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Notes to Accounts of Quadrant Televentures Ltd.

Mar 31, 2015

1. Background

(a) Nature of business and ownership

Quadrant Televentures Limited (Formerly known as HFCL Infotel Limited) ('the Company' or 'QTL'), Unified Access Services Licensee for Punjab Telecom Circle (including Chandigarh and Panchkula), is providing complete telecommunication services, which includes voice telephony, both wireline and fixed wireless, CDMA and GSM based mobiles, internet services, broadband data services and a wide range of value added service viz., centrex, leased lines, VPNs, voice mail, etc. The services were commercially launched in October 2000. As on March 31, 2015, the Company has an active subscriber base of over 3,119,797.

The Company was incorporated on August 2, 1946 with the name of The Investment Trust of India Limited (ITI) which was subsequently changed to HFCL Infotel Limited on May 12, 2003. This was done pursuant to a Scheme of amalgamation (the Scheme), approved by the Hon'ble High Court of the Punjab and Haryana at Chandigarh and Hon'ble High Court of the State of Tamil Nadu at Chennai on March 6, 2003 and March 20, 2003, respectively, whereby the erstwhile HFCL Infotel Limited (name earlier allotted to the transferor Company) ('erstwhile HFCL Infotel') was merged with the Company with effect from September 1, 2002. As per the Scheme envisaged, the Company's then existing business of hire purchase, leasing and securities trading was transferred by way of slump sales to its wholly owned subsidiary, Rajam Finance & Investments Company (India) Limited ('Rajam Finance') with effect from September 1, 2002. Rajam Finance was renamed as The Investment Trust of India Limited with effect from June 17, 2003 and it ceased to be the subsidiary of the Company with effect from September 30, 2003, due to allotment of fresh equity by Rajam Finance to other investors.

The Company, during the year ended March 31, 2004, surrendered its license granted by Reserve Bank of India ('RBI') to carry out NBFC business. RBI confirmed the cancellation of the NBFC license as per their letter dated May 24, 2004.

On September 24, 2010 the name of Company was changed From HFCL Infotel Limited to Quadrant Televentures Limited.

(b) License Fees

The Company obtained licence for Basic Telephony Service for the Punjab Telecom Circle (including Chandigarh and Panchkula) by way of amalgamation of the erstwhile HFCL Infotel with the Company. Erstwhile HFCL Infotel had obtained this licence under fixed license fee regime under National Telecom Policy ('NTP') 1994, valid for a period of 20 years from the effective date, and subsequently migrated from the fixed license fee regime to revenue sharing regime upon implementation of NTP 1999. Further to the Telecom Regulatory Authority of India's ('TRAI') recommendations of October 27, 2003 and the Department of Telecommunications ('DoT') guidelines on Unified Access (Basic & Cellular) Services Licence ('UASL') dated November 11, 2003, the Company migrated its licence to the UASL regime with effect from November 14, 2003. A fresh License Agreement was signed on May 31, 2004. Pursuant to this migration, the Company became additionally entitled to provide full mobility services. HFCL Infotel also entered into a Licence Agreement dated June 28, 2000, and amendments thereto, with DoT to establish maintain and operate internet service in Punjab circle (including Chandigarh and Panchkula).

During the year ended March 31, 2008, the Company has deposited the entry fee to the Department of Telecommunication ('DOT') for the use of GSM Technology in addition to CDMA technology being used under the existing (UASL) for the Punjab Service Area. The UASL has since been amended to incorporate the license for use of GSM technology on January 15, 2008 vide DOT's letter number F.No.10-15/2004/BS.II/ HITL/ Punjab/17 dated January 15, 2008. The Company has launched its GSM services on March 29, 2010 in Punjab Circle.

With effect from August 1, 1999, the Company is required to pay revenue share license fees as a fraction of Adjusted Gross Revenue ('AGR') on UASL, The revenue share fraction other than income from Internet Services was set at 10 per cent of AGR with effect from August 1, 1999 and was reduced to 8 per cent of AGR with effect from April 1, 2004. In addition, spectrum charges calculated at 3 per cent of the AGR earned through the wireless technology is payable under the license agreement.

With effect from July 01, 2012 Income from internet services is included as the service revenue for the purpose of the calculation of AGR under Internet Services Licence as it is governed by a separate ISP licence between the Company and the Department of Telecommunications ('DoT').The revenue share fraction is set at 4% for July 01, 2012 to March 31, 2013 and 8% from April 1, 2013 onwards of income from internet revenue ('AGR' under Internet Service Licence).

(c) Project Financing

The Company's project was initially appraised by Industrial Development Bank of India ('IDBI') during the year ended March 31, 2000.

Pursuant to the migration to UASL regime, the consortium of lenders, led by IDBI, through the Corporate Debt Restructuring ('CDR') mechanism approved an overall restructuring of the liabilities of the Company and thereby revised the peak funding requirements.

Further, the CDR Empowered Group has approved the proposal of the Company for expansion of services, change in the scope of the project, cost of project and means of finance and restructuring of debt as per the reworked restructuring scheme dated June 24, 2005.

2. NOTES FORMING PART OF THE FINANCIAL STATEMENTS

Commitments and contingent liabilities not provided for in respect of:

(a) The Company has certain income tax related matters pending with Income Tax Appellate Tribunal for the Assessment Year 2001-02 aggregating to Rs 7,004,687 as Principal amount and Interest amount of Rs. 8,195,484 (March 31, 2014 - Rs 7,004,687 as Principal amount and Interest amount of Rs 7,354,921).

(b) The Wireless Finance Division of Department of Telecommunications has claimed an outstanding of Rs 29,585,211 towards the Spectrum Charges dues from year 2001 to year 2005 vide their letter 1020/48/2005- WFD dated October 7, 2005. The Company has submitted its reply to the department on October 25, 2005 confirming the total due of Rs 29,472 only and paid the said amount. The Wireless Finance Division of Department of Telecommunications has subsequently claimed Rs 39,310,176 vide letter number 1020/48/2005-WFD dated September 13, 2006 towards the Spectrum Charges dues from year 2001 to year 2006. The Company has submitted a detailed reply on October 31, 2006. During the year ended March 31, 2008, out of the above demand, the Company has deposited Rs 1,801,241 under protest towards the interest due till August 31, 2006. Wireless Finance Division of Department of Telecommunications has updated their claim to Rs 70,604,092 towards Spectrum Charges dues from January 1, 2000 to September 30, 2008 vide letter number 1020/29/WR/07-08 dated October 24, 2008. The Company has once again made a written representation vide its letter dated December 8, 2008 and August 12, 2009. Subsequently DOT has revised their demand to Rs 70,528,239 vide Letter No 1020/48/WFD/2005-06/ Dated September 6, 2010 to which the Company has made representations vide letter dated September 23, 2010, February 3,2011 and March 17,2011. Subsequently DOT has revised their demand to Rs 149,960,749 vide Letter No 1020/48/WFD/2005-06/ Dated January 3, 2013 to which the Company has made representations vide letter dated January 18, 2013. The reply of which has not been received. Based on the legal opinion, the Company is confident that no liability would accrue regarding the same in future.

(c) During the year ended March 31, 2007, Bharat Sanchar Nigam Limited ('BSNL') has raised supplementary bill dated August 10, 2006 for Rs 167,614,241 towards Inter-connect Usage Charges ('IUC) and Access Deficit Charges ('ADC') for the period November 14, 2004 to August 31, 2005 on the Company. BSNL further raised invoices to the tune of Rs 99,346,533 on similar grounds for the period September 1, 2005 to February 28, 2006.These charges are on account of unilateral declaration of the Company's Fixed Wireless and Wire line Phone services as Limited Mobility Services by BSNL. The Company has submitted its reply to BSNL on August 23, 2006 asking for the calculation/basis for the additional amount raised towards IUC and ADC by BSNL for Rs 167,614,241. Subsequently, BSNL issued a disconnection notice on August 26, 2006 which required the payment of Rs 208,236,569 (including Rs 167,614,241). The Company has submitted details to BSNL for payments already made for Rs 40,622,328. The Company has approached Hon'ble TDSAT on the subject matter and a stay order was granted on Company's petition no 232 of 2006 against the disconnection notice on September 21, 2006. BSNL Jalandhar Office subsequently raised a supplementary bill dated March 20, 2007 for Rs 5,206,780, to which the Company has submitted its reply on March 23, 2007 intimating that the matter being sub-judice and pending decision by the Hon'ble TDSAT, no coercive action be taken against the Company. The hearing on the matter has been completed and the Hon'ble TDSAT has pronounced the judgment on May 21, 2010 in Company's favour and has directed that BSNL and the Company should exchange relevant information and reconcile the differences. BSNL went for appeal in Hon Supreme Court vide CA No-7435 of 2010.The matter is yet to be listed in SC for hearing. In the absence of information from BSNL, the Company is not in a position to determine the liability with respect to this matter. The Company, based on expert legal opinion, believes that there would be no financial liability against such bills and accordingly, has not recorded any liability towards the IUC and ADC supplementary bills during the period ended March 31, 2015.

(d) The Company is in receipt of Show Cause Notice dated June 4, 2007 from Department of Telecommunications ('DoT') for non fulflment of first year's roll-out obligations of Unified Access Service License ('UASL') Agreement for Punjab Service Area, where in the licensee as per the terms of the license agreement was required to ensure that at least 10% of the District Headquarter / Towns are covered in the first year of the date of migration to UASL which commences from the date of Test Certificate issued by Telecom Engineering Centre ('TEC'). As stated by DoT in the Show Cause Notice issued, the Company has violated the conditions of UASL and accordingly Liquidated Damages of Rs 70,000,000 has been imposed and DoT has also sought explanation within 21 days as to why they should not take action against the Company under the UASL Agreement to which the Company has replied on September 27, 2007 that the Company has not violated the conditions of UASL and based on expert legal advice, the Company believes that there would be no financial liability against such claims of DoT and accordingly, has not recorded any liability towards the Liquidated Damages during period ended March 31, 2015.

(e) The Company is in receipt of a demand of Rs 433,158,340 from Bharat Sanchar Nigam Limited ('BSNL') on December 20, 2008 on account of unilateral revision of access charges vide its letter dated April 28, 2001 for the period from June 2001 to May 2003, in contravention of the Interconnect Agreement and TRAI Regulations. The Company, Association of Unified Service Providers of India 'AUSPI' (erstwhile Association of Basic Telephone Operators 'ABTO') and other Basic Service Operators contested aforesaid revision in the rates of access charges before Telecom Dispute Settlement Appellate Tribunal ('TDSAT'). TDSAT vide its reasoned and detailed judgement dated April 27, 2005 allowed the refund claims and struck down the unilateral revision in the rates of access charges by BSNL and held that Telecom Regulatory Authority of India ('TRAI') is the final authority for fixing of access charges and access charges would be payable as rates prescribed by the TRAI and as per the Interconnect agreements. BSNL preferred an appeal in Hon'ble Supreme Court against the order of TDSAT and an interim stay was granted on October 19, 2006 Therefore aggrieved by such unilateral action on the part of BSNL by raising aforesaid demand and disturbing the status-quo, applications were moved by the Company, AUSPI and other Operators in the Hon'ble Supreme Court vide C.A No.5834-5836 of 2005 that was listed for hearing on February 9, 2009 and Hon'ble Supreme Court passed an order clarifying its previous order of October 19, 2006 and stayed the refunds claim against the BSNL there by upholding the TDSAT order dated April 27, 2005 whereby BSNL is refrained from raising the access charges demand. The BSNL went for appeal in Hon Supreme Court vide C.A No 5834-5836 of 2005 BSNL Vs ABTO & Others. The matter was Tagged with CA-5253 of 2010 to decide the preliminary objection raised by TRAI on the TDSAT"s jurisdiction. Next date of hearing awaited. The Company based on the legal opinion believes that there would be no financial liability against this demand and has accordingly not recorded any liability towards access charges during the period ended March 31, 2015.

(f) The Company is in receipt of demand of Rs. 7,000,000 from Department of Telecommunications ('DoT'), Licensing Group (Access Services) vide their letter dated October 21, 2009 for issuance of SIM cards on fake ID in Punjab Service Area, where in the Licensee was required to ensure adequate verification of each and every customer before enrolling him as a subscriber. The Company has replied to DoT vide letter dated November 14, 2009 that the levy of penalty imposed by DoT was based on verification done by an agency other than the DOT - TERM Cells and the exercise was carried out suo-moto and in complete disregard of the established procedures and guidelines laid by DoT. Accordingly the Company has requested DoT to have this validation done by the DOT - TERM Cell. The Company believes that there would be no financial liability against this demand and has accordingly not recorded any liability towards penalty during the period ended March 31, 2015.

(g) As per The Telecommunication Interconnect Usage Charges Regulations 2003, had fixed intra circle carriage charges payable per minute for all intra circle calls irrespective of the distance between originating and terminating points. Bharat Sanchar Nigam Limited ('BSNL') was charging additional amounts based on distance for the period October 2007 to March 2009 which was against the telecommunication Interconnect Usage Charges Regulations 2003 of TRAI. The matter was raised to Hon'ble TDSAT by service providers to which Hon'ble TDSAT vide it's order dated May 21, 2010 upheld the demand of BSNL. The liability of the Company on basis of BSNL demand amounted to Rs 4,110,959. Subsequently TRAI appealed against the order of TDSAT in the Hon'ble Supreme Court vide C,A No 271-281 of 2011. The matter is sub-judice and the final decision of the Hon'ble Supreme Court in the matter is still awaited.

(h) The Company is in receipt of a Show Cause Notice amounting to Rs 1,020,00,000 dated May 17, 2013 from Department of Telecommunications ('DOT') purportedly for the non-compliance with Electro Magnetic Frequency Radiation Norms ('EMF Radiation Norms') prescribed by DOT. The Company on May 21, 2013 has represented to DOT that the Company is fully compliant with the specified limits of the EMF Radiation Norms and the Company has also submitted the 'Self Certifications' in respect of all the 204 Base Transceiver Station ('BTS') set up in the Punjab Telecom Circle as mentioned in the Show Cause Notice well within the stipulated last date of March 31, 2011 as prescribed by DOT. Company filled petition in TDSAT vide petition No.294 of 2013.The matter tagged with Petition No 271 of 2013 and the arguments are over in the case and the order is reserved. The Company is confident that no such liability will arise and no further communication is received from DOT with this regard.

(i) The DOT (Term Cell) Punjab has issued another Show Cause Notice to the company making a demand for Rs. 3,23,500,000 DOT vide letter number 8-8/EMR- QTL/TERM-PB/2013/15C dated December 30,2013, wherein the TERM Cell, Punjab has imposed a penalty for alleged non compliance for Emission Magnetic Frequency ("EMF') radiation norms with respect to 647 Base Trans receiver Stations ('BTSs') as per list attached with said letter, in terms of the Unified Access Services ('UAS') License granted to the company. The Company has since submitted its response to the TERM Cell vide letter dated January 8, 2014, in reply to above, the Term Cell has now issued an amended Show Cause Notice vide letter no. 8-8/EMR-QTL/TERM-PB/2013/24C dated August 7, 2014 superseding its earlier Show Cause Notice and revising the amount of penalty to Rs. 2,670,00,000 for 534 BTS sites (in place of earliesr show cause demanding 32,35,00,000 for 647 BTS sites). We fled a case in TDSAT and the matter is listed vide Petition No. 423 of 2014.

(j) BSNL had raised demand of Rs. 269,000,000 on the Company under Clause 6.4.6 of the Interconnect Agreement in connection with the FWT Services being provided by the Company. The Company had challenged the demand through Petition No. 232 of 2006. The TDSAT vide order dated 21-05-2010 had set aside the demand raised by BSNL. BSNL therefore fled an Appeal the Hon'ble Supreme Court.

(k) The Company is in receipt of a Show Cause Notice for assessment of Spectrum Charges from Department of Telecommunications ('DOT') purportedly for disallowance of deductions claimed in audited AGR for the year 2007-08 amounting to Rs 70,870,158 vide letter no. 17-89/2013/LF-II-HFCL dated September 23, 2013, for the year 2008-09 amounting to Rs 43,355,118 vide letter no. 17-90/2013/LF-II-HFCL dated September 24, 2013, for the year 2012-13 amounting to Rs 3,028,932 vide letter no. 17-8/2014/LFA-Quadrant dated April 20, 2015. The Company has made a written representations for the year 2007-08 vide its letter no QTL/Reg/06- 11/08 dated November 29, 2013, for the year 2008-09 vide its letter no QTL/Reg/06-11/07 dated November 20, 2013. The company is also in receipt of demand of Spectrum Charges of the year 2012-13 in respect of CDMA service amounting to Rs. 6,279,256 vide letter no. Spec/2013-14/538 and GSM Service amounting to Rs. 229,12,294 vide letter no. Spec/2013-14/540 dated July 25, 2014 on account of MWA spectrum charges. The Company has made a written representation for vide letter no. QTL/Spectrum/12-13/04 for CDMA and QTL/Spectrum/12-13/05 for GSM. The Company is confident that no liability would accrue regarding the same in future.

(l) The Company's pending litigations comprise of claims against the Company and proceedings pending with Tax Authorities / Statutory Authorities. The Company has reviewed all its pending litigations and proceedings and has made adequate provisions, wherever required and disclosed the contingent liabilities, wherever applicable, in its financial statements. The Company does not expect the outcome of these proceedings to have a material impact on its financial position.

(m) The Company periodically reviews all its long term contracts to assess for any material foreseeable losses. Based on such review wherever applicable, the Company has made adequate provisions for these long term contracts in the books of account as required under any applicable law/accounting standard.

(n) As at March 31, 2015 the Company did not have any outstanding long term derivative contracts.

3. During the year ended March 31, 2015, the Company has incurred losses of Rs 2,398,930,498/- resulting into accumulated loss of Rs 16,290,302,925/- as at March 31, 2015 which has completely eroded its net worth and has a net current liability of Rs 11,325,415,028/-The ability of the Company to continue as a going concern is substantially dependent on its ability to successfully arrange the remaining funding and achieve financial closure to fund its operating and capital funding requirements and to substantially increase its subscriber base. The management in view of its business plans and support from significant shareholders is confident of generating cash flows to fund the operating and capital requirements of the Company. Accordingly, these statements have been prepared on a going concern basis.

4. In the opinion of the Board and to the best of their knowledge and belief, the value of realization in respect of the Current assets, loans and advances in the ordinary course of business would not be less than the amount at which they are stated in the Balance Sheet and the provision for all known and determined liabilities is adequate and not in excess of amount reasonably required.

5. In absence of any taxable income, no provision for the current tax has been made. Also, in view of losses and unabsorbed depreciation, considering the grounds of prudence, deferred tax assets is recognized to the extent of deferred tax liabilities and balance deferred tax assets have not been recognized in the books of accounts.

6. The Company has carried out Impairment Test on its Fixed Assets as on March 31, 2015 and the Management is of the opinion that there is no asset for which impairment is required to be made as per Accounting Standard-28 on Impairment of Assets issued by ICAI . (Previous year Rs. Nil).

7. Share Capital

a. As of date, the entire paid up Equity Share Capital of the company comprising of 612,260,268 equity shares of Rs 1/- each, stands listed on the Bombay Stock Exchange (BSE). Consequent upon the issuance of 86,743,116 equity shares allotted pursuant to the conversion of 7,551,178 OFCDs along with interest accrued thereon to the Financial Institution /Banks on July 8, 2009, the non-promoter shareholding in the Company increased from 38.02% to 46.80%, and the Promoters' Shareholding decreased from 61.97% to 53.19%, whereupon the Company requested BSE to grant listing of unlisted shares without insisting upon the stipulation of the condition for 'Offer for Sale. BSE, vide its letter DCS / AMAL / RCG/ GEN / 1108 / 2008- 09 dated February 13, 2009, inter-alia, agreed to exempt the condition imposed on the Company to comply with requirement of making an offer for sale in the domestic market, subject to compliance of certain procedural requirements including 'three years lock-in' period of 25% of equity shares that had been issued pursuant to the merger on June 17, 2003 i.e. 25% of 432,000,250 shares (108,000,063 equity shares). The Company had - in compliance with the conditions stipulated by BSE - placed under lock-in 108,000,063 equity shares on May 14, 2009 for a period of 3 years ending May 15, 2012. The Company has also complied with all other necessary requirements pursuant to the letter from BSE dated February 13, 2009 related to 83,070,088 equity shares issued pursuant to corporate debt restructuring scheme. BSE had also agreed to grant in-principle approval for allotment of 86,743,116 equity shares to be issued to Banks and financial institutions on conversion upon fling of necessary listing application, which the Company has fled, vide its letter no. HITL/S&L/S-01/09/472 and 473 dated March 07, 2009. Consequently, vide their notice 20090514-12 dated May 14, 2009 hosted on it's website BSE had granted Listing and Trading permission in respect of the 432,000,250 equity shares issued pursuant to scheme of amalgamation. BSE had also granted Listing approval in respect of the 83,070,088 equity shares allotted as aforesaid vide their letter number DCS/PREF/DMN/FIP/239/09-10 dated May 25, 2009 and the shares were Listed by BSE vide its notice number 20090605-20 dated June 5, 2009.

b. Out of the total paid up equity share capital comprising of 612,260,268 equity shares, 86,743,116 equity shares of Rs.10/- each (allotted on July 08, 2009, after obtaining in principle approval from the BSE and MSE. upon the conversion of Optionally Fully Convertible Debentures (OFCDs) allotted pursuant to the Corporate Debt Restructuring (CDR Cell) Consequently, the Listing approval in respect of these shares was granted by Bombay Stock Exchange (BSE) vide its letter number 20090813-08 dated August 13, 2009 w.e.f. August 14, 2009 and by the Madras Stock Exchange Limited vide its letter no.MSE/LD/PSK/738/215/09 dated September 01, 2009 w.e.f. September 01, 2009.

c. Out of the total paid up equity share capital comprising of 612,260,268 equity shares, , 326,705,000 equity shares of Rs.10/- each representing 53.3604% of the total Paid up share capital of the Company - which were earlier held by Himachal Futuristic Communications Limited - the erstwhile promoter or Holding Company), were acquired by M/s Quadrant Enterprises Private Limited on 03rd April, 2010 in compliance with the SEBI Exemption Order in pursuance of the proposal for settlement / change of management of the Company approved under the New Restructuring Scheme as approved by the Corporate Debt Restructuring Cell (CDR Cell) on August 13, 2009.

d. Pursuant to the Company's application in this regard, for Voluntary Delisting pursuant to the provisions of regulation 6(a) and 7(1) of the Securities and Exchange Board of India (Delisting of Equity Shares) Regulation, 2009, the Madras Stock Exchange (MSE), MSE has vide its letter dated March 15, 2011, accepted and accorded its consent to the Voluntary Delisting of the Company's shares vide its letter No. MSE/LD/PSK/731/109/11 dated 15th March, 2011 accepting the Voluntary delisting of the company's equity shares from the MSE.

e. Pursuant to the stipulation of CDR package dated August 13, 2009 with respect to Reduction of Issued, Subscribed & Paid up Equity Share Capital the face value of the Paid Up Equity Shares was required to be reduced to Re. 1 per equity share (from the face value of Rs. 10 per equity share), i.e. reduction in face value of Issued, Subscribed & Paid up Equity Share Capital by 90%, The Company had obtained the approval of shareholders for Reduction of Equity Share Capital in the Extra Ordinary General Meeting held on July 18,2012, subject to confirmation by Bombay Stock Exchange 'BSE' and the Hon'ble Bombay High Court. Subsequently, BSE vide its letter number DCS/AMAL/RT/24(f)/295/2013-14 dated October 23, 2013 conveyed it's No Objection Certificate 'NOC to file the scheme for Reduction of Equity Share Capital with the Hon'ble Bombay High Court. Accordingly, the Company had fled the Reduction of Equity Share Capital Petition with Hon'ble Bombay High Court on March 20, 2014.

f. The Hon'ble Bombay High Court vide its Order dated July 4, 2014 approved the petition of the Company for Reduction of Equity Share Capital. Subsequently, the Registrar of Companies, Mumbai vide its Order dated September 3, 2014 registered the aforesaid order of Hon'ble Bombay High Court. The Reduction of Capital (in terms of the CDR Package) was duly effected in the Books of Accounts of the Company and had also been effected in the "Listed Equity Share Capital" on BSE Ltd. after updating by NSDL and CDSL and Trading in respect of the reduced equity share capital comprising of 61,22,60,268 equity shares with the reduced face value and paid up value of Re. 1/- per share, had commenced on BSE Ltd. w.e.f. December 29, 2014.

8. Secured Loans

a. As per the CDR Scheme approved on March 10, 2004 and subsequently approved on June 4, 2005, the Lenders have signed Master Restructuring Agreement ('MRA') for restructuring of their Debts and Security Trusteeship Agreement, whereby the Lenders have entered into an agreement and appointed IDBI Trusteeship Services Limited (herein after referred as "ITSL") as their custodian of security. On November 11, 2005, the charges were registered in favour of the ITSL for Rupee Term Loans, for providing Specific Credit Facility, for Working Capital Assistance and Zero percent Secured OFCDs. The same are secured by first pari passu charge on immovable properties of the Company situated at Kandivali (East), Mumbai and properties situated at Mohali & Jalandhar under equitable mortgage, first pari passu charge of hypothecation of movable properties of the Company including movable plant & machinery, machinery spares, tools & accessories and other movables including book debts by way of hypothecation, both present and future. Further, the same are also secured by assignment of all rights, title, benefits, claims and interest in, under the project documents, insurance policies, all statutory, government and regulatory approvals, permissions, exemptions and waivers on pari passu basis. Subsequently, pursuant to the reworked restructuring scheme approved under CDR mechanism on June 24, 2005, the Company has entered into amendatory Master Restructuring Agreement and amendatory Security Trusteeship Agreement ('STA') on March 9, 2006, whereby Centurion Bank of Punjab has also joined as one of the lenders and has agreed to appoint ITSL as their custodian for security and signed the STA in line with other lenders in consortium.

On the request of the Company, Corporate Debt Restructuring Cell ('CDR') vide their letter no CDR (JCP) No 138 / 2009-10 ('CDR Letter') dated May 20, 2009 has approved the interim revised restructuring package. The revised restructuring package inter alia includes funding of interest from July 1, 2008 to October 31, 2009 on simple interest basis. Funded Interest on Term Loan ('FITL') would not carry any interest and the FITL shall be repaid in 16 equal monthly instalments commencing from December 1, 2009, and has rescheduled the principle instalments from August 1, 2008 to November 1, 2009 so as to be repayable from December 1, 2009 to March 1, 2011. Corporate Debt Restructuring ('CDR') cell vide their letter no CDR (JCP) No 563 / 2009-10 dated August 13, 2009 has approved a new restructuring scheme, which includes the induction of strategic investor / change of management and settlement proposal for Term Lenders. All the term lenders have given their acceptance to the new restructuring scheme. The new restructuring scheme has been made effective from April 1, 2009 and accordingly an amount of Rs 373,097,077 towards FITL from July 1, 2008 to March 31, 2009 has been considered as term loan.

In pursuant to the new restructuring scheme vide letter no. CDR (JCP) No 563 / 2009-10 dated August 13, 2009, The Company had allotted 15,984,543, 2 % Cumulative Redeemable Preference Shares of Rs.100 each aggregating to Rs.1,598,454,300 on November 9, 2010, to Financial Institution / Banks in conversion of 25% of their outstanding loans as on April 01, 2009.

In compliance with the aforesaid new restructuring scheme dated August 13, 2009 the Company had repaid on July 06, 2010 and July 07, 2010 an amount of Rs 1,598,454,522 being 25% of their outstanding loans as on April 01, 2009

In compliance with the aforesaid new restructuring scheme dated August 13, 2009, the Company had allotted 31,969,088 Redeemable Secured Non -Convertible Debenture ('NCD') of Rs.100 each aggregating to Rs.3,196,908,800 on January 21,2013, to Financial Institution / Banks in conversion of 50% of their outstanding loans as on April 01, 2009.

The Company has complied with all the terms and conditions of Corporate Debt Restructuring Scheme as approved by the CDR Cell letter dated August 13, 2009.

b. The above mentioned security has been further extended to the amount of secured loans and working capital assistance, together with the interest, compound interest, additional interest, default interest, costs, charges, expenses and any other monies payable by the Company in relation thereto and in terms with MRA and STA entered into between the lenders and ITSL.

9. Unsecured Loans

a. On October 16, 2004, the Company issued 1,667,761 zero percent Non Convertible Debentures ('NCDs') of Rs 100 each in lieu of interest accrued on term loans from a financial institution and a bank for the period April 1, 2003 to December 31, 2003. The 'NCD's earlier redeemable at par on March 31, 2014, then at par on March 31, 2016, are now redeemable at par on March 31, 2024 after repayment of the term loans as per CDR Schemes.

b. The Company under the terms of the agreement dated May 1, 2007 had taken convertible loan to facilitate expansion and development of businesses amounting to Rs 499,499,886 from Infotel Digicomm Private Limited. The convertible loan was repayable on demand with an option to convert the Loan into Equity Shares, subject to getting necessary approvals and subject to applicable pricing guidelines as per SEBI and other laws and regulations. On September 16, 2009 Infotel Digicomm Private Limited ('IDPL') had entered into an assignment agreement with Domebell Electronics India Private Limited ('DEIPL'), wherein IDPL had assigned the above convertible loan of Rs 499,499,886 to DEIPL. All the terms and conditions relating to the convertible loan remained the same. The interest accrues at the end of each quarter. During the year ended March 31, 2010 the Company has provided for interest amounting to Rs 14,984,997 @ 12% to IDPL for the three months ended June 30, 2009. DEIPL on the basis of the assignment agreement dated September 16, 2009 has a right on the interest accruing from July 1, 2009 onwards. DEIPL have agreed to waive off the interest from July 1, 2009 till March 31, 2015, therefore no provision for such interest has been made by the Company. Consequent to the addendum to the assignment agreement, the convertible loan from DEIPL is now repayable after 7 years from the date of assignment agreement dated September 16, 2009.

c. The Company under the terms of the agreement dated May 1, 2007 had taken buyer's credit facility to facilitate funding of the telecom project amounting to Rs 410,740,832 from Infotel Business Solutions Limited. The loan carries 12% interest and was repayable on demand. Infotel Business Solutions Limited had the option to convert the loan including interest accrued into equity shares, subject to applicable pricing guidelines as per SEBI and other laws and regulations. On September 16, 2009 Infotel Business Solutions Limited ('IBSL') has entered into an assignment agreement with Domebell Electronics India Private Limited ('DEIPL'), wherein IBSL has assigned the above buyer's credit facility of Rs 410,700,000 to DEIPL. All the terms and conditions relating to the buyer's credit facility remained the same. The interest accrues at the end of each quarter. During the year ended March 31, 2010 the Company has provided for interest amounting to Rs 12,322,225 @ 12% to IBSL for the three months ended June 30, 2009. and accordingly DEIPL on the basis of the assignment agreement dated September 16, 2009 has a right on the interest accruing from July 1, 2009 onwards DEIPL has agreed to waive off the interest from July 1, 2009 till March 31, 2015, therefore no provision for such interest has been made by the Company. Consequent to the addendum to the assignment agreement, the convertible loan from DEIPL is now repayable after 7 years from the date of assignment agreement dated September 16, 2009.

d. The Company had taken an unsecured loan on July 06, 2010 of Rs.1,598,500,000 @ 8% per annum, the interest accrues at the end of each quarter. The lender has agreed to waive off the interest from July 06, 2010 to March 31, 2015, therefore no provision for said interest has been made by the Company. The aforesaid unsecured loan is repayable on demand after 7 years from the commencement of the unsecured loan.

10. Trade Payables include amount payable to Micro and Small Enterprises as at March 31, 2015 of Rs 405,264 (March 31, 2014 - Rs. 337,208). The information as required to be disclosed under the Micro, Small and Medium Enterprises Development Act, 2006 has been determined to the extent such parties have been identified on the basis of information and records available with the Company.

Information for the supplier covered under the Micro, Small and Medium Enterprise Development Act, 2006, as at March 31, 2015 is as under -

11. The Company had received advance of Rs 9,164,986,433 (March 31, 2014 Rs. 6,846,046,047) to fund the entry fee for using GSM Technology under the existing Unified Access Services License (UASL) and business operations for Punjab Service Area. The same is included in Other Current Liabilities. No interest is payable on the said advance.

12. Operating leases Company as a Lessee

a. The Company has entered into various cancellable lease agreements for leased premises. Gross rental expenses for the year ended March 31, 2015 is Rs 89,807,810 (March 31, 2014 – Rs 74,465,642).

b. The Company has entered into site sharing agreements with other operators for sharing of their infrastructure sites. During the year, the Company has incurred Rs 577,608,841 (March 31, 2014 – Rs 540,809,201) towards infrastructure sharing expenses.

The escalation clause includes escalation at various periodic levels ranging from 0 to 50%, includes option of renewal from 1 to 99 years and there are no restrictions imposed on lease arrangements.

Company as a Lessor

a. The Company has entered into cancellable site sharing agreements with other operators for sharing of its infrastructure sites. During the year, the Company has accrued Rs 30,239,700 (March 31, 2014- Rs 13,299,070) towards site sharing revenue.

b. The Company has entered into a non-cancellable lease arrangement to provide approximately 8,357.42 Fiber pair kilometers of dark fibre on indefeasible right of use (IRU) basis for a period of 15 years. The gross block, accumulated depreciation and depreciation expense of the assets given on IRU basis is not readily determinable and hence not disclosed. In respect of such leases, rental income of Rs 51,735,329 (March 31, 2014- Rs 51,380,540) has been recognized in the Statement of Profit and Loss for the period ended March 31, 2015.

Further lease receipts (under non-cancellable operating leases) will be recognized in the Statement of Profit and Loss of subsequent years as follows:-

13. With effect from April 01, 2014, the company has revised the useful life of some of its fixed assets to comply with the useful life as prescribed by schedule II to the Companies Act, 2013. As per Note 7 of Part C of Schedule II to the Companies Act, 2013 the carrying amount of the asset as on the date has to be depreciated over the remaining prescribed useful life of the assets. In case of fixed assets where the use full life was Nil as at April 01, 2014, the Company has adjusted the net residual value aggregating to Rs. 4,687,636 from retained earnings. Further, due to change in rate of depreciation as per Schedule II of the Act during the year, the depreciation for the year is higher by Rs. 89,51,674 and loss is higher by Rs. 89,51,674.

14. Segmental Reporting

The primary reporting of the Company has been performed on the basis of business segments. The Company has only one business segment, which is provision of unified telephony services. Accordingly, the amounts appearing in these financial statements relate to this primary business segment. Further, the Company provides services only in the State of Punjab (including Chandigarh and Panchkula) and, accordingly, no disclosures are required under secondary segment reporting.

15. Related Party Disclosures

As required under Accounting Standard 18 on "Related Party Disclosures", the disclosure of transactions with related parties as defined in the Accounting Standard are given below:

* All transactions with wholly owned subsidiary are with Infotel Tower Infrastructure Private Limited.

** Managerial remuneration (inclusive of employer's PF contribution and gratuity) paid to key management personnel include Rs 2,749,695 (March 31, 2014 - Rs 3,017,365) paid to Chief Financial Officer and Rs 1,665,800 (March 31, 2014 - Rs 1,588,097) paid to Manager.

16. Unclaimed deposits from public

The Company had surrendered its NBFC licence granted by the Reserve Bank of India ('RBI') for carrying out the NBFC business during the year ended March 31, 2004. All the unpaid / unclaimed deposits as on September 15, 2003 and the interest accruing thereon as on that date, were transferred to an Escrow Account in February 2004. On August 10, 2004, the Company obtained the approval of the shareholders for the removal of NBFC related objects from the Memorandum of Association. Further, the Company also submitted a letter dated July 7, 2004 for compliance and RBI vide its letter dated July 30, 2004 gave some concessions from compliance and advised the Company to follow certain instructions till the balance in the escrow account is settled. The entire amount lying in the Escrow Account has either been repaid to the Depositors or transferred to the Investor Education and Protection Fund of the Central Government.

The entire amount lying in the Escrow Account with the Oriental Bank of Commerce, Mumbai has either been repaid to the Depositors or transferred to the Investor Education and Protection Fund of the Central Government on the due date. During the year, an amount of Rs.10,86,059/- which was credited by the Bank into the Escrow Account has also been transferred to the Investor Education and Protection Fund.

17. Debenture Redemption Reserve

Pursuant to the CDR scheme on October 16, 2004, the Company had issued unsecured Zero% Non Convertible Debenture ('NCD') (Erstwhile OFCDs) aggregating to Rs 166,776,100 repayable as on March 31, 2016. Pursuant to the new restructuring scheme dated August 13,2009 the Company has to allot secured Non Convertible Debenture ('NCD') for Rs 3,196,909,043 to Financial institution and Banks equivalent to 50% of their outstanding loans as on April 01,2009 which shall be issued on completion of such approvals and conditions precedent. As per section 117C (1) of the Companies Act, 1956, a debenture redemption reserve ('DRR') is to be created to which adequate amounts are to be credited out of the profits of each year until such debentures are redeemed.

During the year ended March 31, 2015, the Company has incurred loss of Rs 2,398,930,498. Hence, in accordance with the clarification received from the Department of Company Affairs vide circular No 6/3/2001-CL.V dated April 18, 2002, the Company has not created Debenture redemption reserve.

18. Balances of some of the trade receivables and trade payables are subject to confirmations from the respective parties and consequential reconciliations/adjustments arising there from, if any. The management however doesn't expect any material variances.

19. Previous year's figures have been regrouped and reclassified wherever necessary and the figures have been rounded off to the nearest rupee.


Mar 31, 2014

1. The cash flow statement has been prepared under the indirect method as set out in the Accounting Standard 3 on Cash Flow Statement notifi ed under Companies (Accounting Standard) Rules 2006, (''as amended'')

2. Figures in brackets indicate cash outflow.

3. Finance expenses includes interest accrued but not due on secured loan as amounting to Rs 95,907,293 (March 31, 2013 - Rs 159,845,490 ) as per CDR Scheme.

4. Previous year fi gures have been regrouped and recast wherever necessary to conform to current year classification.

(a) Of the above

(i) 490,750 (March 31, 2013 - 490,750 of Rs. 10 each) equity shares of Rs 10 each, were allotted as fully paid bonus shares in the earlier years by way of capitalisation of reserves.

(ii) 83,070,088 equity shares of Rs 10 each were allotted on October 16, 2004, pursuant to the Corporate Debt Restructuring (''CDR'') Scheme.[Refer Note 27 (7) (a)].

Out of these, 63,373,110 equity shares of Rs 10 each were issued by the Company to Industrial Development Bank of India (''IDBI''), at par and the balance of 12,171,778 and 7,525,200 equity shares of Rs 10 each to Oriental Bank of Commerce (''OBC'') and ING Vysya Bank Limited (''ING''), respectively, at a premium of Re 0.50 per equity share as per provisions of applicable law.

(iii) 8,67,43,116 equity shares of Rs.10 each were issued on July 08, 2009 MSE, consequent to the conversion of Optionally Fully Convertible Debentures (OFCDs) pursuant to the Corporate Debt Restructuring (CDR) Cell.

(b) As more fully discussed in Note 27 (7) (a), the Company in accordance with the scheme of amalgamation approved by the High Court of the State of Punjab and Haryana and the State of Tamil Nadu on March 6, 2003 and March 20, 2003, respectively under section 391 and 394 of the Companies Act, 1956, the erstwhile HFCL Infotel Limited (name earlier allotted to the transferor company), amalgamated with HFCL Infotel Limited now Quadrant Televentures Limited, (formerly The Investment Trust of India Limited). Subsequent to the approved amalgamation:

(i) 432,000,250 ( March 31,2013 432,000,250)equity shares of Rs 10 each issued for consideration other than cash pursuant to the amalgamation of erstwhile HFCL Infotel Limited with the Company.

(ii) 1,730,814 equity shares of Rs 10 each were allotted on October 13, 2003, on conversion of the warrants issued to the shareholders of The Investment Trust of India Limited prior to June 11, 2003.

(c) Of the above

(i) 6,500,000 (March 31, 2013 - 6,500,000) 7.5 per cent CRPS were allotted on October 16, 2004, pursuant to the CDR Scheme, where under the specifi ed part of the amount due to CRPS Holder by the Company was converted into 7.5 per cent CRPS redeemable after the repayment of Rupee Term Loan (in Financial Year 2016-17). As per the CDR Scheme, prior approval of the lenders would be required to declare dividend on 7.5 per cent CRPS and all the voting rights attached to the CRPS to be assigned in favour of the term lenders. On June 24, 2005 as per revised CDR Scheme, the dividend percentage was reduced to 2 per cent from 7.5 per cent with effect from date of issuance of CRPS. The CDR dated August 13,2009 does not stipulate any reference to the aforesaid CRPS Accordingly the CRPS shall be redeemable in the Financial Year 2016-17. (With reference to CDR dated June 24,2005)

(ii) 15,984,543 (March 31,2013-15,984,543) 2% Cumulative Redeemable Preference Shares of Rs. 100 fully paid up, aggregating up to Rs. 1,598,454,300 were allotted on November 9, 2010 to the Banks and Financial Institution, namely, IDBI Bank Limited, Life Insurance Corporation of India, Oriental Bank of Commerce, ING Vysya Bank and State Bank of Patiala in terms of the Corporate Debt Restructuring Package (CDR Package) approved by the Corporate Debt Restructuring Cell (CDR Cell) vide their letter dated August 13, 2009, in conversion of 25% of their outstanding loans; the CRPSs shall be redeemed (monthly) over a period of four years commencing from April 1, 2021 at a premium of 34%.

(iii) Due to accumulated losses provision for dividend on CRPS of Rs 650,000,000 and Rs 1,598,454,300 and premium on redemption of CRPS of Rs 1,598,454,300 is not required and hence not provided for in the fi nancials.

(a) Securities premium includes an amount of Rs 9,848,489 received on allotment of 19,696,978 equity shares of Rs 10 each on October 16, 2004 at a premium of Rs 0.50 per equity share [Refer of Note 1 (a) (ii)].

(b) As more fully discussed in Note 26 (1) (a), the Company (erstwhile The Investment Trust of India Limited) was a Non- Banking Financial Corporation (''NBFC'') under the certificate of Registration (''CoR'') No 07.00222 dated April 18, 1998. Further, as more fully discussed in Note 27 (19), the Company had surrendered its CoR with the Reserve Bank of India (''RBI''). In 2004 As a condition for the cancellation of the CoR, the RBI had advised the Company to follow certain strictures till the balance in the escrow account is settled.

a. Yield of Interest and Premium on redemption of Secured Non-Convertible Debentures is 8% p.a.

b. Redemable Secured Non-Convertible Debentures as per CDR is secured by fi rst pari passu charge on movable and immovable fi xed assets and fi rst pari passu charge on Current Assets, assignment of license / contracts and fully detailed in note 27 (8)(a).

c. Redemption Schedule of the Secured Non Convertible Debentures.

d. On October 16, 2004, the Company issued 1,667,761 zero percent Non Convertible Debentures (''NCDs'') of Rs 100 each in lieu of interest accrued on term loans from a financial institution and a bank for the period April 1, 2003 to December 31, 2003. The ''NCD''s earlier redeemable at par on March 31, 2014, are now redeemable at par on March 31, 2016 after repayment of the term loans as per revised CDR Scheme effective from April 1, 2005.

* Other Current liabilities include cheques outstanding beyond six months of Rs 523,618 (March 31, 2013 - 523,618) due on deposits towards repayment of public deposits under the NBFC CoR and Rs. 543,480 interest accrued & due on deposits to be transferred to investors education & protection fund. [Refer Note 27(19)].

a) Debtors are secured to the extent of deposit received from the subscribers.

b) Includes Rs 134,557,517 (March 31, 2013 - Rs 113,959,342 ) of unbilled revenues, the invoices for which have been raised subsequent to March 31, 2014 [Refer Note 26 (2.11)].

NOTE 2 - CONTINGENT LIABILITIES

For the year ended For the year ended 31.03.2014 31.03.2013

Estimated value of contracts remaining to be executed on capital account and not 113,014,325 121,006,095 provided for net of capital advances Rs. 2,304,952 (March 31,2013 Rs 9,170,072) Bank Guarantees given against Bid Bonds/Performance/Advance

Financial Bank Guarantees 86,062,345 81,962,345

Performance Bank Guarantees 52,963,000 53,294,948

Open Letter of Credits (Margin Deposit Rs. Nil [March 31, 2013 - Rs. 23,998,323)] - 27,554,745

Income tax matters under appeal Principal Amount [Refer Note 27 (1) (a)]. 7,004,687 7,004,687

Income tax matters under appeal Interest Amount [Refer Note 27 (1) (a)]. 7,354,921 6,514,359

Claims against the Company not acknowledged as debts 9,780,973 5,022,700

Dividend on 2% cumulative redeemable preference shares (''CRPS'') of 159,845,430 127,876,344 Rs 1,598,454,300

Others [Refer Note 27 (1) (b, c, d, e, f,g,h and i). 1,522,233,377 1,038,397,602

Total 1,958,259,058 1,468,633,825

5. Previous year''s figures have been regrouped and reclassified wherever necessary and the figures have been rounded off to the nearest rupee.


Mar 31, 2013

1. Background

(a) Nature of business and ownership

Quadrant Televentures Limited (Formerly known as HFCL Infotel Limited) (''the Company'' or ''QTL''), Unified Access Services Licensee for Punjab Circle (including Chandigarh and Panchkula), is providing complete telecommunication services, which includes voice telephony, both wireline and fixed wireless, CDMA and GSM based mobiles, internet services, broadband data services and a wide range of value added service viz., centrex, leased lines, VPNs, voice mail, etc. The services were commercially launched in October 2000. As on March 31, 2013, the Company has an active subscriber base of over 1,701,481.

The Company was incorporated on August 2, 1946 with the name of The Investment Trust of India Limited (ITI) which was subsequently changed to HFCL Infotel Limited on May 12, 2003. This was done pursuant to a Scheme of amalgamation (the Scheme), approved by the Hon'' able High Court of the State of Punjab and Haryana and the State of Tamil Nadu on March 6, 2003 and March 20, 2003, respectively, whereby the erstwhile HFCL Infotel Limited (name earlier allotted to the transferor Company) (''erstwhile HFCL Infotel'') was merged with the Company with effect from September 1, 2002. As per the Scheme envisaged, the Company''s then existing business of hire purchase, leasing and securities trading was transferred by way of slump sales to its wholly owned subsidiary, Rajam Finance & Investments Company (India) Limited (''Rajam Finance'') with effect from September 1, 2002. Rajam Finance was renamed as The Investment Trust of India Limited with effect from June 17, 2003 and it ceased to be the subsidiary of the Company with effect from September 30, 2003, due to allotment of fresh equity by Rajam Finance to other investors.

The Company, during the year ended March 31, 2004, surrendered its license granted by Reserve Bank of India (''RBI'') to carry out NBFC business. RBI confirmed the cancellation of the NBFC license as per their letter dated May 24,2004.

On September 24, 2010 the name of Company was changed to Quadrant Televentures Limited.

(b) License Fees

The Company obtained licence for Basic Telephony Service for the Punjab circle (including Chandigarh and Panchkula) by way of amalgamation of the erstwhile HFCL Infotel with the Company. Erstwhile HFCL Infotel had obtained this licence under fixed license fee regime under National Telecom Policy (''NTP'') 1994, valid for a period of 20 years from the effective date, and subsequently migrated from the fixed license fee regime to revenue sharing regime upon implementation of NTP 1999." Further to the Telecom Regulatory Authority of India''s (''TRAI'') recommendations of October 27, 2003 and the Department of Telecommunications (''DoT'') guidelines on Unified Access (Basic & Cellular) Services Licence (''UASL'') dated November 11, 2003, the Company migrated its licence to the UASL regime with effect from November 14, 2003. A fresh License Agreement was signed on May 31,2004. Pursuant to this migration, the Company became additionally entitled to provide full mobility services. HFCL Infotel also entered into a Licence Agreement dated June 28, 2000, and amendments thereto, with DoT to establish maintain and operate internet service in Punjab circle (including Chandigarh and Panchkula).

During the year ended March 31, 2008, the Company has deposited the entry fee to the Department of Telecommunication (''DOT'') for the use of GSM Technology in addition to CDMA technology being used under the existing (UASL) for the Punjab Service Area. The UASL has since been amended to incorporate the license for use of GSM technology on January 15, 2008 vide DOT''s letter number F.No.lO-15/2004/BS.II/ HITL/ Punjab/17 dated January 15,2008. The Company has launched its GSM services on March 29, 2010 in Punjab Circle.

With effect from August 1, 1999, the Company is required to pay revenue share license fees as a fraction of Adjusted Gross Revenue (''AGR'') on UASL, The revenue share fraction other than income from Internet Services was set at 10 per cent of AGR with effect from August 1, 1999 and was reduced to 8 per cent of AGR with - effect from April 1, 2004. In addition, spectrum charges calculated at 3 per cent of the AGR earned through the wireless technology is payable under the license agreement.

With effect from July 01, 2012 Income from internet services is included as the service revenue for the purpose of the calculation of AGR under Internet Services Licence as it is governed by a separate ISP licence between the Company and the Department of Telecommunications (''DoT'').The revenue share fraction is set at 4% of income from internet revenue (''AGR'' under Internet Service Licence)

(c) Project Financing

The Company''s project was initially appraised by Industrial Development Bank of India (TDBF) during the year ended March 31, 2000.

Pursuant to the migration to UASL regime, the consortium of lenders, led by IDBI, through the Corporate Debt Restructuring (''CDR'') mechanism approved an overall restructuring of the liabilities of the Company and thereby revised the peak funding requirements.

Further, the CDR Empowered Group has approved the proposal of the Company for expansion of services, change in the scope of the project, cost of project and means of finance and restructuring of debt as per the reworked restructuring scheme dated Jiine 24,2005.

During the year, the Company has incurred losses of Rs 1,356,822,123 resulting into accumulated loss of Rs 16,785,419,039 as at March 31,2013 which has completely eroded its net worth and has a net current liability of Rs 7,251,909,436 The ability of the Company to continue as a going concern is substantially dependent on its ability to successfully arrange the remaining funding and achieve financial closure to fund its operating and capital funding requirements and to substantially increase its subscriber base The management in view of its business plans and support from significant shareholders is confident of generating cash flows to fund the operating and capital requirements of the Company. Accordingly, these statements have been prepared on a going concern basis.

(1). Commitments and contingent liabilities not provided for in respect of:

(a) The Company has certain income tax related matters pending with Income Tax Appellate Tribunal for the Assessment Year 2001-02 aggregating to Rs 13,519,046 (March 31,2012 - Rs 12,678,483).

(b) The Wireless Finance Division of Department of Telecommunications has claimed an outstanding of Rs 29,585,211 towards the Spectrum Charges dues from year 2001 to year 2005 vide their letter 1020/48/2005- WFD dated October 7, 2005. The Company has submitted its reply to the department on October 25, 2005 confirming the total due of Rs 29,472 only and paid the said amount. The Wireless Finance Division of Department of Telecommunications has subsequently claimed Rs 39,310,176 vide letter number 1020/48/2005-WFD dated September 13, 2006 towards the Spectrum Charges dues from year 2001 to year 2006. The Company has submitted a detailed reply on October 31, 2006. During the year ended March 31,2008, out of the above .demand, the Company has deposited Rs 1,801,241 under protest towards the interest due till August 31, 2006. Wireless Finance Division of Department of Telecommunications has updated their claim to Rs 70,604,092 towards Spectrum Charges dues from January 1, 2000 to September 30, 2008 vide letter number 1020/29/WR/07-08 dated October 24,2008. The Company has once again made a written representation vide its letter dated December 8, 2008 and August 12, 2009. Subsequently DOT has revised their demand to Rs 70,528,239 vide Letter No 1020/48/WFD/2005-06/ Dated September 6, 2010 to which the Company has made representations vide letter dated September 23, 2010, February 3,2011 and March 17,2011. Subsequently DOT has revised their demand to Rs 149,960,749 vide Letter No 1020/48/WFD/2005-06/ Dated January 3, 2013 to which the Company has made representations vide letter dated January 18, 2013. The reply of which has not been received. Based on the legal opinion, the Company is confident that no liability would accrue regarding the same in future.

(c) During the year ended March 31, 2007, Bharat Sanchar Nigam Limited (''BSNL'') has raised supplementary bill dated August 10, 2006 for Rs 167,614,241 towards Inter-connect Usage Charges (TUC) and Access Deficit Charges (''ADC'') for the period November 14, 2004 to August 31, 2005 on the Company. BSNL further raised invoices to the tune of Rs 99,346,533 on similar grounds for the period September 1, 2005 to February 28, 2006.These charges are on account of unilateral declaration of the Company''s Fixed Wireless and Wire line Phone services as Limited Mobility Services by BSNL. The Company has submitted its reply to BSNL on August 23, 2006 asking for the calculation/ basis for the additional amount raised towards IUC and ADC by BSNL for Rs 167,614,241. Subsequently, BSNL issued a disconnection notice on August 26,2006 which required the payment of Rs 208,236,569 (including Rs 167,614,241). The Company has submitted details to BSNL for payments already made for Rs 40,622,328. The Company has approached Hon''ble TDSAT on the subject matter and a stay order was granted on Company''s petition no 232 of 2006 against the disconnection notice on September 21, 2006. BSNL Jalandhar Office subsequently raised a supplementary bill dated March 20, 2007 for Rs 5,206,780, to which the Company has submitted its reply on March 23, 2007 intimating that the matter being sub-judice and pending decision by the Hon''ble TDSAT, no coercive action be taken against the Company. The hearing on the matter has been completed and the Hon''ble TDSAT has pronounced the judgment on May 21,2010 in Company''s favour and has directed that BSNL and the Company should exchange relevant information and reconcile the differences. In the absence of information from BSNL, the Company is not in a position to determine the liability with respect to this matter. The Company, based on expert legal opinion, believes that there would be no financial liability against such bills and accordingly, has not recorded any liability towards the IUC and ADC supplementary bills during the year ended March 31,2013.

(d) The Company is in receipt of Show Cause Notice dated June 4, 2007 from Department of Telecommunications (''DoT'')fornonfulfilmentoffirstyear''sroll-outobligations of Unified Access Service License (''UASL'') Agreement for Punjab Service Area, where in the licensee as per the terms of the license agreement was required to ensure that at least 10% of the District Headquarter / Towns are covered in the first year of the date of migration to UASL which commences from the date of Test Certificate issued by Telecom Engineering Centre (''TEC''). As stated by DoT''in the Show Cause Notice issued, the Company has violated the conditions of UASL and accordingly Liquidated Damages of Rs 70,000,000 has been imposed and DoT has also sought explanation within 21 days as to why they should not take action against the Company under the UASL Agreement to which the Company has ''replied on September 27,2007 that the Company has not violated the conditions of UASL and. based on expert legal advice, the Company believes that''there would be no financial liability against such claims of DoT and accordingly, has not recorded any liability towards the Liquidated Damages during year ended March 31,2013.

(e) The Company is in receipt of a demand of Rs 433,158,340 from Bharat Sanchar Nigam Limited (''BSNL'') on December 20, 2008 on account of unilateral revision of access charges vide its letter dated April 28,2001 for the period from June 2001 to May 2003, in contravention of the Interconnect Agreement and TRAI Regulations. The Company, Association of Unified Service Providers of India ''AUSPF (erstwhile Association of Basic Telephone Operators ''ABTO'') and other Basic Service Operators contested aforesaid revision in the rates of access charges before Telecom Dispute Settlement Appellate Tribunal (''TDSAT''). TDSAT vide its reasoned and detailed judgement dated April 27, 2005 allowed the refund claims and struck down the unilateral revision in the rates of access charges by BSNL and held that Telecom Regulatory Authority of India (''TRAI'') is the final authority for fixing of access charges and access charges would be payable as rates prescribed by the TRAI and as per the Interconnect agreements. BSNL preferred an appeal in Hon''ble Supreme Court against the order of TDSAT and an interim stay was granted on October 19, 2006 Therefore aggrieved by such unilateral action on the part of BSNL by raising aforesaid demand and disturbing the status-quo, applications were moved by the Company, AUSPI and other Operators in the Hon''ble Supreme Court vide C.A No.5834-5836 of 2005 that was listed for hearing on February 9, 2009 and Hon''ble Supreme Court passed an order clarifying its previous order of October 19, 2006 and stayed the refunds claim against the BSNL there by upholding the TDSAT order dated April 27, 2005 whereby BSNL is refrained from raising the access charges demand. The Company based on the legal opinion believes that there would be no financial liability against this demand and has accordingly not recorded any liability towards access charges during the year ended March 31,2013.

(f) The Company is in receipt of demand of Rs. 7,000,000 from Department of Telecommunications (''DoT''), Licensing Group (Access Services) vide their letter dated October 21,2009 for issuance of SIM cards on fake ID in Punjab Service Area, where in the Licensee was required to ensure adequate verification of each and every customer before enrolling him as a subscriber. The Company has replied to DoT vide letter dated November 14, 2009 that the levy of penalty imposed by DoT was based on verification done by an agency other than the DOT - TERM Cells and the exercise was carried put suo moto and in complete disregard of the established procedures and guidelines laid by DoT. Accordingly the Company has requested DoT to have this validation done by the DOT - TERM Cell. The Company believes that there would be no financial liability against this demand and has accordingly not recorded any liability towards penalty during the year ended March 31,2013.

(g) As per The Telecommunication Interconnect Usage Charges Regulations 2003, had fixed intra circle carriage charges payable per minute for all intra circle calls irrespective of the distance between originating and terminating points. Bharat Sanchar Nigam Limited (''BSNL'') was charging additional amounts based on distance for the period October 2007 to March 2009 which was against the telecommunication Interconnect Usage Charges Regulations 2003 of TRAI. The matter was raised to Hon''ble TDSAT by service providers to which Hon''ble TDSAT vide it''s order dated May 21, 2010 upheld the demand of BSNL. The liability of the Company on basis of BSNL demand amounted to Rs 4,110,959. Subsequently TRAI appealed against the order of TDSAT in the Hon''ble Supreme Court. The matter is sub-judice and the final decision of the Hon''ble Supreme Court in the matter is still awaited.

(h) The Company is in receipt of a Show Cause Notice amounting to Rs 1,020,00,000 dated May 17, 2013 from Department of Telecommunications (''DOT'') purportedly for the non-compliance with Electro Magnetic Frequency Radiation Norms (''EMF Radiation Norms'') prescribed by DOT. The Company on May 21, 2013 has represented to DOT that the Corrtpany is fully compliant with the specified limits of the EMF Radiation Norms and the Company has also submitted the ''Self Certifications'' in respect of all the 204 Base Transceiver Station (''BTS'') set up in the Punjab Telecom Circle as mentioned in the Show Cause Notice well within the stipulated last date of March 31, 2011 as prescribed by DOT. The Company is confident that no such liability will arise and no further communication is received from DOT with this regard

(2). Share Capital

(a) As of date, the entire paid up Equity Share Capital of the company comprising of 612,260,268 equity shares of Rs 10 each, stands listed on the Bombay Stock Exchange (BSE) Consequent upon the issuance of 86,743,116 equity shares allotted pursuant to the conversion of 7,551,178 OFCDs along with interest accrued thereon to the Financial Institution /Banks on July 8, 2009, the non-promoter shareholding in the Company increased from 38.02% to 46.80%, and the Promoters'' Shareholding decreased from 61.97% to 53.19%, whereupon the Company requested BSE to grant listing of unlisted shares without insisting upon the stipulation of the condition for ''Offer for Sale. BSE, vide its letter DCS / AMAL / RCG/ GEN / 1108 / 2008- 09 dated February 13, 2009, inter-alia, agreed to exempt the condition imposed on the Company to comply with requirement of making an offer for sale in the domestic market, subject to compliance of certain procedural requirements including ''three years lock-in'' period of 25% of equity shares that had been issued pursuant to the merger on June 17, 2003 i.js. 25% of 432,000,250 shares (108,000,063 equity shares). The-Company had - in compliance with the conditions stipulated by BSE - placed under lock-in 108,000,063 equity shares on May 14,2009 for a period of 3 years ending May 15,2012. The Company has also complied with all other necessary requirements pursuant to the letter from BSE dated February 13, 2009 related to 83,070,088 equity shares issued pursuant to corporate debt restructuring scheme. BSE had also agreed to grant in-principle approval for allotment of 86,743,116 equity shares to be issued to Banks and financial institutions on conversion upon filing of necessary listing application, which the Company has filed, vide its letter no. HITL/S&L/S-01/09/472 and 473 dated March 07, 2009. Consequently, vide their notice 20090514-12 dated May 14, 2009 hosted on it''s website BSE had granted Listing and Trading permission in respect of the 432,000,250 equity shares issued pursuant to scheme of amalgamation, BSE had also granted Listing approval in respect of the .63,070,088 equity shares allotted as aforesaid vide their letter number DCS/PREF/DMN/FIP/239/09-10 dated May 25, 2009 and the shares were Listed by BSE vide its notice number 20090605-20 dated June 5, 2009.

(b) Out of the total paid up equity share capital comprising of 612,260,268 equity shares of Rs 10 each, 86,743,116 equity shares of Rs.10/- each (allotted on July 08, 2009, after obtaining in principle approval frorh the BSE and MSE. upon the conversion of Optionally Fully Convertible Debentures (OFCDs) allotted pursuant to the Corporate Debt'' Restructuring (CDR Cell) Consequently, the Listing approval in respect of these shares was granted by Bombay Stock Exchange (BSE) vide its letter number 20090813-08 dated August 13, 2009 w.e.f. August 14, 2009 and by the Madras Stock Exchange Limited vide its letter no.MSE/LD/PSK/738/215/09 dated September 01,2009 w.e.f. September 01,2009.

Out of the total paid up equity share capital comprising* of 612,260,268 equity shares of Rs 10 each, 326,705,000 equity shares of Rs.10/- each representing 533605 % of the total Paid up share capital of the Company - which were earlier held by Himachal Futuristic Communications

Limited - the erstwhile promoter or Holding Company), were acquired by M/s Quadrant Enterprises Private Limited on 03rd April, 2010 in compliance with the SEBI Exemption Order in pursuance of the proposal for settlement-/ change of management of the Company approved under the New Restructuring Scheme as approved by the Corporate Debt Restructuring Cell (CDR Cell) on August 13, 2009.

(c) Pursuant to the Company''s application in this regard, for Voluntary Delisting pursuant to the provisions of regulation 6(a) and 7(1) of the Securities and Exchange Board of India (Delisting of Equity Shares) Regulation, 2009, the Madras Stock Exchange (MSE), MSE has vide its letter dated March 15, 2011, accepted and accorded its consent to the Voluntary Delisting of the Company''s shares vide its letter No. MSE/LD/PSK/731/109/11 dated 15th March, 2011 accepting the Voluntary delisting of the company''s equity shares from the MSE.

(3). Secured Loans

(a) As per the CDR Scheme approved on March 10, 2004 and subsequently approved on June 4, 2005, the Lenders have signed Master Restructuring Agreement (''MRA'') for restructuring of their Debts and Security Trusteeship Agreement, whereby the Lenders have entered into an agreement and appointed IDBI Trusteeship Services Limited (herein after referred as "ITSL") as their custodian of security. On November 11, 2005, the charges were registered in favour of the ITSL for Rupee Term Loans, for providing Specific Credit Facility, for Working Capital Assistance and Zero percent Secured OFCDs. The same are secured by first pari passu charge on immovable properties of the Company situated at Kandivali (East), Mumbai and properties situated at Mohali & Jalandhar under equitable mortgage, first pari passu charge of hypothecation of movable properties of the Company including movable plant & machinery, machinery spares, tools & accessories and. other movables including book debts by way of hypothecation, both present and future. Further, the same are also secured by assignment of all rights, title, benefits, claims and interest in, under the project documents, insurance policies, all statutory, government and regulatory approvals,'' permissions, exemptions and waivers on pari passu basis. Subsequently, pursuant to the reworked restructuring scheme approved under CDR mechanism on June 24, 2005, the Company has entered into amendatory Master Restructuring Agreement and amendatory Security Trusteeship Agreement (''STA'') on March 9, 2006, whereby Centurion Bank of Punjab has also joined as one of, the lenders and has agreed to appoint ITSL as their custodian for security and signed the STA in line with other lenders in consortium.

On the request of the Company, Corporate Debt Restructuring Cell (''CDR'') vide their letter no CDR (JCP) No 138 / 2009-10 (''CDR Letter'') dated May 20, 2009 has . approved the interim revised restructuring package. The revised restructuring package inter alia includes funding of interest from July 1, 2008 to October 31, 2009 on simple interest basis. Funded Interest on Term Loan (''FITL'') would not carry any interest and the FITL shall be repaid in 16 equal monthly installments commencing '' from December 1,2009, and has rescheduled the principle installments from August 1, 2008 to November 1, 2009 so as to be repayable from December 1, 2009 to March 1, 2011. Corporate Debt Restructuring (''CDR'') cell vide their letter no CDR (JCP) No 563 / 2009-10 dated August 13,2009 has approved a new restructuring scheme, which includes the induction of strategic investor / change of management and settlement proposal for Term Lenders, All the term lenders have given their acceptance to the new restructuring scheme. The new restructuring scheme has been made effective from April 1, 2009 and accordingly an amount of Rs 373,097,077 towards FITL from July 1,2008 to March 31,2009 has been considered as term loan.

In pursuant to the new restructuring scheme vide letter no. CDR (JCP) No 563 / 2009-10 dated August 13, 2009, The Company had allotted 15,984,543, 2 % Cumulative Redeemable Preference Shares of Rs.100 each aggregating to Rs.1,598,454,300 on November 9, 2010, to Financial Institution / Banks in conversion of 25% of their outstanding loans as on April 01,2009. » In compliance - with the aforesaid new restructuring scheme dated August 13,2009 the Company had repaid on July 06, 2010 and July 07, 2010 an amount of Rs 1,598,454,522 being 25% of their outstanding loans as on April 01,2009

In compliance with the aforesaid new restructuring scheme dated August 13, 2009, the Company had allotted 31,969,088 Redeemable Secured Non Convertible Debenture (''NCD'') of Rs.100 each aggregating to Rs.3,196,908,800 on January 21,2013, to Financial Institution / Banks in conversion of 50% of their outstanding loans as on April 01,2009.

(b) The above mentioned security has been further extended to the amount of secured loans and working capital assistance, together, with the interest, compound interest, additional interest, default interest, costs, charges, expenses and any other monies payable by the Company in relation thereto and in terms with MRA and ST A entered into between the lenders and ITSL.

(c) Vehicle Loans of Rs Nil (March 31, 2012'' - Rs 70,786) are secured by way of exclusive hypothecation charge in favour of bank on the specific vehicle acquired out of the loan proceeds of the Company.

(4). Unsecured Loans

(a) On October 16,2004, the Company issued 1,667,761 zero percent Non Convertible Debentures (''NCDs'') of Rs 100 each in lieu of interest accrued on term loans from a financial institution and a bank for the period April 1, 2003 to December 31,2003. The NCDs earlier redeemable at par on March 31, 2014, are now redeemable at par on March 31, 2016 after repayment of the term loans as per reworked restructuring scheme effective from April 1, 2005.

(b) The Company under the terms of the agreement dated May 1, 2007 had taken convertible loan to facilitate expansion and development of businesses amounting to Rs 499,499,886 from Infotel Digicomm Private Limited. The convertible loan was repayable on demand with an option to convert the Loan into Equity Shares, subject to getting necessary approvals and subject to applicable pricing guidelines as per SEBI and other laws and regulations. On- September 16, 2009 Infotel Digicomm Private Limited (''IDPL'') had entered into an assignment agreement with Domebell Electronics India Private Limited (''DEIPL''), wherein IDPL had assigned the above convertible loan of Rs 499,499,886 to DEIPL. , All the terms and conditions relating to the convertible loan remained the same. The interest accrues at the end of each quarter. During the year ended March 31, 2010 the Company has provided for interest amounting to Rs 14,984,997 @ 12% to IDIPL for the three months ended June 30, 2009. DEIPL on the basis of the assignment agreement dated September 16, 2009 has a right on the interest accruing from July 1,2009 onwards. DEIPL have agreed to waive off the interest from July 1, 2009 till March 31, 2013, therefore no provision for such interest has been made by the Company. Consequent to the addendum to the assignment agreement, the convertible loan from DEIPL is now repayable after 7 years from the date of assignment agreement dated September 16,2009.

(c) The Company under the terms of the agreement dated May 1, 2007 had taken buyer''s credit facility to facilitate funding of the telecom project amounting to Rs 410,740,832 from Infotel Business Solutions Limited. The loan carries 12% interest and was repayable on demand. Infotel Business Solutions Limited had the option to convert the loan" including interest accrued into equity shares, subject to applicable pricing guidelines as per SEBI and other laws and regulations. On September 16, 2009 Infotel Business Solutions Limited (TBSL'') has entered into an assignment agreement with Domebell Electronics India Private Limited (''DEIPL''), wherein IBSL has assigned the above buyer''s credit facility of Rs 410,700,000 to DEIPL. All the terms and conditions relating to the buyer''s credit facility remained the same. The interest accrues at the end of each quarter. During the year ended March 31, 2010 the Company has provided for interest amounting to Rs 12,322,225 @ 12% to IBSL for the three months ended June 30, 2009. and accordingly DEIPL on the basis of the assignment agreement dated September 16, 2009 has a right on the interest accruing from July 1, 2009 orywards DEIPL has agreed to waive off the interest from July 1, 2009 till March 31, 2013, therefore no provision for such interest has been made by the Company. Consequent to the addendum to the assignment agreement, the convertible loan from DEIPL is now repayable after 7 years from the date of assignment agreement dated September 16,2009.

(d) The Company had taken an unsecured loan on July 06, 2010 of Rs.1,598,500,000 @ 8% per annum, the interest accrues at the end of each quarter. The lender has agreed to waive off the interest from July 06, 2010 to March 31, 2013, therefore no provision for said interest has been made by the Company. The aforesaid unsecured loan is repayable after 7 years from the commencement of the unsecured loan.

(5). Fixed Assets and Capital work-in-progress

(a) Capital Work in Progress includes Goods in Transit of Rs. NIL (March 31,2012 Rs Nil)

(b) As on March 31, 2013, telephone instruments aggregating to a net book value of Rs 79,675,183

'' (March 31, 2012 - Rs 85,390,844) and other assets aggregating to net book value of Rs 1,029,215,214 (March 31,2012 - Rs 1,031,023,331) are located at customer premises, other parties and at other operator''s sites, respectively.

(6). Inventory for Network Maintenance

The Company holds inventory of network maintenance. consumables and RUIM cards amounting to Rs 16,942,837 (March 31,2012 - Rs 18,445,811). The quantity and valuation of inventory is taken as verified, valued and certified by the management.

(7).Deferred Taxes

During the year, the Company has incurred losses of Rs 1,356,822,123 (accumulated losses of Rs 16,785,419,039) resulting into a tax loss carry forward situation. The Company is eligible for a tax holiday under section 80IA of the Income-tax Act, 1961. Though the management is confident of generating profits in the future, there is currently no convincing evidence, of virtual certainty that the Company would reverse the tax loss carry forwards beyond the tax holiday period. Accordingly, the Company has not recognized any deferred tax assets resulting from the carry forward tax losses. Further, no deferred tax liabilities on account of temporary timing differences have been recognized since they are expected to reverse in the tax holiday period.

(8). Trade Payables include amount payable to Micro and Small Enterprises as at March 31, 2013 of Rs 816,620 (March 31,2012 - Rs 94,298). The information as required to be disclosed under the Micro, Small and Medium Enterprises Development Act, 2006 has been determined to the extent such parties have been identified on the basis of information and records available with the Company.

Information for the supplier covered under the Micro, Small and Medium Enterprise Development Act, 2006, as at March 31,2013 is as under -

(9).The Company had received advance of Rs 4,955,927,643 ( March 31, 2012 Rs. 3,827,500,000) to fund the entry fee for using GSM Technology under the existing Unified Access Services License (UASL) and business operations for Punjab Service Area. The same is included in Other Current Liabilities. No interest is payable on the said advance.

(10).Operating leases

A. Company as a Lessee

(a) The Company has entered into various cancelable lease agreements for leased premises. Gross rental expenses for the year ended March 31, 2013 is Rs 67,334,772 (March 31,2012 - Rs 64,073,190).

(b) The Company has entered into site sharing agreements with other operators for sharing of their infrastructure sites. During the year, the Company has incurred Rs 452,541,058 (March 31, 2012 - Rs 530,032,570) towards infrastructure sharing expenses.

Further lease payments under non-cancellable operating leases are as follows:-

B. . Company as a Lessor

The Company has entered into cancellable site sharing agreements with other operators for sharing of its infrastructure sites. During the year, the Company has accrued Rs 9,710,199 (March 31, 2012- Rs 7,608,860) towards site sharing revenue.

The Company has entered into a non-cancellable lease arrangement to provide approximately 8,357.42 Fiber pair kilometers of dark fiber on indefeasible right of use (IRU) basis for a period of 15 years. The gross block, accumulated depreciation and depreciation expense of the assets given on IRU basis is not readily determinable and hence not disclosed. In respect of such leases, rental income of Rs 38,806,906(March 31, 2012- Rs 36,775,779) has been recognized in the Statement of Profit and Loss for the year ended March 31, 2013.

Further lease receipts (under non-cancellable operating leases) will be recognized in the Statement of Profit and Loss of subsequent years as follows:-

(11). Segmental Reporting

The primary reporting of the Company has been performed on the basis of business segments. The Company has only one business segment, which is provision of unified telephony services. Accordingly, the amounts appearing in these financial statements relate to this primary business segment. Further, the Company provides services only in the State of Punjab (including Chandigarh and Panchkula) and, accordingly, no disclosures are required under secondary segment reporting.

(12).Related Party Disclosures

As required under Accounting Standard 18 on "Related Party Disclosures", the disclosure of transactions with related parties as defined in the Accounting Standard are given below:

(13).Unclaimed deposits from public

During the year ended March 31, 2004, the Company surrendered its licence granted by Reserve Bank of India (''RBI'') to carry out NBFC business. Accordingly, the Company foreclosed all the unpaid / unclaimed deposits as on September 15, 2003 and the interest accruing thereon as on that date, and the same have been transferred to the Escrow Account in February 2004. On August 10,2004, the Company has obtained the approval of the shareholders for the removal of NBFC related objects from the Memorandum of Association. Further, the Company submitted a letter dated July 7, 2004 for compliance and RBI vide its letter dated July 30, 2004 gave some concessions from compliance and has advised the Company to follow certain instructions till the balance in the escrow account is settled.

The, accompanying financial statements include the following account balances relating to the NBFC business whose licence granted by RBI was surrendered during the year ended March 31, 2004:

- Interest accrued and due on deposits up to transferred to Investor Education and Protection Fund Rs 543,480

- Cheques outstanding beyond 6 months Rs 523,618

- Others (Under reconciliation) Rs 18,961

Rs 1,086,009

Balances with Scheduled banks in Escrow account Rs 1,086,009

(14). Debenture redemption reserve

Pursuant to the CDR scheme on October 16, 2004, the Company had issued unsecured Zero% Non Convertible Debenture (''NCD'') (Erstwhile OFCDs) aggregating to Rs 166,776,100 repayable as on March 31,2016. Pursuant to the new restructuring scheme dated August 13,2009 the Company has to allot secured Non Convertible Debenture (''NCD'') for Rs 3,196,909,043 to Financial institution and Banks equivalent to 50% of their - outstanding loans as on April 01,2009 which shall be issued on completion of such approvals and conditions precedent. As per section 117C (1) of the Companies Act, 1956, a debenture redemption reserve (''DRR'') is to be created to which adequate amounts are to be credited out of the profits of each year until such debentures are redeemed.

During the year, the Company has incurred loss of Rs 1,356,822,123. Hence, in accordance with the clarification received from the Department of Company Affairs vide circular No 6/3/2001-CL.V dated April 18, 2002, the Company has not created Debenture redemption reserve.

15. Previous year figures have been regrouped where necessary to conform to this year classification.


Mar 31, 2012

(a) Of the above

(i) 490,750 (March 31, 2011 - 490,750 of Rs. 10/- each) equity shares of Rs 10 each, were allotted as fully paid bonus shares in the earlier years by way of capitalisation of reserves.

(ii) 326,705,000 (March 31, 2011 - 326,705,000) equity shares are held by Quadrant Enterprises Private Limited (Holding Company).

(iii) 83,070,088 equity shares of Rs 10 each were allotted on October 16, 2004, pursuant to the Corporate Debt Restructuring ('CDR') Scheme dated March 10, 2004.[Refer Note 27 (7) (a)].

Out of these, 63,373,110 equity shares of Rs 10 each were issued by the Company to Industrial Development Bank of India ('IDBI'), at par and the balance of 12,171,778 and 7,525,200 equity shares of Rs 10 each to Oriental Bank of Commerce ('OBC') and ING Vysya Bank Limited ('ING'), respectively, at a premium of Re 0.50 per equity share as per provisions of applicable law.

(iv) 8,67,43,116 equity shares of Rs.10/- each were issued on July 08, 2009 after obtaining in principle approval from the BSE and MSE, consequent to the conversion of Optionally Fully Convertible Debentures (OFCDs) pursuant to the Corporate Debt Restructuring (CDR) Cell.

(b) As more fully discussed in Note 27 (7) (a), the Company in accordance with the scheme of amalgamation approved by the High Court of the State of Punjab and Haryana and the State of Tamil Nadu on March 6, 2003 and March 20, 2003, respectively under section 391 and 394 of the Companies Act, 1956, the erstwhile HFCL Infotel Limited (name earlier allotted to the transferor company), amalgamated with HFCL Infotel Limited now Quadrant Televentures Limited, (formerly The Investment Trust of India Limited).

Subsequent to the approved amalgamation:

(i) 432,000,250 ( March 31,2011 432,000,250)equity shares of Rs 10 each issued for consideration other than cash pursuant to the amalgamation of erstwhile HFCL Infotel Limited with the Company.

(ii) 1,730,814 equity shares of Rs 10 each were allotted on October 13, 2003, on conversion of the warrants issued to the shareholders of The Investment Trust of India Limited prior to June 11, 2003.

(c) Of the above

(i) 6,500,000 (March 31, 2011 - 6,500,000) 7.5 per cent CRPS were allotted on October 16, 2004, pursuant to the CDR Scheme, where under the specified part of the amount due to CRPS Holder by the Company was converted into 7.5 per cent CRPS redeemable after the repayment of Rupee Term Loan (in Financial Year 2016-17). As per the CDR Scheme , prior approval of the lenders would be required to declare dividend on 7.5 per cent CRPS and all the voting rights attached to the CRPS to be assigned in favour of the term lenders. On June 24, 2005 as per Reworked Restructuring Scheme, the dividend percentage was reduced to 2 per cent from 7.5 per cent with effect from date of issuance of CRPS. New Restructuring Scheme dated August 13,2009 does not stipulate any reference to the aforesaid CRPS. Accordingly the CRPS shall be redeemable in the Financial Year 2016-17 With reference to Reworked Restructuring Scheme dated June 24,2005

(ii) 15,984,543 (March 31,2011-15,984,543) 2% Cumulative Redeemable Preference Shares of Rs. 100/- fully paid up, aggregating up to Rs. 1,598,454,300 were allotted on November 9, 2011 to the Banks and Financial Institution, namely, IDBI Bank Limited, Life Insurance Corporation of India, Oriental Bank of Commerce, ING Vysya Bank and State Bank of Patiala in terms of the New Restructuring Scheme (CDR Package) approved by the Corporate Debt Restructuring Cell (CDR Cell) vide their letter dated August 13, 2009, in conversion of 25% of their outstanding loans; the CRPSs shall be redeemed (monthly) over a period of four years commencing from April 1, 2021 at a premium of 34%.

(iii) Due to accumulated losses provision for dividend on CRPS of Rs 650,000,000 and Rs1,598,454,300 and premium on redemption of CRPS of Rs 1,598,454,300 is not required and hence not provided for in the financials.

(a) Securities premium includes an amount of Rs 9,848,489 received on allotment of 19,696,978 equity shares of Rs 10 each on October 16, 2004 at a premium of Rs 0.50 per equity share [Refer of Note 1 (a) (iii)].

(b) During the year 2006 in accordance with the CDR Scheme [Refer Note 26 (1) (c )], the company had provided for the premium on Zero % Optionally Fully Convertible Debentures (OFCD) and had utilised the securities premium to that extent .

(c) As more fully discussed in Note 26 (1) (a), the Company (erstwhile The Investment Trust of India Limited) was a Non- Banking Financial Corporation ('NBFC') under the Certificate of Registration ('CoR') No 07.00222 dated April 18, 1998. Further, as more fully discussed in Note 27 (20), the Company had surrendered its CoR with the Reserve Bank of India ('RBI'). In 2004 As a condition for the cancellation of the CoR, the RBI had advised the Company to follow certain strictures till the balance in the escrow account is settled.

a. Secured Loan from Banks & Financial Institutions will be converted in to Non-Convertible Debentures of equal amount as per New Restructuring Scheme dated August 13,2009.

b. Yield of Interest and Premium on redemption of Secured Non-Convertible Debentures is 8% p.a.

c. Secured Loan Convertible into Non-Convertible Debentures as per CDR is secured by first pari passu charge on movable and immovable fixed assets and first pari passu charge on Current Assets, assignment of license / contracts and fully detailed in note 27 (8) (a).

e. Vehicle Loan are secured by hypothecation of respective vehicle.

f. On October 16, 2004, the Company issued 1,667,761 zero percent Non Convertible Debentures ('NCDs') of Rs 100 each in lieu of interest accrued on term loans from a financial institution and a bank for the period April 1, 2003 to December 31, 2003. The 'NCD's earlier redeemable at par on March 31, 2014, are now redeemable at par on March 31, 2016 after repayment of the term loans as per Reworked Restructuring Scheme dated June 24, 2005 effective from April 1, 2005.

During the year ended March 31, 2009, the Company had incorporated one wholly owned Subsidiary Company, Infotel Tower Infrastructure Private Limited with an Investment of Rs 99,800. During the year ended March 31, 2011 the Company has acquired beneficial interest in the remaining 20 equity shares which were earlier held by the subscribers to the Memorandum of Association: Consequently, the company now holds 100% of the issued equity share capital in the subsidiary company.

a) Debtors are secured to the extent of deposit received from the subscribers.

b) Includes Rs. 74,496,145 (March 31, 2011 - Rs 83,158,703) of unbilled revenues, the invoices for which have been raised subsequent to March 31, 2012 [Refer Note 26 (2.11)].

NOTE 1 - CONTINGENT LIABILITIES

For the year ended For the year ended 31.03.2012 31.03.2011

Estimated value of contracts remaining to be executed on capital account and not 64,947,346 296,671,624 provided for net of capital advances Rs. 3,987,253 (March 31,2011 Rs 2,677,951)

Bank Guarantees given against Bid Bonds /Performance/Advance

Financial Bank Guarantees 82,843,358 74,134,394

Performance Bank Guarantees 53,052,363 53,542,500

Open Letter of Credits (Margin Deposit Rs. 18514929 [March 31, 2011 - 18,514,929 14,143,944 Rs. 14143944)]

Income tax matters under appeal [Refer Note 27 (1) (a)]. 12,678,483 11,837,921

Claims against the company not acknowledged as debts 3,277,812 5,381,816

Dividend on 2% cumulative redeemable preference shares ('CRPS') 63,938,172 95,907,258

Others [Refer Note 27 (1) (b, c, d, e, f and g)]. 852,854,133 852,854,133

Total 1,152,106,596 1,404,473,590



2. Background

(a) Nature of business and ownership

Quadrant Televentures Limited ('the Company' or 'QTL'), Unified Access Services Licensee for Punjab Circle (including Chandigarh and Panchkula), is providing complete telecommunication services, which includes voice telephony, both wireline and fixed wireless, CDMA and GSM based mobiles, internet services, broadband data services and a wide range of value added service viz., centrex, leased lines, VPNs, voice mail, etc. The services were commercially launched in October 2000 and as on March 31, 2012, the Company has an active subscriber base of over 1,682,567.

The Company was incorporated on August 2, 1946 with the name of The Investment Trust of India Limited (ITI) which was subsequently changed to HFCL Infotel Limited on May 12, 2003. This was done pursuant to a Scheme of amalgamation (the Scheme), approved by the Hon' able High Court of the State of Punjab and Haryana and the State of Tamil Nadu on March 6, 2003 and March 20, 2003, respectively, whereby the erstwhile HFCL Infotel Limited (name earlier allotted to the transferor Company) ('erstwhile HFCL Infotel') was merged with the Company with effect from September 1, 2002. As per the Scheme envisaged, the Company's then existing business of hire purchase, leasing and securities trading was transferred by way of slump sales to its wholly owned subsidiary, Rajam Finance & Investments Company (India) Limited ('Rajam Finance') with effect from September 1, 2002. Rajam Finance was renamed as The Investment Trust of India Limited with effect from June 17, 2003 and it ceased to be the subsidiary of the Company with effect from September 30, 2003, due to allotment of fresh equity by Rajam Finance to other investors.

The Company, during the year ended March 31, 2004, surrendered its license granted by Reserve Bank of India ('RBI') to carry out NBFC business. RBI confirmed the cancellation of the NBFC license as per their letter dated May 24, 2004.

On September 24, 2010 the name of Company was changed to Quadrant Televentures Limited.

During the year ended March 31,2009, the Company had incorporated one wholly owned subsidiary Company, Infotel Tower Infrastructure Private Limited ('ITIPL') with an investment of Rs. 99,800 During the year ended March 31,2011 the Company has acquired beneficial interest in the remaining 20 equity shares which were earlier held by the subscribers to the Memorandum of Association. Declaration of beneficial Interest in the said shares has been duly filed with the Registrar of Companies. Consequently, the company now holds 100% of the issued equity share capital in the subsidiary company. The principal business of the Company is building, establishing, setting-up, accruing, developing, advising on, managing, providing, operating and/or maintaining, facilitating conduct of, fully or partially infrastructure facilities and services thereof for all kinds of value added services including Broadband Towers for telecom operations/services, payment gateway services and international gateway services.

(b) License Fees

The Company obtained licence for Basic Telephony Service for the Punjab circle (including Chandigarh and Panchkula) by way of amalgamation of the erstwhile HFCL Infotel with the Company. Erstwhile HFCL Infotel had obtained this licence under fixed license fee regime under National Telecom Policy ('NTP') 1994, valid for a period of 20 years from the effective date, and subsequently migrated from the fixed license fee regime to revenue sharing regime upon implementation of NTP 1999. Further to the Telecom Regulatory Authority of India's ('TRAI') recommendations of October 27, 2003 and the Department of Telecommunications ('DoT') guidelines on Unified Access (Basic & Cellular) Services Licence ('UASL') dated November 11, 2003, the Company migrated its licence to the UASL regime with effect from November 14, 2003. A fresh License Agreement was signed on May 31, 2004. Pursuant to this migration, the Company became additionally entitled to provide full mobility services. HFCL Infotel also entered into a Licence Agreement dated June 28, 2000, and amendments thereto, with DoT to establish maintain and operate internet service in Punjab circle (including Chandigarh and Panchkula).

Fixed license fees of Rs 1,775,852,329 paid under the old license fee regime from inception till July 31, 1999, were considered as the License Entry Fees of the Punjab circle (including Chandigarh and Panchkula) as part of the migration package to NTP 1999.

With effect from August 1, 1999, the Company is required to pay revenue share license fees as a fraction of Adjusted Gross Revenue ('AGR'), The revenue share fraction was set at 10 per cent of AGR with effect from August 1, 1999 and was reduced to 8 per cent of AGR with effect from April 1, 2004. In addition, spectrum charges calculated at 3 per cent of the AGR earned through the wireless technology is payable under the license agreement. Income from internet services is excluded from the service revenue for the purpose of the calculation of AGR as it is governed by a separate ISP licence between the Company and the Department of Telecommunications ('DoT').

During the year ended March 31, 2008, the Company has deposited the entry fee of Rs 1,517,500,000 with The Department of Telecommunication ('DOT') for the use of GSM Technology in addition to CDMA technology being used under the existing Unified Access Services Licence ('UASL') for the Punjab Service Area. The UASL has since been amended to incorporate the license for use of GSM technology on January 15, 2008 vide DOT's letter number F.No.10-15/2004/BS.II/HITL/ Punjab/17 dated January 15, 2008. The Company has launched its GSM services on March 29, 2010 in Punjab Circle.

(c) Project Financing

The Company's project was initially appraised by Industrial Development Bank of India ('IDBI') during the year ended March 31, 2000.

Pursuant to the migration to UASL regime, the consortium of lenders, led by IDBI, through the Corporate Debt Restructuring ('CDR') mechanism approved an overall restructuring of the liabilities of the Company and thereby revised the peak funding requirements.

Further, the CDR Empowered Group has approved the proposal of the Company for expansion of services, change in the scope of the project, cost of project and means of finance and restructuring of debt as per the reworked restructuring scheme dated June 24, 2005. During the year, the Company has incurred losses of Rs 1,791,601,978 resulting into accumulated loss of Rs 15,428,596,916 as at March 31, 2012 which has completely eroded its net worth and has a net current liability of Rs 6,847,992,445 The ability of the Company to continue as a going concern is substantially dependent on its ability to successfully arrange the remaining funding and achieve financial closure to fund its operating and capital funding requirements and to substantially increase its subscriber base. The management in view of its business plans and support from significant shareholders is confident of generating cash flows to fund the operating and capital requirements of the Company. Accordingly, these statements have been prepared on a going concern basis.

(1) Commitments and contingent liabilities not provided for in respect of:

(a) The Company has certain income tax related matters pending with Income Tax Appellate Tribunal for the Assessment Year 2001-02 aggregating to Rs 12,678,483 (March 31, 2011 - Rs 11,837,921).

(b) The Wireless Finance Division of Department of Telecommunications has claimed an outstanding of Rs 29,585,211 towards the Spectrum Charges dues from year 2001 to year 2005 vide their letter 1020/48/2005-WFD dated October 7, 2005. The Company has submitted its reply to the department on October 25, 2005 confirming the total due of Rs 29,472 only and paid the said amount. The Wireless Finance Division of Department of Telecommunications has subsequently claimed Rs 39,310,176 vide letter number 1020/48/2005-WFD dated September 13, 2006 towards the Spectrum Charges dues from year 2001 to year 2006. The Company has submitted a detailed reply on October 31, 2006. During the year ended March 31, 2008, out of the above demand, the Company has deposited Rs 1,801,241 under protest towards the interest due till August 31, 2006. Wireless Finance Division of Department of Telecommunications has updated their claim to Rs 70,604,092 towards Spectrum Charges dues from January 1, 2000 to September 30, 2008 vide letter number 1020/29/WR/07-08 dated October 24, 2008. The Company has once again made a written representation vide its letter dated December 8, 2008 and August 12, 2009. Subsequently DOT has revised their demand to Rs 70,528,239 vide Letter No 1020/48/WFD/2005-06/ Dated September 6, 2010 to which the Company has made representations vide letter dated September 23, 2010, February 3, 2011 and March 17, 2011. The reply of which has not been received. Based on the legal opinion, the Company is confident that no liability would accrue regarding the same in future.

(c) During the year ended March 31, 2007, Bharat Sanchar Nigam Limited ('BSNL') has raised supplementary bill dated August 10, 2006 for Rs 167,614,241 towards Inter-connect Usage Charges ('IUC') and Access Deficit Charges ('ADC') for the period November 14, 2004 to August 31, 2005 on the Company. BSNL further raised invoices to the tune of Rs 99,346,533 on similar grounds for the period September 1, 2005 to February 28, 2006.These charges are on account of unilateral declaration of the Company's Fixed Wireless and Wire line Phone services as Limited Mobility Services by BSNL. The Company has submitted its reply to BSNL on August 23, 2006 asking for the calculation/basis for the additional amount raised towards IUC and ADC by BSNL for Rs 167,614,241. Subsequently, BSNL issued a disconnection notice on August 26, 2006 which required the payment of Rs 208,236,569 (including Rs 167,614,241). The Company has submitted details to BSNL for payments already made for Rs 40,622,328. The Company has approached Hon'ble TDSAT on the subject matter and a stay order was granted on Company's petition no 232 of 2006 against the disconnection notice on September 21, 2006. BSNL Jalandhar Office subsequently raised a supplementary bill dated March 20, 2007 for Rs 5,206,780, to which the Company has submitted its reply on March 23, 2007 intimating that the matter being sub-judice and pending decision by the Hon'ble TDSAT, no coercive action be taken against the Company. The hearing on the matter has been completed and the Hon'ble TDSAT has pronounced the judgment on May 21, 2010 in Company's favour and has directed that BSNL and the Company should exchange relevant information and reconcile the differences. In the absence of information from BSNL, the Company is not in a position to determine the liability with respect to this matter. The Company, based on expert legal opinion, believes that there would be no financial liability against such bills and accordingly, has not recorded any liability towards the IUC and ADC supplementary bills during the year ended March 31, 2012.

(d) The Company is in receipt of Show Cause Notice dated June 4, 2007 from Department of Telecommunications ('DoT') for non fulfilment of first year's roll-out obligations of Unified Access Service License ('UASL') Agreement for Punjab Service Area, where in the licensee as per the terms of the license agreement was required to ensure that at least 10% of the District Headquarter / Towns are covered in the first year of the date of migration to UASL which commences from the date of Test Certificate issued by Telecom Engineering Centre ('TEC'). As stated by DoT in the Show Cause Notice issued, the Company has violated the conditions of UASL and accordingly Liquidated Damages of Rs 70,000,000 has been imposed and DoT has also sought explanation within 21 days as to why they should not take action against the Company under the UASL Agreement to which the Company has replied on September 27, 2007 that the Company has not violated the conditions of UASL and based on expert legal advice, the Company believes that there would be no financial liability against such claims of DoT and accordingly, has not recorded any liability towards the Liquidated Damages during year ended March 31, 2012.

(e) The Company is in receipt of a demand of Rs 433,158,340 from Bharat Sanchar Nigam Limited ('BSNL') on December 20, 2008 on account of unilateral revision of access charges vide its letter dated April 28, 2001 for the period from June 2001 to May 2003, in contravention of the Interconnect Agreement and TRAI Regulations. The Company, Association of Unified Service Providers of India 'AUSPI' (erstwhile Association of Basic Telephone Operators 'ABTO') and other Basic Service Operators contested aforesaid revision in the rates of access charges before Telecom Dispute Settlement Appellate Tribunal ('TDSAT'). TDSAT vide its reasoned and detailed judgement dated April 27, 2005 allowed the refund claims and struck down the unilateral revision in the rates of access charges by BSNL and held that Telecom Regulatory Authority of India ('TRAI') is the final authority for fixing of access charges and access charges would be payable as rates prescribed by the TRAI and as per the Interconnect agreements. BSNL preferred an appeal in Hon'ble Supreme Court against the order of TDSAT and an interim stay was granted on October 19, 2006 Therefore aggrieved by such unilateral action on the part of BSNL by raising aforesaid demand and disturbing the status-quo, applications were moved by the Company, AUSPI and other Operators in the Hon'ble Supreme Court vide C.A No.5834-5836 of 2005 that was listed for hearing on February 9, 2009 and Hon'ble Supreme Court passed an order clarifying its previous order of October 19, 2006 and stayed the refunds claim against the BSNL there by upholding the TDSAT order dated April 27, 2005 whereby BSNL is refrained from raising the access charges demand. The Company based on the legal opinion believes that there would be no financial liability against this demand and has accordingly not recorded any liability towards access charges during the year ended March 31, 2012.

(f) The Company is in receipt of demand of Rs. 7,000,000 from Department of Telecommunications ('DoT'), Licensing Group (Access Services) vide their letter dated October 21, 2009 for issuance of SIM cards on fake ID in Punjab Service Area, where in the Licensee was required to ensure adequate verification of each and every customer before enrolling him as a subscriber. The Company has replied to DoT vide letter dated November 14, 2009 that the levy of penalty imposed by DoT was based on verification done by an agency other than the DOT - TERM Cells and the exercise was carried out suo moto and in complete disregard of the established procedures and guidelines laid by DoT. Accordingly the Company has requested DoT to have this validation done by the DOT - TERM Cell. The Company believes that there would be no financial liability against this demand and has accordingly not recorded any liability towards penalty during the year ended March 31, 2012.

(g) The Company is in receipt of a demand of Rs 4,157,718 from Bharat Sanchar Nigam Limited ('BSNL') on February 2, 2009 on account of port charges for the year 2008-09, passive link charges, duct cost for passive link and active link charges. Out the above Rs 430,131 pertaining to port charges for the year 2008-09 and active link charges was paid by the Company vide receipt number 189 dated February 18, 2009. The amount of Rs 3,727,587 towards the duct cost for passive link and passive link charges was not acceptable by the Company as the demand raised by BSNL was unilateral and unjust. The Company filed a petition vide petition number 41(C) of 2009 with Telecom Dispute Settlement and Appellate Tribunal ('TDSAT') to which the Company was granted a stay order dated March 25, 2009 restraining BSNL from recovering the dues from the Company. The hearing on the matter has been completed on February 11, 2010 and the judgement from Hon'ble TDSAT was delivered December 22, 2010 in favour of BSNL where in the Company was required to make payment amounting to Rs. 5,191,862 to BSNL. The said payment has been made in compliance with the order.

The above managerial remuneration does not include provision of gratuity of Rs 98,408 (March 31, 2011- Rs 56,688) and leave encashment of Rs 187,457 (March 31, 2011- Rs129,613), as these provisions are computed on the basis of an actuarial valuation done for the Company and are provided in the financials (Refer Note 5 and note 9).

Value of perquisites and other allowances has been determined in accordance with the provision of the Income-tax Act, 1961.

(3) Share Capital

Equity shares

(a) As of date, the entire paid up Equity Share Capital of the company comprising of 612,260,268 equity shares of Rs 10 each, stands listed on the Bombay Stock Exchange (BSE) Consequent upon the issuance of 8,67,43,116 equity shares allotted pursuant to the conversion of 75,51,178 OFCDs along with interest accrued thereon to the Financial Institution /Banks on July 8, 2009, the non-promoter shareholding in the Company increased from 38.02% to 46.80%, and the Promoters' Shareholding decreased from 61.97% to 53.19%, whereupon the Company requested BSE to grant listing of unlisted shares without insisting upon the stipulation of the condition for 'Offer for Sale. BSE, vide its letter DCS / AMAL / RCG/ GEN / 1108 / 2008-09 dated February 13, 2009, inter-alia, agreed to exempt the condition imposed on the Company to comply with requirement of making an offer for sale in the domestic market, subject to compliance of certain procedural requirements including 'three years lock-in' period of 25% of equity shares that had been issued pursuant to the merger on June 17, 2003 i.e. 25% of 432,000,250 shares (108,000,063 equity shares). The Company had - in compliance with the conditions stipulated by BSE - placed under lock-in 108,000,063 equity shares on May 14, 2009 for a period of 3 years ending May 15, 2012. The Company has also complied with all other necessary requirements pursuant to the letter from BSE dated February 13, 2009 related to 83,070,088 equity shares issued pursuant to corporate debt restructuring scheme. BSE had also agreed to grant in-principle approval for allotment of 86,743,116 equity shares to be issued to Banks and financial institutions on conversion upon filing of necessary listing application, which the Company has filed, vide its letter no. HITL/S&L/S-01/09/472 and 473 dated March 07, 2009. Consequently, vide their notice 20090514-12 dated May 14, 2009 hosted on it's website BSE had granted Listing and Trading permission in respect of the 432,000,250 equity shares issued pursuant to scheme of amalgamation. BSE had also granted Listing approval in respect of the 83,070,088 equity shares allotted as aforesaid vide their letter number DCS/PREF/DMN/ FIP/239/09-10 dated May 25, 2009 and the shares were Listed by BSE vide its notice number 20090605- 20 dated June 5, 2009.

(b) Out of the total paid up equity share capital comprising of 612,260,268 equity shares of Rs 10 each, 8,67,43,116 equity shares of Rs.10/- each (allotted on July 08, 2009, after obtaining in principle approval from the BSE and MSE. upon the conversion of Optionally Fully Convertible Debentures (OFCDs) allotted pursuant to the Corporate Debt Restructuring (CDR Cell) Consequently, the Listing approval in respect of these shares was granted by Bombay Stock Exchange (BSE) vide its letter number 20090813-08 dated August 13, 2009 w.e.f. August 14, 2009 and by the Madras Stock Exchange Limited vide its letter no.MSE/LD/PSK/738/215/09 dated September 01, 2009 w.e.f September 01, 2009.

Out of the total paid up equity share capital comprising of 612,260,268 equity shares of Rs 10 each, 326,705,000 equity shares of Rs.10/- each representing 53.3605% of the total Paid up share capital of the Company - which were earlier held by Himachal Futuristic Communications Limited - the erstwhile promoter or Holding Company), were acquired by M/s Quadrant Enterprises Private Limited on 03rd April, 2010 in compliance with the SEBI Exemption Order in pursuance of the proposal for settlement / change of management of the Company approved under the New Restructuring Scheme as approved by the Corporate Debt Restructuring Cell (CDR Cell) on August 13, 2009.

(c) On March 31, 2004, the Company obtained the approval from the shareholders for de-listing the shares listed in the Calcutta Stock Exchange Association Limited ('CSE') and complied with all the necessary requirements for delisting and submitted its application in CSE. Despite repeated reminders, the Company has not yet received CSE's approval in this regard.

(d) Pursuant to the Company's application in this regard, for Voluntary Delisting pursuant to the provisions of regulation 6(a) and 7(1) of the Securities and Exchange Board of India (Delisting of Equity Shares) Regulation, 2009, the Madras Stock Exchange (MSE), MSE has vide its letter dated March 15, 2011, accepted and accorded its consent to the Voluntary Delisting of the company's shares vide its letter No. MSE/LD/PSK/731/109/11 dated 15th March, 2011 accepting the Voluntary delisting of the company's equity shares from the MSE.

(4) Secured Loans

(a) As per the CDR Scheme approved on March 10, 2004 and subsequently approved on June 4, 2005, the Lenders have signed Master Restructuring Agreement ('MRA') for restructuring of their Debts and Security Trusteeship Agreement, whereby the Lenders have entered into an agreement and appointed IDBI Trusteeship Services Limited (herein after referred as "ITSL") as their custodian of security. On November 11, 2005, the charges were registered in favour of the ITSL for Rupee Term Loans, for providing Specific Credit Facility, for Working Capital Assistance and Zero percent Secured OFCDs. The same are secured by first pari passu charge on immovable properties of the Company situated at Kandivali (East), Mumbai and properties situated at Mohali & Jalandhar under equitable mortgage, first pari passu charge of hypothecation of movable properties of the Company including movable plant & machinery, machinery spares, tools & accessories and other movables including book debts by way of hypothecation, both present and future. Further, the same are also secured by assignment of all rights, title, benefits, claims and interest in, under the project documents, insurance policies, all statutory, government and regulatory approvals, permissions, exemptions and waivers on pari passu basis. Subsequently, pursuant to the reworked restructuring scheme approved under

CDR mechanism on June 24, 2005, the Company has entered into amendatory Master Restructuring Agreement and amendatory Security Trusteeship Agreement ('STA') on March 9, 2006, whereby Centurion Bank of Punjab has also joined as one of the lenders and has agreed to appoint ITSL as their custodian for security and signed the STA in line with other lenders in consortium.

On the request of the Company, Corporate Debt Restructuring Cell ('CDR') vide their letter no CDR (JCP) No 138 / 2009-10 ('CDR Letter') dated May 20, 2009 has approved the interim revised restructuring package. The revised restructuring package inter alia includes funding of interest from July 1, 2008 to October 31, 2009 on simple interest basis. Funded Interest on Term Loan ('FITL') would not carry any interest and the FITL shall be repaid in 16 equal monthly installments commencing from December 1, 2009, and has rescheduled the principle installments from August 1, 2008 to November 1, 2009 so as to be repayable from December 1, 2009 to March 1, 2011. Corporate Debt Restructuring ('CDR') cell vide their letter no CDR (JCP) No 563 / 2009-10 dated August 13, 2009 has approved a new restructuring scheme, which includes the induction of strategic investor / change of management and settlement proposal for Term Lenders. All the term lenders have given their acceptance to the new restructuring scheme. The new restructuring scheme has been made effective from April 1, 2009 and accordingly an amount of Rs 373,097,077 towards FITL from July 1, 2008 to March 31, 2009 has been considered as term loan.

In pursuant to the new restructuring scheme vide letter no. CDR (JCP) No 563 / 2009-10 dated August 13, 2009, The Company had allotted 15,984,543, 2 % Cumulative Redeemable Preference Shares of Rs.100 each aggregating to Rs.1,598,454,300 on November 9, 2010, to Financial Institution / Banks in conversion of 25% of their outstanding loans as on April 01, 2009.

In compliance with the aforesaid new restructuring scheme dated August 13,2009 the Company had repaid on July 06, 2010 and July 07, 2010 an amount of Rs 1,598,454,522 being 25% of their outstanding loans as on April 01, 2009

The Company is required to allot secured Non Convertible Debenture ('NCD') of an amount aggregating to Rs 3,196,909,043 equivalent to 50 % of their outstanding loans as on April 01, 2009, which shall be issued on the terms of the aforesaid new restructuring scheme and shall be implemented on the completion of such approvals and conditions precedent.

(b) The above mentioned security has been further extended to the amount of secured loans and working capital assistance, together with the interest, compound interest, additional interest, default interest, costs, charges, expenses and any other monies payable by the Company in relation thereto and in terms with MRA and STA entered into between the lenders and ITSL.

(c) Vehicle Loans of Rs 70,786 (March 31, 2011 - Rs 351,802) are secured by way of exclusive hypothecation charge in favour of bank on the specific vehicle acquired out of the loan proceeds of the Company. These loans are repayable in monthly instalments and shall be repaid by 2012-13. Vehicle loans repayable within one-year amounts to Rs 70,786. Interest rates on vehicle loans is 10.71 per cent per annum. The average tenure of loan is 36 months.

(5) Unsecured Loans

(a) On October 16, 2004, the Company issued 1,667,761 zero percent Non Convertible Debentures ('NCDs') of Rs 100 each in lieu of interest accrued on term loans from a financial institution and a bank for the period April 1, 2003 to December 31, 2003. The NCDs earlier redeemable at par on March 31, 2014, are now redeemable at par on March 31, 2016 after repayment of the term loans as per reworked restructuring scheme effective from April 1, 2005.

(b) The Company under the terms of the agreement dated May 1, 2007 had taken convertible loan to facilitate expansion and development of businesses amounting to Rs 499,499,886 from Infotel Digicomm Private Limited. The convertible loan was repayable on demand with an option to convert the Loan into Equity Shares, subject to getting necessary approvals and subject to applicable pricing guidelines as per SEBI and other laws and regulations. On September 16, 2009 Infotel Digicomm Private Limited ('IDPL') had entered into an assignment agreement with Domebell Electronics India Private Limited ('DEIPL'), wherein IDPL had assigned the above convertible loan of Rs 499,499,886 to DEIPL. All the terms and conditions relating to the convertible loan remained the same. The interest accrues at the end of each quarter. During the year ended March 31, 2010 the Company has provided for interest amounting to Rs 14,984,997 @ 12% to IDIPL for the three months ended June 30, 2009. DEIPL on the basis of the assignment agreement dated September 16, 2009 has a right on the interest accruing from July 1, 2009 onwards. DEIPL have agreed to waive off the interest from July 1, 2009 till March 31, 2012, therefore no provision for such interest has been made by the Company. Consequent to the addendum to the assignment agreement, the convertible loan from DEIPL is now repayable after 7 years from the date of assignment agreement dated September 16, 2009.

(c) The Company under the terms of the agreement dated May 1, 2007 had taken buyer's credit facility to facilitate funding of the telecom project amounting to Rs 410,740,832 from Infotel Business Solutions Limited. The loan carries 12% interest and was repayable on demand. Infotel Business Solutions Limited had the option to convert the loan including interest accrued into equity shares, subject to applicable pricing guidelines as per SEBI and other laws and regulations. On September 16, 2009 Infotel Business Solutions Limited ('IBSL') has entered into an assignment agreement with Domebell Electronics India Private Limited ('DEIPL'), wherein IBSL has assigned the above buyer's credit facility of Rs 410,700,000 to DEIPL. All the terms and conditions relating to the buyer's credit facility remained the same. The interest accrues at the end of each quarter. During the year ended March 31, 2010 the Company has provided for interest amounting to Rs 12,322,225 @ 12% to IBSL for the three months ended June 30, 2009. and accordingly DEIPL on the basis of the assignment agreement dated September 16, 2009 has a right on the interest accruing from July 1, 2009 onwards DEIPL has agreed to waive off the interest from July 1, 2009 till March 31, 2012, therefore no provision for such interest has been made by the Company. Consequent to the addendum to the assignment agreement, the convertible loan from DEIPL is now repayable after 7 years from the date of assignment agreement dated September 16, 2009.

(d) The Company had taken an unsecured loan on July 06, 2010 of Rs.1,598,500,000 @ 8% per annum, the interest accrues at the end of each quarter. The lender has agreed to waive off the interest from July 06, 2010 to March 31, 2012, therefore no provision for said interest has been made by the Company. The aforesaid unsecured loan is repayable after 7 years from the commencement of the unsecured loan.

(6) Fixed Assets and Capital work-in-progress

(a) Capital Work in Progress includes Goods in Transit of Rs Nil (March 31, 2011 - Rs 2,299,900).

(b) As on March 31, 2012, telephone instruments aggregating to a net book value of Rs 85,390,844(March 31, 2011 - Rs 121,711,778) and other assets aggregating to net book value of Rs 1,031,023,331(March 31, 2011 - Rs 1,105736,867 ) are located at customer premises, other parties and at other operator's sites, respectively.

(7) Investments

During the year ended March 31, 2009 the Company has incorporated a Subsidiary Company Infotel Tower Infrastructure Private Limited with an Investment of Rs 99,800. The principal business of the Company is building, establishing, setting-up, accruing, developing, advising on, managing, providing, operating and/or maintaining, facilitating conduct of, fully or partially infrastructure facilities and services thereof for all kinds of value added services including broadband towers for telecom operations/services, payment gateway services and international gateway services. During the year ended March 31, 2011 the Company has acquired beneficial interest in the remaining 20 equity shares which were earlier held by the subscribers to the Memorandum of Association. Consequently, the company now holds 100% of the issued equity share capital in the subsidiary company.

(8) License Entry Fees

During the year ended March 31, 2008, the Company has deposited the entry fee of Rs 1,517,500,000 with The Department of Telecommunication ('DOT') for the use of GSM Technology in addition to CDMA technology being used under the existing Unified Access Services Licence ('UASL') for the Punjab Service Area. The UASL has since been amended to incorporate the license for use of GSM technology on January 15, 2008 vide DOT's letter number F.No.10-15/2004/BS.II/HITL/ Punjab/17 dated January 15, 2008. The Company has launched its GSM services on March 29, 2010 in Punjab Circle.

(9) Inventory for Network Maintenance

The Company holds inventory of network maintenance consumables and RUIM cards amounting to Rs 18,445,811 (March 31, 2011 - Rs 23,088,275). The quantity and valuation of inventory is taken as verified, valued and certified by the management.

(10) Deferred Taxes

During the year, the Company has incurred losses of Rs 1,791,601,978 (accumulated losses of Rs 15,428,596,916) resulting into a tax loss carry forward situation. The Company is eligible for a tax holiday under section 80IA of the Income-tax Act, 1961. Though the management is confident of generating profits in the future, there is currently no convincing evidence of virtual certainty that the Company would reverse the tax loss carry forwards beyond the tax holiday period. Accordingly, the Company has not recognized any deferred tax assets resulting from the carry forward tax losses. Further, no deferred tax liabilities on account of temporary timing differences have been recognized since they are expected to reverse in the tax holiday period.

(11) Current Liabilities and Provisions

a) Sundry Creditors include amount payable to Micro and Small Enterprises as at March 31, 2012 of Rs 94,298 (March 31, 2011 - Rs 103,716). The information as required to be disclosed under the Micro, Small and Medium Enterprises Development Act, 2006 has been determined to the extent such parties have been identified on the basis of information and records available with the Company.

b) The Company had obtained advance of Rs 3,827,500,000 (March 31, 2011 Rs. 1,517,500,000) to fund the entry fee for using GSM Technology under the existing Unified Access Services License (UASL) and business operations for Punjab Service Area. The amount of aforesaid advance is adjustable or refundable on such terms and conditions as may be mutually agreed. No interest is payable on the said advance.

(12) Operating leases

A. Company as a Lessee

The Company has entered into various cancelable lease agreements for leased premises. Gross rental expenses for the year ended March 31, 2012 is Rs 64,073,190 (March 31, 2011 - Rs 60,588,535).

The Company has entered into site sharing agreements with other operators for sharing of their infrastructure sites. During the year, the Company has incurred Rs 530,032,570 (March 31, 2011 - Rs 549,466,428) towards infrastructure sharing expenses.

The escalation clause includes escalation at various periodic levels ranging from 0 to 50%, includes option of renewal from 1 to 99 years and there are no restrictions imposed on lease arrangements.

B. Company as a Lessor

The Company has entered into cancellable site sharing agreements with other operators for sharing of its infrastructure sites. During the year, the Company has accrued Rs 7,608,860 (March 31, 2011- Rs 4,557,384) towards site sharing revenue.

The Company has entered into a non-cancellable lease arrangement to provide approximately 7,994.42 Fibre pair kilometres of dark fibre on indefeasible right of use (IRU) basis for a period of 15 years. The gross block, accumulated depreciation and depreciation expense of the assets given on IRU basis is not readily determinable and hence not disclosed.In respect of such leases, rental income of Rs 36,775,779(March 31, 2011- Rs 35,810,133) has been recognised in the profit and loss account for the year ended March 31, 2012.

Further lease receipts (under non-cancellable operating leases) will be recognised in the profit and loss account of subsequent years as follows:-

(13) Segmental Reporting

The primary reporting of the Company has been performed on the basis of business segments. The Company has only one business segment, which is provision of unified telephony services. Accordingly, the amounts appearing in these financial statements relate to this primary business segment. Further, the Company provides services only in the State of Punjab (including Chandigarh and Panchkula) and, accordingly, no disclosures are required under secondary segment reporting._

List of related parties

- Holding Company: Himachal Futuristic Communications Limited from April 1, 2010 to April 3, 2010, Quadrant Enterprises Pvt. Ltd from April 4,2010 to Till Date.

- 100 % Wholly owned Subsidiary: Infotel Tower Infrastructure Private Ltd., India

- Company under Key Managerial Personnel: Infotel Business Solutions Limited, Infotel Digicomm Pvt. Ltd. from April 1, 2010 to April 9,2010.

- Key Managerial Personnel: Mr. Surendra Lunia (CEO) from April 1, 2010 to April 9, 2010, Mr.Kapil Bhalla (Manager under Companies Act 1956) from April 10, 2010 to Till Date.

- Manager Interest Free Housing loan Rs Nil, Other advances Rs Nil (from April 10, 2010 to March 31, 2011 Nil)

Details of payment with related parties :

Company Under Key Managerial Personnel:

- Payment against Capital Purchases / Services to Infotel Business Solutions Limited Rs Nil (March 31, 2011 Rs.440,000) and Balance receivable from Infotel Business Solutions Limited Rs Nil (March 31, 2011 Rs.24,400,762)

Key Managerial Personnel:

- Purchase of Services (Expenditure Nature) of Mr. Surendra Lunia (CEO) Rs Nil ( March 31, 2011 Rs 2,861,150) and, Mr.Kapil Bhalla Rs 1,220,615 (March 31, 2011Rs. 1,219620)

- Payment made by the company to Mr. Surendra Lunia (CEO) Rs Nil ( March 31, 2011 Rs 2,861,150) and, Mr.Kapil Bhalla Rs 1,220,615 (March 31, 2011Rs. 1,219620)

(14) Unclaimed deposits from public

During the year ended March 31, 2004, the Company surrendered its licence granted by Reserve Bank of India ('RBI') to carry out NBFC business. Accordingly, the Company foreclosed all the unpaid / unclaimed deposits as on September 15, 2003 and the interest accruing thereon as on that date, and the same have been transferred to the Escrow Account in February 2004. On May 24, 2004, the RBI approved the cancellation of the Company's certificate of NBFC registration and provided certain directives to the Company to be complied with, pending completion of which, the Company would continue to be governed by the relevant provisions of the Reserve Bank of India Act, 1934 and various directions/instructions issued by RBI from time to time. [Refer Note 8 & 15 ]. On August 10, 2004, the Company has obtained the approval of the shareholders for the removal of NBFC related objects from the Memorandum of Association. Further, the Company submitted a letter dated July 7, 2004 for compliance and RBI vide its letter dated July 30, 2004 gave some concessions from compliance and has advised the Company to follow certain instructions till the balance in the escrow account is settled. The Registrar of Companies, Jalandhar, is yet to register the resolution of the shareholders due to delay in filing of the documents, for which the Company has moved an application to Central Government for condonation of delay. Ministry of Company Affairs vide letter no 17/23/2005-CL.V dated 07th July, 2005 has granted a condonation for filing of form 23, which was submitted to Registrar of Companies, Jalandhar vide letter No. HITL/C&L/S-31/05/347 dated July 13, 2005 and the registration certificate is yet to be obtained.

The accompanying financial statements include the following account balances relating to the NBFC business whose licence granted by RBI was surrendered during the year ended March 31, 2004:

(15) Debenture redemption reserve

Pursuant to the CDR scheme on October 16, 2004, the Company had issued unsecured Zero% Non Convertible Debenture ('NCD') (Erstwhile OFCDs) aggregating to Rs 166,776,100 repayable as on March 31, 2016. Pursuant to the new restructuring scheme dated August 13,2009 the Company has to allot secured Non Convertible Debenture ('NCD') for Rs 3,196,909,043 to Financial institution and Banks equivalent to 50% of their outstanding loans as on April 01,2009 which shall be issued on completion of such approvals and conditions precedent. As per section 117C (1) of the Companies Act, 1956, a debenture redemption reserve ('DRR') is to be created to which adequate amounts are to be credited out of the profits of each year until such debentures are redeemed.

During the year, the Company has incurred loss of Rs 1,791,601,978. Hence, in accordance with the clarification received from the Department of Company Affairs vide circular No 6/3/2001-CL.V dated April 18, 2002, the Company has not created Debenture redemption reserve.

Defined Benefit Plans

The employee's gratuity fund scheme managed by Life Insurance Corporation of India and ICICI Lombard General Insurance Company Limited is a defined benefit plan and the same is 100% funded. The present value of obligation is determined based on actuarial valuation using Project Unit Credit Method, which recognizes each period of service as giving rise to additional unit of employee benefit entitlement and measures each unit separately to build up the final obligation. The obligation for leave encashment is recognised in the same manner as gratuity.

Experience adjustments are Nil and have not been disclosed as required under para 120 of Accounting Standard 15 relating to Employee benefits.

d) The expected rate of return on plan assets was based on the average long-term rate of return expected to prevail over the next 15 to 20 years on the investments made by the LIC. This was based on the historical returns suitably adjusted for movements in long-term government bond interest rates. The discount rate is based on the average yield on government bonds of 20 years.

e) The Company made annual contributions to the LIC of an amount advised by the LIC. The Company was not informed by LIC of the investments made by the LIC or the break-down of plan assets by investment type.

f) The estimates of rate of escalation in salary considered in actuarial valuation , taken into account inflation, seniority, promotion and other relevant factors including demand and supply in the employment market. The above information is certified by the actuary.

(16) The Company is primarily engaged in the business of providing telecommunication services. The production and sale of such services is not capable of being expressed in any generic unit.

(17) Changeover of Management.

a) Securities Exchange Board of India ('SEBI') has, vide its Order No. WTM/KMA/CFD/233/03/2010 dated March 3, 2010, granted an exemption to M/s Quadrant Enterprises Private Limited, - ('QEPL'), from the applicability of Regulation 10 & 12 of the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 1997, for acquiring 32,67,05,000 (Thirty Two Crores Sixty Seven Lac and Five Thousand only) equity shares of the Company ('Shares') amounting to 53.3605% (approximately fifty three percent) of the issued, subscribed and paid up share capital of the Company, from the Company Himachal Futuristic Communications Limited ('HFCL'). The Order has been passed pursuant to the proposal for change of management sanctioned by the Corporate Debt Restructuring Cell in terms of its letter No. CDJ (JCP) No. 563/2009-10 dated August 13, 2009. The aforesaid shares have been acquired on April 3, 2010.

b) In line with the stipulations of the new restructuring scheme as approved by the CDR Cell vide its Letter no. BY. CDR(JCP) No. 563/2009-10 dated August 13, 2009 stipulating a change in the management of the Company, the existing Directors except the nominees of Financial Institutions had resigned from the Board and therefore to complete the process of change in the management of the Company, as per the stipulations of the new restructuring scheme, the senior management team comprising of Mr. Surendra Lunia, Chief Executive Officer, Mr. G.D. Singh, Chief Operating Officer, and Mr. Vikash Agarwal, Vice President (Corporate Finance) and Chief Financial Officer have resigned from the Company on April 09, 2010.

(18) Previous year figures have been regrouped where necessary to conform to this year classification.

The Notes to Financial Statement form an integral part of the Balance Sheet and Statement of Profit & Loss.


Mar 31, 2011

1. Background

(a) Nature of business and ownership

Quadrant Televentures Limited (Formerly known as HFCL Infotel Limited) ('the Company' or 'QTL'), Unified Access Services Licensee for Punjab Circle (including Chandigarh and Panchkula), is providing complete telecommunication services, which includes voice telephony, both wireline and fixed wireless, CDMA and GSM based mobiles, internet services, broadband data services and a wide range of value added service viz., centrex, leased lines, VPNs, voice mail, video conferencing etc. The services were commercially launched in October 2000 and as on March 31, 2011, the Company has an active subscriber base of over 1,764,129.

The Company was incorporated on August 2, 1946 with the name of The Investment Trust of India Limited (ITI) which was subsequently changed to HFCL Infotel Limited on May 12, 2003. This was done pursuant to a Scheme of amalgamation (the Scheme), approved by the Hon' able High Court of the State of Punjab and Haryana and the State of Tamil Nadu on March 6, 2003 and March 20, 2003, respectively, whereby the erstwhile HFCL Infotel Limited (name earlier allotted to the transferor Company) ('erstwhile HFCL Infotel') was merged with the Company with effect from September 1, 2002. As per the Scheme envisaged, the Company's then existing business of hire purchase, leasing and securities trading was transferred by way of slump sales to its wholly owned subsidiary, Rajam Finance & Investments Company (India) Limited ('Rajam Finance') with effect from September 1, 2002. Rajam Finance was renamed as The Investment Trust of India Limited with effect from June 17, 2003 and it ceased to be the subsidiary of the Company with effect from September 30, 2003, due to allotment of fresh equity by Rajam Finance to other investors.

The Company, during the year ended March 31, 2004, surrendered its license granted by Reserve Bank of India ('RBI') to carry out NBFC business. RBI confirmed the cancellation of the NBFC license as per their letter dated May 24, 2004.

On September 24, 2010 the name of Company was changed to Quadrant Televentures Limited.

Infotel Tower Infrastructure Private Limited (TTIPL') is a Subsidiary Company. During the year the Company has acquired beneficial interest in the remaining 20 equity shares which were earlier held by the subscribers to the Memorandum of Association; declaration of beneficial Interest in the said shares has been duly filed with the Registrar of Companies. Consequently, the company now holds 100% of the issued equity share capital in the subsidiary company. The principal business of the Company is building, establishing, setting-up, accruing, developing, advising on, managing, providing, operating and/ or maintaining, facilitating conduct of, fully or partially infrastructure facilities and services thereof for all kinds of value added services including Broadband Towers for telecom operations/services, payment gateway services and international gateway services.

(b) License Fees

The Company obtained licence for Basic Telephony Service for the Punjab circle (including Chandigarh and Panchkula) by way of amalgamation of the erstwhile HFCL Infotel with the Company. Erstwhile HFCL Infotel had obtained this licence under fixed license fee regime under National Telecom Policy ('NTP') 1994, valid for a period of 20 years from the effective date, and subsequently migrated from the fixed license fee regime to revenue sharing regime upon implementation of NTP 1999. Further to the Telecom Regulatory Authority of India's ('TRAI') recommendations of October 27, 2003 and the Department of Telecommunications ('DoT') guidelines on Unified Access (Basic & Cellular) Services Licence ('UASL') dated November 11, 2003, the Company migrated its licence to the UASL regime with effect from November 14, 2003. A fresh License Agreement was signed on May 31,2004. Pursuant to this migration, the Company became additionally entitled to provide full mobility services. HFCL Infotel also entered into a Licence Agreement dated June 28, 2000, and amendments thereto, with DoT to establish maintain and operate internet service in Punjab circle (including Chandigarh and Panchkula).

Fixed license fees of Rs. 1,775,852,329 paid under the old license fee regime from inception till July 31,1999, were considered as the License Entry Fees of the Punjab circle (including Chandigarh and Panchkula) as part of the migration package to NTP 1999.

With effect from August 1, 1999, the Company is required to pay revenue share license fees as a fraction of Adjusted Gross Revenue ('AGR'), The revenue share fraction was set at 10% of AGR with effect from August 1, 1999 and was reduced to 8% of AGR with effect from April 1, 2004. In addition, spectrum charges calculated at 3 per cent of the AGR earned through the wireless technology is payable under the license agreement. Income from internet services is excluded from the service revenue for the purpose of the calculation of AGR.

During the year ended March 31, 2008, the Company has deposited the entry fee of Rs. 1,517,500,000 with The Department of Telecommunication ('DOT') for the use of GSM Technology in addition to CDMA technology being used under the existing Unified Access Services Licence ('UASL') for the Punjab Service Area. The UASL has since been amended to incorporate the license for use of GSM technology on January 15, 2008 vide DOT's letter number F.No. 10-15/2004/ BS.II/HITL/ Punjab/17 dated January 15, 2008. The Company has launched its GSM services on March 29, 2010 in Punjab Circle.

(c) Project Financing

The Company's project was initially appraised by Industrial Development Bank of India (TDBI') during the year ended March 31, 2000.

Pursuant to the migration to UASL regime, the consortium of lenders, led by IDBI, through the Corporate Debt Restructuring ('CDR') mechanism approved an overall restructuring of the liabilities of the Company and thereby revised the peak funding requirements,

Further, the CDR Empowered Group has approved the proposal of the Company for expansion of services, change in the scope of the project, cost of project and means of finance and restructuring of debt as per the letter dated June 24,2005. As per the said proposal, the peak funding requirement has been further revised and the principal repayment of existing term loan was rescheduled to be repaid between May 1, 2008 and April 1, 2016. Moreover, the rate of interest on existing term loan, secured OFCDs and working capital shall be 9.3% per annum monthly compounding. The secured OFCD were to be converted into equity shares at par subject to applicable provisions of SEBI guidelines and other relevant Acts during financial year ended March 31, 2006.

During the year, the Company has incurred losses of Rs. 2,236,667,344 resulting into accumulated loss of Rs. 13,636,994,938 as at March 31,2011 which has completely eroded its net worth and has a net current liability of Rs. 6,588,544,442. The ability of the Company to continue as a going concern is substantially dependent on its ability to successfully arrange the remaining funding and achieve financial closure to fund its operating and capital funding requirements and to substantially increase its subscriber base. The management in view of its business plans and support from significant shareholders is confident of generating cash flows to fund the operating and capital requirements of the Company. Accordingly, these statements have been prepared on a going concern basis.

1. Commitments and contingent liabilities not provided for in respect of:

Sr. Description As at As at

No. March 31, March 31,

2011 2010

I. Estimated Value of Contracts

remaining

To be executed on capital 296,671,624 1025,925,638 account and not provided for net of capital advances Rs. 2,677,951 (March 31,2010 - Rs. 1,214,168)

II. Contingent Liabilities and Commitments

Financial Bank Guarantees 74,134,394 185,159,908 (refer Note (a) below)

Performance Bank Guarantees 53,542,500 52,782,810 (refer Note (a) below)

III. Open Letters of Credit 14,143,944 3,612,292 (Margin deposit for above Rs. 1,414,394 (March 31, 2010 - Rs. 361,229)

IV. Income-tax matters under 11,837,921 10,997,359 Appeal (refer Note (b) below)

V. Claims against the Company 5,381,816 6,004,468 not acknowledged as debts - mainly representing miscellaneous claims filed against the Company, which are subject matter of litigation,

VI. Others (refer to Note (c,d,e,f, 852,854,133 856,657,573 g and h) below)

Total 1,308,566,332 2,141,140,048

(a) Financial bank guarantees as at March 31, 2011 of Rs. 74,134,394 (March 31, 2010 - Rs. 185,159,908) and performance bank guarantees of Rs. 53,542,500 (March 31, 2010 - Rs. 52,782,810) are secured. The details of security created are detailed out in Note No. 9 (a) below.

(b) The Company has certain income tax related matters pending with Income Tax Appellate Tribunal for the Assessment Year 2001-02 aggregating to Rs. 11,837,921 (March 31, 2010 - Rs. 10,997,359).

(c) The Wireless Finance Division of Department of Telecommunications has claimed an outstanding of Rs. 29,585,211 towards the Spectrum Charges dues from year 2001 to year 2005 vide their letter 1020/48/2005-WFD dated October 7, 2005. The Company has submitted its reply to the department on October 25, 2005 confirming the total due of Rs. 29,472 only and paid the said amount. The Wireless Finance Division of Department of Telecommunications has subsequently claimed Rs. 39,310,176 vide letter number 1020/48/2005-WFD dated September 13,2006 towards the Spectrum Charges dues from year 2001 to year 2006. The Company has submitted a detailed reply on October 31, 2006. During the year ended March 31,2008, out of the above demand, the Company has deposited Rs. 1,801,241 under protest towards the interest due till August 31, 2006. Wireless Finance Division of Department of Telecommunications has updated their claim to Rs. 70,604,092 towards Spectrum Charges dues from January 1, 2000 to September 30, 2008 vide letter number 1020/29/WR/07-08 dated October 24, 2008. The Company has once again made a written representation vide its letter dated December 8, 2008 and August 12, 2009. Subsequently DOT has revised their demand to Rs. 70,528,239 vide Letter No. 1020/48/WFD/2005-06/ Dated September 6, 2010 to which the Company has made representations vide letter dated September 23, 2010, February 3, 2011 and March 17, 2011. The reply of which has not been received. Based on the legal opinion, the Company is confident that no liability would accrue regarding the same in future.

(d) During the year ended March 31, 2007, Bharat Sanchar Nigam Limited ('BSNL') has raised supplementary bill dated August 10, 2006 for Rs. 167,614,241 towards Inter- connect Usage Charges (TUC) and Access Deficit Charges ('ADC') for the period November 14, 2004 to August 31, 2005 on the Company. BSNL further raised invoices to the tune of Rs. 99,346,533 on similar grounds for the period September 1, 2005 to February 28, 2006.These charges are on account of unilateral declaration of the Company's Fixed Wireless and Wire line Phone services as Limited Mobility Services by BSNL. The Company has submitted its reply to BSNL on August 23, 2006 asking for the calculation/ basis for the additional amount raised towards IUC and ADC by BSNL for Rs. 167,614,241. Subsequently, BSNL issued a disconnection notice on August 26, 2006 which required the payment of Rs. 208,236,569 (including Rs. 167,614,241). The Company has submitted details to BSNL for payments already made for Rs. 40,622,328. The Company has approached Hon'ble TDSAT on the subject matter and a stay order was granted on Company's petition No. 232 of 2006 against the disconnection notice on September 21, 2006. BSNL Jalandhar Office subsequently raised a supplementary bill dated March 20, 2007 for Rs. 5,206,780, to which the Company has submitted its reply on March 23, 2007 intimating that the matter being sub-judice and pending decision by the Hon'ble TDSAT, no coercive action be taken against the Company. The hearing on the matter has been completed and the Hon'ble TDSAT has pronounced the judgment on May 21, 2010 in Company's favour and has directed that BSNL and the Company should exchange relevant information and reconcile tl* differences. In the absence of information from BSNL, the Company is not in a position to determine the liability with respect to this matter. The Company, based on expert legal opinion, believes that there would be no financial liability against such bills and accordingly, has not recorded any liability towards the IUC and ADC supplementary bills during the year ended March 31, 2011.

(e) The Company is in receipt of Show Cause Notice dated June 4, 2007 from. Department of Telecommunications ('DoT') for non fulfilment of first year's roll-out obligations of Unified Access Service License ('UASL') Agreement for Punjab Service Area, where in the licensee as per the terms of the license agreement was required to ensure that at least 10% of the District Headquarter/Towns are covered in the first year of the date of migration to UASL which commences from the date of Test Certificate issued by Telecom Engineering Centre ('TEC'). As stated by DoT in the Show Cause Notice issued, the Company has violated the conditions of UASL and accordingly Liquidated Damages of Rs. 70,000,000 has been imposed and DoT has also sought explanation within 21 days as to why they should not take action against the Company under the UASL Agreement to which the Company has replied on September 27, 2007 that the Company has not violated the conditions of UASL and based on expert legal advice, the Company believes that there would be no financial liability against such claims of DoT and accordingly, has not recorded any liability towards the Liquidated Damages during year ended March 31, 2011.

(f) The Company is in receipt of a demand of Rs. 433,158,340 from Bharat Sanchar Nigam Limited ('BSNL') on December 20,2008 on account of unilateral revision of access charges vide its letter dated April 28,2001 for the period from June 2001 to May 2003, in contravention of the Interconnect Agreement and TRAI Regulations. The Company, Association of Unified Service Providers of India 'AUSPF (erstwhile Association of Basic Telephone Operators 'ABTO) and other Basic Service Operators contested aforesaid revision in the rates of access charges before Telecom Dispute Settlement Appellate Tribunal ('TDSAT'). TDSAT vide its reasoned and detailed judgement dated April 27, 2005 allowed the refund claims and struck down the unilateral revision in the rates of access charges by BSNL and held that Telecom Regulatory Authority of India ('TRAI') is the final authority for fixing of access charges and access charges would be payable as rates prescribed by the TRAI and as per the Interconnect agreements. BSNL preferred an appeal in Hon'ble Supreme Court against the order of TDSAT and an interim stay was granted on October 19> 2006 Therefore aggrieved by such unilateral action on the part of BSNL by raising aforesaid demand and disturbing the status-quo, applications were moved by the Company, AUSPI and other Operators in the Hon'ble Supreme Court vide C.ANo. 5834-5836 of 2005 that was listed for hearing on February 9, 2009 and Hon'ble Supreme Court passed an order clarifying its previous order of October 19, 2006 and stayed the refunds claim against the BSNL there by upholding the TDSAT order dated April 27, 2005 whereby BSNL is refrained from raising the access charges demand. The Company based on the legal opinion believes that there would be no financial liability against this demand and has accordingly not recorded any liability towards access charges during the year ended March 31, 2011.

(g) The Company is in receipt of demand of Rs. 7,000,000 from Department of Telecommunications ('DoT'), Licensing Group (Access Services) vide their letter dated October 21,2009 for issuance of SIM cards on fake ID in Punjab Service Area, where in the Licensee was required to ensure adequate verification of each and every customer before enrolling him as a subscriber. The Company has replied to DoT vide letter dated November 14, 2009 that the levy of penalty imposed by DoT was based on verification done by an agency other than the DOT - TERM Cells and the exercise was carried out suo moto and in complete disregard of the established procedures and guidelines laid by DoT. Accordingly the Company has requested DoT to have this validation done by the DOT - TERM Cell. The Company believes that there would be no financial liability against this demand and has accordingly not recorded any liability towards penalty during the year ended March 31, 2011.

(h) The Company is in receipt of a demand of Rs. 4,157,718 from Bharat Sanchar Nigam Limited ('BSNL') on February 2, 2009 on account of port charges for the year 2008-09, passive link charges, duct cost for passive link and active link charges. Out the above Rs. 430,131 pertaining to port charges for the year 2008 - 09 and active link charges was paid by the Company vide receipt number 189 dated February 18,2009. The amount of Rs. 3,727,587 towards the duct cost for passive link and passive link charges was not acceptable by the Company as the demand raised by BSNL was unilateral and unjust. The Company filed a petition vide petition number 41(C) of 2009 with Telecom Dispute Settlement and Appellate Tribunal ('TDSAT') to which the Company was granted a stay order dated March 25,2009 restraining BSNL from recovering the dues from the Company. The hearing on the matter has been completed on February 11, 2010 and the judgement from Hon'ble TDSAT was delivered December 22, 2010 in fSvour of BSNL where in the Company was required to make payment amounting to Rs. 5,191,862 to BSNL. The said payment has been made in compliance with die order.

3. Managerial remuneration

The above managerial remuneration does not include provision of gratuity of Rs. 56,688 (March 31, 2010 - Rs. 36,607) and leave encashment of Rs. 129,613 (March 31, 2010 - Rs. 58,488), as these provisions are computed on the basis of an actuarial valuation done for the Company and are provided in the financials (Refer Schedule 13).

Value of perquisites and other allowances has been determined in accordance with the provision of the Income-tax Act, 1961.

7. Share Capital

Equity shares

(a) As of date, the entire paid up Equity Share Capital of the company comprising of 612,260,268 equity shares of Rs. 10 each, stands listed on the Bombay Stock Exchange (BSE) Consequent upon the issuance of 8,67,43,116 equity shares allotted pursuant to the conversion of 75,51,178 OFCDs along with interest accrued thereon to the Financial Institution/Banks on July 8, 2009, the non-promoter shareholding in the Company increased from 38.02% to 46.80%, and the Promoters' Shareholding decreased from 61.97% to 53.19%, whereupon the Company requested BSE to grant listing of unlisted shares without insisting upon the stipulation of the condition for 'Offer for Sale. BSE, vide its letter DCS/AMAL/RCG/GEN/1108/2008-09 dated February 13, 2009, inter-alia, agreed to exempt the condition imposed on the Company to comply with requirement of making an offer for sale in the domestic market, subject to compliance of certain procedural requirements including 'three years lock- in' period of 25% of equity shares that had been issued pursuant to the merger on June 17, 2003 i.e. 25% of 432,000,250 shares (108,000,063 equity shares). The Company had - in compliance with the conditions stipulated by BSE - placed under lock-in 108,000,063 equity shares on May 14, 2009 for a period of 3 years ending May 15, 2012. The Company has also complied with all other necessary requirements pursuant to the letter from BSE dated February 13, 2009 related to 83,070,088 equity shares issued pursuant to corporate debt restructuring scheme. BSE had also agreed to grant in-principle approval for allotment of 86,743,116 equity shares to be issued to Banks and financial institutions on conversion upon filing of necessary listing application, which the Company has filed, vide its letter no. HlTLfS&L/S-Ol/09/472 and 473 dated March 07, 2009. Consequently, vide their notice 20090514-12 dated May 14, 2009 hosted on it's website BSE had granted Listing and Trading permission in respect of the 432,000,250 equity shares issued pursuant to scheme of amalgamation. BSE had also granted Listing approval in respect of the 83,070,088 equity shares allotted as aforesaid vide their letter number DCS/PREF/DMN/FIP/239/09-10 dated May 25, 2009 and the shares were Listed by BSE vide its notice number 20090605-20 dated June 5, 2009

(b) Out of the total paid up equity share capital comprising of 612,260,268 equity shares of Rs. 10 each, 8,67,43,116 equity shares of Rs. 10/- each (allotted on July 08, 2009, after obtaining in principle approval from the BSE and MSE. upon the conversion of Optionally Fully Convertible Debentures (OFCDs) allotted pursuant to the Corporate Debt Restructuring (CDR) Cell) Consequently, the Listing approval in respect of these shares was granted by Bombay Stock Exchange (BSE) vide its letter number 20090813-08 dated August 13, 2009 w.e.f. August 14, 2009 and by the Madras Stock Exchange Limited vide its letter No. MSE/LD/ PSK/738/215/09 dated September 01, 2009 w.e.f September 01, 2009.

Out of the total paid up equity share capital comprising of 612,260,268 equity shares of M0 each, 326,705,000 equity shares of Rs. 10/- each representing 53.3605% of the total Paid-up share capital of the Company - which were earlier held by Himachal Futuristic Communications Limited - the erstwhile promoter or Holding Company) till April 3, 2010, were acquired by M/s. Quadrant Enterprises Private Limited on 3rd April, 2010 in compliance with the SEBI Exemption Order in pursuance of the proposal for settlement/ change of management of the Company approved under the Corporate Debt Restructuring Scheme (CDR Scheme) as approved by the Corporate Debt Restructuring Cell (CDR Cell) on August 13, 2009.

(c) On March 31, 2004, the Company obtained the approval from the shareholders for de-listing the shares listed in the Calcutta Stock Exchange Association Limited ('CSE') and complied with all the necessary requirements for delisting and submitted its application in CSE. Despite repeated reminders, the Company has not yet received CSE's approval in this regard.

(d) Pursuant to the Company's application in this regard, for Voluntary Delisting pursuant to the provisions of regulation 6(a) and 7(1) of the Securities and Exchange Board of India (Delisting of Equity Shares) Regulation, 2009, the Madras Stock Exchange (MSE), MSE has vide its letter dated March 15, 2011, accepted and accorded its consent to the Voluntary Delisting of the company's shares vide its letter No. MSE/LD/PSK/731/109/11 dated March 15,2011 accepting the Voluntary delisting of the company's equity shares from the MSE.

8. Secured Loans

(a) As per the CDR Scheme approved on March 10, 2004 and subsequently approved on June 4, 2005, the Lenders have signed Master Restructuring Agreement ('MRA') for restructuring of their Debts and Security Trusteeship Agreement, whereby the Lenders have entered into an agreement and appointed IDBI Trusteeship Services Limited (herein after referred as "ITSL") as their custodian of security. On November 11, 2005, the charges were registered in favour of the ITSL for Rupee Term Loans, for providing Specific Credit Facility, for Working Capital Assistance and Zero % Secured OFCDs. The same are secured by first pari passu charge on immovable properties of the Company situated at Kandivali (East), Mumbai and properties situated at Mohali & Jalandhar under equitable mortgage, first pari passu charge of hypothecation of movable properties of the Company including movable plant & machinery, machinery spares, tools & accessories and other movables including book debts by way of hypothecation, both present and future. Further, the same are also secured by assignment of all rights, title, benefits, claims and interest in, under the project documents, insurance policies, all statutory, government and regulatory approvals, permissions, exemptions and waivers on pari passu basis. Subsequently, pursuant to the reworked restructuring scheme approved under CDR mechanism on June 24,2005, the Company has entered. into amendatory Master Restructuring Agreement and amendatory Security Trusteeship Agreement ('STA') on March 9, 2006, whereby Centurion Bank of Punjab has also joined as one of the lenders and has agreed to appoint ITSL as their custodian for security and signed the STA in line with other lenders in consortium.

On the request of the Company, Corporate Debt Restructuring Cell ('CDR') vide their letter No. CDR (JCP) No. 138 / 2009-10 ('CDR Letter') dated May 20, 2009 has approved the interim revised restructuring package. The revised restructuring package inter alia includes funding of interest from July 1, 2008 to October 31, 2009 on simple interest basis. Funded Interest on Term Loan ('FITL') would not carry any interest and the FITL shall be repaid in 16 equal monthly installments commencing from December 1, 2009, and has rescheduled the principle installments from August 1, 2008 to November 1, 2009 so as to be repayable from December 1, 2009 to March 1, 2011. Corporate Debt Restructuring ('CDR') cell vide their letter no CDR (JCP) No. 563/2009-10 dated August 13, 2009 has approved a new restructuring package, which includes the induction of strategic investor/ change of management and settlement proposal for Term Lenders. All the term lenders have given their acceptance to the new restructuring package. The CDR has been made effective from April 1, 2009 and accordingly an amount of Rs. 373,097,077 towards FITL from July 1, 2008 to March 31, 2009 has been considered as term loan. In accordance with the new restructuring package an amount of Rs. 256,829,422 has been considered as Interest for the year ended March 31, 2010, and reversed the provision for interest of Rs.1,025,846,205, the differential between interest paid and interest accrued on yield basis as per old CDR scheme.

During the year the Company has allotted 15,984,543, 2% Cumulative Redeemable Preference Shares of Rs. 100 each aggregating to Rs. 1,598,454,300 on November 9, 2010, to Financial Institution/Banks in conversion of 25% of their outstanding loans as on April 01, 2009 in terms of new CDR Scheme in compliance with the New CDR Scheme the company has repaid on July 06, 2010 and July 07, 2010 an amount of Rs. 1,598,454,522 being 25% of their outstanding loans as on April 01, 2009 in terms of New CDR Scheme and the Company is required to allot secured Non-Convertible Debenture ('NCD') of an amount aggregating to Rs. 3,196,909,043 equivalent to 50% of their outstanding loans as on April 01, 2009, which shall be issued and the terms of the Revised CDR Scheme shall be implemented on the completion of such approvals and conditions precedent.

(b) The above mentioned security has been further extended to the amount of loans, working capital assistance, specific facility and OFCDs together with the interest, compound interest, additional interest, default interest, costs, charges, expenses and any other monies payable by the Company in relation thereto and in terms with MRA and ST A entered into between the lenders and ITSL.

(c) Vehicle Loans of Rs. 351,802 (March 31,2010 - Rs. 1,341,082) are secured by way of exclusive hypothecation charge in favour of bank on the specific assets acquired out of the loan proceeds of the Company. These loans are repayable in monthly instalments and shall be repaid by 2012. Vehicle loans repayable within one-year amounts to Rs. 300,060. Interest rates on vehicle loans vary from 9.65% per annum to 12.15% per annum. The average tenure of loan is 36 months.

9. Unsecured Loans

(a) On October 16, 2004, the Company issued 1,667,761 zero % Non-Convertible Debentures ('NCDs') of Rs. 100 each in lieu of interest accrued on term loans from a financial institution and a bank for the period April 1, 2003 to December 31, 2003. The NCDs earlier redeemable at par on March 31, 2014, are now redeemable at par on March 31, 2016 after repayment of the term loans as per revised CDR Scheme effective from April 1, 2005.

(b) On February 8, 2005, the Company has entered into a buyer's credit loan agreement with The Export Import Bank of China to facilitate payment to one of its equipment supplier for a total amount of Rs. 544,131,662 (US$ 12,134,961). As on March 31, 2010, the Company has utilized Rs. 527,470,587 (US$ 12,061,985) of this facility. The facility is secured by Financial Bank guarantee of Rs. 108,825,514 and by a Corporate Guarantee of Rs. 544,131,662 given by Himachal Futuristic Communications Limited erstwhile Holding Company, on pari passu basis with other lenders. During the year the Company on July 21, 2010 has fully repaid the amount outstanding towards the Buyer's Credit Loan.

(c) The Company under the terms of the agreement dated May 1, 2007 had taken convertible loan to facilitate expansion and development of businesses amounting to Rs. 499,499,886 from Infotel Digicomm Private Limited. The convertible loan is repayable on demand; Infotel Digicomm Private Limited shall have an option to convert the Loan into Equity Shares, subject to getting necessary approvals and subject to applicable pricing guidelines as per SEBI and other laws and regulations. On September 16, 2009 Infotel Digicomm Private Limited (TDPL') has entered into an assignment agreement with Domebell Electronics India Private Limited ('DEIPL'), wherein IDPL has assigned the above convertible loan of Rs. 499,499,886 to DEIPL. All the terms and conditions relating to the convertible loan has remained the same. The interest accrues at the end of each quarter. During the year ended March 31, 2010 the Company has provided for interest amounting to Rs. 14,984,997 @ 12% to IDIPL for the three months ended June 30, 2009. DEIPL on the basis of the assignment agreement dated September 16, 2009 has a right on the interest accruing from July 1, 2009 onwards, DEIPL have agreed to waive off the interest from July 1, 2009 till March 31, 2011, therefore no provision for such interest has been made by the Company.

(d) The Company under the terms of the agreement dated May 1, 2007 had taken buyer's credit facility to facilitate funding of the telecom project amounting to Rs. 410,740,832 from Infotel Business Solutions Limited. The loan carries 12% interest and is repayable on demand. Infotel Business Solutions Limited has the option to convert the loan including interest accrued into equity shares, subject to applicable pricing guidelines as per SEBI and other laws and regulations. On September 16, 2009 Infotel Business Solutions Limited (TBSL') has entered into an assignment agreement with Domebell Electronics India Private Limited ('DEIPL'), wherein IBSL has assigned the above buyer's credit facility of Rs. 410,700,000 to DEIPL. All the terms and conditions relating to the buyer's credit facility has remained the same. The interest accrues at the end of each quarter. During the year ended March 31, 2010 the Company has provided for interest amounting to Rs. 12,322,225 @ 12% to IBSL for the three months ended June 30, 2009 and accordingly DEIPL on the basis of the assignment agreement dated September 16,2009 has a right on the interest accruing from July 1, 2009 onwards DEIPL has agreed to waive off the interest from July 1, 2009 till March 31, 2011, therefore no provision for such interest has been made by the Company.

(e) The Company during the year has received an unsecured loan on July 06, 2010 of Rs. 1,598,500,000 @ 8% per annum, the interest accrues at the end of each quarter. The lender has agreed to waive off the interest from July 06,2010 to March 31, 2011, therefore no provision for said interest has been made by the Company.

10. Fixed Assets and Capital work-in-progress

(a) Capital Work-in-Progress includes Goods in Transit of Rs. 2,299,900 (March 31,2010 - Rs. 20,106,204).

(b) As on March 31, 2011, telephone instruments aggregating to a net book value of Rs. 121,711,778 (March 31, 2010 - Rs. 155,534,655) and other assets aggregating to net book value of Rs. 1,105,736,867 (March 31, 2010 - Rs. 238,604,630) are located at customer premises, other parties and at other operator's sites, respectively.

11. Investments

During the year ended March 31, 2009 the Company has incorporated a Subsidiary Company Infotel Tower Infrastructure Private Limited with an Investment of Rs. 99,800. The principal business of the Company is building, establishing, setting-up, accruing, developing, advising on, managing, providing, operating and/or maintaining, facilitating conduct of, fully or partially infrastructure facilities and services thereof for all kinds of value added services including broadband towers for telecom operations/ services, payment gateway services and international gateway services. During the year the Company has acquired beneficial interest in the remaining 20 equity shares which were earlier held by the subscribers to the Memorandum of Association. Consequently, the company now holds 100% of the issued equity share capital in the subsidiary company.

12. License Entry Fees

During the year ended March 31, 2008, the Company has deposited the entry fee of Rs. 1,517,500,000 with The Department of Telecommunication ('DOT') for the use of GSM Technology in addition to CDMA technology being used under the existing Unified Access Services Licence ('UASL') for the Punjab Service Area. The UASL has since been amended to incorporate the license for use of GSM technology on January 15, 2008 vide DOT's letter number F.No.10-15/2004/ BS.II/HITL/Punjab/17 dated January 15, 2008. The Company has launched its GSM services on March 29, 2010 in Punjab Circle.

13. Inventory for Network Maintenance

The Company holds inventory of network maintenance consumables and RUIM cards amounting to Rs. 23,088,275 (March 31, 2010 - Rs. 24,064,756). The quantity and valuation of inventory is taken as verified, valued and certified by the management.

14. Deferred Taxes

During the year, the Company has incurred losses of Rs. 2,236,667,344 (accumulated losses of Rs. 13,636,994,938) resulting into a tax loss carry forward situation. The Company is eligible for a tax holiday under section 80IA of the Income-tax Act, 1961. Though the management is confident of generating profits in the future, there is currently no convincing evidence of virtual certainty that the Company would reverse the tax loss any forwards beyond the tax holiday period. Accordingly, the Company has not recognized any deferred tax assets resulting from the carry forward tax losses. Further, no deferred tax liabilities on account of temporary timing differences have been recognized since they are expected to reverse in the tax holiday period.

15. Current Liabilities and Provisions

a) Sundry Creditors include amount payable to Micro and Small Enterprises as at March 31,2011 of Rs. 103,716 (March 31, 2010 - Rs. 1,980,142). The information as required to be disclosed under the Micro, Small and Medium Enterprises Development Act, 2006 has been determined to the extent such parties have been identified on the basis of information and records available with the Company.

b) During the year ended March 31, 2008, the Company had obtained advance of Rs. 1,517,500,000 to fund the entry fee for using GSM Technology under the existing Unified Access Services License (UASL) for Punjab Service Area. The amount of aforesaid advance is adjustable or refundable on such terms and conditions as may be mutually agreed. No interest is payable on the said advance.

17. Operating leases

A. Company as a Lessee

The Company has entered into various cancelable lease agreements for leased premises. Gross rental expenses for the year ended March 31, 2011 is Rs. 60,588,535 (March 31,2010 - Rs. 58,224,713).

The Company has entered into site sharing agreements with other operators for sharing of their infrastructure sites. During the year, the Company has incurred Rs. 549,466,428 (March 31, 2010 - Rs. 267,620,888) towards infrastructure sharing expenses.

The escalation clause includes escalation at various periodic levels ranging from 0 to 50%, includes option of renewal from 1 to 99 years and there are no restrictions imposed on lease arrangements.

B. Company as a Lessor

The Company has entered into cancellable site sharing agreements with other operators for sharing of its infrastructure sites. During the year, the Company has accrued Rs. 4,557,384 (March 31, 2010 - Rs. 4,437,292) towards site sharing revenue.

The Company has entered into a non-cancellable lease arrangement to provide approximately 7,814.27 Fibre pair kilometres of dark fibre on indefeasible right of use (IRU) basis for a period of 15 years. The gross block, accumulated depreciation and depreciation expense of the assets given on IRU basis is not readily determinable and hence not disclosed.

In respect of such leases, rental income of Rs. 35,810,133 (March 31, 2010 - Rs. 33,956,731) has been recognised in the profit and loss account for the year ended March 31, 2011.

18. Segmental Reporting

The primary reporting of the Company has been performed on the basis of business segments. The Company has only one business segment, which is provision of unified telephony services. Accordingly, the amounts appearing in these financial statements relate to this primary business segment. Further, the Company provides services only in the State of Punjab (including Chandigarh and Panchkula) and, accordingly, no disclosures are required under secondary segment reporting.

20. Unclaimed deposits from public

During the year ended March 31, 2004, the Company surrendered its licence granted by Reserve Bank of India ('RBI') to carry out NBFC business. Accordingly, the Company foreclosed all the unpaid/unclaimed deposits as on September 15, 2003 and the interest accruing thereon as on that date, and the same have been transferred to the Escrow Account in February 2004. On May 24, 2004, the RBI approved the cancellation of the Company's certificate of NBFC registration and provided certain directives to the Company to be complied with, pending completion of which, the Company would continue to be governed by the relevant provisions of the Reserve Bank of India Act, 1934 and various directions/instructions issued by RBI from time to time. [Refer Schedule 11 & 14 and Schedule 22, Note 1(a))]. On August 10, 2004, the Company has obtained the approval of the shareholders for the removal of NBFC related objects from the Memorandum of Association. Further, the Company submitted a letter dated July 7, 2004 for compliance and RBI vide its letter dated July 30, 2004 gave some concessions from compliance and has advised the Company to follow certain instructions till the balance in the escrow account is settled. The Registrar of Companies, Jalandhar, is yet to register the resolution of the shareholders due to delay in filing of the documents, for which the Company has moved an application to Central Government for condo nation of delay. Ministry of Company Affairs vide letter No. 17/23/2005-CL.V dated 07th July, 2005 has granted a condonation for filing of form 23, which was submitted to Registrar of Companies, Jalandhar vide letter No. HITL/C&L/S-31/05/347 dated July 13, 2005 and the registration certificate is yet to be obtained.

21. Debenture redemption reserve

Pursuant to the CDR scheme on October 16, 2004, the Company has issued OFCDs aggregating to Rs. 166,776,100 repayable as on March 31, 2016. As per section 117C (1) of the Companies Act, 1956, a debenture redemption reserve ('DRR') is to be created to which adequate amounts are to be credited out of the profits of each year until such debentures are redeemed.

During the year, the Company has incurred loss of Rs. 2,236,774,666. Hence, in accordance with the clarification received from the Department of Company Affairs vide circular No. 6/3/2001-CL.V dated April 18, 2002, the Company has not created Debenture redemption reserve.

22. Employee Benefits

(a) During the year, the Company has recognized the following amounts in the Profit and Loss Account

Defined Benefit Plans

The employee's gratuity fund scheme managed by Life Insurance Corporation of India and ICICI Lombard General Insurance Company Limited is a defined benefit plan and the same is 100% funded. The present value of obligation is determined based on - actuarial valuation using Project Unit Credit Method, which recognizes each period of service as giving rise to additional unit of employee benefit entitlement and measures each unit separately to build up the final obligation. The obligation for leave encashment is recognised in the same manner as gratuity.

Experience adjustments are Nil and have not been disclosed as required under para 120 of Accounting Standard 15 relating to Employee benefits.

The Company expects to contribute Rs. 926,120 towards employers' contribution for funded defined benefit plans in 2010-11.

d) The expected rate of return on plan assets was based on the average long-term rate of return expected to prevail over the next 15 to 20 years on the investments made by the LIC. This was based on the historical returns suitably adjusted for movements in long-term government bond interest rates. The discount rate is based on the average yield on government bonds of 20 years,

e) The Company made annual contributions to the LIC of an amount advised by the LIC. The Company was not informed by LIC of the investments made by the LIC or the break-down of plan assets by investment type.

f) The estimates of rate of escalation in salary considered in actuarial valuation , taken into account inflation, seniority, promotion and other relevant factors . including demand and supply in the employment market. The above information is certified by the actuary.

23. The Company is primarily engaged in the business of providing telecommunication services. The production and sale of such services is not capable of being expressed in any generic unit. Hence, other information pursuant to the provisions of the paragraph 3,4C and 4D of Part II Schedule VI of the Companies Act, 1956 are not applicable to the Company.

24. Changeover of Management.

a) Securities Exchange Board of India ('SEBI') has, vide its Order No. WTM/KMA/CFD/233/03/2010 dated March 3,2010, granted an exemption to M/s Quadrant Enterprises Private Limited, - ('QEPL'), from the applicability of Regulation 10 & 12 of the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 1997, for acquiring 32,67,05,000 (Thirty Two Crores Sixty Seven Lac and Five Thousand only) equity shares of the Company ('Shares') amounting to 53.3605% (approximately fifty three percent) of the issued, subscribed and paid up share capital of the Company, from the Company Himachal Futuristic Communications limited ('HFCL'). The Order has been passed pursuant to the proposal for change of management sanctioned by the Corporate Debt Restructuring Cell in terms of its letter No. CDJ (JCP) No. 563/2009-10 dated August 13, 2009. The aforesaid shares have been acquired on April 3,2010.

b) In line with the stipulations of the CDR package as approved by the CDR Cell vide its Letter no. BY. CDR(JCP) No. 563/2009-10 dated August 13, 2009 stipulating a change in the management of the Company, the existing Directors except the nominees of Financial Institutions had resigned from the Board and therefore to complete the process of change in the management of the Company, as per the stipulations of the CDR package, the senior management team comprising of Mr. Surendra Lunia, Chief Executive Officer, Mr. G.D. Singh, Chief Operating Officer, and Mr. Vikash Agarwal, Vice President (Corporate Finance) and Chief Financial Officer have resigned from the Company on April 09,2010.

25. Previous year figures have been regrouped where necessary to conform to this year classification.

The Schedule referred to above and the Notes to Financial Statement form an integral part of the Balance Sheet.


Mar 31, 2010

1. Commitments and contingent liabilities not provided for in respect of: S. Description

As at As at No. March 31, March 31,

2010 2009

I. Estimated Value of Contracts remaining

To be executed on capital account 1,025,925,638 23,961,254

and notprovided for net of capital advancesRs. 1,214,168 (March 31,2009-Rs 2,024,309)

II. Contingent Liabilities and

Commitments Financial Bank Guarantees 185,159,908 221,206,514

(refer Note (a) below)

Performance Bank Guarantees 52,782,810 53,864,972

(refer Note (a) below)_

Counter guarantee given to HFCL, - 5,225,000,000

the Holding Company

III. Open Letters of Credit 3,612,292 12,620,144

(Margin deposit for above

Rs 361,229 (March 31,2009- Rs 1,262,014)

IV. Income-tax matters under Appeal 10,997,359 10,366,937 (refer Note (b) below)

V. Claims against the Company not 6,004,468 5,148,860 acknowledged as debts - mainly

representing miscellaneous claims filed against the Company, which are subject matter of litigation.

VI. Others (refer to note (c, d, e, f, g I 856,657,573 849,657,573 and h) below)

Total 2,141,140,048 6,401,826,254

(a) Financial bank guarantees as at March 31, 2010 of Rs.185,159,908 (March 31, 2009 - Rs. 221,206,514) and performance bank guarantees of Rs. 52,782,810 (March 31, 2009 - Rs 53,864,972) are secured. The details of security created are detailed out in note no. 9 (a) below. Further, the financial bank guarantee given by Punjab National Bank (PNB) to The Export Import Bank of China of Rs.108,825,514 is unsecured.

(b) The Company has certain income tax related matters pending with Income Tax Appellate Tribunal for the Assessment Year 2001-02 aggregating to Rs 10,997,359 (March 31, 2009 - Rs 10,366,937).

(c) The Wireless Finance Division of Department of Telecommunications has claimed an outstanding of Rs 29,585,211 towards the Spectrum Charges dues from year 2001 to year 2005 vide their letter 1020/48/2005- WFD dated October 7, 2005. The Company has submitted its reply to the department on October 25, 2005 confirming the total due of Rs 29,472 only and paid the said amount. The Wireless Finance Division of Department of Telecommunic -ations has subsequently claimed Rs 39,310,176 vide letter number 1020/48/ 2005-WFD dated September 13, 2006 towards the Spectrum Charges dues from year 2001 to year 2006. The Company has submitted a detailed reply on October 31,2006. During the year ended March 31,2008, out of the above demand, the Company has deposited Rs 1,801,241 under protest towards the interest due till August 31, 2006. Wireless Finance Division of Department of Telecommunications has updated their claim to Rs 70,604,092 towards Spectrum Charges dues from January 1, 2000 to September 30, 2008 vide letter number 1020/29/WR/07-08 dated October 24,2008. The Company has once again made a written representation vide its letter dated December 8, 2008_and Augustl2, 2009. The reply of which has not been received. Based on the legal opinion, the Company is confident that no liability would accrue regarding the same in future

(d) During the year ended March 31, 2007, Bharat Sanchar Nigam Limited (BSNL) has raised supplementary bill dated August 10, 2006 for Rs 167,614,241 towards Inter-connect Usage Charges (IUC) and Access Deficit Charges (ADC) for the period November 14, 2004 to August 31, 2005 on the Company in accordance with HQ Letter No. 460-1/2006-REGLN dated May 22, 2006. BSNL further raised invoices to the tune of Rs 99,346,533 on similar grounds for the period September 1, 2005 to February 28, 2006.These charges are on account of unilateral declaration of the Companys Fixed Wireless and Wire line Phone services as Limited Mobility Services by BSNL. The Company has submitted its reply to BSNL on August 23, 2006 asking for the calculation/ basis for the additional amount raised towards IUC and ADC by BSNL for Rs 167,614,241. Subsequently, BSNL issued a disconnection notice on August 26, 2006 which required the payment of Rs 208,236,569 (including Rs 167,614,241). The Company has submitted details to BSNL for payments already made for Rs 40,622,328. The Company has approached Honble TDSAT on the subject matter and a stay order was granted on our petition no 232 of 2006 against the disconnection notice on September 21, 2006. BSNL Jalandhar Office subsequently raised a supplementary bill vide Letter No. Dy.GMM/NTR/JL/HFCL/75 dated March 20, 2007 for Rs 5,206,780, to which the Company.

submitted its reply on March 23, 2007 intimating that the matter being sub-judice and pending decision by the Honble TDSAT, no coercive action be taken against the Company. The hearing on the matter has been completed on January 22, 2010 and the Honble TDSAT has pronounced the judgement on May 21,2010 and has directed that BSNL and tne Company should exchange relevant information and reconcile the differences. In the absence of information from BSNL the Company is not in position to determine the liability with respect to this matter. The Company, based on expert legal opinion, believes that there would be no financial liability against such bills and accordingly, has not recorded any liability towards the IUC and ADC supplementary bills during the year ended March 31,2010.

(e) The Company is in receipt of Show Cause Notice dated June 4, 2007 from Department of Telecommunications (DoT)fornonfulfilmentoffirstyearsroll-outobligations of Unified Access Service License (UASL) Agreement for Punjab Service Area, where in the licensee as per the terms of the license agreement was required to ensure that at least 10% of the District Headquarter / Towns are covered in the first year of the date of migration to UASL which commences from the date of Test Certificate issued by Telecom Engineering Centre (TEC). As stated by DoT in the Show Cause Notice issued, the Company has violated the conditions of UASL and accordingly Liquidated Damages of Rs 70,000,000 has been imposed and DoT has also sought explanation within 21 days as to why they should not take action against the Company under the UASL Agreement to which the Company has replied on September 27, 2007 that the Company has not violated the conditions of UASL and based on expert legal advice, the Company believes that there would be no financial liability against such claims of DoT and accordingly, has not recorded any liability towards the Liquidated Damages during year ended March 31,2010.

(f) The Company is in receipt of a demand of Rs 4,157,718 from Bharat Sanchar Nigam Limited (BSNL) on February 2, 2009 on account of port charges for the year 2008-09, passive link charges, duct cost for passive link and active link charges. Out the above Rs 430,131 pertaining to port charges for the year 2008-09 and active link charges was paid by the Company vide receipt number 189 dated February 18, 2009. The amount of Rs 3,727,587 towards the duct cost for passive link and passive link charges was not acceptable by the Company as the demand raised by BSNL was unilateral and unjust. The Company filed a petition vide petition number 41(C) of 2009 with Telecom Dispute Settlement and Appellate Tribunal (TDSAT) to which the Company was granted a stay order dated March 25,2009 restraining BSNL from recovering the dues from the Company. The hearing on the matter has been completed on February 11, 2010 and the judgement from Honble TDSAT is awaited. Accordingly no liability has been booked in the books of accounts for the year ended March 31,2010.

(g) The Company is in receipt of a demand of Rs 433,158,340 from Bharat Sanchar Nigam Limited (BSNL) on December 20, 2008 on account of unilateral revision of access charges vide its letter dated April 28, 2001 for the period from June 2001 to May 2003, in contravention of the Interconnect Agreement and TRAI Regulations. The Company, Association of Unified Service Providers of India AUSPI (erstwhile Association of Basic Telephone Operators ABTO) and other Basic Service Operators contested aforesaid revision in the rates of access charges before Telecom Dispute Settlement Appellate Tribunal (TDSAT). TDSAT vide its reasoned and detailed judgement dated April 27, 2005 allowed the refund claims and struck down the unilateral revision in the rates of access charges by BSNL and held that Telecom Regulatory Authority of India (TRAI) is the final authority for fixing of access charges and access charges would be payable as rates prescribed by the TRAI and as per the Interconnect agreements. BSNL preferred an appeal in Honble Supreme Court against the order of TDSAT and an interim stay was granted on October 19,2006. Therefore aggrieved by such unilateral action on the part of BSNL by raising aforesaid demand and disturbing the status-quo, applications were moved by the Company, AUSPI and other operators in the Honble Supreme Court vide C.A No.5834-5836 of 2005 that was listed for hearing on February 9, 2009 and Honble Supreme Court passed an order clarifying its previous order of October 19, 2006 and stayed the refunds claim against the BSNL there by upholding the TDSAT order dated April 27, 2005 where by BSNL is refrained from raising the access charges demand. The Company based on the legal opinion believes that there would be no financial liability against this demand and has accordingly not recorded any liability towards access charges during the year ended March 31, 2010.

(h) The Company is in receipt of demand of Rs. 7,000,000 from Department of Telecommunications (DoT), Licensing Group (Access Services) vide their letter number 16-02(46)/2009-AS HI/PB/799 dated October 21, 2009 for issuance of SIM cards on fake ID in Punjab Service Area, where in the Licensee was required to ensure adequate verification of each and every customer before enrolling him as a subscriber. The Company replied to DoT vide letter number HITL-Reg/DOT/09- 10/269 dated November 14,2009 that the levy of penalty imposed by DoT was based on verification done by any agency other than the DOT - TERM Cells and the exercise was carried out suo moto and in complete disregard of the established procedures and guidelines laid by DoT accordingly the Company has requested DoT to have this validation done by the DOT - TERM Cell. The Company believes that there would be no financial liability against this demand and has accordingly not recorded any liability towards penalty during the year ended March 31,2010.

(a) Out of the total paid up equity share capital comprising of 612,260,268 equity shares of Rs 10 each, 515,070,338 of unlisted equity shares have been listed at Bombay Stock Exchange (BSE) vide its letter number 20090514-12 dated May 14, 2009 and letter number DCS/PREF/DMN/ FIP/239/09-10 dated May 25, 2009. As a pre-condition to the listing of the aforesaid shares of the Company, BSE directed the Company to undertake an offer for sale in the domestic market as the non-promoter holding in the Company was below the minimum stipulated level. Accordingly, the Company filed the draft offer for sale document with SEBI for sale of 8,000,000 equity shares held by promoter in the Company. However, SEBI, vide its order dated March 7,2007 directed the Company that communication of observations on the draft offer for sale document filed by the Company be withheld till the proceedings under Section 11B of the SEBI Act against the Company are disposed off. The Company filed an appeal in SAT challenging the SEBIs order dated March 7, 2007. The Honble SAT directed SEBI to proceed with the letter of offer presented by the Company, in accordance with law, and issue a letter of observations in terms of the guidelines within eight weeks from the date of filing of revised draft offer for sale document by the Company. In parallel, pursuant to the restructuring package approved under CDR mechanism, the Company has been in the process of issuance of fresh equity shares to Banks / Financial Institutions on conversion of optionally fully convertible debentures (OFCDs). Considering that post issuance of fresh equity on conversion of OFCDs, the non-promoter holding in the Company would exceed the minimum stipulated threshold, the Company requested BSE to grant listing of unlisted shares without stipulating the condition of offer of sale. BSE, vide its letter DCS / AMAL / RCG/ GEN / 1108 / 2008-09 dated February 13, 2009 has, interalia, agreed to exempt the condition imposed on the Company to comply with requirement of making an offer for sale in the domestic market, subject to compliance of certain procedural requirements including three years lock-in period of 25% of newly issued equity shares pursuant to the merger i.e. 25% of 432,000,250 shares (108,000,063 equity shares). The Company in compliance with conditions stipulated by BSE has placed under lock in 108,000,063 equity shares on May 14,2009 for a period.

of 3 years ending May 15, 2012. The Company has also complied with all other necessary requirements pursuant to the letter from BSE dated February 13, 2009 related to 83,070,088 equity shares issued pursuant to corporate debt restructuring scheme. BSE has also agreed to grant in-principle approval for allotment of 86,743,116 equity shares to be issued to Banks and financial institutions on conversion upon filing of necessary listing application, which the Company has filed, vide its letter no. HITL/ S&L/S-01/09/472 and 473 dated March 07, 2009. BSE vide their notice 20090514-12 dated May 14, 2009 hosted on its website has granted listing and trading permission for 432,000,250 equity shares issued pursuant to scheme of amalgamation. BSE has granted listing approval for 83,070,088 equitv shares vide their letter number DCS/ PREF/DMN/FIP/239/09-10 dated May 25, 2009 and the shares have been listed vide BSE notice number 20090605-20 dated June 5, 2009.

(b) Out of the total paid up equity share capital comprising of 612,260,268 equity shares of Rs 10/- each, 8,67,43,116 equity shares of Rs.10/- each were issued on July 08, 2009 after obtaining in principle approval from the BSE and MSE, consequent to the conversion of Optionally Fully Convertible Debentures (OFCDs) pursuant to the Corporate Debt Restructuring (CDR) Cell. The aforesaid 8,67.43,116 equity shares have been listed and tradable at Bombay Stock Exchange (BSE) vide its letter number 20090813-08 dated August 13, 2009 w.e.f. August 14, 2009 and at Madras Stock Exchange Limited vide its letter no.MSE/LD/PSK/738/215/09 dated September 01, 2009 w.e.f September 01, 2009.

(c) On March 31,2004, the Company obtained the approval from the sharehoiders for de-listing the shares listed in the Calcutta Stock Exchange Association Limited (CSE) and complied with all the necessary requirements for delisting and submitted its application in CSE. Despite repeated reminders, the Company has not yet received CSEs approval in this regard.

8. Advance Against Share Application Money

As per the restructuring package approved under CDR mechanism, on October 16, 2004, the Company had issued 7,551,178 Zero percent Optionally Fully Convertible Debentures (OFCDs) of Rs 100 each in lieu of interest accrued on term loans from financial institution and banks from January 1, 2004 to March 31, 2005. Pursuant to the revised CDR scheme dated Tune 24, 2005, and lenders confirmation regarding conversion of Zero percent Optionally Fully Convertible Debenture (OFCD) including premium accrued till March 31,2006, the Company transferred OFCDs of Rs 755,117,800 and OFCDs premium of Rs 119,873,594 into equity shares. However, pending clarifications on the conversion price, the Company, with the consent of the lenders, converted the convertible amount into Advance against Equity Share Application Monev on March 31,2006. During the year ended March 31, 2007, the Company had further.

transferred Rs 5,550,374 to Advance against Equity Share Application Money, which pertained to differential interest due to monthly vis-a-vis quarterly compounding in respect of term loan from a scheduled bank. During the year ended March 31, 2008, the Company obtained additional confirmations from lenders regarding conversion of Zero percent Optionally Fully Convertible Debenture (OFCD) including premium accrued till March 31, 2006. The Company has accordingly reduced an amount of Rs 131,110,587 from the OFCD premium and taken back the equivalent amount to securities premium account. Pending clarification on conversion price of such OFCDs (including premium) from SEBI the Company, on the basis of directions of Financial Institution and Banks have requested Bombay Stock Exchange (BSE) to grant in-principle approval for allotment of shares at par. The BSE has agreed vide its letter no.DCS/AMAL/RCG/GEN/1108/2008-2009 dated February 13, 2009 to grant in-principle approval for allotment of 86,743,116 equity shares to be issued to Banks and financial institutions on conversion of OFCDs upon completion of necessary formalities. The Company has filed the requisite application in prescribed format vide its letter no. HITL/S&L/S-01/09/472 and 473 dated March 07, 2009 receipted by BSE on March 12, 2009. BSE vide their letter number DCS/PREF/ DMN/ PRE / 522 /09-10 dated July 1, 2009 and Madras Stock Exchange Limited (MSE) vide their letter no. MSE/LD/ PSK/738/158/09 dated July 07, 2009 accorded their in- principle approval for allotment of Shares in physical form pursuant to conversion of OFCDs into equity and accordingly the Company has allotted 86,743,116 equity- shares of Rs. 10 each (at par) fully paid up on July 08, 2009 and the necessary application for the listing of these shares was made to BSE and MSE on July 13, 2009. Company has received Listing and Trading approval from BSE vide its letter no. 20090813-08 dated August 13,2009 w.e.f August 14. 2009 and MSE vide its letter no. MSE/LD/PSK/738/215/09 dated September 01, 2009 w.e.f September 01, 2009.

9. Secured Loans

(a) As per the CDR Scheme approved on March 10, 2004 and subsequently approved on June 4,2005, the Lenders have signed Master Restructuring Agreement (MRA) for restructuring of their Debts and Security Trusteeship Agreement, whereby the Lenders have entered into an agreement and appointed IDBI Trusteeship Services Limited (herein after referred as "LTSL") as their custodian of security. On November 11, 2005, the charges were registered in favour of the ITSL for Rupee Term Loans, for providing Specific Credit Facility, for Working Capital Assistance and Zero percent Secured OFCDs. The same are secured by first pari passu charge on immovable properties of the Company situated at Kandivali (East), Mumbai and properties situated at Mohali & Jalandhar under equitable mortgage, first pari passu charge of hypothecation of movable properties.

the Company including movable plant & machinery, machinery spares, tools & accessories and other movables including book debts by way of hypothecation, both present and future. Further, the same are also secured by assignment of all rights, title, benefits, claims and interest in, under the project documents, insurance policies, all statutory, government and regulatory approvals, permissions, exemptions and waivers on pari passu basis. Subsequently, pursuant to the reworked restructuring scheme approved under CDR mechanism on June 24, 2005, the Company has entered into amendatory Master Restructuring Agreement and amendatory Security Trusteeship Agreement (STA) on March 9, 2006, whereby Centurion Bank of Punjab has also joined as one of the lenders and has agreed to appoint ITSL as their custodian for security and signed the STA in line with other lenders in consortium.

On the request of the Company, Corporate Debt Restructuring Cell (CDR) vide their letter no CDR 0CP) No 138 / 2009-10 (CDR Letter) dated May 20,2009 has approved the interim revised restructuring package. The revised restructuring package inter alia includes funding of interest from July 1, 2008 to October 31, 2009 on simple interest basis. Funded Interest on Term Loan (FITL) would not carry any interest and the FITL shall be repaid in 16 equal monthly installments commencing from December 1, 2009, and has rescheduled the principle installments from August 1,2008 to November 1, 2009 so as to be repayable from December 1, 2009 to March 1, 2011. Corporate Debt Restructuring (CDR) cell vide their letter no CDR (JCP) No 563 / 2009-10 dated August 13,2009 has approved a new restructuring package, which includes the induction of strategic investor / change of management and settlement proposal for Term Lenders. All the term lenders have given their acceptance to the new restructuring package. The CDR has been made effective from April 1, 2009 and accordingly an amount of Rs 373,097,077 towards FITL from July 1, 2008 to March 31, 2009 has been considered as term loan. In accordance with the new restructuring package an amount of Rs 256,829,422 has been considered as Interest for the year ended March 31, 2010, and reversed the provision for interest of Rs 1,025,846,205, the differential between interest paid and interest accrued on yield basis as per old CDR scheme. The other parameters of the new CDR scheme are yet to be adopted. The management is confident of fulfilling the remaining conditions precedent for the implementation of the Revised CDR Scheme and would fully implement the terms of the Revised CDR Scheme on the completion of such approvals and conditions precedent.

(b) The above mentioned security has been further extended to the amount of loans, working capital assistance, specific facility and OFCDs together with the interest, compound interest, additional interest, default interest, costs, charges, expenses and any other monies payable by the Company in relation thereto and in terms with MRA and STA entered into between the lenders and ITSL.

(c) Vehicle Loans of Rs 1,341,082 (March 31, 2009 - Rs 6,673,308) are secured by way of exclusive hypothecation charge in favour of bank on the specific assets acquired out of the loan proceeds of the Company. These loans are repayable in monthly instalments and shall be repaid by 2012.Vehicle loans repayable within one-year amounts to Rs 968,255. Interest rates on vehicle loans vary from 9.65 per cent per annum to 12.15 percent per annum. The average tenure of loan is 36 months.

10. Unsecured Loans

(a) On October 16,2004, the Company issued 1,667,761 zero percent Non Convertible Debentures (NCDs) of Rs 100 each in lieu of interest accrued on term loans from a financial institution and a bank for the period April 1, 2003 to December 31,2003. The NCDs earlier redeemable at par on March 31, 2014, are now redeemable at par on March 31, 2016 after repayment of the term loans as per revised CDR Scheme effective from April 1, 2005.

(b) On February 8, 2005, the Company has entered into a buyers credit loan agreement with The Export Import Bank of China to facilitate payment to one of its equipment supplier for a total amount of Rs 544,131,662 (US$ 12,134,961). As on March 31,2010, the Company has utilized Rs 527,470,587 (US$ 12,061,985) of this facility. The facility is secured by financial Bank guarantee of Rs 108,825,514 and by a Corporate Guarantee of Rs 544,131,662 given by HFCL, the Holding Company, on pari passu basis with other lenders.

(c) The Company under the terms of the agreement dated May 1, 2007 had taken convertible loan to facilitate expansion and development of businesses amounting to Rs 499,499,886 from Infotel Digicomm Private Limited. The convertible loan is repayable on demand; Infotel Digicomm Private Limited shall have an option to convert the Loan into Equity Shares, subject to getting necessary approvals and subject to applicable pricing guidelines as per SEBI and other laws and regulations. On September 16,2009 Infotel Digicomm Private Limited (IDPL) has entered into an assignment agreement with Domebell Electronics India Private Limited (DEIPL), wherein IDPL has assigned the above convertible loan of Rs 499,499,886 to DEIPL. All the terms and conditions relating to the convertible loan has remained the same. The interest accrues at the end of each quarter. During the year ended March 31, 2010 the Company has provided for interest amounting to Rs 14,984,997 @ 12% to IDIPL for the three months ended June 30, 2009. DEIPL on the basis of the assignment agreement dated September 16, 2009 has a right on the interest accruing from July 1,2009 onwards, DEIPL have agreed to waive off the interest from July 1, 2009 till March 31, 2010, therefore no provision for such interest has been made by the Company.

(d) The Company under the terms of the agreement dated May 1, 2007 had taken buyers credit facility to facilitate funding of the telecom project amounting to Rs 410,740,832 from Infotel Business Solutions Limited. The loan carries 12% interest and is repayable on demand. Infotel Business Solutions Limited has the option to convert the loan including interest accrued into equity shares, subject to applicable pricing guidelines as per SEBI and other laws and regulations. On September 16, 2009 Infotel Business Solutions Limited (IBSL) has entered into an assignment agreement with Domebell Electronics India Private Limited (DEIPL), wherein IBSL has assigned the above buyers credit facility of Rs 410,700,000 to DEIPL. All the terms and conditions relating to the buyers credit facility has remained the same. The interest accrues at the end of each quarter. During the year ended March 31, 2010 the Company has provided for interest amounting to Rs 12,322,225 @ 12% to IBSL for the three months ended June 30,2009. and accordingly DEIPL on the basis of the assignment agreement dated September 16, 2009 has a right on the interest accruing from July 1, 2009 onwards, DEIPL have agreed to waive off the interest from July 1, 2009 till March 31, 2010, therefore no provision for such interest has been made by the Company.

11. Fixed Assets and Capital work-in-progress

(a) Capital Work in Progress includes Goods in Transit of Rs 20,106,204 (March 31, 2009 - Rs 92,177).

(b) As on March 31,2010, telephone instruments aggregating to a net book value of Rs 155,534,655 (March 31, 2009 - Rs 219,610,995) and other assets aggregating to net book value of Rs 238,604,630 (March 31,2009 - Rs 280,717,435) are located at customer premises, other parties and at other operators sites, respectively.

(c) During the year ended March 31, 2010, the Company has sold off Building for Rs 13,320,000 with gross book value of Rs 3,943,939 and accumulated depreciation of Rs 899,247, the net book value being Rs 3,044,692 and accordingly, recorded a gain of Rs 10,275,308 which has been disclosed under Gain on sale of Fixed Assets in the Profit and Loss Account.

12. Investments

During the year ended March 31,2009 the Company has incorporated one wholly owned Subsidiary Company Infotel Tower Infrastructure Private Limited with an Investment of Rs 99,800. The principal business of the Company is building, establishing, setting-up, accruing, developing, advising on, managing, providing, operating and/or maintaining, facilitating conduct of, fully or partially infrastructure facilities and services thereof for all kinds of value added services including broadband towers for telecom operations/services, payment gateway services and international gateway serices

13. License Entry Fees

During the year ended March 31, 2008, the Company has deposited the entry fee of Rs 1,517,500,000 with The Department of Telecommunication (DOT) for the use of GSM Technology in addition to CDMA technology being used under the existing Unified Access Services Licence (UASL) for the Punjab Service Area. The UASL has since been amended to incorporate the license for use of GSM technology on January 15, 2008 vide DOTs letter number F.No.l0-15/2004/BS.II/HITL/ Punjab/17 dated January 15,2008. DOT had provided the allocation of radio spectrum on trial basis for a period of three months till December 9, 2008 vide their letter number L14047/20/2006-NTG (Pt) dated September 10, 2008. The Company had submitted the spectrum trial reports to DOT vide letter number HFCL/DOT/2009-10/38A dated November 18, 2009. DOT has regularized the GSM Spectrum earmarked for Unified Access Services in Punjab Telecom Service Area vide letter number L-14043/37/2009-NTG (Pt-1) dated December 7, 2009 with immediate effect. The Company has launched its GSM services on March 29, 2010 in Punjab Circle.

14. Inventory for Network Maintenance

The Company holds inventory of network maintenance consumables and RUIM cards amounting to Rs 24,064,756 (March 31,2009 - Rs 19,895,676). The quantity and valuation of inventory is taken as verified, valued and certified by the management.

15. Deferred Taxes

During the year, the Company has incurred losses of Rs 206,447,324 (accumulated losses of Rs 11,400,327,594) resulting into a tax loss carry forward situation. The Company is eligible for a tax holiday under section 80IA of the Income-tax Act, 1961. Though the management is confident of generating profits in the future, there is currently no convincing evidence of virtual certainty that the Company would reverse the tax loss carry forwards beyond the tax holiday period. Accordingly, the Company has not recognized any deferred tax assets resulting from the carry forward tax losses. Further, no deferred tax liabilities on account of temporary timing differences have been recognized since they are expected to reverse in the tax holiday period.

16. Current Liabilities and Provisions

a) Sundry Creditors include amount payable to Micro and Small Enterprises as at March 31, 2010 of Rs 1,980,142 (March 31, 2009 - Rs 709,716). The information as required to be disclosed under the Micro, Small and Medium Enterprises Development Act, 2006 has been determined to the extent such parties have been identified on the basis of information and records available with the Company.

Information for the supplier covered under the Micro, Small and Medium Enterprise Development Act, 2006, as at March 31, 2010 is as under -

b) During the year ended March 31, 2008, the Company had obtained advance of Rs 1,517,500,000 to fund the entry fee for using GSM Technology under the existing Unified Access Services License (UASL) for Punjab Service Area. The amount of aforesaid advance is adjustable or refundable on such terms and conditions as may be mutually agreed.

17. Loss per share

The calculation of loss per share is based on the loss for the vear and number of shares is shown below.

18. Operating leases A. Company as a Lessee

(a) The Company has entered into various cancelable lease agreements for leased premises. Gross rental expenses for the year ended March 31, 2010 is Rs 58,224,713 (March 31, 2009 - Rs 62,145,298).

(b) The Company has entered into site sharing agreements with other operators for sharing of their infrastructure

B. Company as a Lessor

The Company has entered into cancellable site sharing agreements with other operators for sharing of its infrastructure sites. During the year, the Company has accrued Rs 4,437,292 (March 31, 2009- Rs 12,561,961) towards site sharing revenue.

The Company has entered into a non-cancellable lease arrangement to provide approximately 7525.11 Fibre pair kilometres of dark fibre on indefeasible right of use (IRU) basis for a period of 15 years. The gross block, accumulated depreciation and depreciation expense of the assets given on IRU basis is not readily determinable and hence not disclosed.

In respect of such leases, rental income of Rs 33,956,731(March 31, 2009- Rs 24,074,532) has been recognised in the profit and loss account for the year ended March 31, 2010

Further lease receipts (under non-cancellable operating leases) will be recognised in the profit and loss account of subsequent years as follows:-

19. Segmental Reporting

The primary reporting of the Company has been performed on the basis of business segments. The Company has only one business segment, which is provision of unified telephony services. Accordingly, the amounts appearing in these financial statements relate to this primary business segment. Further, the Company provides services only in the State of Punjab (including Chandigarh and Panchkula) and, accordingly, no disclosures are required under secondary segment reporting.

21. Unclaimed deposits from public

During the year ended March 31, 2004, the Company surrendered its licence granted by Reserve Bank of India (RBI) to carry out NBFC business. Accordingly, the Company foreclosed all the unpaid / unclaimed deposits as on September 15, 2003 and the interest accruing thereon as on that date, and the same have been transferred to the Escrow Account in February 2004. On May 24, 2004, the RBI approved the cancellation of the Companys certificate of NBFC registration and provided certain directives to the Company to be complied with, pending completion of which, the Company would continue to be governed by the relevant provisions of the Reserve Bank of India Act, 1934 and various directions/instructions issued by RBI from time to time. [Refer Schedule 11 & 14 and Schedule 22, Note 1(a))]. On August 10, 2004, the Company has obtained the approval of the shareholders for the removal of NBFC related objects from the Memorandum of Association. Further, the Company submitted a letter dated July 7, 2004 for compliance and RBI vide its letter dated July 30, 2004 gave some concessions from compliance and has advised the Company to follow certain instructions till the balance in the escrow account is settled. The Registrar of Companies, Jalandhar, is yet to register the resolution of the shareholders due to delay in filing of the documents, for which the Company has moved an application to Central Government for condonation of delay. Ministry of Company Affairs vide letter no 17/23/2005-CL.V dated 07th July, 2005 has granted a condonation for filing of form 23, which was submitted to Registrar of Companies, Jalandhar vide letter No. HITL/C&L/S-31/05/347 dated July 13, 2005 and the registration certificate is yet to be obtained.

The accompanying financial statements include the following account balances relating to the NBFC business whose licence granted by RBI was surrendered during the year ended March 31,2004:

22. Debenture redemption reserve

Pursuant to the CDR scheme on October 16, 2004, the Company has issued OFCDs aggregating to Rs 166,776,100 repayable as on March 31, 2016. As per section 117C (1) of the Companies Act, 1956, a debenture

redemption reserve (DRR) is to be created to which adequate amounts are to be credited out of the profits of each year until such debentures are redeemed.

During the year, the Company has incurred loss of Rs 206,447,324. Hence, in accordance with the clarification received from the Department of Company Affairs vide circular No 6/3/2001-CL.V dated April 18, 2002, the Company has not created Debenture redemption reserve.

Defined Benefit Plans

The employees gratuity fund scheme managed by Life Insurance Corporation of India and ICICI Lombard General Insurance Company Limited is a defined benefit plan and the same is 100% funded. The present value of obligation is determined based on actuarial valuation using Project Unit Credit Method, which recognizes each period of service as giving rise to additional unit of employee benefit entitlement and measures each unit separately to build up the final obligation. The obligation for leave encashment is recognised in the same manner as gratuity.

Experience adjustments are Nil and have not been disclosed as required under Para 120 of Accounting Standard 15 relating to Employee benefits.

d) The expected rate of return on plan assets was based on the average long-term rate of return expected to prevail over the next 15 to 20 years on the investments made by the LIC. This was based on the historical returns suitably adjusted for movements in long-term government bond interest rates. The discount rate is based on the average yield on government bonds of 20 years.

e) The Company made annual contributions to the LIC of an amount advised by the LIC. The Company was not informed by LIC of the investments made by the LIC or the break-down of plan assets by investment type.

f) The estimates of rate of escalation in salary considered in actuarial valuation , taken into account inflation, seniority, promotion and other relevant factors including demand and supply in the employment market. The above information is certified by the actuary.

g) The disclosure requirement as per Para 120 (n) of Accounting Standard -15 Employee Benefits as below:

23. The Company is primarily engaged in the business of providing telecommunication services. The production and sale of such services is not capable of being expressed in any generic unit. Hence, other information pursuant to the provisions of the paragraph 3, 4C and 4D of Part II Schedule VI of the Companies Act, 1956 are not applicable to the Company.

24. Subsequent Events

a) Securities Exchange Board of India (SEBI) has

vide its Order No. WTM/KMA/CFD/233/03/2010 dated March 3,. 2010, granted an exemption to M/s Quadrant Enterprises Private Limited, - (QEPL), from the applicability of Regulation 10 & 12 of the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 1997, for acquiring 32,67,05,000 (Thirty Two Crores Sixty Seven Lac and Five Thousand only) equity shares of the Company (Shares) amounting to 53.3605% (approximately fifty three percent) of the issued, subscribed and paid up share capital of the Company, from the Company Himachal Futuristic Communications Limited (HFCL). The Order has been passed pursuant to the proposal for change of management sanctioned by the Corporate Debt Restructuring Cell in terms of its letter No. CDJ (JCP) No. 563/2009-10 dated August 13, 2009. The aforesaid shares have been acquired on April 3,2010.

b) In line with the stipulations of the CDR package as approved by the CDR Cell vide its Letter no. BY. CDR(JCP) No. 563/2009-10 dated August 13, 2009 stipulating a change in the management of the Company, the existing Directors except the nominees of Financial Institutions had resigned from the Board and therefore to complete the process of change in the management of the Company, as per the stipulations of the CDR package, the senior management team comprising of Mr. Surendra Lunia, Chief Executive Officer, Mr. G.D. Singh, Chief Operating Officer, and Mr. Vikash Agarwal, Vice President (Corporate Finance) and Chief Financial Officer have resigned from the Company on April 09, 2010.

c) The Company has acquired 20 shares at face value of Rs 10 each of its Subsidiary Company Infotel Tower Infrastructure private limited on April 09, 2010, and it become 100 percent owned subsidiary W.e.f. April 09,2010.

The above events do not have any financial impact at the Balance Sheet date.

25. Prior period comparatives

Previous year figures have been regrouped where necessary to conform to this year classification.

 
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