Rs. in crores Rs. in crores i. Number of non-resident shareholders 512 610 ii. Number of shares held by them 23,521,800 30,205,745 iii. Year to which dividend relates 2006-07 2005-2006 iv. Amount remitted net of tax (Rs. in crores) 10.58 13.59

28. Micro, Small and Medium Enterprises Year ended Year ended 31 March, 2008 31 March, 2007 Rs. in crores Rs. in crores Principal Interest Principal Interest Amount due to Vendors 0.19 0.05 0.21 NIL Principal amount paid (includes unpaid beyond the appointed date 6.63 NIL 5.19 NIL Interest accrued and remaining unpaid (includes interest disallowable) NIL 0.05 NIL NIL

29. Advances include an amount of Rs. 295 crore paid to Department of Telecommunications (DOT) under protest, based on the provisional assessment order passed by the DOT towards license fees payment, which amount DOT demanded before issue of certain license to the Company. The Company has challenged the Telecom Disputes Settlement & Appellate Tribunal’s (TDSAT) order of 30 August, 2007 in license fee matter in the Hon’ble Supreme Court. The Company has also filed another petition in the TDSAT challenging applicability of penal provisions under ILD and NLD license agreements, where the matter is currently being heard.

30. Subsequent to 31 March 2008 the Company has received Rs.79.32 crores towards reimbursement from DOT.

31. Previous year’s figures have been regrouped and reclassified wherever necessary.

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78 CEPS 6\D:\Sales\Mohan\Tata Communication AR 2008\TC Main Notes 08.pmd --- Sagam\1-7-skg-2-7/SBC/3-7/Sagam/4-7/SBC/5-7/vk7-7 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 0 8 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 9650 . 45 9650 .45 Source of Funds Paid-up Capital Reserves & Surplus 285 . 00 6262 .34 Secured Loans Unsecured Loans NI L 777 .80 Deferred Tax Liability 84 . 13 Application of Funds Net Fixed Assets Investments 3532 . 67 2103 .77

*Net Current Assets Misc. Expenditure 1772 . 83 NI L Accumulated Losses NIL IV. Performance of Company (Amount in Rs. Crores) Turnover Total Expenditure 3465 . 33 3015 .35 ✓ Profit/Loss Before Tax ✓ Profit/Loss After Tax +- 449 . 98 +- 304 .46 (Please tick appropriate box + for Profit, - for Loss) Earning per Share in Rs. Dividend% 10 . 68 45

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V. Generic Names of Three Principal Products/Services of Company (as per monetary terms) Item Code No. (ITC Code) Product Description I N T E R N A T I O N A L T E L E C O M MUN I C A T I ON S S E R V I C E S 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 RAJIV DHAR SATISH RANADE Chief Financial Officer Company Secretary & Chief Legal Officer MUMBAI DATED: 17 June, 2008

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80 CEPS 6\D:\Sales\Mohan\Tata Communication AR 2008\TC Main Notes 08.pmd --- Sagam\1-7-skg-2-7/SBC/3-7/Sagam/4-7/SBC/5-7/vk7-7 rofit afterrofit Propsed ofit before for Provision P rnover Taxation Taxation Taxation Dividend in the (except in case of investment subsidiaries) otal Investment Total Pr apital Reserves Assets Total T change C Share USD 1.0000 3.28 (6.06) 35.79 38.57 14.17 3.29 (1.60) 0.00 (1.60) 0.00 alia) Pty Ltd.) USD 1.0000 1.43 (0.67) 3.22 2.46 0.00 2.23 2.44 (0.00) 2.44 0.00 rmuda Limited)rmuda USD 1.0000 0.05 (243.43) 2,000.07 2,243.45 0.00 25.19 (268.21) 0.00 (268.21) 0.00 ompany Reporting Ex alia) Pty Ltd. ternational Pteternational Ltd (Netherlands) BV (formerly known as VSNL International (GBRM) Ltd.)VSNL International as known (formerly USD 1.0000 42.47 61.29 106.49 2.73 2.27 202.02 129.34 0.00 129.34 0.00 (Formerly known as VSNL International Pte. Ltd.) known VSNLPte. as International (Formerly VSNL America known Inc.) as (Formerly USD 1.0000 USD 816.57 1.0000 (10.24) 1.20 1,583.78 (56.76) 777.45 12.22 0.00 67.78 113.23 0.00 29.31 44.41 (0.00) 29.31 5.42InternationalVSNL (Austr as known (formerly 0.00 (4.32) 9.74 0.00 (Formerly known Japan K.K.) asVSNL International (Formerly VSNL Hong Kong known Limited) as (Formerly USD 1.0000 (UK) Limited)Telecommunications VSNL as known (formerly USD USD 1.0000 1.0000 14.52 101.85 150.35 0.00VSNL known Germany GMBH) as (formerly (50.68) 302.47 0.00 LDA de Redes Manutencao 1,057.12 137.60 USD 0.00 1,005.95 1.0000 0.00 0.00 0.00 0.14 USD 33.19 481.60 1.0000 0.00 9.72 (3.47) (15.58) 32.22 5.58 36.53 8.87 0.00 19.49 (3.81) 26.68 (12.34) (15.58) 0.05 0.11 0.00 0.00 0.00 19.44 (1.66) 2.76 0.00 0.00 4.11 0.00 0.00 0.14 4.11 0.03 0.00 0.11 0.00 (formerly known as VSNL known Netherlands (formerly as BV)VSNL Be International as known (formerly USD 1.0000 81.67 (5.46) 6,435.92 6,359.71 0.00 37.67 34.36 0.00 34.36 0.00 VSNL SNOSPV Pte. Ltd VSNL SNOSPV Pte. (formerly known as DIL Internet Services Ltd.) as DIL Internet known (formerly Services Limited INR 1.0000 95.00 (122.24) INR (27.23) 1.0000 0.00 0.50 42.64 3.08 272.65 14.59 (120.02) 11.01 4.24 (124.26) 0.00 0.00 72.18 4.67 1.82 2.85 0.00 28 Services Limited (Bermuda) Communications Tata 29 VSNL International (Puerto Inc.Rico) 30 Pte Ltd. Asia Teleglobe 31Ltd Pte. Transport Data Asia Teleglobe 32YK Global ITXC Japan USD USD 1.0000 1.0000 USD 0.00 1.0000 USD 0.00 (0.38) 1.0000 0.24 0.02 (1.46) 0.32 (2.53) 0.00 (1.08) (2.51) 0.05 (0.02) 0.00 (0.21) 0.37 0.00 0.00 0.00 0.00 0.00 0.59 0.00 0.00 (0.06) 0.00 (0.06) 0.00 0.00 0.59 0.00 0.00 (0.06) 0.00 (0.06) 0.00 0.00 0.00 0.00 0.00 6 In Communications Tata 7 Inc. (America) Services Communications Tata 8 UK Ltd VSNL 9 Ltd. Telecommunications(Bermuda) VSNL 10 Communications Tata USD 1.0000 0.00 USD 1.0000 (645.17) (500.19) 23.36 144.98 (24.70) (1.34) 0.00 0.00 0.00 (581.62) 0.00 0.00 11.80 (581.62) (0.77) 0.00 0.00 (0.77) 0.00 12 (Japan) KK. Communications Tata 13 (Hongkong) Communications Limited Tata 14 (US) Inc Communications Tata 15 (UK) Limited Communications Tata 16 SAS VSNL France 17 Videsh Sanchar Nigam Spain Srl.18 Lda. Unipessoal VSNL Portugal 19 VSNL Belgium BVBA USD20 Deutschland GMBH Communications Tata 1.000021 VSNL International Instalacao (Portugal) e USD22 (Guam) LLC VSNL International 0.0023 USD 1.0000Limited Bermuda USD Teleglobe 24 IP Holdings ITXC S.a.r.l 1.0000 (388.56)25 1.0000 Limited International Teleglobe 12.5626 USD International HongKong Ltd Teleglobe 1,755.8027 288.16 (Austr Communications Tata 1.0000 10.10 (51.92) USD 2,144.36 (297.94) USD 1.0000 (9.06) 170.10 0.10 USD USD 1.0000 52.62 0.00 USD 1.0000 102.61 0.00 209.47 1.0000 0.31 1.0000 247.00 62.40 0.00 101.58 10.09 0.00 0.00 0.00 1.18 0.07 26.25 12.29 0.00 0.00 23.89 0.14 80.12 0.00 0.77 66.56 4.52 12.29 1.58 46.87 13.80 36.53 1.19 0.00 98.85 0.00 21.72 0.00 4.16 9.86 36.40 0.00 0.00 0.00 0.00 32.23 0.39 (0.00) 0.00 0.57 0.00 0.00 1.19 0.00 0.00 0.53 0.00 4.16 (10.23) 0.00 32.59 9.29 51.44 0.00 0.00 0.00 12.29 0.00 (12.95) 0.00 (8.37) 1.08 0.53 0.00 (10.23) (0.14) 0.00 0.00 0.13 0.00 (12.81) 12.29 (8.37) 0.00 0.00 0.95 0.00 0.00 11 Limited (Bermuda) Communications Tata No. CurrencyRate Liabilities Details Tu Sr.C Name of Subsidiary New 1 VSNL Internet Services Ltd. 2 Ltd. Broadband VSNL 3Transformation Communications Tata 4 Lanka Ltd Communication Tata 5 INR USD 1.0000 1.0000 70.00 5.62 26.04 29.48 148.46 52.34 52.42 17.24 0.00 33.92 39.97 64.65 1.69 12.02 0.22 0.00 1.46 12.02 0.00 0.00 Statement Pursuant to Sec 212(8) of the Companies Act, 1956, relating to subsidiaryrelating to companies 1956, Act, Sec to 212(8) of the Companies Pursuant Statement

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81 CEPS 6\D:\Sales\Mohan\Tata Communication AR 2008\TC Main Notes 08.pmd --- Sagam\1-7-skg-2-7/SBC/3-7/Sagam/4-7/SBC/5-7/vk7-7 COMMUNICATIONS Twenty Second Annual Report 2007-2008 Tata Communications Limited olly owned of Tata Communi- of Tata rofit afterrofit Propsed ofit before for Provision P rnover Taxation Taxation Taxation Dividend owned subsidiary of Tata Communications Limited. Communications Tata subsidiary of owned in the (except in case of investment subsidiaries) Chief Executive Officer Chief Executive otal Investment Total Pr ns Limited which is intended to be which is intended to ns Limited 100% s Limited. The courts also approved the Scheme of arrangements to transfer the Company’s Retail Business Undertakings Retail courts the Company’s transfer its wh The to the Scheme of arrangements to also approved s Limited. arch 1, 2007 Direct Internet Limited ceases to exist and VSNL wholly owned direct Services subsidiary Internet exist becomes and to Limited 2007 Direct Internet Limited ceases 1, arch apital Reserves Assets Total T For and on behalf of the Board For SUBODH BHARGAVAChairmanRAJIV DHAROfficer Financial Chief MUMBAI 2008 17 June, SRINATH N. DATED: Secretary Officer & Chief Legal Company Managing & Director RANADE SATISH change C Share Internet Limited into its subsidiary VSNL internet ServiceVSNL its subsidiary Limited internet into Internet USD 1.0000USD 1.0000 0.06 387.10 0.86USD 420.49 (0.71) 1.0000 827.77 (1.63) 11.33 20.17 0.00 2.71 0.00 0.94 14.31 0.00 0.81 0.28 580.64 (0.00) 0.00 0.00 0.81 0.00 580.64 0.00 0.00 0.67 0.00 0.67 0.00 ULC) USD 1.0000 34.10 (181.33) 1,718.31 1,865.54 0.00 1,333.33 94.17 0.00 94.17 0.00 ompany Reporting Ex y GmbH USD 1.0000 1.99 (22.25) 250.00 270.26 0.00 129.68 (11.85) 0.00 (11.85) 0.00 tions (Canada) ULC (formerly known as VSNL International (Italy)VSNL International as known SRL.)(formerly USD 1.0000 0.07 (15.48) 77.67 93.09 0.00 25.41 (14.57) 0.15 (14.72) 0.00 (formerly known as Teleglobe Canada Canada Teleglobe known (formerly as (formerly known as VSNL (Nordic) knownAs.) International as (formerly USD 1.0000 Inc.) America Teleglobe as known (formerly 0.06 USD (4.11) 1.0000 5.24 824.99 (247.29) 9.29 2,275.48 0.00 1,697.78 1.45 0.00 (1.44) 1,841.01 (140.98) 0.01 0.00 (1.45) (140.98) 0.00 0.00 indirect subsidiary, Judicature VSNL Internet Services Ltd. Accordingly, pursuant to the orders of the courts, effective from M effective from the orders of the courts, pursuant to Accordingly, VSNL Services Internet Judicature Ltd. indirect subsidiary, Limited. cations 33 S.a.r.l Luxembourg International Teleglobe 34 B.V Netherlands Teleglobe 35 (Italy) SRL Communications Tata 36 USD International German TLGB 37 Belgium International S.P.R.L Teleglobe 38 1.0000 Communica Tata USD 0.06 USD 1.0000 38.14 1.0000 38.83 38.78 0.09 (4.31) 0.58 0.05 2,074.05 2,039.53 0.00 1.96 0.00 0.00 1.82 15.69 55.15 0.00 3.01 0.00 0.00 0.34 55.15 (0.03) 0.00 2.67 0.05 0.00 (0.08) 0.00 39 Zo.o VSNL International(Poland) Sp. 40 AS (Nordic) Communications Tata 41 Luxembourg S.ar.l Holdings TLGB 42 Netherlands Holdings B.V TLGB 43 Corp. VSNL International(ITXC) 44 Inc. Communications (America) Tata 45 LLC IPCO VSNL International 46 VSNL International (Global) Corp. 47 USDHongkong Global ITXC 48 VSNL International Swedon USD49 1.0000 S.A.S International France Teleglobe 50 1.0000 S.L Spain Communications Teleglobe 825.96 USD 107.63 1.0000 (0.33) USD USD USD USD 0.00 100.05 1.0000 825.83 1.0000 1.0000 1.0000 107.63 12.90 10.10 0.21 0.00 0.00 1.86 0.00 112.95 (32.01) 0.00 0.18 0.00 6.93 0.00 79.47 0.00 0.00 0.18 52.86 0.00 101.38 0.00 0.00 (0.00) 44.07 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 43.74 0.00 3.67 (0.00) 79.34 0.00 0.00 (1.44) 0.00 0.00 0.00 14.42 0.39 0.00 0.14 0.00 3.67 0.70 (0.21) (1.58) 0.00 0.00 13.72 0.00 0.60 0.00 0.00 0.00 0.00 Sr.Name C New of Subsidiary No. CurrencyRate Liabilities Details Tu Statement Pursuant to Sec 212(8) of the Companies Act, 1956, relating to subsidiaryrelating to (Contd.) companies 1956, Act, Sec to 212(8) of the Companies Pursuant Statement Notes: (i) of Direct the merger and Delhi High Courtsapproved of Bombay The (ii) Infrasolutio M/s Banking ATM of a new company of Association the Capital clause of Memorandum to has subscribed Company The

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84 CEPS 6\D:\Sales\Mohan\Tata Communication AR 2008\TC Consol Account-2008.pmd --- Sagam\2-7\SBC\7-7\ AUDITORS’ REPORT ON CONSOLIDATED FINANCIAL STATEMENTS TO THE BOARD OF DIRECTORS OF TATA COMMUNICATIONS LIMITED

1. We have audited the attached Consolidated Balance net cash inflows amounting to Rs. 0.23 crores for Sheet of TATA COMMUNICATIONS LIMITED (‘the the year then ended and a joint venture whose Company’) (formerly Videsh Sanchar Nigam Limited), financial statements represents Company’s share and its subsidiaries (the Company, its subsidiaries and of total assets of Rs. 41.15 crores as at 31 March, joint ventures constitute “the Group”) as at 31 March, 2008, total revenues of Rs. 13.75 crores and net 2008, the Consolidated Profit and Loss Account and cash outflows amounting to Rs. 3.03 crores for the Consolidated Cash Flow Statement of the Group the year then ended have been incorporated in for the year ended on that date annexed thereto. the consolidated financial statements on the These financial statements are the responsibility of basis of unaudited financial statements as the Company’s Management and have been prepared provided by the management of that subsidiary by the Management on the basis of separate financial and joint venture. statements and other financial information regarding 4. Subject to our remark in paragraph 3 (b) above: components. Our responsibility is to express an opinion on these financial statements based on our (a) We report that the consolidated financial audit. statements have been prepared by the Company’s management in accordance with the 2. We conducted our audit in accordance with the requirements of the Accounting Standard (AS) 21, auditing standards generally accepted in India. Those Consolidated Financial Statements and Standards require that we plan and perform the audit Accounting Standard (AS) 27, Financial Reporting to obtain reasonable assurance about whether the of Interests in Joint Ventures issued by the financial statements are free of material misstatement. Institute of Chartered Accountants of India. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the (b) Based on our audit and on consideration of financial statements. An audit also includes assessing reports of other auditor’s on separate financial the accounting principles used and significant statements and on the other financial information estimates made by the management, as well as of the components, and to the best of our evaluating the overall financial statement information and according to the explanations presentation. We believe that our audit provides a given to us, we are of the opinion that the reasonable basis for our opinion. attached consolidated financial statements give a true and fair view in conformity with the 3. (a) We did not audit the financial statements of accounting principles generally accepted in India: certain subsidiaries, whose financial statements reflect total assets of Rs. 6,432.36 crores as at 31 (i) in the case of the Consolidated Balance March, 2008, total revenues of Rs. 6,525.94 crores Sheet, of the state of affairs of the Group as and net cash inflows amounting to Rs. 52.82 at 31 March, 2008; crores for the year then ended. We also did not (ii) in the case of Consolidated Profit and Loss audit the financial statements of a joint venture Account, of the profit of the Group for the whose financial statements reflect the Company’s year ended on that date; and share of total assets of Rs. 330.80 crores as at 31 (iii) in the case of the Consolidated Cash Flow March 2008, total revenues of Rs. 54.53 crores and Statement, of the cash flows of the Group net cash inflows amounting to Rs. 23.38 crores for the year ended on that date. for the year then ended. These financial statements and other financial information have For S. B. BILLIMORIA & CO. been audited by other auditors whose reports Chartered Accountants have been furnished to us, and our opinion is based solely on the report of other auditors. P.R.RAMESH Partner (b) The financial statements of a subsidiary which Membership No. 70928 represents total assets of Rs. 54.84 crores as at 31 March, 2008, total revenues of Rs. 3.29 crores and Mumbai, 17 June, 2008

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CONSOLIDATED BALANCE SHEET AS AT 31 MARCH, 2008 Schedule As at 31st March‘07 Rs. in crores Rs. in crores FUNDS EMPLOYED: 1 SHARE CAPITAL 1 285.00 285.00 2 RESERVES AND SURPLUS 2 4,866.98 4,967.41 3 TOTAL SHAREHOLDERS’ FUNDS 5,151.98 5,252.41 4 MINORITY INTEREST 3.21 — 5 SECURED LOANS 3 105.24 130.08 6 UNSECURED LOANS 4 3,241.38 2,381.37 7 OBLIGATIONS UNDER FINANCE LEASE 42.26 56.61 8 DEFERRED TAX LIABILITY (NET) (Refer Note B11(A), Schedule 20) 99.82 81.12 9 TOTAL FUNDS EMPLOYED 8,643.89 7,901.59

APPLICATION OF FUNDS: 10 FIXED ASSETS: 5 (a) Gross Block 8900.08 8,081.59 (b) Less: Accumulated Depreciation/ Amortisation 2644.37 1,971.49 (c) Net Block 6255.71 6,110.10 (d) Capital work-in-progress 2,040.62 730.04 8,296.33 6,840.14 11 GOODWILL (ON CONSOLIDATION) 167.41 167.41 12 INVESTMENTS 6 1,204.38 1,763.60 13 DEFERRED TAX ASSET (NET) (Refer Note B11(B), Schedule 20) — 4.27 14 CURRENT ASSETS, LOANS AND ADVANCES A. CURRENT ASSETS (a) Inventories 7 9.29 8.16 (b) Sundry Debtors 8 2,074.56 1,664.81 (c) Cash and Bank Balances 9 294.07 245.40 (d) Other Current Assets 10 611.45 143.39 2,989.37 2,061.76 B. LOANS AND ADVANCES 11 1,673.44 1,273.66 4,662.81 3,335.42 15 Less: CURRENT LIABILITIES AND PROVISIONS (A) Current Liabilities 12 5,322.91 3,820.47 (B) Provisions 13 364.13 388.78 5,687.04 4,209.25 16 NET CURRENT LIABILITIES [(14) less (15)] (1,024.23) (873.83) 17 TOTAL ASSETS (NET) 8,643.89 7,901.59 SIGNIFICANT ACCOUNTING POLICIES AND NOTES TO ACCOUNTS 20

As per 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 RAJIV DHAR SATISH RANADE Chief Financial Officer Company Secretary & Chief Legal Officer MUMBAI MUMBAI DATED: 17 June, 2008 DATED: 17 June, 2008

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86 CEPS 6\D:\Sales\Mohan\Tata Communication AR 2008\TC Consol Account-2008.pmd --- Sagam\2-7\SBC\7-7\ CONSOLIDATED PROFIT AND LOSS ACCOUNT FOR THE PERIOD ENDED 31 MARCH, 2008 Schedule Year ended ‘31 March 2007 Rs. in crores Rs. in crores INCOME: 1 REVENUES FROM TELECOMMUNICATION SERVICES 8,262.98 8,611.21 2 OTHER INCOME 14 263.55 238.25 3 INTEREST INCOME 15 11.23 7.14 4 TOTAL INCOME 8,537.76 8,856.60 EXPENDITURE: 5 SALARIES AND RELATED COSTS 16 895.00 866.21 6 NETWORK COSTS 17 4,763.47 5,242.78 7 OPERATING AND OTHER EXPENSES 18 1,759.35 1,448.59 8 INTEREST EXPENSE 19 175.41 143.58 9 DEPRECIATION, AMORTISATION AND IMPAIRMENT 784.41 783.00 (Net of transfer from Capital Reserve) 10 TOTAL EXPENDITURE 8,377.64 8,484.16 PROFIT BEFORE TAXES AND EXCEPTIONAL ITEMS 160.12 372.44 11 EXCEPTIONAL ITEMS: (a) Expenditure on Voluntary Retirement Schemes/ Voluntary Separation Schemes — 23.86 (b) Restructuring Costs — 59.45 (c) Fixed Assets written off 11.20 8.05 PROFIT BEFORE TAXES 148.92 281.08 12 TAXES (a) CURRENT TAX 133.72 255.88 (b) DEFERRED TAX EXPENSE/ (BENEFIT) 37.78 17.67 (c) FRINGE BENEFIT TAX 5.39 5.86 NET PROFIT/ (LOSS) BEFORE MINORITY INTEREST (27.97) 1.67 13 MINORITY INTEREST (Share of Loss, Net) 38.27 13.73 NET PROFIT 10.30 15.40 14 BALANCE BROUGHT FORWARD FROM PREVIOUS YEAR 627.08 808.59 LESS: TAX ADJUSTMENT ON RETAIL BUSINESS HIVE OFF (9.25) 15 AMOUNT AVAILABLE FOR APPROPRIATIONS 628.13 823.99 16 APPROPRIATIONS : (a) PROPOSED DIVIDEND (Refer Note B3, Schedule 20) 128.25 128.25 (b) TAX ON DIVIDEND 21.80 21.80 (c) GENERAL RESERVE 33.27 46.86 BALANCE CARRIED TO BALANCE SHEET 444.81 627.08 EARNINGS PER SHARE (EPS) 17 Basic/Diluted earnings per share, excluding exceptional items (Rs.) (Refer Note B12, Schedule 20) 0.62 3.37 18 Basic/Diluted earnings per share, including exceptional items (Rs.) (Refer Note B12, Schedule 20) 0.36 0.54 SIGNIFICANT ACCOUNTING POLICIES AND NOTES TO ACCOUNTS 20

As per 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 RAJIV DHAR SATISH RANADE Chief Financial Officer Company Secretary & Chief Legal Officer MUMBAI MUMBAI DATED: 17 June, 2008 DATED: 17 June, 2008

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CONSOLIDATED CASH FLOW STATEMENT FOR THE YEAR ENDED 31 MARCH, 2008 Year ended 31 March, 2007 Rs. in crores Rs. in crores 1 CASH FLOWS FROM OPERATING ACTIVITIES PROFIT BEFORE TAXES AND EXCEPTIONAL ITEMS 160.12 372.44 Adjustments for: Depreciation,amortisation and impairment 784.41 783.00 Profit on sale of fixed assets (0.39) (42.74) Interest income (11.23) (7.14) Interest expense 175.41 143.58 Fixed assets written down 1.21 — Interest on income tax refunds (16.66) (6.34) Dividend income/profit on sale of current investments (46.58) (59.44) Valuation loss on current investments (0.07) — Loss on sale of long-term investments 0.36 — OPERATING PROFIT BEFORE WORKING CAPITAL CHANGES 1,046.58 1,183.36 Inventories (1.13) 4.68 Sundry debtors (483.54) (178.57) Other current assets, loans and advances (554.41) (73.77) Current liabilities and provisions 1,682.93 209.66 Cash generated from operations before tax and exceptional items 1,690.43 1,145.36 Expenditure on voluntary retirement schemes/voluntary separation schemes — (21.11) Expenditure on restructuring costs — (10.01) Cash generated from operations before taxes 1,690.43 1,114.24 Income tax (paid)/refunds (421.94) (293.44) Interest on income tax refunds 16.66 6.34 NET CASH FROM OPERATING ACTIVITIES 1,285.15 827.14 2 CASH FLOWS FROM INVESTING ACTIVITIES Purchase of fixed assets (2,543.86) (1,365.46) Business acquisitions, net of cash — (74.97) Sale/ (Purchase) of current investments (net of mutual funds dividend reinvested) (net) 601.92 65.66 Proceeds from sale of fixed assets 10.67 76.60 Proceeds from sale of long-term investment 2.71 — Dividend income from current investments 3.75 16.38 Fixed deposits (net) 2.82 29.73 Interest received 8.42 9.08 NET CASH USED IN INVESTING ACTIVITIES (1,913.57) (1,242.98) 3 CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from unsecured loans (net) 1,042.02 540.48 Repayment of secured loans (net) (13.39) (12.53) Payment for finance lease (9.77) (16.15) Dividends paid including dividend tax (150.21) (146.14) Interest paid (174.65) (150.83) CASH FLOW FROM FINANCING ACTIVITIES 694.00 214.83 NET INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS 65.58 (201.01) CASH AND CASH EQUIVALENTS AS AT THE BEGINNING OF THE YEAR 220.56 440.16 (Refer note B10, Schedule 20) Effect of exchange on cash and cash equivalents 2.26 (18.59) CASH AND CASH EQUIVALENTS AS AT THE END OF THE YEAR 288.40 220.56 (Refer note B10, Schedule 20) Note : During the year fixed assets amounting to Rs. 75.09 crores were acquired by a Joint Venture from one of the co-veturer’s by utilising a loan with the said co-venturer which is secured against those assets. As per 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 RAJIV DHAR SATISH RANADE Chief Financial Officer Company Secretary & Chief Legal Officer MUMBAI DATED: 17 June, 2008

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88 CEPS 6\D:\Sales\Mohan\Tata Communication AR 2008\TC Consol Account-2008.pmd --- Sagam\2-7\SBC\7-7\ SCHEDULES FORMING PART OF THE CONSOLIDATED BALANCE SHEET As at As at 31 March, 2008 31 March, 2007 Rs. in crores Rs. in crores SCHEDULE - 1 SHARE CAPITAL AUTHORISED : 300,000,000 (2007:300,000,000) Equity Shares of Rs.10 each 300.00 300.00 ISSUED, SUBSCRIBED AND PAID UP 285,000,000 (2007: 285,000,000) Equity Shares of Rs.10 each, fully paid up 285.00 285.00 SCHEDULE - 2 RESERVES AND SURPLUS (a) Capital Reserve 208.15 208.91 (b) Securities Premium 834.88 834.88 (c) General Reserve 3,326.90 3,287.80 (d) Profit and Loss Account 444.81 627.08 4,814.74 4,958.67 (e) Exchange Translation Reserve (net) 52.24 8.74 4,866.98 4,967.41

Notes: 1. Depreciation on gifted assets of Rs.0.62 crores (2007: Rs. 0.63 crores) has been transferred from Capital Reserve to the profit and loss account for the year ended 31 March, 2008 2. Capital Reserve includes Rs. 205.22 crores (2007: Rs. 205.22 crores) in respect of foreign exchange gains on unutilised proceeds from Global Depository Receipts credited to Capital Reserve in a previous year 3. As at 31 March, 2008 Rs. 30.45 crores (2007: Rs. 46.86 crores) has been transferred from the profit and loss account to General Reserve SCHEDULE - 3 SECURED LOANS From Banks Term-Loan from Hongkong and Shanghai Banking Corporation Limited 45.88 52.94 (Secured by hypothecation of moveable properties both present and future) Term-Loan from Punjab National Bank (Refer note 1) 9.99 13.74 Term-Loan from Everest Bank Limited (Refer note 1) 0.51 0.83 Loans against fixed deposits of Joint Venture – 0.94 From Others 48.86 61.63 105.24 130.08 Note: 1. Secured against fixed assets of Joint Ventures 2. Loans repayable within one year Rs.10.36 crores (2007: 10.53 crores) SCHEDULE - 4 UNSECURED LOANS From Banks 3,171.23 2,358.39 From Others 70.15 22.98 3,241.38 2,381.37 Note: 1. Loans repayable within one year Rs. 438.35 crores (2007: Rs. 200.67 crores)

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89 CEPS 6\D:\Sales\Mohan\Tata Communication AR 2008\TC Consol Account-2008.pmd --- Sagam\2-7\SBC\7-7\ COMMUNICATIONS Twenty Second Annual Report 2007-2008 Tata Communications Limited 730.04 6,840.14 0.68 0.78 (Rupees in Crs) 83.24 65.14 61.17 72.82 326.44 336.42 (2007: Rs. 956.41 Rs. (2007: 2,040.62 8,296.33 terms of the approval terms (2007: Rs. 601.34 crores) 601.34 Rs. (2007: 0.60 25.26 32.57 15.07 40.52 36.40 192.01 456.78 605.59 t in accordance with the t in accordance (0.09) 1.36 (1.30) (0.87) 23.27 (2.48)(2.11) 14.45 48.62 (15.00) 127.63 136.17 112.61 and Rs. 601.34 crores 601.34 crores and Rs. Judicature at Bombay. at Judicature accumulated depreciation aggregating accumulated 0.65 (0.05) 7.57 0.14 25.74 41.60 41.86 3.34 (0.94) 137.07 543.26 (30.37) 1,515.65 4,673.03 4,494.69 Expense towards distribution rights. towards (2007: Rs. 1,557.75 crores) Rs. (2007: 1.20 0.25 4.79 12.14 127.63 64.83 (16.57) 175.89 221.46 136.17 1,251.58 783.63 (63.72) 1,971.49 6,110.10 5,941.87 was Accoun Premium Securities to debited of the shareholders and the High Court of of the shareholders and High Court (2007: Rs. 7.69 crores) Rs. (2007: in reduction block and corresponding 1,557.75 crores Rs. 956.41 crores Rs. in carrying net reduction aggregating The cost respectively. crores) 106.51 2.62 21.52 375.06 41.52 9.21 7 year. for the previous in italics are Figures 5 undertook the company an impairment charge of Nil 2008, the year ended 31 March During 6 includes reduction of gross in cost Deduction/adjustments the year ended 31 March 2004, for (0.51) 2.04 (7.51) 25.86 - (3.39) (7.21) 75.62 (0.11) 67.34 18.03 (2.47) 55.59 12.67 (127.41) 6,188.68 1,002.76 (2007: Rs. (2007: (2007: Rs. 1285.69 crores) Rs. (2007: 1.98 0.57 10.6532.57 - 0.80 (10.65) - 0.34 10.31 (10.65) - - 10.31 67.76 40.36 (1.61) 77.61 5.22 59.89 7.56 49.07 8.99 2007 Adjustments 2008 2007 Amortisation/ Adjustments 2008 2008 2007 661.83 - (13.04) 648.79 56.24 377.94 0.51 137.14 135.16 - 272.30 4.46 2.63 - 7.09 265.21 132.68 219.56 61.59 (17.35) 263.80 106.95 35.68 under lease. This includes: This under lease. 7,193.45 1,079.40 (191.26) 8,081.59 5,497.45 818.64 easible Rights of Use (IRUs) for domestic easible Rights of Use (IRUs) for for flats at Mumbai and Rs. 1.03 crores 1.03 crores Mumbai and Rs. flats at for for leasehold office space, of which Rs. 1.84 crores of which Rs. leasehold office space, for in respect of which lease agreement has not been being cost of flats in Co-operative Societies under in Co-operative being cost of flats identified as Surplus land. in respect of which conveyance is not done in respect of which conveyance ] interest capitalised of Rs. 39.62 crores of Rs. capitalised interest

(2007: Rs. 198.99 crores) Rs. (2007: (2007: Rs. 33.52 crores) Rs. (2007: (2007: Rs. 7.79 crores) Rs. (2007: (2007: Rs. 1.21 crores) Rs. (2007: (2007: Rs. 0.44 crore) Rs. (2007: (2007: Rs. 0.16 crore) Rs. (2007: (2007: Rs. 0.26 crore) Rs. (2007: for office space at New Delhi space office not been for in respect have of which agreements (2007: Rs. 11.98 crores) Rs. (2007: (2007: Rs. 1.84 crores) pertains to assets acquired on or after 31 March 2001. on or after pertains assets acquired to 1.84 crores) Rs. (2007: formation. executed/ registered executed/ 1.00 crore) executed. TOTAL 8,081.59 1,375.01 (556.52) 8,900.08 1,971.49 784.40 (111.52) 2,644.37 6,255.71 6,110.10 PROGRESS for capital expenditure [including advances (b) DISTRIBUTION RIGHTS(c) LICENCE FEES - 25.86 - - - (4.49) 21.37 - 0.60 - 0.85 - (0.11) - 1.34 20.03 - 25.26 - - (a) SOFTWARE 106.51 33.91 (8.63) 131.79 23.27 31.96 1.27 56.50 75.29 83.24 Rs. 15.22 crores Rs. (c) BUILDING 375.06 10.54 (14.02) 371.58 48.62 12.26 (5.60) 55.28 316.30 326.44 (d) PLANT AND MACHINERY 6,188.68 1,111.69 (425.70) 6,874.67 1,515.65 583.03 (73.13) 2,025.55 4,849.12 4,673.03 (b) LEASEHOLD IMPROVEMENTS 75.62 17.04 (7.77) 84.89 14.45 11.26 (1.60) 24.11 60.78 61.17 (a) LAND 272.30 - (4.77) 267.53 7.09 2.63 0.16 9.88 257.65 265.21 (d) GOODWILL 648.79 1.26 (43.42) 606.63 192.01 64.93 (13.74) 243.20 363.43 456.78 (e) FURNITURE AND FIXTURES 67.34 13.87 (0.93) 80.28 25.74 10.01 (0.57) 35.18 45.10 41.60 (g) COMPUTERS(h) VEHICLES MOTOR 263.80 2.04 177.04 0.07 (43.49) (0.29) 397.35 1.82 1.36 0.16 (0.30) 1.22 0.60 0.68 (f) OFFICE EQUIPMENT 55.59 9.59 (3.01) 62.17 15.07 2.48 (1.33) 16.22 45.95 40.52 Gross block of buildings include: Gross block (i) 7.79 crores Rs. (ii) 0.44 crore Rs. (iii) 32.75 crores Rs. (ii)(iii) Land in Srinagar in respect Leasehold of which lease deed is not available 1.21 crores Rs. (iv) 0.16 crore Rs. (i) crore Rs.0.26 1271.97 crores Rs. circuits telecommunication and international (2007: Rs. 11.25 crores) Rs. (2007: Land includes Rs. 198.99 crores 198.99 crores includes Rs. Land 3 WORK-IN- CAPITAL 2 ASSETS INTANGIBLE SL. FIXED ASSETSNO.1 FIXED ASSETS TANGIBLE GROSS BLOCKApril, 1 Additions Deductions/ March, 31 April, 1 Depreciation/ Deductions/ / AMORTISATION DEPRECIATION ACCUMULATED March, 31 March, 31 March, 31 NET BLOCK SCHEDULE - 5 2 3 assets includes Block of fixed Gross 4 and machinery includes the net block of Indef Plant NOTES: 1

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90 CEPS 6\D:\Sales\Mohan\Tata Communication AR 2008\TC Consol Account-2008.pmd --- Sagam\2-7\SBC\7-7\ SCHEDULES FORMING PART OF THE CONSOLIDATED BALANCE SHEET As at As at 31 March, 2008 31 March, 2007 Rs. in crores Rs. in crores SCHEDULE - 6 INVESTMENTS I. TRADE INVESTMENTS - LONG TERM (At Cost) A. Fully Paid Equity Shares (Unquoted) (a) Tata Teleservices Ltd. 810.17 810.17 (Refer Note B4, Schedule 20) (b) New ICO Global Communications (Holdings) Limited 0.01 0.01 (c) Wmode Inc. 2.27 2.47 812.45 812.65 B. Current Investments (Unquoted) Investments In Mutual Funds 391.93 950.95 1,204.38 1,763.60

SCHEDULE - 7 INVENTORIES Equipments for resale 0.70 1.85 Less: Provision for obsolescence (0.01) (0.01) 0.69 1.84 Consumable stores and spares (at cost) 8.60 6.32 9.29 8.16

SCHEDULE - 8 SUNDRY DEBTORS (a) Over six months (unsecured) Considered good 326.39 305.65 Considered doubtful 285.87 258.61 612.26 564.26 Less: Provision for doubtful debts (285.87) (258.61) 326.39 305.65 (b) Other debts (unsecured) Considered good 1,748.17 1,359.16 2,074.56 1,664.81

SCHEDULE - 9 CASH AND BANK BALANCES (a) Cash in hand 0.17 0.12 (b) Cheques in hand 17.91 33.74 (c) Remittances in transit 17.26 9.29 (d) Current accounts with banks 192.33 130.32 (e) Deposit accounts with banks 66.40 71.93 294.07 245.40

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SCHEDULES FORMING PART OF THE CONSOLIDATED BALANCE SHEET As at As at 31 March, 2008 31 March, 2007 Rs. in crores Rs. in crores SCHEDULE - 10 OTHER CURRENT ASSETS (a) Interest receivable 5.24 2.44 (b) Service tax / VAT recoverable 176.54 42.82 (c) Pension contributions recoverable from Government of India (net of provision of Rs. 53.71 crores; 2007: Rs. 53.71 crores) 7.44 7.44 (Refer Note B7 Schedule 20) (d) Licence fees paid recoverable from Government of India 81.96 54.16 (e) Licence Fees paid under protest 295.00 — (f) Others 45.27 36.53 611.45 143.39 SCHEDULE - 11 LOANS AND ADVANCES (a) Unsecured - Considered good (i) Staff Advances 10.37 7.42 (ii) Deposits with public bodies and others 67.71 42.09 (iii) Prepaid expenditure 285.16 202.99 (iv) Advance payment of tax (net of provision for tax) 1,207.92 934.33 (v) Other loans and advances 102.28 86.83 1,673.44 1,273.66 (b) Unsecured - Considered doubtful Other loans and advances 7.61 8.51 Less: Provision for doubtful advances (7.61) (8.51) 1,673.44 1,273.66 SCHEDULE - 12 CURRENT LIABILITIES (a) Sundry Creditors: (i) Creditors for interconnect charges 1,876.73 1,289.07 (ii) Others 1,056.17 691.06 (b) Unearned income and deferred revenues 1,395.90 1,269.64 (c) Investor Education and Protection Fund - unpaid dividend 1.12 1.28 (d) Government of India current account 20.57 20.57 (e) Provision for tax (net of advance taxes) 25.88 8.70 (f) Interest accrued but not due on loans taken from banks 11.55 10.79 (g) Other liabilities (note 1) 934.99 529.36 5,322.91 3,820.47 Note: 1. Includes Rs. 27.61 crores overdrawn book bank balance (2007: Rs. 11.29 crores) SCHEDULE - 13 PROVISIONS (a) Provisions for employee benefits 184.67 205.24 (b) Provision for proposed dividend 128.25 128.25 (c) Tax on dividend 21.80 21.80 (d) Provision for contingencies (Refer Note B17, Schedule 20) 29.41 33.49 364.13 388.78

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92 CEPS 6\D:\Sales\Mohan\Tata Communication AR 2008\TC Consol Account-2008.pmd --- Sagam\2-7\SBC\7-7\ SCHEDULES FORMING PART OF THE CONSOLIDATED PROFIT AND LOSS ACCOUNT Year ended Year ended 31 March, 2008 31 March, 2007 Rs. in crores Rs. in crores SCHEDULE - 14 OTHER INCOME (a) Dividend income from current investments 31.68 57.84 (b) Profit on sale of current investments (net) 14.91 1.60 (c) Profit on sale of fixed assets (net) 1.68 42.74 (d) Rent 14.93 12.35 (e) Exchange gain (net) 8.72 5.64 (f) Provisions no longer required written back 22.95 74.44 (g) Interest on income tax refund 16.66 6.34 (h) Other 152.02 37.30 263.55 238.25

SCHEDULE - 15 INTEREST INCOME (a) On Bank deposits ( Tax deducted at source 4.56 2.17 Rs. 1.40 crores, 2007: Rs. 0.11 crores) (b) On Other loans and advances ( Tax deducted at source 6.67 4.97 Rs. 2.22 crores, 2007: Rs. 1.10 crores) 11.23 7.14

SCHEDULE - 16 SALARIES AND RELATED COSTS (a) Salaries and bonus 808.01 794.02 (b) Contribution to provident, gratuity and other funds 23.18 28.32 (c) Staff welfare expenses 63.81 43.87 895.00 866.21

SCHEDULE - 17 NETWORK COSTS (a) Charges for use of transmission facilities 4,506.03 5,025.22 (b) Royalty and licence fee to Department of Telecommunications 110.28 115.85 (c) Rent of satellite channels 29.84 58.31 (d) Rent of landlines 112.10 33.57 (e) Administrative lease charges 5.22 9.83 4,763.47 5,242.78

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SCHEDULES FORMING PART OF THE CONSOLIDATED PROFIT AND LOSS ACCOUNT Year ended Year ended 31 March, 2008 31 March, 2007 Rs. in crores Rs. in crores SCHEDULE - 18 OPERATING AND OTHER EXPENSES (a) Consumption of stores 10.63 14.09 (b) Light and power 120.95 95.46 (c) Repairs and Maintenance: (i) Buildings 29.20 28.25 (ii) Plant and Machinery 394.28 365.73 (iii) Others 22.84 14.80 (d) Bad Debts written off 27.78 42.40 (e) Provision for doubtful debts 32.25 46.41 (f) Provision for doubtful advances - 1.13 (g) Rent 191.08 183.06 (h) Rates and taxes 32.12 13.58 (i) Travelling expenses 87.54 64.62 (j) Telephone and telex 36.93 29.69 (k) Printing, postage and stationery 14.90 16.97 (l) Legal and professional fees 420.82 147.98 (m) Advertising and publicity 41.52 55.19 (n) Commissions 35.03 38.54 (o) Insurance 16.30 25.00 (p) Donations 0.27 0.96 (q) Services rendered by third parties 101.51 153.14 (r) Prior period adjustments (net) 2.00 6.78 (s) Other expenses 141.40 104.81 1,759.35 1,448.59

SCHEDULE - 19 INTEREST EXPENSE Interest on: - Bank Loans 133.85 139.43 - Others 41.56 4.15 175.41 143.58

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94 CEPS 6\D:\Sales\Mohan\Tata Communication AR 2008\TC Consol Account-2008.pmd --- Sagam\2-7\SBC\7-7\ 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 joint ventures (“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 networth 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 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. v) 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. vi) 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 benefits, provision for income taxes, provision for cable restoration, impairment of assets, asset retirement obligation and useful lives of fixed assets.

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SIGNIFICANT ACCOUNTING POLICIES AND NOTES TO ACCOUNTS (Contd.)

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, interest costs incurred to finance construction 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) Borrowing Costs that are attributable to the acquisition or construction of the qualifying assets are capitalized as part of the cost of such asset. A qualifying asset is one which necessarily takes substantial period to get ready for 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.

f) Consideration for purchase of business in excess of the value of net assets acquired is recognised as goodwill.

g) Internally developed computer software, distribution rights 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 other 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 estimated useful lives, at the following rates: a) Leasehold land Lease period b) Leasehold improvements Lease period c) Buildings 1.64% to 4.00% 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 25.00% f) Office equipment 4.75% to 25.00% g) Computers 15.83% to 33.33% h) Motor vehicles 9.50% to 20.00% i) Goodwill on purchase of business 60/120 months j ) Intangibles (i) Internally developed computer software 20.00% to 33.33% (ii) Distribution rights 25.00% (iii) License fees 4.00%

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6. Leases

Lease arrangements where the risk and rewards incident to ownership of an asset substantially vests with the lessor are classified as operating lease.

Rental income and rental expense 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 expense 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 for diminution in value. Provision for diminution in the value is made to recognise a decline, which is other than temporary. 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 benefit expected to be paid in exchange for services rendered

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SIGNIFICANT ACCOUNTING POLICIES AND NOTES TO ACCOUNTS (Contd.)

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.

(ii) Post-employment benefit plans Contributions to defined contribution retirement benefit schemes are recognized as an expense 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. 12. Revenue recognition

a) Revenues from Telephony services are recognised at the end of each month based upon minutes of incoming traffic completed in such month. b) Revenues from Data services are recognised over the period of arrangement based on contracted fee schedules. c) Revenues from right to use of fibre capacity provided based on IRU are recognised over the period of such arrangements. d) Revenues from Internet services are recognised 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 collectibility exists. f) Transactions relating to exchange or swapping of capacities, which results in insignificant or no consideration represent the exchange of productive assets not held for sale in the ordinary course of business and as such do not result in the culmination of the earnings process and hence the Company does not recognize any revenue for these types of transactions. g) 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 recognised on timing differences being the difference between taxable incomes 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 recognised only to the

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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 recognised 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. 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 and upfront premium payable on option contracts is amortised over the life of such contracts and is recognised 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 recognised in the Profit and Loss Account. Profit or loss arising on cancellation or enforcement/exercise of a forward exchange and option contracts is recognised in the Profit and Loss Account in the period of such cancellation or enforcement/exercise option contracts outstanding as at the balance sheet date are marked-to-market with the values as reported by banks and any gains or losses are recognised 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 foreign exchange forward and 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 recognised 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 recognised in the Profit and Loss Account immediately. B. NOTES TO ACCOUNTS

1. Particulars of subsidiaries and joint ventures is as follows: Country of Incorporation Percentage of voting power As at 31 As at 31 March, 2008 March, 2007 Subsidiaries (held directly) VSNL Broadband Ltd. India 100.00 100.00 VSNL Internet Services Limited (formerly known as DIL Internet Ltd.) India 100.00 100.00 Tata Communications Transformation Services Limited (formerly known as VSNL Global Services Limited) India 100.00 100.00

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Country of Incorporation Percentage of voting power As at 31 As at 31 March, 2008 March, 2007 Tata Communications Lanka Limited (formerly known as VSNL Lanka Ltd.) Sri Lanka 90.00 100.00 Tata Communications Services (America) Inc. (formerly known as VSNL America Inc.) United States of America 100.00 100.00 Tata Communications International Pte Ltd (formerly known as VSNL International Pte. Ltd.) Singapore 100.00 100.00 VSNL SNOSPV Pte. Ltd. Singapore 100.00 100.00 Subsidiaries (held indirectly) VSNL Telecommunications (Bermuda) Limited (in liquidation) Bermuda 100.00 100.00 VSNL UK Limited (in liquidation) United Kingdom 100.00 100.00 Tata Communications (Bermuda) Limited (formerly known as VSNL International Bermuda Limited) Bermuda 100.00 100.00 Tata Communications (Netherlands) BV (formerly known as VSNL Netherlands BV) Netherlands 100.00 100.00 Tata Communications (Hong Kong) Limited (formerly known as VSNL Hong Kong Limited). Hong Kong 100.00 100.00 ITXC Global Hong Kong Limited (in liquidation) Hong Kong 100.00 100.00 Teleglobe Global Japan YK Japan 100.00 100.00 ITXC IP Holdings S.A.R.L. Luxembourg 100.00 100.00 Tata Communications (America) Inc. (formerly known as Teleglobe America Inc.) United States of America 100.00 100.00 Teleglobe Asia Data Transport Pte. Ltd. Singapore 100.00 100.00 Teleglobe Asia Pte. Ltd. Singapore 100.00 100.00 Teleglobe Bermuda Limited (in liquidation) Bermuda 100.00 100.00 Tata Communications (Canada) ULC (formerly known as Teleglobe Canada ULC) Canada 100.00 100.00 Teleglobe France International S.A.S (Liquidated) France - 100.00 Teleglobe International Belgium S.P.R.L Belgium 100.00 100.00 VSNL International (Hong Kong) Limited (in liquidation) Hong Kong 100.00 100.00 Teleglobe International Limited (in liquidation) United Kingdom 100.00 100.00 Teleglobe International Luxembourg S.A.R.L (in liquidation) Luxembourg 100.00 100.00 Tata Communications (Italy) SRL (formerly known as VSNL International (Italy) SRL.) Italy 100.00 100.00 Teleglobe Netherlands B.V Netherlands 100.00 100.00 Teleglobe Spain Communications S.L(Liquidated) Spain - 100.00 TLGB International Germany GMBH. Germany 100.00 100.00 TLGB Luxembourg Holdings S.A.R.L. (in liquidation) Luxembourg 100.00 100.00

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Country of Incorporation Percentage of voting power As at 31 As at 31 March, 2008 March, 2007 TLGB Netherlands Holdings B.V Netherlands 100.00 100.00 VSNL (Portugal) Unipessoal Lda Portugal 100.00 100.00

VSNL Belgium BVBA Belgium 100.00 100.00

VSNL France SAS France 100.00 100.00

Tata Communications (Nordic) AS (formerly known as VSNL International (Nordic) AS.) Norway 100.00 100.00

VSNL International (Global) Corp. United States of America 100.00 100.00

VSNL International (Guam) LLC Guam 100.00 100.00

VSNL International (Portugal) Instalacao E Manutencao de Redes Lda Portugal 100.00 100.00

Tata Communications (US) Inc. (formerly known as VSNL International (US) Inc.) United States of America 100.00 100.00

Tata Communications (Australia) Pty Ltd. (formerly known as VSNL International (Australia) Pty Ltd.) Australia 100.00 100.00

Tata Communications Services (Bermuda) Limited (formerly known as VSNL International (GBRM) Ltd.) Bermuda 100.00 100.00

VSNL International (IPCO) LLC United States of America 100.00 100.00

VSNL International (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. (formerly known as VSNL International Japan K.K.) Japan 100.00 100.00

Videsh Sanchar Nigam Spain Srl Spain 100.00 100.00

Tata Communications (UK) Limited (formerly known as VSNL Telecommunications (UK) Limited) United Kingdom 100.00 100.00

Tata Communications Deutschland GMBH (formerly known as VSNL Germany GMBH) Germany 100.00 100.00

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Country of Incorporation Percentage of voting power As at 31 As at 31 March, 2008 March, 2007 ITXC (UK) Ltd. (liquidated) United Kingdom - 100.00

ITXC Global UK Ltd.(Liquidated) United Kingdom - 100.00

Enhanced Services Inc. (Liquidated) United States of America - 100.00

VSNL International (Sweden) AB Sweden 100.00 -

Joint Ventures

United Telecom Ltd. Nepal 26.66 26.66

SEPCO Communications Pty. Ltd. and it’s subsidiary Neotel (Pty) Ltd. South Africa 43.16 43.16

2. The Company was incorporated on 19 March, 1986. The Government of India vide its letter No. G 25015/6/86 OC dated 27.3.1986, transferred all the assets and liabilities of the 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 1 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 those names.

3. The Board of Directors of the Company recommended a dividend of Rs. 4.50 (2007: Rs. 4.50) per share to its shareholders for the year ended 31 March, 2008 based on the financial results of the Company.

4. The Company has an investment of Rs. 810.17 crores in Tata Teleservices Ltd.(“TTSL”) representing an equity interest of 15.01 percent (2007: 15.61 percent) in the issued and paid-up capital of TTSL. TTSL has accumulated losses, which have significantly eroded its net worth. In the opinion of the management, having regard to the long gestation period inevitable to the nature of its business, there is no permanent diminution in value of the investment.

5. During the year, Management reviewed the amortisation of goodwill arising on amalgamation of an international entity amalgamated in a previous year and revised the amortisation from 60 months to 120 months. As a result of such change, the amortisation charge for the year is lower and the profit for the year and goodwill balance is higher by Rs. 56.09 crores.

6. During the year, there has been a refinement in the method of determining provision for doubtful debts for outstanding customer balances in the Enterprise and Carrier Data Business. Had the earlier method been followed for determinig such provision, the charge for provision for doubtful debts would have been higher by Rs. 68.76 crores and consequently the profit for the year and Sundry Debtors balances would have been lower by Rs. 68.76 crores.

7. As at 31 March, 2007 proportionate share of pension obligation and payments to erstwhile OCS employees of Rs. 61.15 crores 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, thereby having a net amount due from the Government towards its share of pension obligation of Rs. 7.44 crores.

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8. On 20 October, 2006, the Group committed to a plan to sell a portion of it’s fiber optic network, all related assets, liabilities and contracts to a buyer. As at 31 March, 2007, management had plans to sell these assets and liabilities within twelve month period from the commitment date following a due diligence period. Subsequently there has been change in the business plans and the management decided to utilize these assets in its business of selling capacities.

9. Employee Benefits:

(A) Domestic

During the previous year ended 31 March, 2007, consequent to the early adoption of Accounting Standard 15 “Employee Benefits” (AS - 15), an amount of Rs. 23.28 crores (net of tax of Rs. 11.82 crores) have been adjusted against General Reserve as on 1 April, 2006 as per transitional provisions of the Standard.

During the current year, in view of the Guidance on implementing AS – 15, the Company has considered certain entitlements to earned leave as a long term employee benefit. This has resulted in a reduction in the net liability in respect of employee benefits as on at 1 April, 2007, of Rs. 5.80 crores (net of tax of Rs. 2.99 crores). This amount has been adjusted to the opening balance of General Reserve as on 1 April, 2007.

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.

On account of provident fund a sum of Rs. 11.47 crores (2007: Rs. 9.12 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.

- 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 settled/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 3.49 crores to meet the additional pension obligation on account of increase in Dearness Allowances.

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The details in respect of funded status and the amounts recognised in the Company’s financial statement as at 31 March, 2008 for these defined benefit schemes are as under:

(i) Changes in the defined benefit obligation:

Defined Benefit Plans Gratuity Medical Benefits Particulars (Funded) (Unfunded) As at 31 As at 31 March, 2008 March, 2008 Rs. in crores Rs. in crores Projected defined benefit obligation, beginning of the year (1 April, 2007) 29.76 28.48

Current service cost 2.63 4.23

Interest cost 2.03 2.28

Liability transferred to other companies (1.36) -

Others 0.33 -

Actuarial (gain) / loss (3.30) 0.67

Benefits paid (1.35) (4.12)

Projected benefit obligation at the end of the year 28.74 31.54

(ii) Changes in the fair value of plan assets for gratuity:

Particulars As at 31 March, 2008 (Funded) Rs. in crores

Fair value of plan assets, beginning of the year (1 April, 2007) 30.17

Expected return on plan assets 2.34

Employer’s contribution -

Transfer to other company (1.36)

Actuarial (loss)/ gain 1.02

Benefits paid (1.35)

Fair value of plan assets at the end of the year 30.82

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(iii) The amounts recognised in the Profit and Loss Account for the year ended 31 March, 2008:

Defined Benefit Plans Gratuity Medical Benefits Particulars (Funded) (Unfunded) As at 31 As at 31 March, 2008 March, 2008 Rs. in crores Rs. in crores Current service cost 2.63 4.23 Interest cost 2.03 2.28 Expected return on plan assets (2.34) - Net actuarial loss/(gain) recognised in the year (4.32) 0.67

(2.00) 7.18

(iv) The amounts recognized in the Balance sheet is as follows

Defined Benefit Plans Gratuity Medical Benefits Particulars (Funded) (Unfunded) As at 31 As at 31 March, 2008 March, 2008 Rs. in crores Rs. in crores Present value of funded obligations 28.74 - Fair value of plan assets (30.82) - Present value of unfunded obligations - 31.54 Net (asset)/liability in balance sheet (2.08) 31.54

(v) Categories of plan assets as a percentage of total plan assets: Category of assets As at 31 March, 2008 Government of India Bonds 8.33% Corporate Bonds 6.57% Special Deposit Scheme 5.37% State Government Bonds 8.27% Insurer Managed Fund 65.11% Others 6.35% Total 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.

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(vi) Principal actuarial assumptions used in accounting for gratuity and medical benefit obligations: Gratuity Medical Benefits (Funded) (Unfunded) Assumptions As at 31 As at 31 March, 2008 March, 2008 Discount rate 8.00% 8.00% Expected return on plan assets 8.00% - Increase in compensation cost 5.00% - 7.00% 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.

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, 2008 1 Percentage point Particulars Increase Decrease Rs. in crores Rs. in crores Effect on service cost 3.88 4.28 Effect on interest cost 2.38 1.96 Effect on post-employment benefit obligation 28.78 31.93 As the present value of the plan assets is in excess of the present value of funded obligations, the Company does not expect to contribute to its funded defined benefit plans in 2008-09. (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 U.K and 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. 8.06 crores (2007: Rs. 8.14 crores) is charged to Profit and Loss Acount for the year ended 31 March, 2008. (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.

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The details in respect of funded status and the amounts recognised in the Company’s financial statement as at 31 March, 2008 for these defined benefit schemes are as under: (i) Changes in the defined benefit obligation:

Pension Plans Health care and Life insurance Plans Non- Particulars Contributory contributory SERP As at As at As at As at 31 March, 31 March, 31 March, 31 March, 2008 2008 2008 2008 Rs. in crores Rs. in crores Rs. in crores Rs. in crores Projected defined benefit obligation, beginning of the year (1 April, 2007) 355.76 327.56 8.67 8.98 Current service cost 2.91 10.02 0.35 0.14 Interest cost 18.98 17.20 0.49 0.48 Benefits paid (17.49) (41.32) - (0.73) Actuarial (gain) /loss (22.29) (28.23) 1.32 (0.79) Effect of foreign exchange rate changes 13.43 12.23 0.34 0.33

Projected benefit obligation at the end of the year 351.30 297.46 11.17 8.41

(ii) Changes in the fair value of plan assets for pension plans Pension Plans Non- Particulars Contributory contributory As at 31 As at 31 March, 2008 March, 2008 Rs. in crores Rs. in crores Fair value of plan assets, beginning of the year (1 April, 2007) 446.84 321.64 Actual return on plan assets 26.03 18.46 Contributions - - Benefits paid (17.49) (41.32) Actuarial loss (11.45) (8.28) Effect of foreign exchange rate changes 16.97 31.27 Fair value of plan assets, end of the year 460.90 321.77

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(iii) The components of pension expense recognised in the Profit and Loss Account for the year ended 31 March, 2008:

Particulars Year ended 31 March, 2008 Rs. in crores

Current service cost 13.42 Interest cost 37.15 Actual return on plan assets (44.49) Net actuarial loss/(gain) recognized (30.26) Effect of foreign exchange rate changes(Net) (8.61) (32.79)

(iv) The amounts recognized in the Balance sheet is as follows:

Pension Plans Health care and Life insurance Plans Non- Particulars 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) (321.77) - - Present value of unfunded obligations - - 11.17 8.41

Net (asset)/liability in balance sheet (109.60) (24.31) 11.17 8.41

(v) Categories of plan assets as a percentage of total plan assets:

Category of assets As at 31 March, 2008

Government Bonds 76%

Equity securities 19%

Short term investments 5%

Total 100%

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.

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(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 March, 2008

Discount rate used for benefit costs 5.25%

Discount rate used for benefit obligations 5.75%

Expected long-term return on plan assets 5.75%

Inflation 2.50%

Rate of compensation increase 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, 2008 is 9.38%. A one-percentage-point change in assumed health care cost trend rates would have the following effects:

31 March, 2008 1 Percentage point Particulars Increase Decrease Rs. in crores Rs. in crores Effect on service cost 0.03 0.02 Effect on interest cost 0.04 0.04 Effect on post-employment benefit obligation 0.65 0.58

The Group expects to contribute Rs. 15.16 crores to its defined benefit plans in 2008-2009.

10. Cash and cash equivalents represent:-

As at As at Particulars 31 March, 2008 31 March, 2007 Rs. in crores Rs. in crores Cash and cheques on hand and balances held with banks 210.41 164.18 Remittances in transit 17.26 9.29

Deposit accounts held with banks 66.40 71.93

294.07 245.40

Less: Deposits with original maturity over three months (0.95) (3.77) Current Account / Deposits held for unpaid dividends (1.10) (1.27) Deposit accounts held as margin money (3.62) (19.80) Cash and cash equivalents 288.40 220.56

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11. Deferred tax : As at As at 31 March, 2008 31 March, 2007 Rs. in crores Rs. in crores (A) Deferred tax liability/(assets) (Net) Difference between accounting and tax depreciation 282.86 370.89 Others 5.74 1.16 Provision for doubtful debts (65.22) (57.60) Expenditure on VRS and VSS (4.87) (13.36) Expenditure incurred on NLD license fees (23.26) (24.80) Unearned income / deferred revenues (75.93) (120.36) Provisions for post employment benefit and Leave encashment pursuant to the transitional provisions of AS-15 (9.07) (11.82) Others (10.43) (62.99)

Net Deferred Tax Liability 99.82 81.12 (B) Deferred tax assets/(liability) (Net) Difference between accounting and tax depreciation - 3.39 Others - 0.88 Net Deferred Tax Asset - 4.27

12. Earnings Per Share Rs. in crores, except Number of Shares Particulars and Earnings per share data Year ended Year ended 31 March, 2008 31 March, 2007

Profit before taxes and exceptional items 160.12 372.44 Income tax expense on profit excluding exceptional items 180.70 290.15 Profit after tax excluding exceptional items (20.58) 82.29 Exceptional (expense)/ income (net) (11.20) (91.36) Income tax benefit/(expense) on exceptional items 3.81 10.74 Minority Interest 38.27 13.73

Net Profit after tax and exceptional items 10.30 15.40

Number of Shares 285,000,000 285,000,000 Earnings per share excluding exceptional items Rs. 0.62 Rs. 3.37 Earnings per share including exceptional items Rs. 0.36 Rs. 0.54

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13. Segment Reporting - Business Segments The reportable segments for the year ended 31 March, 2008 and 31 March, 2007 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 Centre and other services. Year ended 31 March, 2008 Rs. in crores Wholesale Enterprise and Others Total Voice Carrier Data Revenues from Telecommunications Services 5,060.78 1,883.77 1,318.43 8,262.98 Segment Results 2,503.50 421.08 585.77 3,510.35 Unallocable expenses (net) 3,350.23 Profit before taxes and exceptional items 160.12 Exceptional Item 11.20 Profit before taxes 148.92 Tax expense 176.89 Loss after taxes (27.97) Minority interest – Share of Loss (net) 38.27 Net Profit 10.30 Year ended 31 March, 2007 Rs. in crores Wholesale Enterprise and Others Total Voice Carrier Data Revenues from Telecommunications Services 5,648.99 1,969.58 992.64 8,611.21 Segment Results 880.65 1,708.09 792.21 3,380.95 Unallocable expenses (net) 3,008.51 Profit before taxes and exceptional items 372.44 Exceptional Items 91.36 Profit before taxes 281.08 Tax expense 279.41 Profit after taxes 1.67 Minority interest – Share of Loss 13.73 Net Profit 15.40 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 fee 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”.

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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. - Geographical Segment: Segment revenues by Geographical Market

Year ended Year ended 31 March, 2008 31 March, 2007 Rs. in crores Rs. in crores India 3,528.04 2,388.57 United States of America 1,781.72 1,871.59 United Kingdom 528.19 734.69 Canada 434.89 430.68 Singapore 305.32 162.62 Saudi Arabia 268.30 240.67 United Arab Emirates 168.97 239.88 Hong Kong 100.20 167.60 Netherlands 97.14 229.81 Others 1,050.21 2,145.10 8,262.98 8,611.21

14. Related Party Disclosures (a) List of related parties and relationship: I. Investing party • Panatone Finvest 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. • Neotel(Pty)Ltd. – subsidiary of SEPCO IV. Company owned by Managing Director of subsidiary and Director of Tata Communications Limited • Panther Technology Partners Pvt. Ltd.

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(b) Related party transactions Investing Key Company Joint Total Company Managerial owned by Venture Personnel Managing (Refer Director Note 2) of subsidiary Transactions Dividend Paid Panatone Finvest Limited 52.19 - - - 52.19 52.08 - - - 52.08 Total 52.19 - - - 52.19 52.08 - - - 52.08 Revenues from Telecommunication services United Telecom Limited - - - 4.68 4.68 - - - 2.99 2.99 Neotel(Pty) Ltd ---28.15 28.15 - - - 4.68 4.68 Total - - - 32.83 32.83 - - - 7.67 7.67 Network Cost United Telecom Limited - - - 20.96 20.96 - - - 12.33 12.33 Neotel(Pty) Ltd ---3.15 3.15 - - - 2.12 2.12 Total - - - 24.11 24.11 - - - 14.45 14.45 Services rendered Neotel (Pty) Ltd. ------0.88 0.88 Total ------0.88 0.88 Interest Income SEPCO Communications Pty. Ltd. - - - 2.19 2.19 ---0.14 0.14 Total - - - 2.19 2.19 - - - 0.14 0.14 Loan given SEPCO Communications Pty. Ltd. - - - 3.17 3.17 - - - 7.72 7.72 Total - - - 3.17 3.17 - - - 7.72 7.72 Advances given by the Company Neotel (Pty) Ltd - - - 0.14 0.14 - - - 1.72 1.72 Total - - - 0.14 0.14 - - - 1.72 1.72 Advances repaid by the Company Neotel (Pty) Ltd - - - 2.39 2.39 ----- Total - - - 2.39 2.39 ----- Managerial Remuneration - 7.73 --7.73 - 2.59 - - 2.59 Total - 7.73 --7.73 -2.59- -2.59

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Commission ------3.51 - 3.51 Total ------3.51 - 3.51 Balances Receivables United Telecom Limited - - - 0.31 0.31 - - - 0.36 0.36 Neotel (Pty) Ltd. ---19.16 19.16 - - - 3.60 3.60 SEPCO Communications Pty Ltd - - - 2.09 2.09 - - - 0.14 0.14 Total - - - 21.56 21.56 - - - 4.10 4.10 Bad Debts written back United Telecom Limited ------1.03 1.03 Total ------1.03 1.03 Payables Managerial Remuneration - 4.23 - - 4.23 - 0.50 - - 0.50 Commission ------2.72 - 2.72 Neotel(Pty)Ltd - - - 3.02 3.02 ----- United Telecom Limited - - - 5.25 5.25 - - - 3.41 3.41 Total - 4.23 - 8.27 12.50 - 0.50 2.72 3.41 6.63 Loans Given SEPCO Communications Pty Ltd - - - 20.90 20.90 - - - 8.43 8.43 Total - - - 20.90 20.90 - - - 8.43 8.43 Advance Receivable Neotel(Pty)Ltd - - - 0.75 0.75 - - - 3.87 3.87 Total - - - 0.75 0.75 - - - 3.87 3.87 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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15. Operating lease arrangements: (a) As lessee: Year ended Year ended Particulars 31 March, 2008 31 March, 2007 Rs. in crores Rs. in crores Minimum lease payments under operating leases recognized as expense in the year 252.19 292.98 At the balance sheet date, minimum lease payments under non- cancellable operating leases fall due as follows: Year ended Year ended 31 March, 2008 31 March, 2007 Rs. in crores Rs. in crores Due not later than one year 210.20 221.93 Due later than one year but not later than five years 539.23 600.20 Later than five years 461.99 538.86 1,211.42 1,360.99

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. 25.35 crores (2007: Rs 35.86 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. 7.65 crores (2007: Rs. 8.60 crores) was recognised in the current year as minimum sublease rental against the same. (b) As lessor: (i) The Company has leased under operating lease arrangements certain IRU’s with gross carrying amount and accumulated depreciation of Rs. 84.05 crores (2007: Rs. 84.05 crores) and Rs. 16.75 crores (2007: Rs. 11.26 crores) respectively as at 31 March, 2008. Depreciation expense of Rs. 5.49 crores (2007: Rs. 5.49 crores) in respect of these assets has been recognised in the Profit and Loss Account for the year ended 31 March, 2008. In case of certain lease arrangements aggregating to Rs. 198.97 crores for the year ended 31 March, 2008, 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, 2008 amounts Rs. 15.33 crores. In respect of the above, rental income of Rs. 22.11 crores (2007: Rs. 10.97 crores) has been recognised in the Profit and Loss Account for the year ended 31 March, 2008. Future lease rental receipts will be recognised in the Profit and Loss Account of subsequent years as follows: Year ended Year ended 31 March, 2008 31 March, 2007 Rs. In crores Rs. In crores Not later than one year 24.82 6.90 Later than one year but not later than five years 99.28 27.61 Later than five years 144.71 56.07 268.81 90.58

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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 recognised in the Profit and Loss Account of subsequent years as follows: Year ended Year ended 31 March, 2008 31 March, 2007 Rs. in crores Rs. In crores Not later than one year 0.71 1.21 Later than one year but not later than five years 0.49 0.01 Later than five years 0.39 0.03 1.59 1.25

Lease rental income of Rs. 1.80 crores (2007: Rs. 4.09 crores) in respect of the above leases have been recognised in the Profit and Loss Account for the year ended 31 March, 2008. 16. Finance lease arrangements: (a) As Lessee As at 31 March,2008, assets under finance leases with gross carrying amount and accumulated depreciation of Rs. 33.35 crores (2007: Rs. 33.43 crores) and Rs.15.61 crores (2007: Rs.9.26 crores) respectively, are included in the total fixed assets. The net carrying amount of each class of asset under finance leases is as follows: Particulars Gross carrying Accumulated Net carrying amount Depreciation amount As at 31 March, As at 31 March, As at 31 March, 2008 2007 2008 2007 2008 2007 Rs.in crores Rs.in crores Rs.in crores Building 1.84 1.84 0.13 0.10 1.71 1.74 Plant and Machinery 22.93 22.26 11.31 6.62 11.62 15.64 Furniture and Fixtures 3.78 4.12 0.81 0.47 2.97 3.65 Computers 4.80 5.21 3.36 2.07 1.44 3.14 33.35 33.43 15.61 9.26 17.74 24.17

Minimum lease payments and the corresponding present value are as follows: Minimum lease Present Value of Difference representing payments (“MLP”) MLP Interest Year ended 31 March, Year ended 31 March, Year ended 31 March, 2008 2007 2008 2007 2008 2007 Rs. in crores Rs. in crores Rs. in crores Not later than one year 5.48 10.09 5.25 9.25 0.23 0.84 Later than one year but not later than five years 0.23 6.21 0.23 5.97 - 0.24 Later than five years ------5.71 16.30 5.48 15.22 0.23 1.08

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17. Provision for Contingencies: Asset Others Total Particulars Retirement Obligation (“ARO”) Rs. in crores Rs. in crores Rs. in crores Balance as at 1 April, 2007 20.91 12.58 33.49 Provision made during the year - - - Provisions no longer required, written back (0.50) (3.58) (4.08) Balance as at 31 March, 2008 20.41 9.00 29.41

Notes: 1) 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. 18. Contingent Liabilities and Capital Commitments Contingent Liabilities: As at As at 31 March, 2008 31 March, 2007 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 94.15 198.47

(b) Income tax disputes where the Company has a favourable decision in other assessment year for the same issue 2.43 6.52

(c ) Income tax disputes other than the above 1,405.85 1,655.30

ii. Claims for other taxes 2.20 6.15

iii. Other claims 778.27 540.99

Notes:

(1) Significant claims by the revenue authorities in respect of income tax matters are in respect of:

(a) 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.

(b) Reimbursement by the Department of Telecommunications (DoT) of income tax paid by the Company on the DoT levy during 1994-95, that was taxed by the revenue authorities. The Commissioner of Income Tax (Appeals) has upheld the disallowance. The Company is in appeal with the Income Tax Appellate Tribunal.

(c) The Company has taken necessary expert opinion and no further provisions are required.

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(2) A claim of Rs. 6,003 crores (US $ 1,500 million) was made in the US Federal District Court for the Southern District of New York against the Company by a former strategic business alliance associated during the course of one of the acquisitions effected by the Company. This claim was settled out of court and the same has been borne by certain entites in the Group deemed beneficiaries in the settlement.

(3) In May 2006, an Arbitration Tribunal of the International Chamber of Commerce (ICC) issued a ruling on certain issues in a matter initiated by FLAG Telecom Group Limited (FLAG) in December 2004. The matter concerned the interpretation of certain provisions of the Construction and Maintenance Agreement (C&MA) governing the FLAG Europe Asia (FEA) cable system to which FLAG and the Company, and various other parties, are signatories. The Arbitration Tribunal by a majority decision ordered the Company to grant FLAG access to the Mumbai cable landing station of the FEA cable system for the purposes of installation, inspection, testing, training and other functions so as to equip capacity of the FEA cable system to any level. This award of the tribunal is complied with. In September 2006, the Company filed a Writ in the Netherlands court to seek to set aside the award of the ICC Arbitration Tribunal which writ was not granted. The Company has since filed appeal in the higher court in the Netherlands. During February 2007, the Company was in receipt of a communication from FLAG to the Arbitration Tribunal of the ICC seeking monetary relief of about Rs. 1,624.81 crores (US $ 406 million) plus interest in the Arbitration in relation to the aforesaid dispute which was subsequently revised to Rs. 1,540.77 crores (US$ 385 million). The Tribunal held a hearing on the question of damages in The Hague during October/November 2007. The Company rebutted FLAG’s claim as a matter of principle and in detail. The Tribunal is currently preparing its Award on damages which is expected during FY 2008-09. (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.

(5) 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 the Company and / or its subsidiaries 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 consolidated financial position, the FCPA investigation noted above is 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 consolidated financial position and results of operations for the period in which the effect becomes reasonably estimable.

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Capital commitments Estimated amount of contracts remaining to be executed on capital account and not provided for Rs. 3,023.95 crores (2007: Rs. 917.13 crores). Subsequent to the year end the Company has subscribed to the Capital clause of Memorandum of Association of a new Company M/s Banking ATM Infrasolutions Limited which is intended to be 100% owned subsidiary of Tata Communications Limited. 19. 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 for the year ended 31 March, 2008 and 31 March, 2007 are as follows: As at As at 31 March, 2008 31 March, 2007 LIABILITIES: Rs. in crores Rs. in crores 1 Reserves and Surplus (23.54) (20.11) 2 Secured Loan 10.50 14.57 3 Unsecured Loan 8.81 4.00 ASSETS

4 Fixed Assets (a) Gross Block 29.14 29.32 (b) Less: Accumulated Depreciation 12.24 9.87 (c) Net Block 16.90 19.45 (d) Capital work-in-progress 4.39 0.59 21.29 20.04 5 A. Current Assets (a) Inventories 2.20 1.80 (b) Sundry Debtors 4.94 5.39 (c) Cash and Bank Balances 3.32 6.35 (d) Other Current Assets 0.18 5.48 10.64 19.02 B. Loans And Advances 4.46 1.70 15.10 20.72 6 Less: Current Liabilities 7.50 11.30 7 Net Current assets 7.60 9.42

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Year ended Year ended 31 March, 2008 31 March, 2007 INCOME Rs. in crores Rs. in crores 1 Traffic Revenue 5.89 4.21 2 Other Income 0.09 0.04 3 Interest Income 0.15 0.07 Total Income 6.13 4.32 EXPENDITURE 4 Salaries and Related Costs 0.51 0.36 5 Network Costs 1.42 2.94 6 Operating and Other Expenses 5.48 7.62 7 Interest Expense 1.62 2.46 8 Depreciation 2.92 (5.31) Total Expenditure 11.95 8.07

CONTINGENT LIABILITIES Rs. in crores Rs. in crores (i) Claims for other Taxes - - (ii) Other Claims - - - -

20. As at 31 March, 2008, the Company through it’s wholly owned subsidiary, VSNL SNOSPV Pte. Ltd., has 43.16 percent (2007: 43.16 percent) ownership in the issued and paid-up share capital of SEPCO Communications (Pty) Ltd. 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, 2008 and 31 March,2007 are as follows: As at As at 31 March, 2008 31 March, 2007 LIABILITIES Rs. in crores Rs. in crores 1 Reserves and Surplus (57.93) (9.71) 2 Secured Loan 48.86 61.63 3 Unsecured Loan 238.03 23.02

ASSETS 4 Fixed Assets (a) Gross Block 177.01 95.13 (b) Less: Accumulated Depreciation 19.07 1.75 (c) Net Block 157.94 93.38 (d) Capital work-in-progress 74.13 6.98 232.07 100.36

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Year ended Year ended 31 March, 2008 31 March, 2007 INCOME Rs. in crores Rs. in crores 1 Traffic Revenue 43.82 4.65 2 Other Income 8.01 - 3 Interest Income 2.71 0.92 Total Income 54.54 5.57 EXPENDITURE 4 Salaries and Related Costs 30.25 9.62 5 Network Cost 38.37 2.97 6 Operating and Other Expenses 52.06 9.71 7 Interest Expenses 9.13 3.43 8 Depreciation 20.55 1.89 Total Expenditure 150.36 27.62

CONTINGENT LIABILITIES Rs. in crores Rs. in crores (i) Claims for other Taxes - - (ii) Other Claims - - - -

21. Previous year’s figures have been regrouped and reclassified wherever necessary.

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BOARD OF DIRECTORS Mr. Subodh Bhargava

Born in Agra in 1942, Mr. Subodh Bhargava holds a Degree of Management, Indore and the Entrepreneurship in Mechanical Engineering from the University of Roorkee. Development Institute of India, Ahmedabad. He started his career with Balmer Lawrie & Co., Kolkata before joining the Eicher group of companies in Delhi in He was also a Member of the senior panel of the All India Council for Technical Education (AICTE) set up for a 1975. On March 31, 2000, he retired as the Group Chairman comprehensive evaluation of research in engineering and and Chief Executive and is now the Chairman Emeritus, technology; and on the committee set up by the Ministry Eicher group. of Human Resource Department, Government of India for He is the past President of the Confederation of Indian policy perspectives for management education in India. Industry (CII) and the Association of Indian Automobile He is currently on the Board of several Corporates including Manufacturers; and the Vice President of the Tractor the Centre for Policy Research; Member, Technology Manufacturers Association. Over several years, he was Development Board, Ministry of Science & Technology, therefore a key spokesperson for Indian industry, Govt. of India; Director, Tata Steel Limited; Director, Power contributing to and influencing government policy while Finance Corporation; Director, Larsen & Toubro; Trustee, simultaneously working with industry to evolve new Bhartiya Yuva Shakti Trust; Executive Trustee, National responses to the changing environment. Centre for Promoting Employment for Disabled Persons; He was a member of the Insurance Tariff Advisory Chairman Trustee, Charity Aid Foundation. He is also on Committee, the Economic Development Board of the the Board of Governors of other Institutions for Graduate government of Rajasthan. He was also the chairman of the Engineering and Bachelors and Master’s Degree National Accreditation Board for Certifying Bodies (NABCB) programmes in Business Management. under the aegis of the Quality Council of India (QCI). He has been conferred with the first IIT Roorkee Mr. Bhargava has been closely associated with technical Distinguished Alumnus Award in 2005 by Indian Institute and management education in India. He was the Chairman of Technology, Roorkee. Mr Bhargava is the Chairman of of the Board of Apprenticeship Training and Member of Tata Communications Limited and also Wartsila India the Board of Governors of the University of Roorkee; The Limited and Director on the boards of several Indian Indian Institute of Foreign Trade, New Delhi; Indian Institute Corporates.

Mr. N. Srinath

Mr. N. Srinath was born in 1962. He received a degree in He was part of the team that set up Tata Information Mechanical Engineering from IIT (Chennai) and completed Systems (later Tata IBM). In June 1992 he moved into that his Management Degree from IIM (Kolkata), specialising in company full-time for the next six years, during which marketing and systems. period he handled a number of assignments in sales & marketing. Joining the Tata Administrative Services in 1986 as a probationer, Mr. Srinath has held positions in Project In March 1998, he returned to Tata Industries as general Management, Sales & Marketing, and Corporate functions manager (projects) and worked with Tata Teleservices in in different Tata companies over the last 22 years. He has this capacity for a year. In April 1999, he moved to been responsible for setting up new projects in high Hyderabad as chief operating officer responsible for the technology areas like process automation and control, operations of Tata Teleservices. In late 2000 he took over information technology and telecommunications. After his as chief executive officer of Tata Internet Services, a position probation, he was a project executive in Tata Honeywell he held till February 2002, when he moved to Tata from 1987 to 1988, working on getting various approvals Communications Limited as Director (Operations). In and the necessary project funding. He then moved to Tata February 2007 he has been appointed as Managing Industries as executive assistant to the chairman, an Director of Tata Communications Limited & CEO of Tata assignment he handled till mid – 1992. Communications Group of companies.

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122 Ceps-6\D:\Sales\Mohan\Tata Communication\VSNL Board of Directors-2008.pmd — pradip5-7 Mr. Kishor A. Chaukar Mr. Kishor A. Chaukar, born in 1947, currently the Managing Teleservices Limited, Tata Communications Limited, Tata Director of Tata Industries Limited (TIL), is a post-graduate Autocomp Systems Limited, Tata Investment Corporation in management from the Indian Institute of Management Limited, among others. He also oversees the functions of at Ahmedabad. the Department of Economics and Statistics (DES) and the TIL is one of the two principal holding companies of the Tata Credit Card. Tata Group, acts as its diversification and new projects Mr. Chaukar is the chairman of Tata Council for Community promotion arm, and spearheads its entry into the emerging Initiatives (TCCI) – the nodal agency of the Group on all high-technology and sunrise sectors of the economy. matters related to social development, environmental In his capacity as Managing Director of TIL, Mr. Chaukar is management, bio-diversity restoration and conservation responsible for enhancing the value and interest of TIL in of wild life. TIL divisions and in companies where TIL has made Mr. Chaukar was previously the managing director of ICICI investments. One of the tasks performed in the quest for Securities & Finance Company Ltd. (July 1993 to October this value enhancement is to provide strategic direction 1998), and a board member of ICICI Ltd. from February 9, to these companies. 1995 to October 15, 1998. His other experiences include Mr. Chaukar is a member of the group Corporate Centre, stints in Bhartiya Agro Industries Foundation, a public trust which is engaged in strategy formulation at the House of engaged in rural development on a no-profit no-loss basis Tata. He is on the Board of various companies like Tata and based in Pune, Maharashtra, and Godrej Soaps Limited.

Mr. P.V. Kalyanasundaram Mr. P.V. Kalyanasundaram was born in 1958. He received a public activities. As the managing trustee of the Green Bachelor of Arts degree in history, from the New College, Peace World Charitable Trust, Chennai, he took an active Chennai in 1977, followed by a Bachelor of Law degree part in the various welfare measures organized by the trust. from Madras Law College in 1982. These include organizing free eye camps to treat poor An advocate by profession, Mr. Kalyanasundaram is a legal people. advisor for Pallavan Transport Corporation, Chennai, a Between 2000 and 2004, Mr. Kalyanasundaram was the 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 is 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 worth Rs. 10,000 million belonging Board, Chennai as well as the Presidency Club, Chennai. to the trust. He was also instrumental in conducting several Mr. Kalyanasundaram has played a leading role in various educational seminars and courses in various institutions.

Dr. V.R.S Sampath Dr. V.R.S Sampath born in 1956, received a Bachelor of Arts Dr. Sampath is currently an empanelled advocate to both degree in History from the Presidency College in 1976, Canara Bank and Indian Overseas Bank, and a legal advisor followed by a Bachelor of Law degree from Madras Law to the Construction Industry Development Board of the College in 1980, a Master of Law degree in 1987 and a Government of Malaysia. He started his career as a junior PH.D in 1997, all from the University of Madras. He also advocate for the Aiyer and Dalia law firm in 1981 and has holds a Master of Arts degree in History from the Madurai since served as a legal advisor to the Tamil Nadu Industrial Kamaraj University (1985). Development Corporation. Dr. Sampath also holds a Diploma in Tourism and has Dr. Sampath has served on various government committees completed a large number of specialised training including the advisory committees of the Central Board of programmes and courses, notably in human rights and Film Certification and the All India Radio, both of the social work. He was awarded an honorary D.Litt for his Government of India, Chennai. He is the chairman of various contribution to global peace efforts by the World Peace non-governmental organisations in Chennai including the Academy, Chicago, USA in 1994. He has published Inter-University Cultural Service, the Madras Development numerous research papers and traveled widely Society, the India International Tourism Centre, the Indian internationally, including on study tours. He has also Institute for Aids Prevention, the International Centre for published eight books on subjects such as travel, law and society. Human Rights and the National Development Trust.

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Mr. Amal Ganguli Mr. Amal Ganguli, born in 1939, is a fellow member of the dealt with a variety of clients including US AID, World Bank, Institute of Chartered Accountants of India and the ADB, NTPC, Alcatel, GE, Hindustan Lever, STC, Hewlett Institute of Chartered Accountants of England and Wales Packard and IBM. and a member of the New Delhi chapter of the Institute of Mr. Ganguli is a member of the Board of Directors of several Internal Auditors, Florida, U.S.A. He was the Chairman and Companies such as Hughes Escorts Communications Senior Partner of Pricewaterhouse Coopers (PWC), India Limited, Flextronics Software Systems Limited, Tube till his retirement on 31st March, 2003. Besides his Investments of India Limited, Gillette India Limited, HCL qualifications in the area of accounting and auditing, Mr. Technologies Limited, Samtel Colour Limited, Samcor Glass Ganguli is a fellow of the British Institute of Management Ltd., New Delhi Television Limited and Century Textiles and and alumnus of IMI, Geneva. Industries Ltd. Mr. Ganguli is a member of Audit Mr. Ganguli, trained in the UK to become a Chartered Committees of Hughes Escorts Communications Ltd., HCL Accountant. He was econded as a Partner to PWC, UK/USA Technologies Ltd., Gillette India Limited, Samtel Colour for a year in 1972-73. During his career spanning over 40 Limited, Samcor Glass Limited and Century Textiles and years, Mr. Ganguli’s range of work included International Industries Ltd. He is chairman of the Audit Committee of Tax advice and planing, cross border investments, Flextronics Software Systems Limited and a member of Corporate mergers and re-organisation, financial evaluation Remuneration Committees of Tube Investments of India of projects, management, operational and statutory audit Limited and Gillette India Limited. He is also a member of and consulting projects funded by International funding Share Transfer and Shareholders’/Investors’ Grievance agencies. In the course of his professional career, he has Committee of Century Textiles and Industries Ltd.

Mr. Vinod Kumar

As president and managing director of Tata Senior Vice-President of Asia Netcom and responsible for Communications International Pte. Ltd., a subsidiary of Tata all aspects of generating top-line growth, including Communications Limited, Mr. Kumar is responsible for strategy formulation, product marketing and sales. He was expanding Tata Communications International’s roadmap actively involved in all aspects of the financial restructuring, and charter into the global communications market. and eventual asset sale of Asia Global Crossing to China Enhancing the service capabilities and customer facing Netcom, resulting in the formation of Asia Netcom. activities in strategic markets beyond the shores of India In 1999, Mr. Kumar joined WorldCom Japan as Chief in a nut shell sums his mandate. Besides heading these Executive Officer and prior to that, he held various senior strategic initiatives, Mr. Kumar is also responsible for the positions in Global One in the United States and Asia where Wholesale Data, Global Mobile and International Enterprise he has had major responsibilities in market management, lines of business and meeting the company’s ambitious sales, marketing, product management, multinational targets. account management and operations. Mr. Kumar has a wide range of cross-functional experience Mr. Kumar born in 1965, holds a Masters in Business Administration from The American University. He also in the telecommunications industry. He also has an graduated with honors in Electrical and Electronic impressive track record in developing business strategies Engineering at the Birla Institute of Technology and Science and creating fast growth organizations. He was previously in India.

Mr. S. Ramadorai Mr. S. Ramadorai, born in 1944, Chief Executive Officer and Top Ten Software companies. In October 2006, TCS was Managing Director of Tata Consultancy Services, has been recognized by the Economic Times as the company of the associated with TCS for the past thirty five years. He took Year, a fitting tribute to its increasing global presence. over as chief executive officer of TCS in 1996 and has been instrumental in building TCS to a $4.3 Billion global IT Mr. Ramadorai’s contributions to the industry have been services, business solutions and outsourcing company, with well recognized through the numerous awards he has a talent base of over 85,000 people, geographical reach of received. In 2002, he was awarded with CNBC Asia Pacific’s 39 countries and an enviable client list which includes six prestigious ‘Asia Business Leader of the Year’ Award. He of the top ten Fortune companies. Mr. Ramadorai has now has been honoured with the position of “IT Advisor to set his sights on ensuring that TCS is among the Global Qingdao City’, People’s Republic of China. In November

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124 Ceps-6\D:\Sales\Mohan\Tata Communication\VSNL Board of Directors-2008.pmd — pradip5-7 2006, Ernst & Young awarded Mr. Ramadorai the Advisory Board, Marshall School of Business (USC) as well Entrepreneur Manager of the Year award. He has been as the Said Business School at Oxford. Among his other recognized by Computer Business Review in July 2006 as distinctions, Mr. Ramadorai is a Fellow of the Institute of the sixth most influential IT leader in the world. In Electrical and Electronics Engineers (IEEE), The Computer recognition of Mr. Ramadorai’s commitment and dedication Society of India (CSI) and the Indian National Academy of to the IT industry, he was awarded the “Padma Bhushan” Engineering. by the Government of India in January 2006. Mr. Ramadorai holds a Bachelors degree in Physics from Delhi University, India, a Bachelor of Engineering degree Mr. Ramadorai holds chairmanships and directorships of in Electronics and Telecommunications from the Indian several Tata Group companies and is on the board of Institute of Science, Bangalore, India, and a Masters degree directors of Hindustan Unilever Limited and Nicholas in Computer Science from the University of California - Piramal India Limited. He is a member of the Corporate UCLA, USA.

Mr. A.K. Srivastava Mr. A.K. Srivastava was born in 1951. Mr. Srivastava is a departments of the Government of India and has a wide Bachelor of Science and has a Master’s Degree in Science experience in the telecommunications industry. besides being a Graduate from the Institution of Electronics and Telecommunication Engineers (IETE). Mr. Srivastava is currently the Deputy Director General Mr. Srivastava joined the Government of India service in (Access Service), Department of Telecommunications, 1973. Thereafter, Mr. Srivastava had worked in various Government of India.

Mr. Arun Gandhi Mr. Arunkumar Ramanlal Gandhi born in 1943 became an assisting the Tata Group in acquiring diverse assets and Executive Director of Tata Sons Ltd in August 2003, and is companies across the globe. This has enabled the Tata a member of the Group Corporate Centre of the Tata Group. Group to acquire critical assets, resources and access to He is a fellow member of the Institute of Chartered 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 worked on numerous mergers and acquisitions, both cross- of the Chartered Institute of Taxation, London. border 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 constituted by industry forums and regulatory bodies such July 1969 and in 1993 became a senior partner. The firm has more than 60 years of professional standing. as SEBI’s Takeover Panel Exemption Committee and the Institute of Chartered Accountants of India’s Accounting As Executive Director of Tata Sons Ltd, Mr. Gandhi has been Standards Board among various others.

Mr. H.P. Mishra

Mr. HP Mishra was born in 1950. Mishra holds a degree in Service, Group ‘A’, Government of India. mechanical engineering and has Master Degree in MBA (Finance). Presently he is acting as Deputy Directors General (WPF), Mr. Mishra is a member of Indian P&T Accounts & Finance Department of Telecommunications, Government of India.

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126 Ceps-6\D:\Sales\Mohan\Tata Communication\VSNL Board of Directors-2008.pmd — pradip5-7 Tata Communications Limited Registered office : VSB, M.G. Road, Fort, Mumbai - 400 001.

TWENTY SECOND ANNUAL GENERAL MEETING - 2 AUGUST, 2008 AT 1100 HRS.

ATTENDANCE SLIP

I, Mr/Mrs./Miss...... LF/Client ID. No ...... hereby record my presence at the 22nd 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 22nd Annual General Meeting of the Company to

be held at 1100 Hrs on Saturday, the 2 August, 2008, and at any adjournment thereof.

IN WITNESS whereof I/We have set my/our hand/hands this...... day of...... 2008.

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.

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Tata Communications Limited VSB, MG Road, Fort, Mumbai 400001 India