Home  »  Company  »  RelianceCommu.Ltd  »  Quotes  »  Auditor Report
Enter the first few characters of Company and click 'Go'

Auditor Report of Reliance Communications Ltd.

Mar 31, 2016

We have audited the accompanying standalone financial statements of Reliance Communications Limited (''the Company''), which comprise the Balance Sheet as at 31 March 2016, the Statement of Profit and Loss, the Cash Flow Statement for the year then ended and a summary of significant accounting policies and other explanatory information.

Management''s Responsibility for the Standalone Financial Statements

The Company''s Board of Directors is responsible for the matters stated in sub-section 5 of Section 134 of the Companies Act, 2013 (''the Act'') with respect to the preparation of these standalone financial statements that give a true and fair view of the financial position, financial performance and cash flows of the Company in accordance with the accounting principles generally accepted in India, including the Accounting Standards specified under Section 133 of the Act, read with Rule 7 of the Companies (Accounts) Rules, 2014 (''the Rules'').This responsibility also includes maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding the assets of the Company and for preventing and detecting frauds and other irregularities; selection and application of appropriate accounting policies, making judgments and estimates that are reasonable and prudent; and design, implementation and maintenance of adequate internal financial controls, that were operating effectively for ensuring the accuracy and completeness of the accounting records, relevant to the preparation and presentation of the standalone financial statements that give a true and fair view and are free from material misstatement, whether due to fraud or error.

Auditor''s Responsibility

Our responsibility is to express an opinion on these standalone financial statements based on our audit. We have taken into account the provisions of the Act, the accounting and auditing standards and matters which are required to be included in the audit report under the provisions of the Act and the Rules made thereunder.

We conducted our audit in accordance with the Standards on Auditing specified under Section 143(10) of the Act. Those Standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and the disclosures in the financial statements. The procedures selected depend on the auditor''s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal financial control relevant to the Company''s preparation of the financial statements that give a true and fair view in order to design audit procedures that are appropriate in the circumstances.

An audit also includes evaluating the appropriateness of the accounting policies used and the reasonableness of the accounting estimates made by the Company''s Directors, as well as evaluating the overall presentation of the standalone financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion on the standalone financial statements.

Opinion

In our opinion and to the best of our information and according to the explanations given to us, the aforesaid standalone financial statements give the information required by the Act in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India, of the state of affairs of the Company as at 31 March 2016, and its loss and its cash flows for the year ended on that date.

Emphasis of Matters

a. We draw attention to Note 2.28 (vi) of the standalone financial statements regarding the Scheme of Arrangement (''the Scheme'') sanctioned on 03 July 2009 by the Hon''ble High Court of Judicature at Mumbai, the Company is permitted to adjust additional depreciation/amortisation, expenses and/or losses, which have been or are required to be debited to the Statement of Profit and Loss by a corresponding withdrawal or credit from/to General Reserve, as determined by the Board of Directors. During the year, the Company has withdrawn Rs. 1,190 crore (previous year Rs. 1,177 crore) to offset additional depreciation/ amortisation on account of fair valuation of certain assets which may be considered to override the relevant provisions of Schedule II of the Act and Accounting Standard 5 (AS 5) ''Net Profit or Loss for the Period, Prior Period Items and Changes in Accounting Policies''. Our opinion is not qualified in respect of this matter.

b. We further draw your attention to Note 2.37 (b) of the standalone financial statements regarding the Scheme of Arrangement (''the Scheme'') sanctioned by the Hon''ble High Court of Judicature at Mumbai. The Scheme permits the Company to adjust expenses and/or losses identified by the Board of Directors, which are required to be debited to the Statement of proft and loss by a corresponding withdrawal from General Reserve, which is considered to be an override to the relevant provisions of AS 5. The Company has identified net foreign exchange variations of Rs. 3 crore (previous year Rs. 31 crore), amortization of Foreign Currency Monetary Items Translation Difference Account (FCMITDA) of Rs. 274 crore (previous year Rs. 199 crore) and depreciation on exchange losses capitalised of Rs. 467 crore (previous year Rs. 387 crore), as in the opinion of the Board, such exchange losses and depreciation are considered to be of an exceptional nature and accordingly, these expenses have been met by corresponding withdrawal from General Reserve. Our opinion is not qualified in respect of this matter.

Had the effect of paragraphs (a) and (b) above, not been met from General Reserve, the Company would have reflected a loss after tax for the year of Rs. 3,558 crore (previous year Rs. 1,948 crore).

Report on Other Legal and Regulatory Requirements

As required by the Companies (Auditor''s Report) Order, 2016 (''the Order''), issued by the Central Government of India in terms of sub-section (11) of Section 143 of the Act, we enclose in ''Annexure A''a statement on the matters specified in paragraphs 3 and 4 of the Order, to the extent applicable.

2. As required by sub-section 3 of Section 143 of the Act, we report that:

(a) we have sought and obtained all the information and explanations which to the best of our knowledge and belief were necessary for the purposes of our audit;

(b) in our opinion, proper books of account as required by law have been kept by the Company so far as it appears from our examination of those books;

(c) the Balance Sheet, the Statement of Profit and Loss and the Cash Flow Statement dealt with by this report are in agreement with the books of account;

(d) in our opinion, the aforesaid standalone financial statements comply with the Accounting Standards specified under Section 133 of the Act read with Rule 7 of the Companies (Accounts) Rules, 2014; read with Emphasis of Matter paragraph above, regarding exercise of option available as per the Court Order which overrides the requirement of AS 5;

(e) on the basis of written representations received from the directors as on 31 March 2016 taken on record by the Board of Directors, none of the directors is disqualified as on 31 March 2016 from being appointed as a director in terms of sub-section 2 of Section 164 of the Act;

(f) With respect to the adequacy of the internal financial controls over financial reporting of the Company and the operating effectiveness of such controls, refer to our separate report in "Annexure B" and

(g) with respect to the other matters to be included in the Auditor''s Report in accordance with Rule 11 of the Companies (Audit and Auditors) Rules, 2014, in our opinion and to the best of our information and according to the explanations given to us:

i. The Company has disclosed the impact of pending litigations on its financial position in its standalone financial statements – Refer Note 2.31 to the standalone financial statements;

ii. The Company did not have any long-term contracts including derivative contracts for which there were any material foreseeable losses; and

iii. There has been no delay in transferring amounts, required to be transferred, to the Investor Education and Protection Fund by the Company.

With reference to the Annexure A referred to in the Independent Auditors''Report to the Members of Reliance Communications Limited (''the Company'') on the standalone financial statements for the year ended 31 March 2016, we report the following:

(i) (a) The Company has maintained proper records showing full particulars, including quantitative details and situation of fixed assets.

(b) We are informed that the Company physically verifies its assets over a three year period, except for base trans-receiver stations. We are informed that these assets are under continuous operational surveillance at National Network Operating Centre and are therefore not separately physically verified. In our opinion, this periodicity of physical verification is reasonable having regard to the size of the Company and the nature of its assets. In accordance with this policy, the Company has physically verified certain fixed assets during the year and no material discrepancies were identified on such physical verification.

(c) According to the information and explanations given to us, the title deeds of immovable properties, as disclosed in Note 2.10 to the standalone financial statements, are held in the name of the Company, except for the following where the Company is in the process of transferring the title deeds in it''s name as these were acquired through various schemes of arrangement entered in the earlier years:

Particulars Freehold Leasehold Building land land No of cases 418 8 435 Gross block as at 189 3 347 31 March 2016 (Rs. in crore)

Net block as at 189 2 240 31 March 2016 (Rs. in crore)

(ii) The inventory has been physically verified by the management during the year. In our opinion, the frequency of such verification is reasonable. The discrepancies noticed on verification between the physical stocks and the book records were not material and have been dealt with in books of account.

(iii) The Company has not granted any loans, secured or unsecured, to companies, firms, Limited liability Partnerships or other parties covered in the register maintained under Section 189 of the Act. Accordingly, paragraph (iii) of the Order is not applicable to the Company.

(iv) The Company has not granted any loans or provided any guarantees or security to the parties covered under Section 185 of the Act. The Company has complied with the applicable provisions of Section 186 of the Act.

(v) In our opinion and according to the information and explanations given to us, the Company has not accepted any deposits from the public in accordance with relevant provisions of Sections 73 to 76 or any other relevant provisions of the Act and the rules framed there under. Accordingly, paragraph (v) of the Order is not applicable to the Company.

(vi) We have broadly reviewed the books of account maintained by the Company pursuant to the rules prescribed by the Central Government for maintenance of cost records under sub-section 1 of Section 148 of the Act, in respect of telecommunication activities and are of the opinion that prima facie, the prescribed accounts and records have been made and maintained. However, we have not made a detailed examination of the records.

(vii) (a) According to the information and explanations given to us and on the basis of our examination of the records of the Company, amounts deducted/accrued in the books of account in respect of undisputed statutory dues including Provident Fund, Wealth Tax, Income Tax, Service Tax, Customs Duty, Sales Tax, Value Added Tax (VAT), Entry Tax, Employees''State Insurance, cess and other material statutory dues have been generally regularly deposited during the year by the Company with the appropriate authorities though there has been slight delay in few cases. As explained to us, the Company did not have any dues on account of Excise Duty.

According to the information and explanations given to us, no undisputed amounts payable in respect of Provident Fund, Wealth Tax, Income Tax, Service Tax, Customs Duty, Sales Tax, VAT, Entry Tax, Employees'' State Insurance, cess and other material statutory dues were in arrears as at 31 March 2016 for a period of more than six months from the date they became payable.

(b) According to the information and explanations given to us, there are no dues of Wealth Tax or cess which have not been deposited on account of any dispute. The dues of Excise Duty, Income Tax, Customs Duty, Service Tax, Sales Tax, VAT and Entry Tax as disclosed below have not been deposited by the Company on account of disputes.

Name of the Statute Nature of dues Amount Period Forum where the dispute is pending (Rs. in Cr)

Central Sales Tax, Uttar Pradesh Central Sales Tax 0.07 2006-07 High Court

Additional Commissioner (Appeals)

0.08 2010-11

Central Sales Tax, Bihar Central Sales Tax 0.04 2005-06 Appellate Tribunal

0.09 2013-14 Dy. Commissioner of Commercial Taxes

Central Sales Tax, Haryana Central Sales Tax 0.06 2012-13 Jt. Commissioner

Central Sales Tax, Madhya Pradesh Central Sales Tax 0.03 2011-12 to Dy. Commissioner (Appeals)

2013-14

Central Sales Tax, Uttarakhand Central Sales Tax 0.12 2009-10 to Dy. Commissioner of Commercial Taxes 2010-11

Central Sales Tax, Orissa Central Sales Tax 0.02 Oct-06 to Sales Tax Appellate Tribunal March-09

0.01 2009-10 Addl. Commissioner (Appeals)

Central Sales Tax, West Bengal Central Sales Tax 0.34 2007-08 Tax revision Board

Entry Tax, Madhya Pradesh Entry Tax 0.48 2002-03 to Asst. Commissioner of Commercial Taxes

2003-04

1.58 2005-06 to MP Taxation Board

2008-09 and 2010-11

0.21 2011-12 Dy. Commissioner (Appeals)

Entry Tax, Rajasthan Entry Tax 14.73 2005-06, Supreme Court

2007-08 to 2012-13

3.40 2013-14 to Appellate Authority

2014-15

Entry Tax, Orissa Entry Tax 0.05 Oct 06 - Mar Sales Tax Appellate Tribunal 09

0.08 2009-10 Addl. Commissioner (Appeals)

Entry Tax, Uttar Pradesh Entry Tax 0.13 2003-04 Commercial Tax Tribunal

Entry Tax, Chattisgarh Entry Tax 0.50 2006-07 to Commercial Tax Tribunal

2007-08

0.17 2010-11 Dy. Commissioner (Appeals)

Name of the Statute Nature of dues Amount Period Forum where the dispute is pending (Rs. in Cr)

Entry Tax, Himachal Pradesh Entry Tax 0.95 2010-11 to High Court 2013-14

Entry Tax, Bihar Entry Tax 0.38 2007-08 to Commercial Tax Tribunal 2008-09

Central Excise Act, 1944 Excise duty 4.16 2002-04 CESTAT, Mumbai

Sales Tax, Maharashtra Sales Tax 4.79 2004-05 Jt. Commissioner (Appeals)

VAT, Bihar VAT 0.24 2005-06 Commercial Tax Tribunal

VAT/Sales Tax, Uttar Pradesh VAT/Sales Tax 0.24 2003-04 UP Trade Tax Tribunal

0.93 2004-05 High Court

0.52 2005-06, Dy. Commissioner of Commercial Taxes

Jan ''08 to March ''08

0.20 2010-11 Addl. Commissioner (Appeals)

VAT, VAT 0.03 2007-08 Jt. Commissioner (Appeals)

Uttarakhand 0.78 2009-10 to Dy. Commissioner of Commercial Taxes

2010-11

VAT, West Bengal VAT 4.17 2005-06, Tax Revision Board

2007-08 to 2008-09

VAT, Kerala VAT 0.01 2006-07 Deputy Commissioner (Appeals)

VAT, Punjab VAT 0.05 2010-11 Deputy Commissioner (Appeals)

VAT Haryana VAT 1.15 2011-12 Commercial Tax Tribunal

Finance Act, 1994 CENVAT Credit 1.32 2014-15 CESTAT

The Customs Act, 1962 Customs duty 0.23 2006-07 CESTAT

Income Tax Act, 1961 Income Tax 0.57 2012-13 Commissioner Income Tax (Appeals)

Income Tax Act, 1961 Income Tax 89.97 2002-06 Bombay High Court

(viii) In our opinion and according to the information and explanations given to us, the Company has not defaulted in repayment of loans or borrowings to financial institutions, banks and Government and in payment of dues to debenture holders as at balance sheet date.

(ix) During the year, the Company has not raised any money by way of initial public offer or further public offer (including debt instruments). The term loans have been utilized for the purpose for which these were raised.

(x) According to the information and explanations given to us, no material fraud by the Company or on the Company by its officers or employees has been noticed or reported during the course of our audit.

(xi) According to the information and explanations given to us and based on our examination of the records, the Company has paid /provided for managerial remuneration in accordance with the requisite approvals mandated by the provisions of Section 197 read with Schedule V to the Act.

(xii) In our opinion and according to the information and explanations given to us, the Company is not a nidhi company. Accordingly, paragraph (xii) of the Order is not applicable to the Company.

(xiii) According to the information and explanations given to us and based on our examination of the records of the Company, transactions with the related parties are in compliance with Sections 177 and 188 of the Act, where applicable. The details of such related party transactions have been disclosed in the financial statements as required under Accounting Standard (AS) 18, Related Party Disclosures specified under Section 133 of the Act, read with Rule 7 of the Companies (Accounts) Rules, 2014.

(xiv) According to the information and explanations given to us and based on our examination of the records, the Company has not made any preferential allotment or private placement of shares or fully or partly convertible debentures during the year.

(xv) According to the information and explanations given to us and based on our examination of the records, the Company has not entered into non-cash transactions with directors or persons connected with him. Accordingly, paragraph (xv) of the Order is not applicable to the Company.

(xvi) The Company is not required to be registered under Section 45-IA of the Reserve Bank of India Act, 1934. Accordingly, the provisions of Clause (xvi) of the Order are not applicable to the Company.

For Chaturvedi & Shah For B S R & Co. LLP

Chartered Accountants Chartered Accountants

Firm''s Reg. No: 101720W Firm''s Reg. No: 101248W/

W-100022

Lalit R. Mhalsekar Vijay Bhatt

Partner Partner

Membership No: 103418 Membership No: 036647

Mumbai Mumbai

May 30, 2016 May 30, 2016


Mar 31, 2015

We have audited the accompanying Standalone Financial Statements of Reliance Communications Limited ('the Company'), which comprise the Balance Sheet as at 31 March 2015, the Statement of Profit and Loss, the Cash Flow Statement for the year then ended, and a summary of significant accounting policies and other explanatory information.

Management's responsibility for the Standalone Financial Statements

The Company's Board of Directors is responsible for the matters stated in Section 134(5) of the Companies Act, 2013 ('the Act') with respect to the preparation of these Standalone Financial Statements that give a true and fair view of the financial position, financial performance and cash flows of the Company in accordance with the accounting principles generally accepted in India, including the Accounting Standards specifed under Section 133 of the Act, read with Rule 7 of the Companies (Accounts) Rules, 2014. This responsibility also includes maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding the assets of the Company and for preventing and detecting frauds and other irregularities; selection and application of appropriate accounting policies, making judgments and estimates that are reasonable and prudent; and design, implementation and maintenance of adequate internal financial controls, that were operating effectively for ensuring the accuracy and completeness of the accounting records, relevant to the preparation and presentation of the financial statements that give a true and fair view and are free from material misstatement, whether due to fraud or error.

Auditor's responsibility

Our responsibility is to express an opinion on these Standalone Financial Statements based on our audit. We have taken into account the provisions of the Act, the accounting and auditing standards and matters which are required to be included in the audit report under the provisions of the Act and the Rules made thereunder. We conducted our audit in accordance with the Standards on Auditing specified under Section 143(10) of the Act. Those Standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor's judgement, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the Company's preparation of the financial statements that give a true and fair view in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on whether the Company has in place an adequate internal financial control system over financial reporting and the operative effectiveness of such controls. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of the accounting estimates made by the Company's Directors, as well as evaluating the overall presentation of the financial statements.

We believe that the audit evidence we have obtained is suffcient and appropriate to provide a basis for our audit opinion on the Standalone Financial Statements.

Opinion

In our opinion and to the best of our information and according to the explanations given to us, the aforesaid Standalone Financial Statements give the information required by the Act in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India, of the state of affairs of the Company as at 31 March 2015, and its loss and cash flows for the year ended on that date.

Emphasis of Matter

a) We draw attention to Note 2.29 (vi) of the Standalone Financial Statements regarding the Scheme of Arrangement ('the Scheme') sanctioned on 03 July 2009 by the Hon'ble High Court of Judicature at Mumbai, the Company is permitted to adjust additional depreciation/ amortisation, expenses and/or losses, which have been or are required to be debited to the Statement of Profit and Loss by a corresponding withdrawal or credit from/ to General Reserve, as determined by the Board of Directors. During the year, the Company has withdrawn Rs. 1,177 crore to offset additional depreciation / amortisation on account of fair valuation of certain assets which may be considered to override the relevant provisions of Schedule II of the Act and Accounting Standard 5 (AS 5) 'Net Profit or Loss for the Period, Prior Period Items and Changes in Accounting Policies'. Our opinion is not Qualified in respect of this matter.

b) We further draw your attention to Note 2.38 (b) of the Standalone Financial Statements regarding the Scheme of Arrangement ('the Scheme') sanctioned by the Hon'ble High Court of Judicature at Mumbai. The Scheme permits the Company to adjust expenses and/ or losses identified by the Board of Directors, which are required to be debited to the Statement of Profit and Loss by a corresponding withdrawal from General Reserve, which is considered to be an override to the relevant provisions of AS 5 'Net Profit or Loss for the Period, Prior Period Items and Changes in Accounting Policies'. The Company has identified net foreign exchange variations of Rs. 31 crore (previous year Rs. 54 crore), amortization of Foreign Currency Monetary Items Translation Difference Account (FCMITDA) of Rs. 199 crore (previous year Rs. 254 crore) and depreciation on exchange losses capitalised of Rs. 387 crore (previous year Rs. 333 crore), as in the opinion of the Board, such exchange losses and depreciation are considered to be of an exceptional nature and accordingly, these expenses have been met by corresponding withdrawal from General Reserve. Our opinion is not Qualified in respect of this matter.

Had the effect of paragraphs (a) and (b) above, not been met from General Reserve, the Company would have reflected a loss after tax for the year of Rs. 1,948 crore (previous year- profit after tax Rs. 89 crore)

Report on other legal and regulatory requirements

1. As required by the Companies (Auditor's Report) Order, 2015 ('the Order'), issued by the Central Government of India in terms of sub-section (11) of Section 143 of the Act, we give in the Annexure a statement on the matters specified in paragraphs 3 and 4 of the Order.

2. As required by Section 143(3) of the Act, we report that:

(a) we have sought and obtained all the information and explanations which to the best of our knowledge and belief were necessary for the purpose of our audit;

(b) in our opinion, proper books of account as required by law have been kept by the Company so far as appears from our examination of those books;

(c) the Balance Sheet, the Statement of Profit and Loss and the Cash Flow Statement dealt with by this report are in agreement with the books of account;

(d) in our opinion, the aforesaid Standalone Financial Statements comply with the Accounting Standards specified under Section 133 of the Act read with Rule 7 of the Companies (Accounts) Rules, 2014; and read with Emphasis of Matter paragraph above, the Company has exercised the option available as per the Court Order which overrides the relevant provisions of AS 5;

(e) on the basis of written representations received from the directors as on 31 March 2015 taken on record by the Board of Directors, none of the director is disqualified as on 31 March 2015 from being appointed as a director in terms of Section 164(2) of the Act; and

(f) with respect to other matters to be included in the Auditor's Report in accordance with Rule 11 of the Companies (Audit and Auditors) Rules, 2014, in our opinion and to the best of our information and according to the explanations given to us:

i. The Company has disclosed the impact of pending litigations on its financial position in its financial statements – Refer Note 2.32 to the Standalone Financial Statements;

ii. The Company did not have any long-term contracts including derivative contracts for which there were any foreseeable losses; and

iii. There has been no delay in transferring amounts, required to be transferred, to the Investor Education and Protection Fund by the Company.

With reference to the Annexure referred to in the Independent Auditors' Report to the Members of Reliance Communications Limited ('the Company') on the standalone financial statements for the year ended 31 March 2015, we report the following:

(i) (a) The Company has maintained proper records showing full particulars, including quantitative details and location of fixed assets.

(b) We are informed that the Company physically verifies its assets over a three year period, except for base trans-receiver stations. We are informed that these assets are under continuous operational surveillance at National Network Operating Centre and are therefore not separately physically verified. In our opinion, this periodicity of physical verification is reasonable having regard to the size of the Company and the nature of its assets. In accordance with this policy, the Company has physically verified certain fixed assets during the year. No material discrepancies were noticed on physical verification of fixed asset as compared to book records.

(ii) (a) The inventory has been physically verified by the management during the year. In our opinion, the frequency of such verification is reasonable.

(b) The procedures for the physical verification of inventories followed by the management are reasonable and adequate in relation to the size of the Company and the nature of its business.

(c) The Company is maintaining proper records of inventories. The discrepancies noticed on verification between the physical stocks and the book records were not material.

(iii) The Company has not granted any loans, secured or unsecured, to companies, firms or other parties covered in the register maintained under Section 189 of the Act. Accordingly, paragraphs (iii) (a) and (b) of the Order are not applicable to the Company.

(iv) In our opinion, and according to the information and explanations given to us, and having regard to the explanation that purchases of certain items of inventories and fixed assets are for the Company's specialised requirements for which suitable alternative sources are not available to obtain comparable quotations, there is an adequate internal control system commensurate with the size of the Company and nature of its business with regard to the purchase of inventories and fixed assets and with regard to the sale of services. In our opinion, activities of the Company do not involve sale of goods. In our opinion, and according to the information and explanations given to us, there is no continuing failure to correct major weaknesses in the internal control system.

(v) In our opinion, and according to the information and explanations given to us, the Company has not accepted deposits as per the directives issued by the Reserve Bank of India under the provisions of Sections 73 to 76 or any other relevant provisions of the Act and the rules framed there under. Accordingly, paragraph (v) of the Order is not applicable to the Company.

(vi) We have broadly reviewed the books of account maintained by the Company pursuant to the rules prescribed by the Central Government for maintenance of cost records under sub-section (1) of Section 148 of the Act, in respect of telecommunication activities and are of the opinion that prima facie, the prescribed accounts and records have been made and maintained. However, we have not made a detailed examination of the records.

(vii) (a) According to the information and explanations given to us and on the basis of our examination of the records of the Company, amounts deducted/accrued in the books of account in respect of undisputed statutory dues including Provident Fund, Wealth Tax, Income Tax, Service Tax, Customs Duty, Sales Tax, Value Added Tax (VAT), Entry Tax, Employees' State Insurance, cess and other material statutory dues have been generally regularly deposited during the year by the Company with the appropriate authorities. As explained to us, the Company did not have any dues on account of Excise Duty. According to the information and explanations given to us, no undisputed amounts payable in respect of Provident Fund, Wealth Tax, Income Tax, Service Tax, Customs Duty, Sales Tax, VAT, Entry Tax, Employees' State Insurance, cess and other material statutory dues were in arrears as at 31 March 2015 for a period of more than six months from the date they became payable.

(b) According to the information and explanations given to us, there are no dues of Wealth Tax or cess which have not been deposited on account of any dispute. The dues of Excise Duty, Income Tax, Customs Duty, Service Tax, Sales Tax, VAT and Entry Tax as disclosed below have not been deposited by the Company on account of disputes.

Name of the Statute Nature of dues Amount (Rs.in Cr)

Central Sales Tax, West Central Sales Tax 0.34 Bengal

0.09

Central Sales Tax, Central Sales Tax 0.07

Uttar Pradesh 0.08

Central Sales Tax, Central Sales Tax 0.12 Uttarakhand

Central Sales Tax, Madhya Central Sales Tax 0.01 Pradesh

Central Sales Tax, Orissa Central Sales Tax 0.02

0.01

Sales Tax, Maharashtra Sales Tax 4.79

Central Sales Tax, Central Sales Tax 0.44 Maharashtra

Central Sales Tax, Bihar Central Sales Tax 0.04

0.09

Entry Tax, Bihar Entry Tax 0.38

Entry Tax, Entry Tax 0.48 Madhya Pradesh 1.76

0.21

Entry Tax, Orissa Entry Tax 0.05

0.08

Entry Tax, Rajasthan Entry Tax 18.06

Entry Tax, Uttar Pradesh Entry Tax 0.13

Entry Tax, Chattisgarh Entry Tax 0.50

Entry Tax, Himachal Entry Tax 0.82 Pradesh

Central Excise Act, 1944 Excise duty 4.16

VAT, Bihar VAT 0.24

VAT/Sales Tax, Uttar VAT/Sales Tax 0.24 Pradesh

0.93

0.72

0.71

VAT, Uttarakhand VAT 0.03

0.78

VAT, West Bengal VAT 1.49

2.69

2.42

VAT, Haryana VAT 1.15

VAT, Kerala VAT 0.01

VAT, Punjab VAT 0.05

Finance Act, 1944 Service tax 14.31

The Custom Act, 1962 Custom duty 0.23

Income Tax Act, 1961 Income Tax 116.76

Income Tax Act, 1961 Income Tax 89.97

Name of the Statue Period Forum where the dispute is pending

Central Sales Tax, West 2007-08 Tax revision board Bengal

2011-12 Jt. Commissioner (Appeals)

Central Sales Tax 2006-07 UP Trade Tax Tribunal

Uttar Pradesh 2010-11 Addl. Commissioner (Appeals)

Central Sales Tax, 2009-10 Dy. Commissioner of Commercial Taxes Uttarakhand to 2010-11

Central Sales Tax, Madhya 2011-12 Dy. Commissioner (Appeals) Pradesh

Central Sales Tax, Orissa Oct06 -Mar09 Sales Tax Appellate Tribunal 2009-10 Addl. Commissioner (Appeals)

Sales Tax, Maharashtra 2004-05 Jt. Commissioner (Appeals)

Central Sales Tax 2005-06 Dy. Commissioner of Sales Tax Maharashtra

Central Sales Tax, Bihar 2005-06 Commercial Taxes Tribunal 2013-14 Jt. Commissioner of Commercial Taxes (Appeals)

Entry Tax, Bihar 2007-08 to Commercial Taxes Tribunal 2008-09

Entry Tax 2002-03 to Asst. Commissioner of Commercial Taxes Madhya Pradesh 2003-04

2005-06 to MP Taxation Board 2008-09 and 2010-11

2011-12 Dy. Commissioner (Appeals)

Entry Tax, Orissa Oct06 - Mar09 Sales Tax Appellate Tribunal

2009-10 Addl. Commissioner (Appeals)

Entry Tax, Rajasthan 2005-06, Supreme Court 2007-08 to 2012-13

Entry Tax, Uttar Pradesh 2003-04 Commercial Tax Tribunal

Entry Tax, Chattisgarh 2006-07 to Commercial Tax Tribunal 2007-08

Entry Tax, Himac 2010-11 to High Court Pradesh 2013-14

Central Excise Act, 1944 2002-04 CESTAT, Mumbai

VAT, Bihar 2005-06 Commercial Tax Tribunal

VAT/Sales Tax, Uttar 2003-04 UP Trade Tax Tribunal Pradesh

2004-05 High Court

2005-06, Jan '08 Addl. Commissioner (Appeals) to March'08 and

2010-11

2006-07 to Dy. Commissioner of Commercial Taxes 2009-10

VAT, Uttarakhand 2007-08 Jt. Commissioner (Appeals)

2009-10 to Dy. Commissioner of Commercial Taxes 2010-11

VAT, West Bengal 2005-06 Tax Revision Board

2007-08 to Tax revision board 2008-09

2006-07, Jt. Commissioner (Appeals) 2009-10 to

2011-12

VAT, Haryana 2011-12 Jt. Excise and Taxation Commissioner (Appeals)

VAT, Kerala 2006-07 Deputy Commissioner (Appeals)

VAT, Punjab 2010-11 Deputy Commissioner (Appeals)

Finance Act, 1944 Oct'06 to Sept'11 CESTAT and May'08 to May'09

The Custom Act, 1962 2006-07 CESTAT

Income Tax Act, 1961 2008-09, 2009-10 Commissioner Income Tax (Appeals) and 2011-12

Income Tax Act, 1961 2002-06 Bombay High Court

(c) According to the information and explanations given to us and on the basis of our examination of the records of the Company, the amount required to be transferred to Investor Education and Protection Fund in accordance with the relevant provisions of the Companies Act, 1956 and rules made thereunder has been transferred to such fund within time.

(viii) The Company does not have any accumulated losses at the end of the financial year. The Company has not incurred any cash losses in the current year and in the immediately preceding financial year.

(ix) In our opinion and according to the information and explanations given to us, the Company has not defaulted in repayment of dues to its bankers or debenture holders or to any financial institutions.

(x) In our opinion and according to the information and explanations given to us, the terms and conditions on which the Company has given guarantee for loan taken, by subsidiaries and other companies with whom the Company has business dealings, from banks are not prima facie prejudicial to the interests of the Company.

(xi) In our opinion and according to the information and explanations given to us and the records of the Company examined by us, the term loans taken by the Company have been applied for the purpose for which they were raised except for certain term loans availed as at the end of the year, which have been placed as fixed deposits with bank and have been utilised for the stated purpose, subsequent to Balance Sheet date.

(xii) According to the information and explanations given to us, no significant fraud on or by the Company, that causes a material misstatement to the financial statements, has been noticed or reported during the year.

For Chaturvedi & Shah For B S R & Co. LLP

Chartered Accountants Chartered Accountants

Firm's Reg. No: 101720W Firm's Reg. No: 101248W/

W-100022

Chandan Lala Rajesh Mehra Partner Partner

Membership No: 35671 Membership No: 103145

Mumbai

May 29, 2015


Mar 31, 2014

We have audited the accompanying financial statements of Reliance Communications Limited (''the Company''), which comprise the Balance Sheet as at 31 March 2014, the Statement of profit and Loss and the Cash Flow Statement for the year then ended, and a summary of significant accounting policies and other explanatory information.

Management''s responsibility for the financial statements

The Management is responsible for the preparation of these financial statements that give a true and fair view of the financial position, financial performance and cash flows of the Company in accordance with the Accounting Standards referred to in sub-section (3C) of Section 211 of the Companies Act, 1956 ("the Act") read with the General Circular 15/2013 dated 13 September 2013 of the Ministry of Corporate Affairs in respect of Section 133 of the Companies Act, 2013. This responsibility includes the design, implementation and maintenance of internal control relevant to the preparation and presentation of the financial statements that give a true and fair view and are free from material misstatement, whether due to fraud or error.

Auditor''s responsibility

Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with the Standards on Auditing issued by the Institute of Chartered Accountants of India. Those Standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor''s judgement, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the Company''s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances but not for the purpose of expressing an opinion on the effectiveness of the entity''s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of the accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Opinion

In our opinion and to the best of our information and according to the explanations given to us, the financial statements give the information required by the Act in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India:

(a) in the case of the Balance Sheet, of the state of affairs of the Company as at 31 March 2014;

(b) in the case of the Statement of profit and Loss, of the profit of the Company for the year ended on that date; and

(c) in the case of the Cash Flow Statement, of the cash flows of the Company for the year ended on that date.

Emphasis of Matter

We draw your attention to Note 2.37 of the financial statements regarding the Scheme of Arrangement (''the Scheme'') sanctioned by the Hon''ble High Court of Judicature at Mumbai. The Scheme permits the Company to adjust expenses and/or losses identified by the Board of Directors, which are required to be debited to the Statement of profit and loss by a corresponding withdrawal from General Reserve, which is considered to be an override to the relevant provisions of Accounting Standard 5 (AS 5) ''Net profit or Loss for the Period, Prior Period Items and Changes in Accounting Policies''. The Company has identified net foreign exchange variations of Rs. 54 crore (previous year Rs. 91 crore), amortization of Foreign Currency Monetary Items Translation Difference Account (FCMITDA) of Rs. 254 crore (previous year Rs. 546 crore) and depreciation on exchange losses capitalised of Rs. 333 crore (previous year Rs. 218 crore), as in the opinion of the Board, such exchange loss and depreciation are considered to be of an exceptional nature and accordingly, these expenses have been met by corresponding withdrawal from General Reserve. Had such write off of exchange loss and depreciation not been met from General Reserve, the Company would have refected a profit after tax for the year of Rs. 89 crore (previous year – loss after tax of Rs. 231 crore) and the consequential effect of this on the profit after tax for the year would have been of Rs. 641 crore (previous year Rs. 855 crore). Pending clarifcation from the Institute of Chartered Accountants of India (ICAI), the Company has credited such withdrawals to the Statement of profit and loss. Our opinion is not Qualified in this matter.

Report on other legal and regulatory requirements

As required by the Companies (Auditor''s Report) Order, 2003 (''the Order''), issued by the Central Government of India in terms of sub-section (4A) of Section 227 of the Act, we give in the Annexure a statement on the matters specified in paragraphs 4 and 5 of the Order.

As required by Section 227(3) of the Act, we report that:

(a) we have obtained all the information and explanations which to the best of our knowledge and belief were necessary for the purpose of our audit;

(b) in our opinion, proper books of account as required by law have been kept by the Company so far as appears from our examination of those books;

(c) the Balance Sheet, the Statement of profit and Loss and the Cash Flow Statement dealt with by this report are in agreement with the books of account;

(d) in our opinion, the Balance Sheet, the Statement of profit and Loss and the Cash Flow Statement comply with the Accounting Standards referred to in sub- section (3C) of Section 211 of the Act read with the General Circular 15/2013 dated 13 September 2013 of the Ministry of Corporate Affairs in respect of Section 133 of the Companies Act, 2013; as referred in Emphasis of Matter paragraph above, the Company has exercised the option available as per the Court Order which overrides the relevant provisions of the Accounting Standard 5 (AS 5); and

(e) on the basis of written representations received from the directors of the Company as at 31 March 2014, and taken on record by the Board of Directors, none of the directors is disQualified as on 31 March 2014 from being appointed as a director in terms of clause (g) of sub-section (1) of Section 274 of the Act.

Annexure to the Independent Auditors'' Report - 31 March 2014

With reference to the Annexure referred to in the Independent Auditors'' Report to the Members of Reliance Communications Limited (''the Company'') on the financial statements for the year ended 31 March 2014, we report the following:

1. (a) The Company has maintained proper records showing full particulars, including quantitative details and location of fixed assets.

(b) We are informed that the Company physically verifes its assets over a three year period, except for base trans-receiver stations. We are informed that these assets are under continuous operational surveillance at National Network Operating Centre and are therefore not separately physically verifed. In our opinion, this periodicity of physical verifcation is reasonable having regard to the size of the Company and the nature of its assets. In accordance with this policy, the Company has physically verifed certain fixed assets during the year.

(c) The Company has not disposed off any fixed assets during the year.

2. (a) The inventory has been physically verifed by management during the current year. In our opinion, the frequency of such verifcation is reasonable.

(b) The procedures for the physical verifcation of inventories followed by management are reasonable and adequate in relation to the size of the Company and the nature of its business.

(c) The Company is maintaining proper records of inventory. Discrepancies identified on physical verifcation of inventories as compared to book records were not material.

3. The Company has neither granted nor taken any loans, secured or unsecured, to or from companies, firms or other parties covered in the register maintained under section 301 of the Companies Act, 1956. Accordingly, paragraph 4(iii) of the Order is not applicable.

4. In our opinion, and according to the information and explanations given to us, and having regard to the explanation that purchases of certain items of inventories and fixed assets are for the Company''s specialised requirements for which suitable alternative sources are not available to obtain comparable quotations, there is an adequate internal control system commensurate with the size of the Company and nature of its business with regard to the purchase of inventories and fixed assets and with regard to the sale of services. In our opinion, activities of the Company do not involve sale of goods. In our opinion, and according to the information and explanations given to us, there is no continuing failure to correct major weaknesses in the internal control system.

5. In our opinion, and according to the information and explanations given to us, there are no contracts and arrangements the particulars of which need to be entered into the register maintained under section 301 of the Companies Act, 1956.

6. The Company has not accepted any deposits from the public.

7. In our opinion, the Company has an internal audit system commensurate with the size and nature of its business.

8. We have broadly reviewed the books of account maintained by the Company pursuant to the rules prescribed by the Central Government for maintenance of cost records under section 209(1) (d) of the Companies Act, 1956 in respect of telecommunication activities and are of the opinion that prima facie, the prescribed accounts and records have been made and maintained. However, we have not made a detailed examination of the records.

9. (a) According to the information and explanations given to us and on the basis of our examination of the records of the Company, amounts deducted/accrued in the books of account in respect of undisputed statutory dues including Provident Fund, Wealth Tax, Income Tax, Service Tax, Customs Duty, Sales Tax, Value Added Tax (VAT), Entry Tax, Employees'' State Insurance and other material statutory dues have been generally regularly deposited during the year by the Company with the appropriate authorities. As explained to us, the Company did not have any dues on account of excise duty and Investor Education and Protection Fund. According to the information and explanations given to us, no undisputed amounts payable in respect of Provident Fund, Wealth Tax, Income Tax, Service Tax, Customs Duty, Sales Tax, VAT, Entry Tax, Employees'' State Insurance and other material statutory dues were in arrears as at 31 March 2014 for a period of more than six months from the date they became payable.

(b) According to the information and explanations given to us, there are no dues of Wealth Tax which have not been deposited on account of any dispute. The dues of Excise Duty, Income Tax, Customs Duty, Service Tax, Sales Tax, VAT and Entry Tax as disclosed below have not been deposited by the Company on account of disputes.

Name of the Statute Nature of dues Amount Period Rs. Cr.

Income Tax Act, 1961 Income tax 49.43 2008-09

Income Tax Act, 1961 Withholding tax 89.97 2002-06

Central Sales Tax, West Bengal Central Sales Tax 0.34 2007-08

Central Sales Tax, Uttar Pradesh Central Sales Tax 0.02 2005-06

0.50 2006-07



Name of the Statue Forum where dispute is pending

Income Tax Act, 1961 Commissioner income tax (Appeal)

Income Tax Act, 1961 Bombay High court

Central Sales Tax, West Bengal West Bengal Tax revision board

Central Sales Tax, Uttar Pradesh Assessing Officer (Remanded by Additional Commissioner (Appeals))

Assessing Officer (Remanded by Additional Commissioner (Appeals))

Name of the Statute Nature of dues Amount Period Rs. Cr.

0.07 2006-07

0.20 2007-08

1.04 2008-09

1.23 2009-10

Central Sales Tax, Orissa Central Sales Tax 0.02 Oct 06 - Mar 09

0.01 2009-10

Central Sales Tax, Bihar Central Sales Tax 0.04 2005-06

Sales Tax, Maharashtra Sales Tax 4.79 2004-05

Sales Tax, Uttar Pradesh Sales Tax 0.24 2003-04

Sales Tax 0.93 2004-05

Entry Tax, Assam Entry Tax 0.10 2007-08

Entry Tax, Bihar Entry Tax 0.29 2007-08

0.09 2008-09

Entry Tax, Chattisgarh Entry Tax 0.05 2006-07

0.57 2007-08

Entry Tax, Madhya Pradesh Entry Tax 0.29 2002-03

0.19 2003-04

0.12 2005-06

0.12 2006-07

0.52 2007-08

0.07 2008-09

Entry Tax, Orissa Entry Tax 0.05 Oct 06 - Mar 09

Entry Tax 0.08 2009-10

Entry Tax, Rajasthan Entry Tax 0.03 2005-06

6.64 2007-08

6.52 2008-09

0.96 2009-10

2.52 2010-11

Entry Tax, Uttar Pradesh Entry Tax 0.13 2003-04

Entry Tax, Himachal Pradesh Entry Tax 0.79 2010-14

Finance Act, 1994 Service Tax 27.13 2006-12

The Central Excise Act, 1944 Excise duty 2.08 2002-04

The Customs Act, 1962 Customs Duty 0.23 2006-07

VAT, Bihar VAT 0.24 2005-06

VAT, Kerala VAT 0.01 2006-07

VAT, Punjab VAT 0.05 2010-11

VAT, Uttar Pradesh VAT 0.17 2008-09

0.18 2005-06

0.23 2006-07



Name of the Statue Forum where dispute is pending

UP Trade Tax Tribunal

Assessing Officer (Remanded by Additional Commissioner (Appeals))

Assessing Officer (Remanded by Additional Commissioner (Appeals))

Assessing Officer (Remanded by Additional Commissioner (Appeals))

Central Sales Tax, Orissa Sales Tax Appellate Tribunal

Joint Commissioner (Appeals)

Central Sales Tax, Bihar Sales Tax Appellate Tribunal

Sales Tax, Maharashtra Joint Commissioner (Appeals)

Sales Tax, Uttar Pradesh Sales Tax Appellate Tribunal

Allahabad High court

Entry Tax, Assam Deputy Commissioner (Appeals)

Entry Tax, Bihar Sales Tax Appellate Tribunal

Sales Tax Appellate Tribunal

Entry Tax, Chattisgarh Dy. Commissioner (Appeals)

Dy. Commissioner (Appeals)

Entry Tax, Madhya Pradesh MP Taxation Board

MP Taxation Board MP Taxation Board MP Taxation Board MP Taxation Board Appellate Tribunal

Entry Tax, Orissa Appellate Tribunal

Joint Commissioner (Appeals)

Entry Tax, Rajasthan High Court of Rajasthan

High Court of Rajasthan

High Court of Rajasthan

High Court of Rajasthan

High Court of Rajasthan

Entry Tax, Uttar Pradesh UP Trade Tax Tribunal

Entry Tax, Himachal Pradesh High Court of Himachal Pradesh

Finance Act, 1994 CESTAT Customs Excise Service Tax Appellate Tribunal

The Central Excise Act, 1944 CESTAT Customs Excise Service Tax Appellate Tribunal

The Customs Act, 1962 CESTAT Customs Excise Service Tax Appellate Tribunal

VAT, Bihar Appellate Tribunal

VAT, Kerala Deputy Commissioner (Appeals)

VAT, Punjab Deputy Commissioner (Appeals)

VAT, Uttar Pradesh Addl. Commissioner (Appeals)

Addl. Commissioner (Appeals)

Addl. Commissioner (Appeals)

Name of the Statute Nature of dues Amount Period Rs. Cr.

0.12 2007-08

0.34 Jan ''08 to March ''08

0.25 2009-10

VAT, Uttarakhand VAT 0.01 2005-06

0.03 2007-08

VAT, West Bengal VAT 1.49 2005-06

1.80 2006-07

2.34 2007-08

0.34 2008-09

0.71 2009-10

1.62 2010-11

Name of the Statue Forum where dispute is pending

Addl. Commissioner (Appeals) Addl. Commissioner (Appeals)

Addl. Commissioner (Appeals)

VAT, Uttarakhand Uttarakhand Sales Tax Tribunal Joint Commissioner (Appeals)

VAT, West Bengal West Bengal Tax revision board

West Bengal Tax revision board

West Bengal Tax revision board

West Bengal Tax revision board

Addl. Commissioner (Appeals)

Addl. Commissioner (Appeals)

10. The Company does not have any accumulated losses at the end of the financial year and has not incurred cash losses in the current financial year and in the immediately preceding financial year.

11. In our opinion and according to the information and explanations given to us, the Company, has not defaulted in repayment of dues to its bankers or debenture holders or to any financial institutions.

12. According to the information and explanations given to us, the Company has not granted loans and advances on the basis of security by way of pledge of shares, debentures and other securities.

13. In our opinion and according to the information and explanations given to us, the Company is not a chit fund/ nidhi/ mutual benefit fund/ society.

14. According to the information and explanations given to us, the Company is not dealing or trading in shares, securities, debentures and other investments.

15. In our opinion and according to the information and explanations given to us, the terms and conditions on which the Company has given guarantees for loans taken by wholly owned subsidiaries and other companies with whom the Company has business dealings, from banks or financial institutions are not prejudicial to the interest of the Company.

16. In our opinion and according to the information and explanations given to us and the records of the Company examined by us, the term loans taken by the Company have been applied for the purpose for which they were raised.

17. According to the information and explanations given to us and on an overall examination of the balance sheet of the Company, we are of the opinion that the funds raised on the short term basis have not been used for long-term investment.

18. The Company has not made any preferential allotment of shares to companies/firms/parties covered in the register maintained under Section 301 of the Companies Act, 1956.

19. According to the information and explanations given to us, the Company has created security in respect of debentures issued except for certain debentures as mentioned in Note 2.03.1 for which the Company is in the process of creating the security.

20. The Company has not raised any money by public issues during the year.

21. According to the information and explanations given to us, no significant fraud on or by the Company, that causes a material misstatement to the financial statements, has been noticed or reported during the year.

Fo r Chaturvedi & Shah Fo r B S R & Co. LLP

Chartered Accountants Chartered Accountants

Firm''s Reg. No: 101720W Firm''s Reg. No: 101248W

C D Lala Bhavesh Dhupelia

Partner Partner

Membership No: 35671 Membership No: 042070

Mumbai May 2, 2014


Mar 31, 2013

Report on the financial statements

We have audited the accompanying financial statements of Reliance Communications Limited (''the Company''), which comprise the Balance Sheet as at 31 March 2013, the Statement of Profit and Loss and the Cash Flow Statement for the year then ended, and a summary of significant accounting policies and other explanatory information.

Management''s responsibility for the financial statements

The Management is responsible for the preparation of these financial statements that give a true and fair view of the financial position, financial performance and cash flows of the Company in accordance with the Accounting Standards referred to in sub- section (3C) of Section 211 of the Companies Act, 1 956 ("the Act"). This responsibility includes the design, implementation and maintenance of internal control relevant to the preparation and presentation of the financial statements that give a true and fair view and are free from material misstatement, whether due to fraud or error.

Auditors'' responsibility

Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with the Standards on Auditing issued by the Institute of Chartered Accountants of India. Those Standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements, The procedures selected depend on the auditor''s judgement, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making - those risk assessments, the auditor considers internal control relevant to the Company''s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of the accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Opinion

In our opinion and to the best of our information and according to the explanations given to us, the financial statements give the information required by the Act in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India:

(a) in the case of the Balance Sheet, of the state of affairs of the Company as at 31 March 2013;

(b) in the case of the Statement of Profit and Loss, of the profit of the Company for the year ended on that date; and

(c) in the case of the Cash Flow Statement, of the cash flows of the Company fbr the year ended on that date.

Emphasis of Matter

We draw your attention to Note 2,37 of the financial statements regarding the Scheme of Arrangement (''the Scheme'') sanctioned by the Hon''ble High Court of Judicature at Mumbai. The Scheme permits the Company to adjust expenses and/ or losses identified by the Board of Directors, which are required to be debited to the Statement of profit and loss by a corresponding withdrawal from General Reserve, which is considered to be an override to the relevant provisions of Accounting Standard 5 (AS 5) ''Net Profit or Loss for the Period, Prior Period Items and Changes in Accounting Policies''. The Company has identified exchange variations of Rs. 91 crore (previous yearRs. 1,048 crore), provision for doubtful debt of Rs. Nil (previous yearRs. 220 crore), amortization of Foreign Currency Monetary Items Translation Difference Account (FCMITDA) of Rs. 546 crore (previous year Rs. 1 6 crore), provision for subsidy receivable ofRs. Nil (previous yearRs. 48 crore) and depreciation on exchange losses capitalised of Rs. 218 crore (previous year Rs. Nil), as in the opinion of the Board, such exchange loss, provision and depreciation are considered to be of an exceptional nature and accordingly, these expenses have been met by corresponding withdrawal from General Reserve. Had such write off of expenses and losses not been met from General Reserve, the Company would have reflected a loss after tax for the year of Rs. 231 crore (previous year Rs. 1,176 crore) and the consequential effect of this on the profit after tax for the year would have been of Rs. 855 crore (previous yearRs. 1,332 crore). Pending clarification from the Institute of Chartered Accountants of India (ICAI), the Company has credited such withdrawals to the Statement o.: profit and loss. Our opinion is not qualified in respect of this matter.

Report on other legal and regulatory requirements

1. As required by the Companies (Auditor''s Report) Order, 2003 (''the Order''), issued by the Central Government of India in terms of sub-section (4A) of Section 227 of the Act, we give in the Annexure a statement on the matters specified in paragraphs 4 and 5 of the Order.

2. As required by Section 227(3) of the Act, we report that:

(a) we have obtained all the information and explanations which to the best of our knowledge and belief were necessary for the purpose of our audit;

(b) in our opinion, proper books of account as required by law have been kept by the Company so far as appears from our examination of those books;

(c) the Balance Sheet, the Statement of Profit and Loss and the Cash Flow Statement dealt with by this report are in agreement with the books of account;

(d) in our opinion, the Balance Sheet, the Statement of Profit and Loss and the Cash Flow Statement comply with the Accounting Standards referred to in sub- section (3C) of Section 211 of the Act; as referred in Emphasis of Matter paragraph above, the Company has exercised the option available as per the Court Order which overrides the relevant provisions of the Accounting Standard 5 (AS 5) and

(e) on the basis of written representations received from the directors of the Company as at 31 March 201 3, and taken on record by the Board of Directors, none of the directors is disqualified as on 31 March 201 3 from being appointed as a director in terms of clause (g) of sub-section (1) of Section 274 of the Act.

With reference to the Annexure referred to in the Independent Auditors'' Report to the Members of Reliance Communications Limited (''the Company'') on the f nancial statements for the year ended 31 March 2013, we report the following:

1. (a) The Company is in the process of updating its fixed asset register including, to give effect to the assets transferred on demerger of the optical fibre undertaking and the passive infrastructure to a subsidiary company.

(b) We are informed that the Company physically verifies its assets over a three year period, except for base trans-receiver stations. We are informed that these assets are under continuous operational surveillance at National Network Operating Centre and are therefore not separately physically verified. In our opinion, this periodicity of physical verification is reasonable having regard to the size of the Company and the nature of its assets. In accordance with this policy, the Company has physically verified certain fixed assets during the year and we are informed that no material discrepancies were noticed on such verification.

(c) The Company has not disposed off any fixed assets during the year.

2. (a) The inventory has been physically verified by management during the current year. In our opinion, the frequency of such verification is reasonable.

(b) The procedures for the physical verification of inventories followed by management are reasonable and adequate in relation to the size of the Company and the nature of its business.

(c) The Company is maintaining proper records of inventory. Discrepancies identified on physical verification of inventories as compared to book records were not material.

3. The Company has neither granted nor taken any loans, secured or unsecured, to orfrom companies, firms or other parties covered in the register maintained under section 301 of the Companies Act, 1956. Accordingly, paragraph 4(iii) of the Order is not applicable.

4. In our opinion, and according to the information and explanations given to us, and having regard to the explanation that purchases of certain items of inventories and fixed assets are for the Company''s specialised requirements for which suitable alternative sources are not available to obtain comparable quotations, there is an adequate internal control system commensurate with the size of the Company and nature of its business with regard to the purchase of inventories and fixed assets and with regard to the sale of services. In oar-— opinion, activities of the Company do not involve sale of goods. In our opinion, and according to the information and explanations given to us, there is no continuing failure to correct major weaknesses in the internal control system.

5. In our opinion, and according to the information and explanations given to us, there are no contracts and arrangements the particulars of which need to be entered into the register maintained under section 301 of the Companies Act, 1 956.

6. The Company has not accepted any deposits from the public.

7. In our opinion, the Company has an internal audit system commensurate with the size and nature of its business.

8. We have broadly reviewed the books of account maintained by the Company pursuant to the rules prescribed by the Central Government for maintenance of cost records under section 209(1) (d) of the Companies Act, 1956 in respect of telecommunication activities and are of the opinion that prima facie, the prescribed accounts and records have been made and maintained. However, we have not made a detailed examination of the records.

9. (a) According to the information and explanations given to us and on the basis of our examination of the records of the Company, amounts deducted/accrued in the books of account in respect of undisputed statutory dues including Provident Fund, Wealth Tax, Income Tax, Service Tax, Customs Duty, Sales Tax, Entry Tax, Employees'' State Insurance and other material statutory dues have been generally regularly deposited during the year by the Company with the appropriate authorities. As explained to us, the Company did not have any dues on account of excise duty and Investor Education and Protection Fund. According to the information and explanations given to us,, no undisputed amounts payable in respect of Provident Fund, Wealth Tax, Income Tax, Service Tax, Customs Duty, Sales Tax, Entry Tax, Employees'' State Insurance and other material statutory dues were in arrears as at 31 March 201 3 for a period of more than six months from the date they became payable.

(b) According to the information and explanations given to us, there are no dues of Provident Fund, Wealth Tax, Income Tax, Service Tax, Customs Duty, Employees'' State Insurance which have not been deposited on account of any dispute. The dues of Excise Duty, VAT, Sales Tax and Entry Tax as disclosed below have not been deposited by the Company on account of disputes.

Name of the Statute Nature of dues Amount (Rs in Crore)

Central Sales Tax, West Bengal Central Sales Tax 0.34

Central Sales Tax 1.73

Central Sales Tax, Uttar Pradesh Central Sates Tax 0.24

0.93

0.02

0.07

0.50

0.20

1.04

Central Sales Tax, Orissa Central Sales Tax 0.02

0.01

Central Sales Tax, Maharashtra Central Sales Tax 4.79

Central Sales Tax, Delhi Central Sates Tax 0.05

Central Sales Tax, Bihar Central Sales Tax 0.03

Central Sales Tax, Assam Central Sales Tax 0.05

Entry Tax, Assam Entry Tax 0.10

Entry Tax, Bihar Entry Tax 0.76

0.20

Entry Tax, Chattisgarh Entry Tax 0.05

0.57

Name of the Statute Period Forum where dispute is pending

Central Sales Tax, West Bengal 2007-08 West Bengal Tax revision board

2008-09 Joint Commissioner (Appeals)

Central Sales Tax, Uttar Pradesh 2003-04 UP Trade Tax Tribunal

2004-05 High Court of Uttar Pradesh

2005-06 Additional Commissioner (Appeals)

2006-07 UP Trade Tax Tribunal

2006-07 Additional Commissioner (Appeals)

2007-08 Additional Commissioner (Appeals)

2008-09 Additional Commissioner (Appeals)

Central Sales Tax Orissa Oct 06-Mar 09 Joint Commissioner (Appeals)

2009-10 Joint Commissioner (Appeals)

Central Sales Tax, Maharashtra 2004-05 Joint Commissioner (Appeals)

Central Sales Tax, Delhi 2010-11 VAT Officer (Remanded by the Commissioner)

Central Sales Tax, Bihar 2005-06 Sales Tax Appellate Tribunal

Central Sales Tax, Assam 2010-11 Deputy Commissioner (Appeals)

Entry Tax Assam 2007-08 Deputy Commissioner (Appeals)

Entry Tax Bihar 2007-08 Joint Commissioner (Appeals)

2008-09 Joint Commissioner (Appeals)

Entry Tax Chattisgarh 2006-07 Dy. Commissioner (Appeals)

2007-08 Dy. Commissioner (Appeals)

10. The Company does not have any accumulated losses at the end of the financial year and has not incurred cash losses in the current financial year and in the immediately preceding financial year.

11. In our opinion and according to the information and explanations given to us, the Company has not defaulted in repayment of dues to its bankers or debenture holders or to any financial institutions.

12. According to the information and explanations given to us, the Company has not granted loans and advances on the basis of security by way of pledge of shares, debentures and other securities.

13. In our opinion and according to the information and explanations given to us, the Company is not a chit fund/ nidhi/ mutual benefit ftjnd/ society.

14. According to the information and explanations given to us, the Company is not dealing or trading in shares, securities, debentures and other investments.

15. In our opinion and according to the information and explanations given to us, the terms and conditions on which the Company has given guarantees for loans taken by wholly owned subsidiaries and other companies with whom the Company has business dealings, from banks or financial institutions are not prejudicial to the interest of the Company.

16. In our opinion and according to the information and explanations given to us and the records of the Company examined by us, the term loans taken by the Company have been applied for the purpose for which they were raised except portion of term loans availed as at the end of the year is kept in bank, to be applied for the purpose for which it was obtained.

17. According to the information and explanations given to us and on an overall examination of the balance sheet of the Company, we are of the opinion that the funds raised on the short term basis have not been used for long-term investment.

18. The Company has not made any preferential allotment of shares to companies/firms/parties covered in the register maintained under Section 301 of the Companies Act 1 956.

19. According to the information and explanations given to us, the Company has created security in respect of debentures issued except for certain debentures as mentioned in Note 2.03.1 for which the Company is in the process of creating the security,

20. The Company has not raised any money by public issues during the year.

21. According to the information and explanations given to us, no significant fraud on or by the Company, that causes a material misstatement to the financial statements, has been noticed or reported during the year.

For Chaturvedi & Shah For B S R & Co.

Chartered Accountants Chartered Accountants

Firm''s Reg. No: 101720W Firm''s Reg. No: 101248W

C.D. Lala Bhavesh Dhupelia

Partner Partner

Membership No: 35671 Membership No: 042070

Mumbai

10 May 2013


Mar 31, 2012

1 We have audited the attached Balance Sheet of Reliance Communications Limited ('the Company') as at March 31, 2012 and also the Statement of profit and loss and the Cash flow statement for the year ended on that date, annexed thereto. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit.

2 We conducted our audit in accordance with the auditing standards generally accepted in India. Those Standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

3 As required by the Companies (Auditor's Report) Order, 2003 ('the Order') issued by the Central Government of India in terms of sub-section (4A) of Section 227 of the Companies Act, 1956 ('the Act'), we enclose in the Annexure, a statement on the matters specified in paragraphs 4 and 5 of the said Order.

4 Without qualifying our report, we draw your attention to Note 2.38 of the financial statements regarding the Scheme of Arrangement ('the Scheme') sanctioned by the Hon'ble High Court of Judicature at Mumbai. The Scheme permits the Company to adjust expenses and/ or losses identified by the Board of Directors, which are required to be debited to the Statement of profit and loss by a corresponding withdrawal from General Reserve, which is considered to be an override to the relevant provisions of Accounting Standard 5 (AS 5) Net Profit or Loss for the Period, Prior Period Items and Changes in Accounting Policies'. The Company has identified exchange variations of Rs. 1,064 crore (including Rs. 775 crore in the nature of borrowing costs), provision for doubtful debt of Rs. 220 crore and provision for subsidy receivable of Rs. 48 crore, as in the opinion of the Board, such exchange loss and provisions are considered to be of an exceptional nature and accordingly, these expenses have been met by corresponding withdrawal from General Reserve. Pending clarification from the Institute of Chartered Accountants of India (ICAI), the Company has credited such withdrawal to the Statement of profit and loss. Had such write off of expenses and losses not been met from General Reserve, the Company would have reflected a loss after tax for the year of Rs. 1,176 crore and the consequential effect of this on the profit after tax for the year would have been of Rs. 1,332 crore.

5 Further to our comments in the Annexure referred to in the paragraph 3 above, we report that:

(a) we have obtained all the information and explanations which to the best of our knowledge and belief were necessary for the purposes of our audit;

(b) in our opinion, proper books of account as required by law have been kept by the Company so far as appears from our examination of those books;

(c) the Balance Sheet, Statement of profit and loss and Cash flow statement dealt with by this report are in agreement with the books of account;

(d) in our opinion, the Balance sheet, Statement of profit and loss and Cash flow statement dealt with by this report comply with the Accounting Standards referred to in sub-section (3C) of Section 211 of the Companies Act, 1956; as referred in paragraph (4) above, the Company has exercised the option available as per the Court Order which overrides the relevant provisions of Accounting Standard 5 (AS 5);

(e) on the basis of written representations received from the directors of the Company as at March 31, 2012 and taken on record by the Board of Directors, we report that none of the directors is disqualified as at March 31, 2012 from being appointed as a director of the Company under clause (g) of sub-section (1) of Section 274 of the Companies Act, 1956; and

(f) in our opinion, and to the best of our information and according to the explanations given to us, the financial statements give the information required by the Act in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India.

i. in the case of the Balance Sheet, of the state of affairs of the Company as at March 31, 2012;

ii. in the case of the Statement of profit and loss, of the profit of the Company for the year ended on that date; and

iii. in the case of the Cash flow statement, of the cash flows of the Company for the year ended on that date.

With reference to the Annexure referred to in the Auditors' Report to the Members of Reliance Communications Limited ('the Company') on the financial statements for the year ended March 31, 2012, we report the following:

1. (a) The Company is in the process of updating its fixed asset register including, to give effect to the assets transferred on demerger of the optical fibre undertaking and the passive infrastructure to a subsidiary company,

(b) We are informed that the Company physically verifies its assets over a three year period, except for base trans-receiver stations. We are informed that these assets are under continuous operational surveillance at National Network Operating Centre and are therefore not separately physically verified. In our opinion, this periodicity of physical verification is reasonable having regard to the size of the Company and the nature of its assets. In accordance with this policy, the Company has physically verified certain fixed assets during the year,

(c) Fixed assets disposed off during the year were not substantial and, therefore, do not affect the going concern assumption.

2. (a) The inventory has been physically verified by management during the current year. In our opinion, the frequency of such verification is reasonable.

(b) The procedures for the physical verification of inventories followed by management are reasonable and adequate in relation to the size of the Company and the nature of its business.

(c) The Company is maintaining proper records of inventory. Discrepancies identified on physical verification of inventories as compared to book records were not material.

3. The Company has neither granted nor taken any loans, secured or unsecured, to or from companies, firms or other parties covered in the register maintained under section 301 of the Companies Act, 1956. Accordingly, paragraph 4(iii) of the Order is not applicable.

4. In our opinion, and according to the information and explanations given to us, and having regard to the explanation that purchases of certain items of inventories and fixed assets are for the Company's specialised requirements for which suitable alternative sources are not available to obtain comparable quotations, there is an adequate internal control system commensurate with the size of the Company and nature of its business with regard to the purchase of inventories and fixed assets and with regard to the sale of services. In our opinion, activities of the Company do not involve sale of goods. In our opinion, and according to the information and explanations given to us, there is no continuing failure to correct major weaknesses in the internal control system.

5. In our opinion, and according to the information and explanations given to us, there are no contracts and arrangements the particulars of which need to be entered into the register maintained under section 301 of the Companies Act, 1956.

6. The Company has not accepted any deposits from the public.

7. In our opinion, the Company has an internal audit system commensurate with the size and nature of its business.

8. We have broadly reviewed the books of account maintained by the Company pursuant to the rules prescribed by the Central Government for maintenance of cost records under section 209(1)(d) of the Companies Act, 1 956 in respect of telecommunication activities and are of the opinion that prima facie, the prescribed accounts and records have been made and maintained. However, we have not made a detailed examination of the records.

9. (a) According to the information and explanations given to us and on the basis of our examination of the records of the Company, amounts deducted/ accrued in the books of account in respect of undisputed statutory dues including Provident Fund, Wealth Tax, Income Tax, Service Tax, Customs Duty, Sales Tax, Entry Tax, Employees' State Insurance and other material statutory dues have been generally regularly deposited during the year by the Company with the appropriate authorities. As explained to us, the Company did not have any dues on account of excise duty and Investor Education and Protection Fund. According to the information and explanations given to us, no undisputed amounts payable in respect of Provident Fund, Wealth Tax, Income Tax, Service Tax, Customs Duty, Sales Tax, Entry Tax, Employees' State Insurance and other material statutory dues were in arrears as at March 31, 2012 for a period of more than six months from the date they became payable.

(b) According to the information and explanations given to us, there are no dues of Provident Fund, Wealth Tax, Income Tax, Service Tax, Customs Duty, Employees' State Insurance which have not been deposited on account of any dispute. The dues of Excise Duty, Sales Tax and Entry Tax as disclosed below have not been deposited by the Company on account of disputes.

Name of the Statute Nature of dues Amount Period to which Forum where dispute is pending (Rs. crore) the amount relates

Central Sales Tax, West Bengal Central Sales Tax 0.34 2007-08 West Bengal Tax revision board

Central Sales Tax 1.73 2008-09 Joint Commissioner (Appeals)

Central Sales Tax, Uttar Pradesh Central Sales Tax 0.24 2003-04 UP Trade Tax Tribunal

0.93 2004-05 High Court of Uttar Pradesh

0.07 2006-07 UP Trade Tax Tribunal

Central Sales Tax, Orissa Central Sales Tax 0.02 Oct 06 - Mar 09 Joint Commissioner (Appeals)

Central Sales Tax, Maharashtra Central Sales Tax 4.79 2004-05 Joint Commissioner (Appeals)

Central Sales Tax, Bihar Central Sales Tax 0.03 2005-06 Deputy Commissioner (Appeals)

Entry Tax, Assam Entry Tax 0.10 2007-08 Deputy Commissioner (Appeals)

Entry Tax, Bihar Entry Tax 0.76 2007-08 Joint Commissioner (Appeals)

0.20 2008-09 Joint Commissioner (Appeals)

Entry Tax, Madhya Pradesh Entry Tax 0.05 2006-07 Deputy Commissioner (Appeals)

0.29 2002-03 MP Taxation Board

0.19 2003-04 MP Taxation Board

0.12 2005-06 MP Taxation Board

0.12 2006-07 MP Taxation Board

0.52 2007-08 Deputy Commissioner (Appeals)

0.07 2008-09 MP Taxation Board

Entry Tax, Orissa Entry Tax 0.05 Oct 06 - Mar 09 Joint Commissioner (Appeals)

Entry Tax, Rajasthan Entry Tax 0.03 2005-06 Deputy Commissioner (Appeals)

6.64 2007-08 High Court of Rajasthan

6.52 2008-09 High Court of Rajasthan

0.96 2009-10 Supreme Court

Entry Tax, Uttar Pradesh Entry Tax 0.13 2003-04 UP Trade Tax Tribunal

Excise duty, Maharashtra Excise duty 2.08 2002-04 UP Trade Tax Tribunal

VAT, Bihar VAT 0.68 2005-06 Deputy Commissioner (Appeals)

VAT, Uttarakhand VAT 0.01 2005-06 Uttarakhand Sales Tax Tribunal

0.03 2007-08 Joint Commissioner (Appeals)

VAT, West Bengal VAT 1.49 2005-06 West Bengal Tax revision board

1.80 2006-07 West Bengal Tax revision board

2.34 2007-08 West Bengal Tax revision board

2.75 2008-09 Joint Commissioner (Appeals)

10. The Company does not have any accumulated losses at the end of the financial year and has not incurred cash losses in the current financial year and in the immediately preceding financial year,

11. In our opinion and according to the information and explanations given to us, the Company has not defaulted in repayment of dues to its bankers or debenture holders or to any financial institutions.

12. According to the information and explanations given to us, the Company has not granted loans and advances on the basis of security by way of pledge of shares, debentures and other securities.

13. In our opinion and according to the information and explanations given to us, the Company is not a chit fund/ nidhi/ mutual benefit fund/ society

14. According to the information and explanations given to us, the Company is not dealing or trading in shares, securities, debentures and other investments.

15. In our opinion and according to the information and explanations given to us, the terms and conditions on which the Company has given guarantees for loans taken by wholly owned subsidiaries and other companies with whom the Company has business dealings, from banks or financial institutions are not prejudicial to the interest of the Company.

16. In our opinion and according to the information and explanations given to us and the records of the Company examined by us, the term loans taken by the Company have been applied for the purpose for which they were raised.

17. According to the information and explanations given to us and on an overall examination of the balance sheet of the Company, we are of the opinion that the funds raised on the short term basis have not been used for long-term investment.

18. The Company has not made any preferential allotment of shares to companies/ firms/ parties covered in the register maintained under Section 301 of the Companies Act, 1956.

19. According to the information and explanations given to us, the Company has created securities in respect of Debentures issued except for certain Debentures issued during the year as mentioned in Note 2.03.1 for which the Company is in the process of creating the security

20. The Company has not raised any money by public issues during the year,

21. According to the information and explanations given to us, no significant fraud on or by the Company, that causes a material misstatement to the financial statements, has been noticed or reported during the year.

For Chaturvedi & Shah For B S R & Co.

Chartered Accountants Chartered Accountants

Firm Reg. No.: 101720W Firm Reg. No.: 101248W

C. D. Lala Bhavesh Dhupelia

Partner Partner

Membership No: 035671 Membership No: 042070

Mumbai

May 26, 2012


Mar 31, 2011

1 We have audited the attached Balance Sheet of Reliance Communications Limited ('the Company') as at 31 March 2011 and also the profit and Loss Account and the Cash flow statement for the year ended on that date, annexed thereto. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit.

2 We conducted our audit in accordance with the auditing standards generally accepted in India. Those Standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

3 As required by the Companies (Auditor's Report) Order, 2003 ('the Order') issued by the Central Government of India in terms of sub-section (4A) of Section 227 of the Companies Act, 1956 ('the Act'), we enclose in the Annexure, a statement on the matters specified in paragraphs 4 and 5 of the said Order.

4 Further to our comments in the Annexure referred to in the paragraph 3 above, we report that:

(a) we have obtained all the information and explanations which to the best of our knowledge and belief were necessary for the purposes of our audit;

(b) in our opinion, proper books of account as required by law have been kept by the Company so far as appears from our examination of those books;

(c) the Balance Sheet, profit and Loss Account and Cash Flow Statement dealt with by this report are in agreement with the books of account;

(d) in our opinion, the Balance Sheet, profit and Loss Account and Cash Flow Statement dealt with by this report comply with the Accounting Standards referred to in sub-section (3C) of Section 211 of the Companies Act, 1956;

(e) on the basis of written representations received from the directors of the Company as at 31 March 2011 and taken on record by the Board of Directors, we report that none of the directors is disQualified as at 31 March 2011 from being appointed as a director of the Company under clause (g) of sub-section (1) of Section 274 of the Companies Act, 1956; and

(f) in our opinion, and to the best of our information and according to the explanations given to us, the said accounts give the information required by the Companies Act, 1956, in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India:

(i) in the case of the Balance Sheet, of the state of affairs of the Company as at 31 March 2011;

(ii) in the case of the profit and Loss Account, of the loss of the Company for the year ended on that date; and

(iii) in the case of the Cash Flow Statement, of the cash flows of the Company for the year ended on that date.

Annexure to Auditors' Report - 31st March, 2011

With reference to the Annexure referred to in the Auditors' Report to the Members of Reliance Communications Limited ('the Company') on the financial statements for the year ended 31 March 2011, we report the following:

1. (a) The Company is in the process of updating its fixed asset register including, to give effect to the assets transferred on demerger of the optical fibre undertaking and the passive infrastructure to a subsidiary company.

(b) We are informed that the Company physically verifies its assets over a three year period, except for base trans-receiver stations. We are informed that these assets are under continuous operational surveillance at National Network Operating Centre and are therefore not separately physically verified. In our opinion, this periodicity of physical verification is reasonable having regard to the size of the Company and the nature of its assets. In accordance with this policy, the Company has physically verified certain fixed assets during the year.

(c) Fixed assets disposed off during the year were not substantial and, therefore, do not affect the going concern assumption.

2. (a) The inventory has been physically verified by management during the current year. In our opinion, the frequency of such verification is reasonable.

(b) The procedures for the physical verification of inventories followed by management are reasonable and adequate in relation to the size of the Company and the nature of its business.

(c) The Company is maintaining proper records of inventory. Discrepancies identifed on physical verification of inventories as compared to book records were not material.

3. The Company has neither granted nor taken any loans, secured or unsecured, to or from companies, firms or other parties covered in the register maintained under section 301 of the Companies Act, 1956. Accordingly, paragraph 4(iii) of the Order is not applicable.

4. In our opinion, and according to the information and explanations given to us, and having regard to the explanation that purchases of certain items of inventories and fixed assets are for the Company's specialised requirements for which suitable alternative sources are not available to obtain comparable quotations, there is an adequate internal control system commensurate with the size of the Company and nature of its business with regard to the purchase of inventories and fixed assets and with regard to the sale of services. In our opinion, activities of the Company do not involve sale of goods. In our opinion, and according to the information and explanations given to us, there is no continuing failure to correct major weaknesses in the internal control system.

5. In our opinion, and according to the information and explanations given to us, there are no contracts and arrangements the particulars of which need to be entered into the register maintained under section 301 of the Companies Act, 1956.

6. The Company has not accepted any deposits from the public.

7. In our opinion, the Company has an internal audit system commensurate with the size and nature of its business.

8. We have broadly reviewed the books of account maintained by the Company pursuant to the rules prescribed by the Central Government for maintenance of cost records under section 209(1) (d) of the Companies Act, 1956 in respect of telecommunication activities and are of the opinion that prima facie, the prescribed accounts and records have been made and maintained. However, we have not made a detailed examination of the records.

9. (a) According to the information and explanations given to us and on the basis of our examination of the records of the Company, amounts deducted/accrued in the books of account in respect of undisputed statutory dues including Provident Fund, Wealth Tax, Income Tax, Service Tax, Customs Duty, Sales Tax, Entry Tax, Employees' State Insurance and other material statutory dues have been regularly deposited during the year by the Company with the appropriate authorities. As explained to us, the Company did not have any dues on account of Excise Duty and Investor Education and Protection Fund. There were no dues on account of cess under Section 441A of the Companies Act, 1956 since the date from which the aforesaid section comes into force has not yet been notified by the Central Government. According to the information and explanations given to us, no undisputed amounts payable in respect of Provident Fund, Wealth Tax, Income Tax, Service Tax, Customs Duty, Sales Tax, Entry Tax, Employees' State Insurance and other material statutory dues were in arrears as at 31 March 2011 for a period of more than six months from the date they became payable.

(b) According to the information and explanations given to us, there are no dues of Income Tax, Wealth Tax, Service Tax, Customs Duty, Employees' State Insurance which have not been deposited on account of any dispute. The dues of Excise Duty, Sales Tax and Entry Tax as disclosed below have not been deposited by the Company on account of disputes.

Name of the Statute Nature of Amount Period to which the Forum where dispute is pending the Dues (Rs crores) amount relates

The Central Excise and Salt Act, 1944 Excise duty 2.08 2002-04 Tribunal

Entry Tax Act, Uttar Pradesh Entry Tax 0.13 2003-04 Trade Tax Tribunal, Lucknow

Trade Tax Act, Uttar Pradesh Sales Tax 0.93 2004-05 Trade tax Tribunal,(Appeals)

10.53 2005-06 Joint Commissioner (Appeals)

0.24 2003-04 Trade Tax Tribunal Lucknow

Entry Tax Act, Madhya Pradesh Entry Tax 0.29 2002-03 Deputy Commissioner of Appeals (Commercial Taxes)

0.20 2003-04 Deputy Commissioner of Appeals (Commercial Taxes)

0.16 2005-06 Deputy Commissioner of Appeals (Commercial Taxes)

0.15 2006-07 Deputy Commissioner of Appeals (Commercial Taxes)

0.65 2007-08 Deputy Commissioner of Appeals (Commercial Taxes)

Punjab VAT Act VAT 0.01 2007-08 Deputy Commissioner (Appeals)

Entry Tax Act, Chhattisgarh Entry Tax 0.03 2003-04 Deputy Commissioner (Appeals) (Commercial Taxes)

Uttarakhand VAT Act VAT 0.01 2005-06 Deputy Commissioner of Commercial Taxes

West Bengal VAT Act VAT 1.49 2005-06 First appellate authority

1.80 2006-07 First appellate authority

2.40 2007-08 Deputy Commissioner of Sales Tax

Entry Tax Act, Rajasthan Entry tax 0.03 2005-06 Deputy Commissioner of Appeals (Commercial Taxes)

10.78 2007-08 Deputy Commissioner of Appeals (Commercial Taxes)

10.59 2008-09 Deputy Commissioner of Appeals (Commercial Taxes)

Delhi VAT Act VAT 36.48 2007-08 Commissioner (Appeals)

Maharashtra Sales Tax Sales Tax 4.79 2004-05 Deputy Commissioner of Sales tax

West Bengal,CST CST 0.21 2007-08 Deputy Commissioner of Sales Tax

Punjab VAT Act VAT 0.05 First appellate authority

10. The Company does not have any accumulated losses at the end of the financial year and has not incurred cash losses in the current financial year and in the immediately preceding financial year.

11. In our opinion and according to the information and explanations given to us, the Company has not defaulted in repayment of dues to its bankers or debenture holders or to any financial institutions.

12. According to the information and explanations given to us, the Company has not granted loans and advances on the basis of security by way of pledge of shares, debentures and other securities.

13. In our opinion and according to the information and explanations given to us, the Company is not a chit fund/ nidhi/ mutual benefit fund/ society.

14. According to the information and explanations given to us, the Company is not dealing or trading in shares, securities, debentures and other investments.

15. In our opinion and according to the information and explanations given to us, the terms and conditions on which the Company has given guarantees for loans taken by wholly owned subsidiaries and other companies with whom the Company has business dealings, from banks or financial institutions are not prejudicial to the interest of the Company.

16. In our opinion and according to the information and explanations given to us and examination of the records of the Company by us, the term loans taken by the Company have been applied for the purpose for which they were raised except portion of term loans availed as at the end of the year is kept in bank, to be applied for the purpose for which it was obtained.

17. According to the information and explanations given to us and on an overall examination of the balance sheet of the Company, we are of the opinion that the funds raised on short term basis have not been used for long term investment.

18. The Company has not made any preferential allotment of shares to companies/firms/parties covered in the register maintained under Section 301 of the Companies Act, 1956.

19. According to the information and explanations given to us, the Company has created security in respect of debentures issued.

20. The Company has not raised any money by public issues during the year.

21. According to the information and explanations given to us, no significant fraud on or by the Company, that causes a material misstatement to the financial statements, has been noticed or reported during the year.

For Chaturvedi & Shah For B S R & Co.

Chartered Accountants Chartered Accountants

Firm Reg. No: 101720W Firm Reg. No: 101248W

C. D. Lala Bhavesh Dhupelia

Partner Partner

Membership No: 35671 Membership No: 042070

Mumbai

30 May 2011



 
Subscribe now to get personal finance updates in your inbox!