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Notes to Accounts of Cairn India Ltd.

Mar 31, 2015

Cairn India Limited (''the Company'') was incorporated in India on 21 August 2006. The equity shares of the Company are listed in India on the Bombay stock exchange and the National stock exchange.

The Company is primarily engaged in the business of surveying, prospecting, drilling, exploring, acquiring, developing, producing, maintaining, refining, storing, trading, supplying, transporting, marketing, distributing, importing, exporting and generally dealing in minerals, oils, petroleum, gas and related by-products and other activities incidental to the above. As part of its business activities, the Company also holds interests in its subsidiary companies which have been granted rights to explore and develop oil exploration blocks.

The Company is a participant in various Oil and Gas blocks/fields, which are in the nature of jointly controlled assets, granted by the Government of India through Production Sharing Contracts (''PSC'') entered into between the Company and Government of India and other venture partners.

2 BASIS OF PREPARATION

The financial statements of the Company have been prepared in accordance with the generally accepted accounting principles in India (Indian GAAP). The Company has prepared these financial statements to comply in all material respects with the accounting standards notified under section 133 of the Companies Act 2013, read together with paragraph 7 of the Companies (Accounts) Rules 2014. The financial statements have been prepared on an accrual basis and under the historical cost convention. The accounting policies, in all material respects, have been consistently applied by the Company and are consistent with those used in the previous year, except to the extent stated in note 2.1 a below.

3. GRATUITY

The Company has a defined benefit gratuity plan for its employees. Under the gratuity plan, every employee who has completed atleast five years of service gets a gratuity on departure @ 15 days of last drawn salary for each completed year of service. The scheme is funded with an insurance company in the form of qualifying insurance policy.

The following tables summarize the components of net benefit expense recognized in the statement of profit and loss, the funded status and amounts recognized in the balance sheet for the respective plans.

The estimates of future salary increases, considered in actuarial valuation, take account of inflation, seniority, promotion and other relevant factors, such as supply and demand in the employment market. The overall expected rate of return on assets is determined based on the market prices prevailing on that date, applicable to the period over which the obligation is to be settled.

The Company is maintaining a fund with the Life Insurance Corporation of India (LIC) to meet its gratuity liability. The present value of the plan assets represents the balance available with the LIC as at the end of the year. The total value of plan assets is as certified by the LIC.

CIPOP plan (including phantom options)

Options will vest (i.e., become exercisable) at the end of a "performance period" which has been set by the remuneration committee at the time of grant (although such period will not be less than three years). However, the percentage of an option which vests on this date will be determined by the extent to which pre-determined performance conditions have been satisfied. Phantom options are exercisable proportionate to the period of service rendered by the employee subject to completion of one year.

Inputs for Fair valuation of Employees Stock Option Plans

The Share Options have been fair valued using an Option Pricing Model (Black Scholes Model). The main inputs to the model and the Fair Value of the options granted during the current year and previous year, based on an independent valuation, are as under:

4. RELATED PARTY DISCLOSURES

Names of related parties and related party relationship Related parties where control exists

Holding / Ultimate holding company

Vedanta Resources Pic.

Vedanta Resources Holdings Limited

Volcan Investments Limited

Vedanta Limited (formerly Sesa Sterlite Limited) *

* With effect from 26 August 2013 Vedanta Limited became the Company''s holding company. Prior to that date, it was a fellow subsidiary and also had significant influence over the Company.

Subsidiary companies

1. Cairn Energy Australia Pty Limited

2. Cairn Energy India Pty Limited

3. CEH Australia Pty Limited ***

4. Cairn Energy Asia Pty Limited ***

5. Sydney Oil Company Pty Limited ***

6. Cairn Energy Investments Australia Pty Limited ***

7 Wessington Investments Pty Limited ***

8. CEH Australia Limited**

9. Cairn India Holdings Limited

10. CIG Mauritius Holding Private Limited

11. CIG Mauritius Private Limited

12. Cairn Energy Holdings Limited

13. Cairn Energy Discovery Limited

14. Cairn Exploration (No. 2) Limited

15. Cairn Exploration (No. 6) Limited

16. Cairn Energy Hydrocarbons Limited 17 Cairn Petroleum India Limited ***

18. Cairn Energy Gujarat Block 1 Limited

19. Cairn Exploration (No. 4) Limited ***

20. Cairn Exploration (No. 7) Limited

21. Cairn Lanka Private Limited

22. Cairn Energy Group Holdings BV ***

23. Cairn Energy India West BV **

24. Cairn Energy India West Holding BV ***

25. Cairn Energy Gujarat Holding BV ***

26. Cairn Energy India Holdings BV ***

27 Cairn Energy Netherlands Holdings BV **

28. Cairn Energy Gujarat BV **

29. Cairn Energy Cambay BV **

30. Cairn Energy Cambay Holding BV ***

31. Cairn South Africa Proprietary Limited

** Liquidated during the year. *** Liquidated during previous year

Related parties with whom transactions have taken place

Fellow subsidiaries

Twin Star Mauritius Holdings Limited ****

Sterlite Industries (India) Limited [merged into Vedanta Limited on 17 August 2013] Sesa Resources Limited

****also has significant influence over the Company.

Key management personnel

Mayank Ashar, Managing Director and Chief Executive Officer (from 17 November 2014) Sudhir Mathur, Chief Financial Officer (Interim Head, from 2 May 2014 to 16 November 2014) P. Elango, Wholetime Director and Interim Chief Executive Officer (upto 2 May 2014)

5. CAPITAL AND OTHER COMMITMENTS Capital commitments (net of advances)

Company''s share of Joint Ventures'' Exploration activities and Development activities Rs. 238.70 crore (31 March 2014: Rs. 1,016.07 crore) and Rs. 915.80 crore (31 March 2014: Rs. 2,261.17 crore) respectively.

Other commitments

Company''s share of Joint Ventures'' minimum exploration commitments as per the production sharing contracts Rs. 1,540.94 crore (31 March 2014: Rs. 1,095.34 crore).

6. CONTINGENT LIABILITIES

a. Ravva Joint Venture Arbitration proceedings : Base Development Cost

Ravva joint venture had received the notice from Ministry of Petroleum & Natural Gas Government of India (GOI) for the period from 2000-2005 for USD 129 million for an alleged underpayment of profit petroleum to the Indian Government, out of which, Company''s share will be USD 29 million (approximately Rs. 181.65 crore) [31 March 2014: USD 29 million (approximately Rs. 173.76 crore)] plus potential interest at applicable rate (LIBOR plus 2% as per PSC).

This claim relates to the Indian Government''s allegation that the Ravva JV had recovered costs in excess of the Base Development Costs ("BDC") cap imposed in the PSC and that the Ravva JV had also allowed these excess costs in the calculation of the Post Tax Rate of Return (PTRR). Joint venture partners initiated the arbitration proceedings and Arbitration Tribunal published the Award on 18 January 2011 at Kuala Lumpur, allowing Claimants (including the Company) to recover the Development costs spent to the tune of USD 278 million and disallowed over run of USD 22.3 million spent in respect of BDC along with 50% legal costs reimbursable to the Joint venture partners. High Court of Kuala Lumpur dismissed Government of India''s (GOI) application of setting aside the part of the Award on 30 August 2012 with costs. However, GOI appealed before the Court of Appeal against the High Court''s order and the same is dismissed the GOI''s appeal on 27 June 2014. However, GOI still preferred to challenge the same before the Federal Court, Kuala Lumpur and their Leave to Appeal is pending. GOI''s has also issued Show Cause Notice on this matter which the Company has replied to and also filed an application for enforcement of Award before Delhi High Court as an abundant caution. Next hearing is due on 29 June 2015.

b. Ravva Joint Venture Arbitration proceedings: ONGC Carry

The Company is involved in a dispute with GOI relating to the calculation of payments that it was required to make in connection with the Ravva field. The Ravva PSC obliges the Company to pay proportional share of ONGC''s exploration, development, production and contract costs in consideration for ONGC''s payment of costs related to construction and other activities it conducted in Ravva prior to the effective date of the Ravva PSC (the ''''ONGC Carry''''). The question as to how the ONGC Carry is to be calculated, along with other issues, was submitted to an international arbitration panel in August 2002 which rendered a decision on the ONGC Carry in the Company''s favour and four other issues in favour of GOI in October 2004 ("Partial Award"). The GOI filed a challenge to the ONGC Carry decision in the Malaysian courts, as Kuala Lumpur was the seat of the arbitration. The Federal Court of Malaysia which adjudicated the matter on 11 October 2011, upheld the Partial Award. Company persuaded with Ministry of Petroleum and Natural Gas (MoPNG) to implement the Partial Award while reconciling the statement of accounts as outlined in Partial Award ever since the Federal Court adjudication in place. However, MoPNG has issued a Show Cause Notice on 10 July 2014 alleging that profit petroleum has been short-paid. The Company had requested for Tribunal''s reconstitution to publish the Final Award since it has retained the jurisdiction if parties are unable to agree on quantification sums due and payable to each other pursuant to the Partial Award. Accordingly, Tribunal was reconstituted and the next hearing is due in 24 September 2015. While the Company does not believe the GOI will be successful in its challenge, if the arbritral award is reversed and such reversal is binding, the Company could be liable for up to approximately USD 63.90 million (approximately Rs. 400.26 crore) [31 March 2014: USD 63.90 million (approximately Rs. 382.89 crore)] plus potential interest at applicable rate (LIBOR plus 2% as per PSC). GOI has issued a Show Cause Notice to make the payment and Company filed its submissions on 25 March 2015.

c. Service tax

The Company has received nine show cause notices (SCN''s) related to period 1 April 2006 to 31 March 2014, citing non-payment of service tax on various services. Detailed reply to all SCN''s has been filed with the Commissioner of Service. Tax except for the last SCN for the period 1 April 2013 to 31 March 2014, reply to which will be submitted in due course.

Should future adjudication go against the Company, it will be liable to pay the service tax of approximately Rs. 119.41 crore (31 March 2014: Rs. 110.21 crore) plus potential interest of approximately Rs. 132.70 crore (31 March 2014: Rs. 102.35 crore), although this could be recovered in part, where it relates to services provided to Joint Venture of which the Company is operator.

d. Tax holiday on gas production

Section 80-IB (9) of the Income Tax Act, 1961 allows the deduction of 100% of profits from the commercial production or refining of mineral oil. The term ''mineral oil'' is not defined but has always been understood to refer to both oil and gas, either separately or collectively.

The 2008 Indian Finance Bill appeared to remove this deduction by stating [without amending section 80-IB (9)] that "for the purpose of section 80-IB (9), the term ''mineral oil'' does not include petroleum and natural gas, unlike in other sections of the Act". Subsequent announcements by the Finance Minister and the Ministry of Petroleum and Natural Gas have confirmed that tax holiday would be available on production of crude oil but have continued to exclude gas.

The Company filed a writ petition to the Gujarat High Court in December 2008 challenging the restriction of section 80-IB to the production of oil. Gujarat High Court did not admit the writ petition on the ground that the matter needs to be first decided by lower tax authorities. A Special Leave Petition has been filed before Supreme Court against the decision of Gujarat High court. However in an another similar case, the Gujarat High Court has held that tax holiday benefit would extend to production of gas.

In the event this challenge is unsuccessful, the potential liability for tax and related interest on tax holiday claimed on gas is approximately Rs. 263.35 crore (31 March 2014: Rs. 248.43 crore).

e. Withholding tax on payments made on acquiring a subsidiary

In March 2014 the Company received a notice from the Indian Tax Authorities ("Tax Authorities") alleging failure by the Company to withhold tax on the consideration paid to Cairn UK Holdings Limited ("CUHL") in the year 2006-07, the then holding company. The said transaction relates to the acquisition of the shares of Cairn India Holdings Limited ("CIHL"), a 100% subsidiary of the Company, from CUHL during the financial year 2006-2007 as a part of group reorganization by the then ultimate parent company Cairn Energy Plc. Based upon the retrospective amendment(s) made in the year 2012 by inserting explanation 5 of section 9(1)(i) of the Income Tax Act, 1961, the Tax Authorities vide its order dated 11 March 2015, have raised a demand of approx. Rs. 20,494.73 crore (comprising tax of appox. Rs. 10,247.36 crore and interest of an equivalent amount) for not withholding tax on the consideration paid to CUHL, for acquiring shares of CIHL. Tax Authorities have stated in the said order that a short term capital gain of Rs. 24,503.50 crore accrued to CUHL on transfer of the shares of CIHL to the Company in financial year 2006-2007, on which tax should have been withheld by the Company. The Company understands that a tax demand has also been raised by the Tax Authorities on CUHL with respect to taxability of alleged capital gain earned by CUHL.

In this regard, Vedanta Resources Plc. filed a Notice of Claim against the Government of India under the UK-India bilateral investment treaty (the "BIT") in order to protect its legal position and shareholder interests. Management has been advised that Vedanta Resources Plc. has a good case to defend as per provisions of BIT, the benefit of which would ultimately accrue to the Company.

Further, the Company has been advised that there could be no liability on the Company on account of not withholding the taxes in the year 2006-07 based on provisions of law prevailing at the time of transaction as the aforesaid retrospective amendment has cast an impossible obligation on the Company to deduct tax by having to predict and anticipate that the retrospective amendment will be made by legislature on a future date. The Company has approached the Hon''ble Delhi High Court against the said order and also filed an appeal before the Commissioner of Income Tax (Appeals) to defend its said position.

f. Others

i) Pursuant to the provisions of the Rajasthan Entry Tax Act, 1999, an entry tax demand has been raised for Rs. 5.93 crore (31 March 2014: Rs. 5.81 crore) plus penalty and interest which the Company has contested before the Deputy Commissioner. The Company believes that this levy is not constitutionally valid and its Special Leave Petition in this regard is pending before the Honorable Supreme Court.

ii) The Company has terminated a drilling rig contract with one of its contractor. The contractor has claimed demobilisation and early termination fee for an amount Rs. 32.51 crore (US$ 5.19 million) from the Company. The Company''s stand is that the contract has been terminated due to contractor''s default and therefore the demobilasation fee and early termination fee is not payable to the contractor.

Based on an analysis of the legal positions, the management is of the view that the liabilities in the cases mentioned in (a) to (f) above are not probable and accordingly no provision has been considered necessary there against.

7. BUY BACK OF EQUITY SHARES

During the previous year, the Company had approved a proposal for buy back of its equity shares at a price not exceeding Rs. 335 pe equity share for an aggregate amount not exceeding Rs. 5,725.00 crore. The buyback had commenced on 23 January 2014 and closed o 22 July 2014. During the said period the Company bought back and extinguished 36,703,839 equity shares for a total consideration o Rs. 1,225.45 crore, which accounted for 21.41% of its Maximum buy-back size. The Company pursuant to the Securities & Exchange Boar of India (Buyback of Securities) Regulations, 1998 (''the Regulations'''') has deposited a sum of Rs. 143.13 crore, being 2.5% of the maximur buy back size, in an escrow account, which was to be released subject to the Company either completing a buyback for 50% of th maximum buyback size or complying with the conditions specified in regulation 15B(8) of the Regulations.

Although the buyback was for less than Rs. 2,862.50 crore, being 50% of the maximum buy back size, the Company believes that it ha complied with the conditions specified in regulation 15B(8) of the Regulations and has accordingly applied to SEBI for a release of th amount deposited in the escrow account. SEBI has informed the Company, that its application is under consideration and the Compan believes that it has a good case on merits to obtain this refund.

The Company''s gross reserve estimates are updated atleast annually based on the forecast of production profiles, determined on an asset-by-asset basis, using appropriate petroleum engineering techniques. The estimates of reserves and resources have been derived in accordance with the Society for Petroleum Engineers "Petroleum Resources Management System (2007)". The changes to the reserves are generally on account of future development projects, application of technologies such as enhanced oil recovery techniques and true up of the estimates. The management''s internal estimates of hydrocarbon reserves and resources at the period end, based on the current terms of the PSCs, are as follows:

* Includes probable oil reserves of 39.62 mmstb (of which 20.20 mmstb is developed) and probable gas reserves of 10.42 bscf (of which 9.70 bscf is developed)

** Includes probable oil reserves of 44.95 mmstb (of which 1737 mmstb is developed) and probable gas reserves of 29.72 bscf (of which 789 bscf is developed)

*** Includes probable oil reserves of 36.95 mmstb (of which 13.84 mmstb is developed) and probable gas reserves of 34.32 bscf (of which 5.94 bscf is developed)

mmboe = million barrels of oil equivalent

mmstb = million stock tank barrels

bscf = billion standard cubic feet

1 million metric tonnes = 74 mmstb

1 standard cubic meter =35.315 standard cubic feet

MBA = Mangala, Bhagyam & Aishwarya

EOR = Enhanced Oil Recovery

8. SEGMENTAL REPORTING

Business segments

The primary reporting of the Company has been prepared on the basis of business segments. The Company has only one business segment, which is the exploration, development and production of oil and gas and operates in a single business segment based on the nature of the products, the risks and returns, the organisation structure and the internal financial reporting systems. Accordingly the figures appearing in these financial statements relate to the Company''s single business segment.

Geographical segments

The Company''s secondary segments are the geographic distribution of activities. Revenue and receivables are specified by location of customers while the other geographic information is specified by location of the assets. The figures appearing in these financial statements relate to the Company''s single geographical segment, being operations in the Indian sub-continent.

9. PREVIOUS YEAR FIGURES

The Company has reclassified and regrouped the previous year figures to confirm to this year''s classification.


Mar 31, 2013

1. NATURE OF OPERATIONS

Cairn India Limited (''the Company'') was incorporated in India on August 21, 2006. The equity shares of the Company are listed in India on the Bombay stock exchange and the National stock exchange.

The Company is primarily engaged in the business of surveying, prospecting, drilling, exploring, acquiring, developing, producing, maintaining, refining, storing, trading, supplying, transporting, marketing, distributing, importing, exporting and generally dealing in minerals, oils, petroleum, gas and related by-products and other activities incidental to the above. As part of its business activities, the Company also holds interests in its subsidiary companies which have been granted rights to explore and develop oil exploration blocks.

The Company is participant in various Oil and Gas blocks/fields, which are in the nature of jointly controlled assets, granted by the Government of India through Production Sharing Contracts (''PSC'') entered into between the Company and Government of India and other venture partners.

* acquired on account of transfer of Indian undertakings of the subsidiaries pursuant to the implementation of the Scheme referred to in note 26 below.

** increase in participating interest is on account of transfer of Indian undertakings of the subsidiaries pursuant to the implementation of the Scheme referred to in note 26 below.

2. BASIS OF PREPARATION

The financial statements have been prepared to comply in all material respects with the accounting principles generally accepted in India, including mandatory Accounting Standards notified under the Companies (Accounting Standard) Rules, 2006 (as amended) under the historical cost convention and on an accrual basis. The accounting policies, in all material respects, have been consistently applied by the Company and are consistent with those used in the previous year.

3. SCHEME OF ARRANGEMENT

The shareholders of the Company had in February 2010 approved a Scheme of Arrangement (''Scheme'') between the Company and four of its wholly owned subsidiaries, Cairn Energy India Pty Ltd (''CEIPL''), Cairn Energy India West BV (''CEIW''), Cairn Energy Cambay BV (''CEC''), Cairn Energy Gujarat BV (''CEG''), (collectively the ''transferor companies''), with an Appointed date of 1 January 2010. The Scheme of Arrangement had been approved by the Hon''ble High Court of Madras and Hon''ble High Court of Bombay and was subsequently approved by other relevant regulatory authorities on 18 October 2012. Accordingly, from 1 January 2010, the Indian undertakings of the transferor companies stood transferred to and vested in the Company on a going concern basis.

In accordance with the provisions of the aforesaid Scheme,

i) The Indian undertakings of the transferor companies relating to exploration, development and production of crude, natural gas and related by-products have been transferred to the Company on a going concern basis. The transfer of assets and liabilities representing the Indian undertakings has been effected from the "Appointed date" of 1 January 2010, as defined in the Scheme.

The above mentioned deferred tax liabilities (net) have been further reduced by Rs. 4,563 lacs on account of application of tax rate as applicable to the Company and fixed assets have been further decreased by Rs. 530 lacs due to alignment of accounting policy (on depreciation) as consistently followed by the Company, and adjustments in respect of these have been recorded in the Statement of profit and loss.

iii) As a consideration for the transfer of the above mentioned assets and liabilities and consequential expected future cash flows from the transferor companies to the Company, the Company has reduced the value of its investment in its direct subsidiary Cairn India Holdings Limited (''CIHL'') by Rs. 1,495,278 lacs and consequentially a goodwill of Rs. 1,016,703 lacs, after adjusting the net assets taken over of Rs. 478,575 lacs, has been recorded in the books of accounts in accordance with the provisions of Accounting Standard (AS)-10 of the Companies (Accounting Standard) Rules, 2006 (as amended). The reduction in value of investments in CIHL has been considered on the basis of an independent valuation of the future discounted cash flows from CIHL as at 31 December 2009.

iv) Further, in accordance with the Special Resolution passed by the shareholders of the Company under sections 78 and 100 to 103 of the Companies Act, 1956, which was an integral part of the aforesaid Scheme approved the Courts, the goodwill of Rs. 1,016,703 lacs as mentioned in (iii) above has been adjusted against the securities premium account and as a result both goodwill and securities premium account are stated lower by Rs. 1,016,703 lacs each. This accounting, although different from that prescribed under the Accounting Standards, is in conformity with the accounting principles generally accepted in India, as the same has been approved by the Courts and has no impact on the profit for the year.

v) Since the Scheme received all the requisite approvals in the current year, operations of the Indian undertakings of the transferor companies from 1 January 2010 to 31 March 2012, as detailed below, have been accounted for in the current year''s statement of profit and loss as a seperate line item.

4. GRATUITY

The Company has a defined benefit gratuity plan for its employees. Under the gratuity plan, every employee who has completed atleast five years of service gets a gratuity on departure @ 15 days of last drawn salary for each completed year of service. The scheme is funded with an insurance company in the form of qualifying insurance policy.

The following tables summarize the components of net benefit expense recognized in the statement of profit and loss, the funded status and amounts recognized in the balance sheet for the respective plans.

The vesting conditions of the above plans are as under- CISMP plan

(A) 6,714,233 options to be vested in the following manner- - 1/3rd of the options vest on the day following the date on which the equity shares have been admitted to listing on the Stock Exchanges (''admission date''). Listing date was 9 Jan 2007.

- 1/3rd of the options vest 18 months after the admission date.

- 1/3rd of the options vest on achieving 30 days'' consecutive production of over 150,000 bopd from the Rajasthan Block.

(B) 1,584,480 options to be vested in the following manner- - 1/2 of the options vest on the day following the date on which the equity shares have been admitted to listing on the Stock Exchanges.

- 1/4th of the options vest on the date on which all major equipment for the start-up of the Mangala field is delivered to site.

- 1/4th of the options vest on achieving 100,000 bopd from the Mangala Field.

CIPoP plan (including phantom options)

Options will vest (i.e., become exercisable) at the end of a "performance period" which has been set by the remuneration committee at the time of grant (although such period will not be less than three years). However, the percentage of an option which vests on this date will be determined by the extent to which pre-determined performance conditions have been satisfied. Phantom options are exercisable proportionate to the period of service rendered by the employee subject to completion of one year.

CIESoP plan (including phantom options)

There are no specific vesting conditions under CIESOP plan other than completion of the minimum service period. Phantom options are exercisable proportionate to the period of service rendered by the employee subject to completion of one year.

Capital commitments (net of advances)

Company''s share of Joint Ventures'' Exploration activities and Development activities - Rs. 14,772 lacs (31 March 2012: Rs. 1,059 lacs) and Rs. 72,383 lacs (31 March 2012: Nil) respectively.

Other commitments

Company''s share of Joint Ventures'' minimum exploration commitments as per the production sharing contracts - Rs. 4,132 lacs (31 March 2012: Rs. 1,321 lacs).

5. CONTINGENT LIABILITIES

a. Ravva Joint Venture Arbitration proceedings : Base Development Cost

Ravva joint venture had received a claim from the Director General of Hydrocarbons (DGH) for the period from 2000-2005 for USD 166.4 million for an alleged underpayment of profit petroleum to the Indian Government, out of which, Company''s share will be USD 374 million (approximately Rs. 16,880 lacs) [31 March 2012: Nil] plus potential interest at applicable rate (LIBOR plus 2% as per PSC).

This claim relates to the Indian Government''s allegation that the Ravva JV had recovered costs in excess of the Base Development Costs ("BDC") cap imposed in the PSC and that the Ravva JV had also allowed these excess costs in the calculation of the Post Tax Rate of Return (PTRR). Joint venture partners initiated the arbitration proceedings and Arbitration Tribunal published the Award on 18 January 2011 at Kuala Lumpur, allowing Claimants (including the Company) to recover the Development costs spent to the tune of USD 278 million and disallowed over run of USD 22.3 million spent in respect of BDC along with 50% legal costs reimbursable to the Joint venture partners. High Court of Kuala Lumpur dismissed Government of India''s (GOI) application of setting aside the part of the Award on 30 August 2012 with costs. However, GOI''s counsel served notice of appeal filed before Court of Appeal against the High Court''s order.

b. Service tax

The Company has received five show cause notices from the tax authorities in India for non payment of service tax as a recipient of services from foreign service providers, against which replies have already been filed before the authorities.

These notices cover periods from 1 April 2006 to 31 March 2011 . A writ petition has been filed with Chennai High Court challenging the scope of some services in respect of first show cause notice (1 April 2006 to 31 March 2007).

Should future adjudication go against the Company, it will be liable to pay the service tax of approximately Rs. 11,248 lacs (31 March 2012: Nil) plus potential interest of approximately Rs. 9,013 lacs (31 March 2012: Nil), although this could be recovered in part, where it relates to services provided to Joint Venture of which the Company is operator.

c. Tax holiday on gas production

Section 80-IB (9) of the Income Tax Act, 1961 allows the deduction of 100% of profits from the commercial production or refining of mineral oil. The term ''mineral oil'' is not defined but has always been understood to refer to both oil and gas, either separately or collectively.

The 2008 Indian Finance Bill appeared to remove this deduction by stating [without amending section 80-IB (9)] that "for the purpose of section 80-IB (9), the term ''mineral oil'' does not include petroleum and natural gas, unlike in other sections of the Act". Subsequent announcements by the Finance Minister and the Ministry of Petroleum and Natural Gas have confirmed that tax holiday would be available on production of crude oil but have continued to exclude gas.

The Company filed a writ petition to the Gujarat High Court in December 2008 challenging the restriction of section 80-IB to the production of oil. Gujarat High Court did not admit the writ petition on the ground that the matter needs to be first decided by lower tax authorities. A Special Leave Petition has been filed before Supreme Court against the decision of Gujarat High court.

In the event this challenge is unsuccessful, the potential liability for tax and related interest on tax holiday claimed on gas is approximately Rs. 24,317 lacs (31 March 2012: Nil).

d. others

i) Pursuant to the provisions of the Rajasthan Entry Tax Act, 1999, an entry tax demand has been raised for Rs. 332 Lacs (31 March 2012: Nil) plus penalty and interest which the Company has contested before the Deputy Commissioner. The Company believes that this levy is not constitutionally valid and its writ petition in this regard is pending before the Honorable Rajasthan High Court.

ii) Other claims against the Company not acknowledged as debts amounts to Rs. 1,500 lacs (31 March 2012: Nil).

6. The Board, subject to the approval of shareholders, has appointed Mr. P. Elango, Interim Chief Executive Officer, as a Whole Time Director of the Company with effect from 21 January 2013.

Business segments

The primary reporting of the Company has been prepared on the basis of business segments. The Company has only one business segment, which is the exploration, development and production of oil and gas and operates in a single business segment based on the nature of the products, the risks and returns, the organisation structure and the internal financial reporting systems. Accordingly, the figures appearing in these financial statements relate to the Company''s single business segment.

Geographical segments

The Company''s secondary segments are the geographic distribution of activities. Revenue and receivables are specified by location of customers while the other geographic information is specified by location of the assets. The figures appearing in these financial statements relate to the Company''s single geographical segment, being operations in the Indian sub-continent.

7. LOANS AND ADVANCES IN THE NATURE OF LOANS GIVEN TO SUBSIDIARIES AND ASSOCIATES AND FIRMS/ COMPANIES IN WHICH DIRECTORS ARE INTERESTED

Details of amounts recoverable from subsidiary companies in which directors are interested are the same as disclosed under note no 31 . The balance outstanding as at the year end is also the maximum amount outstanding during the year in all cases except for in previous year in the case of Cairn Energy Hydrocarbons Limited where the maximum amount outstanding was Rs. 314 lacs. No loans have been given to the subsidiaries, associates, firms and companies, in which directors are interested.

8 PREVIOUS YEAR FIGURES

The current year financial information include the state of affairs and operations of the Indian undertakings of the transferor companies, as described in note 26 above. Hence, the current year''s figures are not comparable with the previous year''s figures. The Company has reclassified and regrouped the previous year figures to confirm to this year''s classification.


Mar 31, 2012

1. NATURE OF OPERATIONS

Cairn India Limited ('the Company') was incorporated in India on August 21, 2006. The equity shares of the Company are listed in India on the Bombay stock exchange and the National stock exchange.

The Company is primarily engaged in the business of surveying, prospecting, drilling, exploring, acquiring, developing, producing, maintaining, refining, storing, trading, supplying, transporting, marketing, distributing, importing, exporting and generally dealing in minerals, oils, petroleum, gas and related by-products and other activities incidental to the above. As part of its business activities, the Company also holds interests in its subsidiary companies which have been granted rights to explore and develop oil exploration blocks in the Indian sub-continent.

The Company is participant in various Oil and Gas blocks/fields, which are in the nature of jointly controlled assets, granted by the Government of India through Production Sharing Contracts ('PSC') entered into between the Company and Government of India and other venture partners. The Company has interest in the following Oil & Gas blocks / fields, which are presently under exploration phase-

2. BASIS OF PREPARATION

The financial statements have been prepared to comply in all material respects with the accounting principles generally accepted in India, including mandatory Accounting Standards notified under the Companies (Accounting Standard) Rules, 2006 (as amended) under the historical cost convention and on an accrual basis. The accounting policies, in all material respects, have been consistently applied by the Company and are consistent with those used in the previous year except for changes in the presentation and disclosures of the financial statements as described in note no. 41 below.

(a) Terms/ rights attached to equity shares

The Company has only one class of equity shares having par value of INR 10 per share. Each holder of equity shares is entitled to one vote per share. The dividend, if any, proposed by the Board of Directors will be subject to the approval of the shareholders in the ensuing Annual General Meeting.

In the event of liquidation of the Company, the holders of equity shares will be entitled to receive assets of the Company remaining after settlement of all liabilities. The distribution will be in proportion to the number of equity shares held by the shareholders.

a. Series A debentures are redeemable at par after 21 months from date of allotment viz. 12 October 2010. Series B debentures are redeemable at par after 24 months from date of allotment viz. 12 October 2010. Series C debentures were redeemable at par after 27 months from date of allotment viz. 12 October 2010 on which a coupon rate of 8.50 % was applicable for the first 12 months and thereafter a market determined floating rate subject to a minimum of 8.50 %. The Company during the current year bought back the debentures issued under Series C, after their offer of buy back was accepted by the debenture holders.

b. The debenture holders have a negative lien on the assets of the Company. The Company had the option to prepay the debentures issued under series A and B at the end of 12 months from the date of issue.

a. The Company has made equity investments in CIG Mauritius Holding Private Limited fCMHPL') mainly for funding the expenditure pertaining to block SL 2007-0-001 held by Cairn Lanka Private Limited (a wholly owned subsidiary of CMHPL). As the block is presently under exploration phase, no diminution in value of the said investments exists at the balance sheet date.

b. Cairn India Holdings Limited, U.K. has redeemed its preference shares during the year at par.

The Company has a defined benefit gratuity plan for its employees. Under the gratuity plan, every employee who has completed atleast five years of service gets a gratuity on departure @ 15 days of last drawn salary for each completed year of service. The gratuity plan of the Company is an unfunded scheme.

The following tables summarize the components of net benefit expense recognised in the statement of profit and loss and the amounts recognised in the balance sheet for the gratuity plans.

CISMP plan

(A) 6,714,233 options are to be vested in the following manner-

- 1/3rd of the options will vest on the day following the date on which the equity shares have been admitted to listing on the Stock Exchanges ('admission date'). Listing date was 9 Jan 2007.

- 1/3rd of the options will vest 18 months after the admission date.

- 1/3rd of the options will vest on achieving 30 days' consecutive production of over 150,000 bopd from the Rajasthan Block.

(B) 1,584,480 options are to be vested in the following manner-

- 1/2 of the options will vest on the day following the date on which the equity shares have been admitted to listing on the Stock Exchanges.

- 1/4th of the options will vest on the date on which all major equipment for the start-up of the Mangala field is delivered to site.

- 1/4th of the options will vest on achieving 100,000 bopd from the Mangala Field.

CIPOP plan (including phantom options)

Options will vest (i.e., become exercisable) at the end of a "performance period" which has been set by the remuneration committee at the time of grant (although such period will not be less than three years). However, the percentage of an option which vests on this date will be determined by the extent to which pre-determined performance conditions have been satisfied. Phantom options are exercisable proportionate to the period of service rendered by the employee subject to completion of one year.

CIESOP plan

There are no specific vesting conditions under Cl ESOP plan other than completion of the minimum service period.

Subsequent to change in control of the Company as stated in note no 37, the remuneration committee approved immediate vesting of all the outstanding options under CISMP plan and prorata vesting upto 8 December 2011 of outstanding options under CIPOP plan as per the provisions of the scheme. This does not have any material impact on these financial statements.

Volatility is the measure of the amount by which the price has fluctuated or is expected to fluctuate during the period. The measure of volatility used in Black-Scholes option-pricing model is the annualized standard deviation of the continuously compounded rates of return on the stock over a period of time. Time to maturity /expected life of options is the period for which the Cairn India Group expects the options to be live. Time to maturity has been calculated as an average of the minimum and maximum life of the options.

Operating Lease:

The Joint Ventures, in which the Company has participating interest, have entered into operating lease for equipments and buildings. All such leases are cancellable in nature. There are neither escalation clauses nor any restrictions in the lease agreements. There are no subleases.

Capital commitments (net of advances)

Company's share of Joint Ventures' Exploration activities - INR 105,912 thousand (31 March 2011: - I NR 67,462 thousand).

Other commitments

Company's share of Joint Ventures' minimum exploration commitments as per the production sharing contracts - INR 132,066 thousand (31 March 2011: - INR 5,945,379 thousand).

The shareholders of the Company have approved a Scheme of Arrangement between the Company and some of its wholly owned subsidiaries, to be effective from 1 January 2010. The Scheme of Arrangement has been approved by the Hon'ble High Court of Madras and the Hon'ble High Court of Bombay. However, it is pending for approval from other regulatory authorities. Pending receipt of such approvals, no accounting impact of the scheme has been given in these financial statements. After the implementation of the scheme, the Company will directly own the Indian businesses, which are currently owned by some of its wholly owned subsidiaries and as contemplated in the scheme, any goodwill arising in the Company pursuant to the scheme, shall be adjusted against the securities premium account.

Business segments

The primary reporting of the Company has been prepared on the basis of business segments. The Company has only one business segment, which is the exploration, development and production of oil and gas and operates in a single business segment based on the nature of the products, the risks and returns, the organisation structure and the internal financial reporting systems. Accordingly, the figures appearing in these financial statements relate to the Company's single business segment.

Geographical segments

Secondary segmental reporting is prepared on the basis of the geographical location of customers. The operating interests of the Company are confined to India in terms of oil and gas blocks and customers. Accordingly, the figures appearing in these financial statements relate to the Company's single geographical segment, being operations in India.

The sale of shares of the Company by Cairn UK Holdings Limited and its holding company, Cairn Energy Pic. to Vedanta Resources Pic. and its subsidiaries (collectively the 'Vedanta group') was completed on 8 December 2011 and resulted in change of control in the management of the Company from that date.

3. The Board of Directors, subject to the approval of the shareholders, have reappointed the Managing Director of the Company for a period of five years w.e.f. 22 August 2011 .

In accordance with the provisions of Accounting Standard 22 'Accounting for taxes on income', the Company would have had deferred tax assets of INR 1,001,000 thousand (31 March 2011: INR 918,000 thousand) in respect of accumulated tax losses, INR 528,000 thousand (31 March 2011: Nil) in respect of accumulated long term capital losses and INR 669,000 thousand (31 March 2011 : INR 586,000 thousand) in respect of differences in block of fixed assets/exploration assets as per tax books and financial books. However, as the management is not virtually certain of subsequent realization of the asset, the same has not been recognized in these financial statements.

Details of amounts recoverable from subsidiary companies in which directors are interested are the same as disclosed under note no 27. The balance outstanding as at the year end is also the maximum amount outstanding during the year in all cases except for in the case of Cairn Energy Hydrocarbons Limited where the maximum amount outstanding during the year was INR 31,432 thousand (31 Mar 2011: INR 31,432 thousand). No loans have been given to the subsidiaries, associates, firms and companies, in which directors are interested.

During the year ended 31 March 2012, the revised Schedule VI notified under the Companies Act 1956, became applicable to the Company, for preparation and presentation of its financial statements. The adoption of revised Schedule VI does not impact recognition and measurement principles followed for preparation of financial statements. However, it has significant impact on presentation and disclosures made in the financial statements. The Company has also reclassified the previous year figures in accordance with the requirements applicable in the current year.


Mar 31, 2011

1. NATURE OF OPERATIONS

Cairn India Limited ('the Company') was incorporated in India on August 21, 2006 and is a subsidiary of Cairn UK Holdings Limited, which in turn is a wholly owned subsidiary of Cairn Energy Plc., UK which is listed on London Stock Exchange.

The Company is primarily engaged in the business of surveying, prospecting, drilling, exploring, acquiring, developing, producing, maintaining, refining, storing, trading, supplying, transporting, marketing, distributing, importing, exporting and generally dealing in minerals, oils, petroleum, gas and related by-products and other activities incidental to the above. As part of its business activities, the Company also holds interests in its subsidiary companies which have been granted rights to explore and develop oil exploration blocks in the Indian sub-continent.

2. SEGMENTAL REPORTING Business segments

The primary reporting of the Company has been prepared on the basis of business segments. The Company has only one business segment, which is the exploration, development and production of oil and gas and operates in a single business segment based on the nature of the products, the risks and returns, the organisation structure and the internal fi nancial reporting systems. Accordingly, the fi gures appearing in these financial statements relate to the Company's single business segment.

Geographical segments

Secondary segmental reporting is prepared on the basis of the geographical location of customers. The operating interests of the Company are confined to India in terms of oil and gas blocks and customers. Accordingly, the fi gures appearing in these financial statements relate to the Company's single geographical segment, being operations in India.

3. RELATED PARTY TRANSACTIONS

(A) Names of related parties: Companies having control

- Cairn UK Holdings Limited, UK Holding Company

- Cairn Energy Plc., UK Ultimate holding company

Subsidiary companies

1 Cairn Energy Australia Pty Limited

2 Cairn Energy India Pty Limited

3 CEH Australia Pty Limited

4 Cairn Energy Asia Pty Limited

5 Sydney Oil Company Pty Limited

6 Cairn Energy Investments Australia Pty Limited

7 Wessington Investments Pty Limited

8 CEH Australia Limited

9 Cairn India Holdings Limited

10 CIG Mauritius Holding Private Limited

11 CIG Mauritius Private Limited

12 Cairn Energy Holdings Limited

13 Cairn Energy Discovery Limited

14 Cairn Exploration (No. 2) Limited

15 Cairn Exploration (No. 6) Limited

16 Cairn Energy Hydrocarbons Limited

17 Cairn Petroleum India Limited

18 Cairn Energy Gujarat Block 1 Limited

19 Cairn Exploration (No. 4) Limited

20 Cairn Exploration (No. 7) Limited

21 Cairn Energy Development Pte Limited (Liquidated during the year)

22 Cairn Lanka (Pvt) Limited

23 Cairn Energy Group Holdings BV

24 Cairn Energy India West BV

25 Cairn Energy India West Holding BV

26 Cairn Energy Gujarat Holding BV

27 Cairn Energy India Holdings BV

28 Cairn Energy Netherlands Holdings BV

29 Cairn Energy Gujarat BV

30 Cairn Energy Cambay BV

31 Cairn Energy Cambay Holding BV

Key Management Personnel

- Rahul Dhir, Managing Director and Chief Executive Officer

- Winston Frederick Bott Jr., Executive Director and Chief Operating Officer

- Indrajit Banerjee, Executive Director and Chief Financial Officer

4. Debenture redemption reserve aggregating to INR 831,913 thousand (previous year Nil) has not been created due to inadequacy of profits.

CIPOP plan

Options will vest (i.e. become exercisable) at the end of a "performance period" which have been set by the remuneration committee at the time of grant (although such period will not be less than three years). However, the percentage of an option which vests on this date will be determined by the extent to which pre-determined performance conditions have been satisfied.

CIESOP plan

There are no specific vesting conditions under CIESOP plan other than completion of the minimum service period.

Volatility is the measure of the amount by which the price has fl uctuated or is expected to fl uctuate during the period. The measure of volatility used in Black-Scholes option-pricing model is the annualized standard deviation of the continuously compounded rates of return on the stock over a period of time. Time to maturity /expected life of options is the period for which the Company expects the options to be live. The time to maturity has been calculated as an average of the minimum and maximum life of the options.

Impact of Fair Valuation Method on net profits and EPS

In March 2005, the Institute of Chartered Accountants of India has issued a guidance note on "Accounting for Employees Share Based Payments" applicable to employee based share plan the grant date in respect of which falls on or after April 1, 2005. The said guidance note requires the Proforma disclosures of the impact of the fair value method of accounting of employee stock compensation accounting in the financial statements.

5. The Company has a gratuity plan, wherein every employee who has completed five years or more of service gets a gratuity on departure at 15 days salary (last drawn salary) for each completed year of service. The gratuity plan of the Company is an unfunded scheme.

The following tables summarize the components of net benefit expense recognised in the profit and loss account and the amounts recognised in the balance sheet for the gratuity plans.

6. In accordance with the provisions of Accounting Standard 22 'Accounting for taxes on income', the Company would have had deferred tax assets of INR 811,000 thousand (previous year INR 361,000 thousand) and INR 393,000 thousand (previous year INR 224,720 thousand) in respect of accumulated tax losses and differences in block of fi xed assets/exploration assets as per tax books and financial books respectively. However, as the management is not virtually certain of subsequent realization of the asset, the same has not been recognized in these financial statements.

7. The shareholders of the Company have approved a Scheme of Arrangement between the Company and some of its wholly owned subsidiaries, to be effective from 1st January 2010. The Scheme of Arrangement has been approved by the Hon'ble High Court of Madras and the Hon'ble High Court of Bombay. However, it is pending for approval from other regulatory authorities. Pending receipt of such approvals, no accounting impact of the scheme has been given in these financial statements. After the implementation of the scheme, the Company will directly own the Indian businesses, which are currently owned by some of its wholly owned subsidiaries and as contemplated in the scheme, any goodwill arising in the Company pursuant to the scheme, shall be adjusted against the securities premium account.

8. The reversal in fringe benefit tax (FBT) in the previous year is on account of the abolishment of FBT with effect from 1st April 2009, as the Company was accounting for FBT liability on stock options on a pro-rata basis over the vesting period.

9. Details of amounts recoverable from subsidiary companies in which directors are interested are the same as disclosed in note 4 (c) above. The balance outstanding as at the year end is also the maximum amount outstanding during the year. No loans have been given to the subsidiaries, associates, fi rms and companies, in which directors are interested.

10. The Company has made equity investments in CIG Mauritius Holding Private Limited ('CMHPL') mainly for funding the expenditure pertaining to block SL 2007-0-001 held by Cairn Lanka Private Limited (a wholly owned subsidiary of CMHPL). As the block is presently under exploration phase, no diminution in value of the said investments exists at the balance sheet date.

11. The holding company of Cairn India Limited, Cairn UK Holdings Limited, along with its holding company, Cairn Energy Plc. (Company's ultimate holding company) has agreed to sell a substantial portion of its investment in the Company to Twin Star Holdings Ltd. and Vedanta Resources Plc. This transaction has been approved by shareholders of both Cairn Energy Plc. and Vedanta Resources Plc. However, pending receipt of certain regulatory approvals, Cairn Energy Plc. continues to be treated as the promoter of the Company.

12. Previous year's figures have been regrouped where necessary to confirm to current year's classification.


Mar 31, 2010

1. NATURE OF OPERATIONS

Cairn India Limited (the Company) was incorporated in India on August 21, 2006 and is a subsidiary of Cairn UK Holdings Limited, which in turn is a wholly owned subsidiary of Cairn Energy Plc., UK which is listed on London Stock Exchange.

The Company is primarily engaged in the business of surveying, prospecting, drilling, exploring, acquiring, developing, producing, maintaining, refi ning, storing, trading, supplying, transporting, marketing, distributing, importing, exporting and generally dealing in minerals, oils, petroleum, gas and related by-products and other activities incidental to the above. As part of its business activities, the Company also holds interests in its subsidiary companies which have been granted rights to explore and develop oil exploration blocks in the Indian sub-continent.

The Company is participant in various Oil and Gas blocks/fi elds (which are in the nature of jointly controlled assets), granted by the Government of India through Production Sharing Contracts (PSC) entered into between the Company and Government of India and other venture partners. The Company has interest in the following Oil & Gas blocks / fields, which are presently under exploration phase:

2. SEGMENTAL REPORTING Business segments

The primary reporting of the Company has been prepared on the basis of business segments. The Company has only one business segment, which is the exploration, development and production of oil and gas and operates in a single business segment based on the nature of the products, the risks and returns, the organisation structure and the internal fi nancial reporting systems. Accordingly, the fi gures appearing in these fi nancial statements relate to the Companys single business segment.

Geographical segments

Secondary segmental reporting is prepared on the basis of the geographical location of customers. The operating interests of the Company are confi ned to India in terms of oil and gas blocks and customers. Accordingly, the fi gures appearing in these fi nancial statements relate to the Companys single geographical segment, being operations in India.

3. RELATED PARTY TRANSACTIONS (A) Names of related parties: Companies having control

Cairn UK Holdings Limited, UK

Holding Company Cairn Energy Plc., UK

Ultimate holding company

Subsidiary companies

1 Cairn Energy Australia Pty Limited

2 Cairn Energy India Pty Limited

3 CEH Australia Pty Limited

4 Cairn Energy Asia Pty Limited

5 Sydney Oil Company Pty Limited

6 Cairn Energy Investments Australia Pty Limited

7 Wessington Investments Pty Limited

8 CEH Australia Limited

9 Cairn India Holdings Limited

10 CIG Mauritius Holding Private Limited

11 CIG Mauritius Private Limited

12 Cairn Energy Holdings Limited

13 Cairn Energy Discovery Limited

14 Cairn Exploration (No. 2) Limited

15 Cairn Exploration (No. 6) Limited

16 Cairn Energy Hydrocarbons Limited

17 Cairn Petroleum India Limited

18 Cairn Energy Gujarat Block 1 Limited

19 Cairn Exploration (No. 4) Limited

20 Cairn Exploration (No. 7) Limited

21 Cairn Energy Development Pte Limited

22 Cairn Lanka (Pvt) Limited

23 Cairn Energy Group Holdings BV

24 Cairn Energy India West BV

25 Cairn Energy India West Holding BV

26 Cairn Energy Gujarat Holding BV

27 Cairn Energy India Holdings BV

28 Cairn Energy Netherlands Holdings BV

29 Cairn Energy Gujarat BV

30 Cairn Energy Cambay BV

31 Cairn Energy Cambay Holding BV

Key Management Personnel

- Rahul Dhir, Managing Director and Chief Executive Offi cer

- Winston Frederick Bott Jr., Executive Director and Chief Operating Offi cer (appointed on 29th April, 2008)

- Indrajit Banerjee, Executive Director and Chief Financial Offi cer

- Lawrence Smyth, Executive Director and Chief Operating Offi cer (resigned on 21st January, 2008)

The Vesting conditions of the above plans are as under:

CISMP plan

(A) 6,714,233 options are to be vested in the following manner:

- 1/3rd of the options will vest on the day following the date on which the equity shares have been admitted to listing on the Stock Exchanges (admission date). Listing date was 9th Jan 2007.

- 1/3rd of the options will vest 18 months after the admission date.

- 1/3rd of the options will vest on achieving 30 days consecutive production of over 150,000 bopd from the Rajasthan Block.

(B) 1,584,480 options are to be vested in the following manner:

- 1/2 of the options will vest on the day following the date on which the equity shares have been admitted to listing on the Stock Exchanges.

- 1/4th of the options will vest on the date on which all major equipment for the start-up of the Mangala fi eld is delivered to site.

- 1/4th of the options will vest on achieving 100,000 boepd from the Mangala Field.

CIPOP plan

Options will vest (i.e. become exercisable) at the end of a "performance period" which will be set by the remuneration committee at the time of grant (although such period will not be less than three years). However, the percentage of an option which vests on this date will be determined by the extent to which pre-determined performance conditions have been satisfi ed.

CIESOP plan

There are no specifi c vesting conditions under CIESOP plan.

4. The Company has a gratuity plan, wherein every employee who has completed fi ve years or more of service gets a gratuity on departure at 15 days salary (last drawn salary) for each completed year of service. The gratuity plan of the Company is an unfunded scheme.

The following tables summarize the components of net benefi t expense recognised in the profi t and loss account and the amounts recognised in the balance sheet for the gratuity plans.

5. In accordance with the provisions of Accounting Standard 22 Accounting for taxes on income, the Company would have had deferred tax assets of approximately INR 361,000 thousand (previous period INR 511,000 thousand) primarily comprising of accumulated tax losses and unamortized issue expenses. However, as the management is not virtually certain of subsequent realization of the asset, no deferred tax asset has been computed or recognized in these fi nancial statements.

6. The Company and its wholly owned subsidiary Cairn Energy Hydrocarbons Limited ("CEHyL") have entered into a loan facility for INR 40,000 million (available to the Company) and USD 750 million (available to CEHyL) with a consortium of banks. The purpose of the loan facility is to fi nance the RJ-ON-90/1 block expenditure and also the repayment of the earlier loan facility of USD 850 million. The main security for the INR loan facility is the hypothecation of the 35% participating interest in RJ-ON-90/1 block held by Cairn Energy India Pty Limited, a wholly owned subsidiary of the Company whereas for the USD loan facility, the entire shares of CEHyL has been provided as the main security.

7. The shareholders of the Company have approved a Scheme of Arrangement between the Company and some of its wholly owned subsidiaries, to be effective from 1st January 2010. The Scheme of Arrangement has been approved by the Honble High Court of Madras. However, it is pending for approval from the Honble High Court of Bombay and other regulatory authorities. Pending receipt of such approvals, no accounting impact of the scheme has been given in these fi nancial statements. After the implementation of the scheme, the Company will directly own the Indian businesses, which are currently owned by some of its wholly owned subsidiaries and as contemplated in the scheme, any goodwill arising in the Company pursuant to the scheme, shall be adjusted against the securities premium account.

8. The reversal in fringe benefi t tax (FBT) is on account of the abolishment of FBT with effect from 1st April 2009, as the Company was accounting for FBT liability on stock options on a pro-rata basis over the vesting period.

9. CURRENT INVESTMENTS - UNQUOTED AND NON TRADE (REFER SCHEDULE-7 OF THE FINANCIAL STATEMENTS):

The following mutual fund units were purchased and sold during the current year:-

1 335,214,545 units of Birla Sunlife mutual fund under Birla Cash Plus - Institutional Premium - Daily Dividend Reinvestment

2 19,920,035 units of Canara Robeco mutual fund under Canara Robeco Liquid Collection - Daily Dividend Reinvestment

3 1,073,385 units of DSP Blackrock mutual fund under DSP Blackrock Liquidity Fund - Daily Dividend Reinvestment

4 332,343,248 units of HDFC mutual fund under HDFC Liquid Fund - Premium Plan - Daily Dividend Reinvestment

5 49,198,541 units of ICICI Prudential mutual fund under ICICI Prudential Flexible Income Plan Premium - Daily Dividend Reinvestment

6 368,973,177 units of ICICI Prudential mutual fund under ICICI Prudential Institutional Liquid Plan - Super Inst - Daily Dividend Reinvestment

7 115,181,352 units of IDFC mutual fund under IDFC Cash Fund Super Institutional - Plan C - Daily Dividend Reinvestment

8 8,927,386 units of Kotak Mahindra mutual fund under Kotak Floater Long Term Fund - Daily Dividend Reinvestment

9 173,076,949 units of Kotak Mahindra mutual fund under Kotak Liquid Fund - Institutional Premium - Daily Dividend Reinvestment

10 148,837,398 units of Reliance mutual fund under Reliance Liquid Fund - Treasury Plan - Institutional Option - Daily Dividend Reinvestment

11 76,780,784 units of SBI mutual fund under SBI Magnum Insta Cash Fund - Daily Dividend Reinvestment

12 39,908,068 units of Tata mutual fund under Tata Floater Fund - Daily Dividend Reinvestment

13 2,089,903 units of Tata mutual fund under Tata Liquid Fund - SHIP - Daily Dividend Reinvestment

14 4,152,801 units of UTI mutual fund under UTI Liquid Cash Plan - Inst - Daily Dividend Reinvestment

15 504,918 units of UTI mutual fund under UTI Treasury Advantage Fund - Daily Dividend Reinvestment

The following mutual fund units were purchased and sold during the previous period :-

1 288,767,315 units of Birla Sunlife mutual fund under Birla Sunlife Cash Plus - Institutional Premium - Daily Dividend Reinvestment

2 396,375,092 units of Birla Sunlife mutual fund under Birla Sunlife Cash Plus - Institutional Premium - Growth

3 22,951,572 units of Birla Sunlife mutual fund under Birla Sunlife Interval Income - Institutional - Quarterly - Series 2 - Growth

4 76,578,715 units of Birla Sunlife mutual fund under Birla Sunlife Liquid Plus - Institutional - Daily Dividend Reinvestment

5 185,222,322 units of Birla Sunlife mutual fund under Birla Sunlife Liquid Plus - Institutional - Growth

6 15,000,000 units of Canara Robeco mutual fund under Canara Robeco FMP - Series 3 - 90 Days - IP - Growth

7 48,919,527 units of Canara Robeco mutual fund under Canara Robeco Liquid Plus Super Institutional - Daily Dividend Reinvestment

8 31,366,504 units of Fidelity mutual fund under Fidelity Cash - SIP - Growth

9 62,263,786 units of Fidelity mutual fund under Fidelity Liquid Plus - SIP - Daily Dividend Reinvestment

10 57,042,071 units of Fidelity mutual fund under Fidelity Liquid Plus - SIP - Growth

11 128,735,017 units of HDFC mutual fund under HDFC Cash Mgmt - Savings Plan - Daily Dividend Reinvestment

12 193,231,349 units of HDFC mutual fund under HDFC Cash Mgmt - Savings Plus Plan - Wholesale - Daily Dividend Reinvestment

13 174,864,026 units of HDFC mutual fund under HDFC Cash Mgmt - Savings Plus Plan - Wholesale - Growth

14 166,891,418 units of HDFC mutual fund under HDFC Floating Rate Income - Short Term Plan - Wholesale - Daily Dividend Reinvestment

15 193,913,572 units of HDFC mutual fund under HDFC Floating Rate Income - Short Term Plan - Wholesale - Growth

16 24,000,000 units of HDFC mutual fund under HDFC FMP 90D (VIII)(3) - Wholesale - Growth

17 62,847,681 units of HDFC mutual fund under HDFC Liquid - Premium Plan - Daily Dividend Reinvestment

18 303,956,967 units of HDFC mutual fund under HDFC Liquid - Premium Plan - Growth

19 41,003,276 units of HDFC mutual fund under HDFC Liquid - Premium Plus Plan - Weekly Dividend Reinvestment

20 23,586,686 units of HDFC mutual fund under HDFC Quarterly Interval -Plan B Wholesale Growth - Growth

21 106,509,667 units of HSBC mutual fund under HSBC Cash - Inst Plus - Daily Dividend Reinvestment

22 155,825,133 units of HSBC mutual fund under HSBC Cash - Inst Plus - Growth

23 146,239,354 units of HSBC mutual fund under HSBC Liquid Plus - IP - Daily Dividend Reinvestment

24 229,632,812 units of HSBC mutual fund under HSBC Liquid Plus - IP - Growth

25 150,719,932 units of ICICI Prudential mutual fund under ICICI Prudential Flexible Income Plan - Daily Dividend Reinvestment

26 208,534,658 units of ICICI Prudential mutual fund under ICICI Prudential Flexible Income Plan - Growth

27 32,963,479 units of ICICI Prudential mutual fund under ICICI Prudential FRF - Plan D - Growth

28 475,076,846 units of ICICI Prudential mutual fund under ICICI Prudential Inst Liquid Plan - Super Iinst - Daily Dividend Reinvestment

29 446,678,300 units of ICICI Prudential mutual fund under ICICI Prudential Inst Liquid Plan - Super Iinst - Growth

30 24,485,319 units of ICICI prudential mutual fund under ICICI Prudential Interval II Quarterly Interval Plan B - Retail Cumulative - Growth

31 49,165,296 units of IDFC mutual fund under IDFC Cash - Super Institutional Plan C - Daily Dividend Reinvestment

32 81,765,530 units of IDFC mutual fund under IDFC Floating Rate -LT-Inst Plan B - Growth

33 24,000,000 units of IDFC mutual fund under IDFC FMP Qtr Series 31 - Growth

34 64,428,611 units of IDFC mutual fund under IDFC Liquid Plus - Investment Plan - Inst Plan B - Daily Dividend Reinvestment

35 15,341,934 units of IDFC mutual fund under IDFC Quarterly Interval - Plan A - Inst - Daily Dividend Reinvestment

36 15,984,797 units of IDFC mutual fund under IDFC Quarterly Interval - Plan A - Inst - Growth

37 18,000,000 units of ING mutual fund under ING Interval - Quarterly-C-Institutional - Growth

38 115,482,014 units of ING mutual fund under ING Liquid Super Institutional - Growth

39 128,337,221 units of ING mutual fund under ING Liquid Plus - Institutional - Growth

40 23,518,230 units of ING mutual fund under ING Vysya Liquid Plus - IP - Growth

41 66,088,565 units of JP Morgan mutual fund under JP Morgan India Liquid Plus - Growth

42 20,913,377 units of Kotak Mahindra mutual fund under Kotak Liquid - Institutional Premium - Growth

43 3,165,849 units of Principal mutual fund under Principal Cash Mgmt LO- Institutional Plan - Growth

44 50,350,378 units of Principal mutual fund under Principal Cash Mgmt LO- Institutional Premium Plan - Daily Dividend Reinvestment

45 150,114,425 units of Principal mutual fund under Principal Floating Rate - FMP - Institutional - Daily Dividend Reinvestment

46 197,490,161 units of Principal mutual fund under Principal Floating Rate - FMP - Institutional - Growth

47 20,583,957 units of Reliance mutual fund under Reliance Liquid - Treasury Plan-Institutional Option - Daily Dividend Reinvestment

48 82,564,435 units of Reliance mutual fund under Reliance Liquid - Treasury Plan-Institutional Option - Growth

49 2,052,210 units of Reliance mutual fund under Reliance Liquid Plus - Institutional - Daily Dividend Reinvestment

50 2,380,814 units of Reliance mutual fund under Reliance Liquid Plus - Institutional - Growth

51 23,091,765 units of Reliance mutual fund under Reliance Liquidity - Daily Dividend Reinvestment

52 36,180,905 units of Reliance mutual fund under Reliance Liquidity - Growth

53 158,916,208 units of Reliance mutual fund under Reliance Medium Term - Daily Dividend Reinvestment

54 21,680,417 units of Reliance mutual fund under Reliance Monthly Interval - Series I Institutional - Growth

55 23,407,582 units of Reliance mutual fund under Reliance Quarterly Interval - Series II Institutional - Growth

56 29,168,603 units of SBI mutual fund under SBI Magnum Insta Cash - Daily Dividend Reinvestment

57 20,444,600 units of SBI mutual fund under SBI SDFS - 90 Days - Growth

58 98,778,982 units of SBI mutual fund under SBI SHF - Liquid Plus - IP - Daily Dividend Reinvestment

59 233,026,709 units of SBI mutual fund under SBI SHF - Liquid Plus - IP - Growth

60 859,255 units of Standard Chartered mutual fund under Standard Chartered Liquidity Manager Plus - Growth

61 259,059,638 units of Tata mutual fund under Tata Floater - Daily Dividend Reinvestment

62 206,755,713 units of Tata mutual fund under Tata Floater - Growth

63 38,774,118 units of Tata mutual fund under Tata Floating Rate - STP - Institutional Plan - Growth

64 2,457,011 units of Tata mutual fund under Tata Liquid - SHIP - Daily Dividend Reinvestment

65 329,827 units of Tata mutual fund under Tata Liquid - SHIP - Growth

13. Balances written back are on account of reconciliation of certain working capital balances pertaining to joint ventures, in which the Company has participating interest.

14. The Company has made equity investments in CIG Mauritius Holding Private Limited (CMHPL) mainly for funding the expenditure pertaining to block SL 2007-0-001 held by Cairn Lanka (Private) Limited (a wholly owned subsidiary of CMHPL). The said investment is carried at cost, as the block is presently under exploration phase.

15. During the previous period, the Company had decided to retrospectively account for stock options using the Intrinsic Value Method as against the Fair Value Method (Black Scholes) followed till the fi nancial year ended 31st December 2007. Accordingly, the excess stock option provision up to 31st December 2007 was reversed during the previous period, resulting in an exceptional gain of INR 155,723 thousand.

16. Details of amounts recoverable from subsidiary companies in which directors are interested are same as disclosed in note 4 (c) above. The balance outstanding as at the year / period end is also the maximum amount outstanding during the year/period. No loans have been given to the subsidiaries, associates, fi rms and companies, in which directors are interested.

17. CHANGE IN FINANCIAL YEAR AND PREVIOUS PERIOD COMPARATIVES

The previous fi nancial period consisted of fi fteen months from 1st January 2008 to 31st March 2009, while the current fi nancial year is for a twelve months period. Accordingly, previous period fi gures in the profi t and loss account and cash fl ow statement are not comparable with current fi nancial year. Previous periods fi gures have been regrouped where necessary to confi rm to current years classifi cation.

 
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