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Notes to Accounts of Tata Communications Ltd.

Mar 31, 2015

1. Employee Benefits

i. Defined Contribution Plan - The Company makes contributions towards a provident fund under a defined contribution retirement benefit plan for qualifying employees. The provident fund is administered by the Trustees of the Tata Communications Employees' Provident Fund Trust and by the Regional Provident Fund Commissioner. Under this scheme, the Company is required to contribute a specified percentage of payroll cost to fund the benefits.

The rules of the Company's Provident Fund administered by the Trust require that if the Board of Trustees are unable to pay interest at the rate declared for Employees' Provident Fund by the Government under the applicable law for the reason that the return on investment is lower or for any other reason, then the deficiency shall be made good by the Company. Having regard to the assets of the Fund and the return on the investments, the Company does not expect any deficiency in the foreseeable future. There has also been no such deficiency since the inception of the Fund.

Provident fund contributions amounting to Rs. 22.54 crores (2014: Rs. 20.52 crores) have been charged to the Statement of Profit and Loss, under Contributions to provident, gratuity and other funds in note 25 "Employee benefits".

ii. Defined Benefit Plan

Gratuity:

The Company makes annual contributions under the Employees Gratuity scheme to a fund administered by Trustees covering all eligible employees. The plan provides for lump sum payments to employees whose right to receive gratuity had vested at the time of resignation, retirement, death while in employment or on termination of employment of an amount equivalent to 15 days salary for each completed year of service or part thereof in excess of six months. Vesting occurs upon completion of five years of service except in case of death.

Medical Benefit:

The Company reimburses domiciliary and hospitalisation expenses not exceeding specified limits incurred by eligible and qualifying employees and their dependent family members under the Tata Communications Employee's Medical Reimbursement Scheme.

Pension Plan:

The Company's pension obligations relate to certain employees transferred to the Company from the Overseas Communications Service ("OCS") an erstwhile department of Ministry of Commerce, Government of India. The Company purchases life annuity policies from an insurance company to settle such pension obligations. During the year, the Company has incurred a charge of Rs. 6.94 crores (2014:Rs. 10.53 crores) to meet the additional pension obligation on account of increase in Pension and Dearness Allowance and has been included under Contributions to provident, gratuity and other funds in note 25 "Employee benefits". _

I. Leave plan and Compensated absences

For executives

Leave unavailed of by eligible employees may be carried forward/ encashed by them/ their nominees in the event of death or permanent disablement or resignation, subject to a maximum leave of 120 days in addition to accumulated leave balance available in accumulated quota.

For non executives

Leave unavailed of by eligible employees may be carried forward/ encashed by them/ their nominees in the event of death or permanent disablement or resignation, subject to a maximum leave of 300 days.

The liability for compensated absences as at the year end is Rs. 65.79 crores (2014: Rs. 57.88 crores) as shown under long term provisions Rs. 59.63 crores (2014: Rs. 50.78 crores) and short term provisions Rs. 6.16 crores (2014: Rs. 7.10 crores). The amount charged to the Statement of Profit and Loss under Salaries and related costs in note 25 "Employee benefits" is Rs. 20.03 crores (2014: Rs. 13.98 crores).

Refer table VI above for actuarial assumptions on compensated absences.

2. Segment Reporting

a. Business Segments

The Company's reportable business segments are Voice Solutions (VS) and Data and Managed Services (DMS). The composition of the reportable segments is as follows:

Voice Solutions (VS)

VS includes international and national long distance voice services.

* Netherlands includes amounts recorded as revenues from Tata Communications (Netherlands) BV of Rs. 171.09 crores (2014: Rs. 317.85 crores). Tata Communications (Netherlands) BV is a central contracting party and a transfer pricing administrator for inter-company transactions between Tata Communications Limited and its international subsidiaries.

From 1 April 2006, the Company adopted the Residual Profits Split Method ("RPSM") for recording transactions pertaining to International Telecommunications Services under its Transfer Pricing Policy. This policy governs the majority of the transactions between the Company and its international subsidiaries. The Company's subsidiary in the Netherlands is designated as the Central Contracting Party ("CCP") and Transfer Pricing Administrator ("TPA").

3. Operating lease arrangements

Operating lease payments represent rentals payable by the Company for certain buildings and satellite channels.

b. As lessor:

i. The Company has leased under operating lease arrangements certain Indefeasible Rights of Use ("IRU") with gross carrying amount and accumulated depreciation of Rs. 87.02 crores (2014: Rs. 87.02 crores) and Rs. 56.92 crores (2014:Rs. 51.25 crores) respectively as at 31 March 2015. Depreciation expense of Rs. 5.67 crores (2014:Rs. 5.67 crores) in respect of these assets has been charged in the Statement of Profit and Loss for the year ended 31 March 2015.

In case of certain operating lease agreements aggregating Rs. 609.43 crores (2014: Rs. 530.70 crores) as at 31 March 2015, the gross block, accumulated depreciation and depreciation expense of the assets given on an IRU basis cannot be identified as these assets are not exclusively leased. The lease rentals associated with such IRU arrangements for the year ended 31 March 2015 amount to Rs. 53.85 crores (2014: Rs. 47.10 crores).

In respect of IRU arrangements, rental income of Rs. 60.70 crores (2014:Rs. 54.00 crores) has been recognised in the Statement of Profit and Loss for the year ended 31 March 2015.

4. Contingent Liabilities and Commitments:

a. Contingent Liabilities:

(Rs. in crores) As at As at 31 March 2015 31 March 2014

i. Guarantees given on behalf of subsidiaries (Refer 1 below) 13,451.48 12,516.09

ii. Claims for taxes on income (Refer 2 below) Income tax disputes where department is in appeal against the Company 626.15 401.63

Other disputes related to income tax 2,067.82 1,870.51

iii. Claims for other taxes 1.45 1.28

iv. Other claims (Refer 3 below) 967.71 827.29

v. Also Refer 5 below

Under the terms of the Shareholders Agreement if certain performance parameters and other conditions are not met by TTSL by 31 March 2014 the SP has an option to divest its entire shareholdings in TTSL at a price being the higher of fair value orRs. 58.05 per share (i.e 50 percent of the subscription price) ("Sale Price"), subject to compliance with applicable law and regulations ("Sale Option").

The Company has an "inter se" agreement with Tata Sons Limited and other Tata Group companies. Tata Sons Limited has informed the Company as follows:

i. The Shareholders Agreement obliges Tata Sons Limited to find a buyer for the entire shareholding of SP shares at the Sale Price.

ii. If there is no buyer at the Sale Price, then Tata Sons Limited is obliged to acquire or procure the acquisition of such shares. These obligations are subject to compliance with applicable law and regulations.

iii. Under the terms of the "inter se" agreement, the Company may be obligated to acquire the shareholding of the SP in proportion of the number of shares sold by the company to the aggregate of the secondary shares sold to the SP.

iv. The SP has exercised the Sale Option on 7 July 2014.

v. Tata Sons have also informed the Company that the Reserve Bank of India have not permitted acquisition of the shares at the pre-determined price and have advised that the acquisition can only be made at Fair Market Value (FMV) prevailing at the time of the acquisition. The FMV determined as at 30 June 2014 is Rs. 23.34 per share. Tata Sons Limited has conveyed to Docomo its willingness to acquire the shares at Rs. 23.34 per share, however, Docomo reiterated its position that the shares be acquired at Rs. 58.05 per share.

vi. Docomo have initiated Arbitration in the matter.

vii. The liability, if any, to the extent of the difference in price sought by Docomo and the Fair Market Value is dependent upon the outcome of the Arbitration and prevailing Exchange Control Regulations.

5. Future cash flows in respect of the above matters are determinable only on receipt of judgements/ decisions pending at various forums/ authorities.

b. Commitments:

i. Capital Commitments:

Estimated amount of contracts remaining to be executed on capital account, not provided for amount to Rs. 208.24 crores (2014: Rs. 154.75 crores) (net of capital advances).

ii. Other Commitments:

1. As on 31 March 2015, the Company has issued Letters of Comfort for the credit facility agreements in respect of various subsidiaries:

2. The Company has issued a support letter to Tata Communications International Pte. Limited (TCIPL), aggregating Rs. 6,095.73 crores (2014:Rs. 5,446.50 crores) for providing financial support enabling, in turn, TCIPL to issue such support letters to certain subsidiaries with negative net worth as at 31 March 2015 in various geographies in order that they may continue as going concerns.

3. The Company has committed loan facility to wholly owned subsidiaries to the tune of Rs. 6,728.24 crores (2014: Rs. 5,673.34 crores) as at 31 March 2015, utilisation of which is subject to future requirements and appropriate approval processes from time to time.

6. United Telecom Limited ("UTL") passed a resolution on 4 September 2014, wherein the joint venture agreement between the shareholders of UTL was amended to the effect that certain major decisions of UTL would require the affirmative vote of a two-third majority of the directors compared to the earlier clause which required the affirmative vote of all directors. This led to the termination of joint control and consequently the joint venture status in UTL. The Company holds 22.05% shares in UTL as on 31 March 2015 and is considered to be an associate with effect from 4 September 2014.

7. Details of loans given, investment made and guarantee given covered u/s 186 (4) of the Companies Act, 2013 are provided in note no. 13, 15, 20 and 36 to the financial statements.

8. Derivative Transactions

The Company uses forward exchange contracts and currency options to hedge its exposure in foreign currency and interest rates. The year-end foreign currency exposures that have not been hedged by a derivative instrument or otherwise are given below:

9. Previous year figures have been regrouped/rearranged wherever necessary to conform to the current year's classifications.


Mar 31, 2014

1. Corporate information

TATA Communications Limited ("the Company") was incorporated on 19 March 1986. The Government of India vide its letter No. G-25015/6/86OC dated 27 March 1986, transferred all assets and liabilities of the Overseas Communications Service ("OCS") (part of the Department of Telecommunications, Ministry of Communications) as appearing in the Balance sheet as at 31 March 1986 to the Company with effect from 01 April 1986. During the year 2007-08, the Company changed its name from Videsh Sanchar Nigam Limited to Tata Communications Limited and the fresh certificate of incorporation consequent upon the change of name was issued by the Registrar of Companies, Maharashtra on 28 January 2008.

The Company offers international and national voice and data transmission services, selling and leasing of bandwidth on undersea cable systems, internet dial up and broadband services, and other value-added services comprising telepresence, managed hosting, mobile global roaming and signaling services, transponder lease, television uplinking and other services.

2. During the year, the Company has received duty credit scrips aggregating Rs. 46.35 crores (2013: Nil) in respect of foreign exchange earnings to be utilised towards import duty. This is included in Other operating income.

3. Employee Benefits

i. Defined Contribution Plan - Provident Fund:

The Company makes contributions towards a provident fund under a defined contribution retirement benefit plan for qualifying employees. The provident fund is administered by the Trustees of the Tata Communications Employees'' Provident Fund Trust and by the Regional Provident Fund Commissioner. Under this scheme, the Company is required to contribute a specified percentage of payroll cost to fund the benefits.

The rules of the Company''s Provident Fund administered by the Trust require that if the Board of Trustees are unable to pay interest at the rate declared for Employees'' Provident Fund by the Government under para 60 of the Employees'' Provident Fund Scheme, 1952 for the reason that the return on investment is less or for any other reason, then the deficiency shall be made good by the Company. Having regard to the assets of the Fund and the return on the investments, the Company does not expect any deficiency in the foreseeable future. There has also been no such deficiency since the inception of the Fund.

Provident fund contributions amounting to Rs. 20.52 crores (2013: Rs. 20.67 crores) have been charged to the Statement of Profit and Loss.

ii. Defined Benefit Plan

Gratuity:

The Company makes annual contributions under the Employees Gratuity scheme to a fund administered by Trustees covering all eligible employees. The plan provides for lump sum payments to vested employees at retirement, death while in employment or on termination of employment of an amount equivalent to 15 days salary for each completed year of service or part thereof in excess of six months. Vesting occurs upon completion of five years of service.

Medical Benefit:

The Company reimburses domiciliary and hospitalisation expenses not exceeding specified limits incurred by eligible and qualifying employees and their dependent family members under the Tata Communications Employee''s Medical Reimbursement Scheme.

Pension Plan:

The Company''s pension obligations relate to certain employees transferred to the Company from the Overseas Communications Service ("OCS")an erstwhile department of Ministry of Commerce, Government of India. The Company purchases life annuity policies from an insurance company to settle such pension obligations. During the year the Company has incurred a charge ofRs. 10.53 crores (2013:Rs. 8.09 crores) to meet the additional pension obligation on account of increase in Pension and Dearness Allowance.

4. In January 2008, an amount ofRs. 290 crores was paid to the Department of Telecommunications (DoT) under protest, towards payment of license fees, interest and penalty demanded by DoT before issue of certain licenses to the Company. Against this, the Company carried a provision of Rs. 174.15 crores for license fees and interest thereon which has been set off against the payment of Rs. 290 crores for the presentation in the financial statements. The Company has filed a petition in the Supreme Court of India challenging the judgement of The Telecom Disputes Settlement Appellate Tribunal (TDSAT) relating to the computation of license fee.

Additionally, the Company has also filed a petition with TDSAT challenging the applicability of penal provisions under International Long Distance (ILD) and National Long Distance (NLD) license agreements, whereby DoT claimed penalty and interest on penalty amounting to Rs. 115.73 crores (included in aforesaid Rs. 290 crores). Consequently, the amount of Rs. 115.73 crores was reflected as an asset in the books since 31 March 2009.

During the year 2009-10, TDSAT accepted the Company''s position and decided in favour of the Company. However, DoT has filed an appeal in the Supreme Court of India challenging the judgement of TDSAT relating to the waiver of penalty and interest on penalty. A claim of Rs. 115.73 crores along with interest was raised upon DoT in financial year 2009-10 based on this TDSAT order, which DoT has refused. The Company filed an appeal in TDSAT in financial year 2010-11 against DoT, which had been allowed in favour of the Company by TDSAT in financial year 2011-12. Pending implementation of this order by DoT, the Company had further filed execution petition in TDSAT in financial year 2011- 12. TDSAT, on 9 May 2012, decided the execution petition in favour of the Company and directed DoT to refund the Rs. 115.72 crores being penalty and interest on penalty, along with interest till date of payment. Accordingly DoT, on 7 June 2012 refunded an amount of Rs. 226.23 crores to the Company, including interest of Rs. 110.51 crores which was included in Other Income in financial year 2012-13. The Company based on legal opinion and position in law is confident that its position will be upheld in the Supreme Court.

5. Segment Reporting

a. Business Segments

The Company''s reportable business segments are Global Voice Solutions (GVS) and Global Data and Managed Services (GDMS). The composition of the reportable segments is as follows:

Global Voice Solutions (GVS)

GVS includes international and national long distance voice services.

Global Data and Managed Services (GDMS)

GDMS includes corporate data transmission services, data centers, virtual private network signaling and roaming services, television and other network and managed services.

i. Revenues and interconnect charges are directly attributable to the segments. Space segment utilisation charges, rent of landlines and other network and transmission costs are allocated based on utilisation of satellite and landlines. License fee for GVS and GDMS have been allocated based on net revenues from these services. Segment result is segment revenues less segment expenses. Depreciation and certain other costs cannot be allocated to segments.

ii. Telecommunication services are provided utilising the Company''s assets which do not generally make a distinction between the types of services. As a result, fixed assets are used interchangeably between segments. Accordingly assets and liabilities cannot be allocated to segments.

6. Operating lease arrangements

Operating lease payments represent rentals payable by the Company for certain buildings and satellite channels.

b. As lessor:

i. The Company has leased under operating lease arrangements certain Indefeasible Rights of Use ("IRU") with gross carrying amount and accumulated depreciation of Rs. 87.02 crores (2013: Rs. 87.02 crores) and Rs. 51.25 crores (2013: Rs. 45.57 crores) respectively as at 31 March 2014. Depreciation expense ofRs. 5.67 crores (2013: Rs. 5.67 crores) in respect of these assets has been charged in the Statement of Profit and Loss for the year ended 31 March 2014.

In case of certain lease agreements aggregatingRs. 530.70 crores (2013:Rs. 513.79 crores) as at 31 March 2014, the gross block, accumulated depreciation and depreciation expense of the assets given on IRU basis cannot be identified as these assets are not exclusively leased. The lease rentals associated with such IRU arrangements for the year ended 31 March 2014 amount to Rs. 47.10 crores (2013: Rs. 37.83 crores).

In respect of IRU arrangements, rental income ofRs. 54 crores (2013: Rs. 44.73 crores) has been recognised in the Statement of Profit and Loss for the year ended 31 March 2014.

7. Contingent Liabilities and Commitments:

a. Contingent Liabilities:

(Rs. in crores) As at As at 31 March 2014 31 March 2013

i. Guarantees given on behalf of subsidiaries 12,516.09 11,836.69

ii. Claims for taxes on income (Refer 1)

Income tax disputes where department is in appeal against the Company. 401.63 457.08

Other disputes related to income tax 1,870.51 2,067.27

iii. Claims for other taxes 1.28 1.28

iv. Other claims (Refer 2) 827.29 733.53

v. Also Refer 4

1. Claims for taxes on income:

Significant claims by the revenue authorities in respect of income tax matters relate to disallowance of deductions claimed section 80 IA of the Income Tax Act, 1961 from Assessment years 1996-97 onwards and transfer pricing adjustments carried out by revenue authorities. The Company has contested the disallowances/ adjustments and has preferred appeals which are pending.

2. Other claims:

i. Telecom Regulatory Authority of India ("TRAI") reduced the Access Deficit Charge ("ADC") rates effective 1 April 2007. All telecom services providers including National Long Distance ("NLD") and International Long Distance ("ILD") operators in India are bound by the TRAI regulations; accordingly the Company has recorded the cost relating to ADC at revised rates as directed by TRAI. However, BSNL continued to bill at the ADC rate applicable prior to 1 April 2007. BSNL had filed an appeal against the TRAI Interconnect Usage Charges ("IUC") regulation of reduction in ADC and currently this matter is pending with the Supreme Court. The possible liability on Company is Rs. 311.84 crores (2013: Rs.311.84 crores).

ii. On 19 February 2013, DoT issued a license fee demand for financial year 2006-07 and 2007-08, based on special audit reports of auditors appointed by DoT. The total demand is for Rs. 222.79 crores (2013: Rs. 193.05 crores, being Rs. 92.86 crores for financial year 2006-07 and Rs. 100.19 crores for financial year 2007-08, including Rs. 102.06 crores, being interest as on 28 February 2013). The Company has challenged the said demand notice in the Madras High Court which has vide its orders dated 1 March 2013, granted a stay-order against the said demand. Further, the Company is also contesting a license fee claim of Rs. 121.38 crores (2013:Rs. 101.24 crores) (including interest and penalty) for financial year 2005-06. However, the said demand notice includes the items which are already the subject-matter of petitions/ appeals, pending for hearing in the Supreme Court of India, for the previous years.

iii. Other claims of Rs. 171.28 crores (2013: Rs. 127.40 crores) mainly pertain to routine suits for collection, commercial disputes, claims from customers and/ or suppliers and claims from Employee State Insurance Corporation (ESIC).

3. The Company has taken appropriate professional advice in respect of the claims/ appeals and has taken all necessary steps to protect its interest. Based on expert opinion, no provision is required in respect of these claims/ appeals.

4. In terms of agreements entered into in 2008-09 between the Company and NTT Docomo Inc. the Company sold to NTT Docomo Inc. of Japan (Strategic Partner - SP), 36,542,378 equity shares of Tata Teleservices Ltd ("TTSL") atRs. 116.09 per share which resulted in a profit ofRs. 346.65 crores in the same year.

Tata Sons Limited (TSL) is party to a Shareholders Agreement with NTT Docomo Inc. of Japan (Strategic Partner - SP) dated 25 March 2009 and amended on 21 May 2010.

Under the terms of the Shareholders Agreement if certain performance parameters and other conditions are not met by TTSL by 31 March 2014 the SP has an option to divest its entire shareholdings in TTSL at a price being the higher of fair value orRs. 58.05 per share (i.e 50 percent of the subscription price) ("Sale Price"), subject to compliance with applicable law and regulations ("Sale Option").

The Company has an "inter se" agreement with Tata Sons Limited and other Tata Group companies.

Tata Sons Limited has informed the Company as follows:

i. In the wake of recent regulatory developments in India, Tata Sons Limited has considered its position relating to the possible exercise of the Sale Option under the Shareholders Agreement.

ii. The Shareholders Agreement obliges Tata Sons Limited to find a buyer for the shares at the Sale Price.

iii. If there is no buyer at the Sale Price, then Tata Sons Limited is obliged to acquire or procure the acquisition of such shares. These obligations are subject to compliance with applicable law and regulations.

iv. No notice of exercise of the Sale Option has been received although the SP has communicated its board decision to exercise the Sale Option.

v. Under the terms of the "inter se" agreement, the Company may be obligated to acquire the shareholding of the SP in proportion of the number of shares sold by the company to the aggregate of the secondary shares sold to the SP.

vi. Pending receipt of a notice exercising the Sale Option and in view of applicable law and regulations, the exposure of the Company (if any) cannot be ascertained.

The aforementioned agreements are governed by Indian Law.

5. Future cash flows in respect of the above matters are determinable only on receipt of judgements/ decisions pending at various forums/ authorities.

b. Commitments:

i. Capital Commitments:

Estimated amount of contracts remaining to be executed on capital account, not provided for amount to Rs. 154.75 crores (2013: Rs. 108.80 crores) (net of capital advances).

ii. Other Commitments:

1. As on 31 March 2014, the Company has issued Letters of Comfort for the credit facility agreements in respect of various subsidiaries:

2. The Company has issued a support letter to Tata Communications International Pte. Limited (TCIPL), aggregating Rs. 5,446.50 crores (2013: Rs. 2,547.22 crores) for providing financial support enabling, in turn, TCIPL to issue such support letters to certain subsidiaries with negative net worth as at 31 March 2014 in various geographies in order that they may continue as going concerns.

3. The Company has given loan commitments to other wholly owned subsidiaries aggregating Rs. 5,673.34 crores (2013: Rs. 2,784.70 crores) as at 31 March 2014.

8. United Telecom Limited ("UTL") is a joint venture between the Company, Mahanagar Telephone Nigam Limited, Telecommunications Consultant India Limited and Nepal Ventures Private Limited. The Company has 26.66 percent equity ownership in UTL. UTL operates basic telephony services in Nepal based on wireless-in-local loop technology.

9. Previous year figures have been regrouped/ rearranged wherever necessary to conform to the current year''s classifications. The results for the current year ended 31 March 2014 includes the effect of scheme of arrangement for transfer of Internet Data Center ("IDC") division (Colocation service division of TCL) to Tata Communication Data Centers Private Limited (refer note 4(iii)). In view of this, the results for the current year are not comparable with the corresponding previous financial year.


Mar 31, 2013

1. Corporate information:

TATA Communications Limited ("the Company") was incorporated on 19 March 1986. The Government of India vide its letter No. G-25015/6/86OC dated 27 March 1986, transferred all assets and liabilities of the Overseas Communications Service ("OCS") (part of the Department of Telecommunications, Ministry of Communications) as appearing in the Balance sheet as at 31 March 1986 to the Company with effect from 01 April 1986. During the year 2007-08, the Company changed its name from Videsh Sanchar Nigam Limited to Tata Communications Limited.

The Company offers international and national voice and data transmission services, selling and leasing of bandwidth on undersea cable systems, internet dial up and broadband services, and other value-added services comprising mainly- mobile global roaming and signaling services, transponder lease, data centers, telex and telegraph and television uplinking.

a. Authorized:

The authorized capital of the Company increased from Rs. 300.00 crores to Rs. 400.00 crores during financial year 2011-12 due to the Ministry of Corporate Affairs giving effect to the merger of 100% subsidiary VSNL Broadband Limited into the Company which was approved in December 2007 by the Company and the Bombay High Court in April 2009.

b. Issued, Subscribed and Paid up:

There was no movement in the issued, subscribed and paid up share capital of the Company during the current and past five financial years.

c. Terms/ rights attached to equity shares:

The Company has only one class of equity shares with a face value of Rs. 10 per share. Each shareholder of equity shares is entitled to one vote per share at any general meeting of shareholders. The Company declares and pays dividends in Indian rupees. The dividend proposed by the Board of Directors is subject to the approval of the shareholders in the ensuing Annual General Meeting. The holders of American Depositary Receipts ("ADRs") do not have voting rights.

Subsequent to the year end the company announced its intention to delist its American Depositary Shares ("ADSs"), as evidenced by ADRs, from the New York Stock Exchange ("NYSE") and to terminate its ADR program.

The Board of Directors have recommended a dividend of Rs. 3 (2012: Rs. 2) per share for the year ended 31 March 2013.

i. As part of its initiative to enhance the long-term efficiency of the business, during the year the Company undertook organisational changes to align to the Company''s current and prospective business requirements. These changes involved certain positions in the Company becoming redundant and the Company incurred a one time charge of Rs. 18.73 crores (2012: Rs. Nil) and a further a one time cost of Rs. 12.54 crores (2012: Rs. Nil) towards other related initiatives.

ii. During the year, the Company sold part of land and building at Chennai for a consideration of Rs. 192.30 crores (2012: Rs. Nil) resulting in a profit on sale of fixed assets of Rs. 189.62 crores (2012: Rs. Nil).

2. Employee Benefits

i. Defined Contribution Plan - Provident Fund:

The Company makes contributions towards a provident fund under a defined contribution retirement benefit plan for qualifying employees. The provident fund is administered by the Trustees of the Tata Communications Employees'' Provident Fund Trust and by the Regional Provident Fund Commissioner. Under this scheme, the Company is required to contribute a specified percentage of payroll cost to fund the benefits.

The rules of the Company''s Provident Fund administered by the Trust require that if the Board of Trustees are unable to pay interest at the rate declared for Employees'' Provident Fund by the Government under para 60 of the Employees'' Provident Fund Scheme, 1952 for the reason that the return on investment is less or for any other reason, then the deficiency shall be made good by the Company. Having regard to the assets of the Fund and the return on the investments, the Company does not expect any deficiency in the foreseeable future. There has also been no such deficiency since the inception of the Fund.

Provident fund contributions amounting to Rs. 20.68 crores (2012: Rs. 19.05 crores) have been charged to the Statement of Profit and Loss.

ii. Defined Benefit Plan Gratuity:

The Company makes annual contributions under the Employees Gratuity scheme to a fund administered by Trustees covering all eligible employees. The plan provides for lump sum payments to vested employees at retirement, death while in employment or on termination of employment of an amount equivalent to 15 days salary for each completed year of service or part thereof in excess of six months. Vesting occurs upon completion of five years of service.

Medical Benefit:

The Company reimburses domiciliary and hospitalization expenses not exceeding specified limits incurred by eligible and qualifying employees and their dependent family members under the Tata Communications Employee''s Medical Reimbursement Scheme.

Pension Plan:

The Company''s pension obligations relate to certain employees transferred to the Company from the Overseas Communications Service ("OCS") an erstwhile department of Ministry of Commerce, Government of India. The Company purchases life annuity policies from an insurance company to settle such pension obligations. During the year the Company has incurred a charge of Rs. 8.09 crores (2012: Rs. 14.24 crores) to meet the additional pension obligation on account of increase in Pension and Dearness Allowance.

The details in respect of the status of funding and the amounts recognized in the Company''s financial statements for the year ended 31 March 2013 for these defined benefit schemes are as under:

3. In January 2008, an amount of Rs. 290 crores was paid to the Department of Telecommunications (DoT) under protest, towards payment of license fees, interest and penalty demanded by DoT before issue of certain licenses to the Company. Against this, the Company carried a provision of Rs. 174.15 crores for license fees and interest thereon which has been set off against the payment of Rs. 290 crores for the presentation in the financial statements. The Company has filed a petition in the Supreme Court of India challenging the judgement of The Telecom Disputes Settlement Appellate Tribunal (TDSAT) relating to the computation of license fee.

Additionally, the Company has also filed a petition with TDSAT challenging the applicability of penal provisions under International Long Distance (ILD) and National Long Distance (NLD) license agreements, whereby DoT claimed penalty and interest on penalty amounting to Rs. 115.73 crores (included in aforesaid Rs. 290 crores). Consequently, the amount of Rs.115.73 crores was reflected as an asset in the books since 31 March 2009.

During the year 2009-10, TDSAT accepted the Company''s position and decided in favour of the Company. However, DoT has filed an appeal in the Supreme Court of India challenging the judgement of TDSAT relating to the waiver of penalty and interest on penalty. A claim of Rs. 115.73 crores alongwith interest was raised upon DoT in financial year 2009-10 based on this TDSAT order, which DoT has refused. The Company filed an appeal in TDSAT in financial year 2010-11 against DoT, which had been allowed in favour of the Company by TDSAT in financial year 2011-12. Pending implementation of this order by DoT, the Company had further filed execution petition in TDSAT in financial year 2011- 12. TDSAT, on 9 May 2012, decided the execution petition in favour of the Company and directed DoT to refund the Rs. 115.72 crores being penalty and interest on penalty, along with interest till date of payment. Accordingly DoT, on 7 June 2012 refunded an amount of Rs. 226.23 crores (2012: Rs. Nil) to the Company, including interest of Rs. 110.51 crores (2012: Rs. Nil) which is included in Other Income because the Company based on legal opinion and position in law is confident that its position will sustain in Supreme Court.

4. Segment Reporting

a. Business Segments

The Company''s reportable business segments are Global Voice Solutions (GVS) and Global Data and Managed Services (GDMS). The composition of the reportable segments is as follows:

Global Voice Solutions (GVS)

GVS includes international and national long distance voice services Global Data and Managed Services (GDMS)

GDMS includes corporate data transmission services, data centers, virtual private network signaling and roaming services, television and other network and managed services.

Pursuant to acquisitions of Tyco Global Network ("TGN") and Teleglobe ("TLGB"), the Company from 1 April 2006 adopted the Residual Profits Split Method ("RPSM") for recording transactions pertaining to International Telecommunications Services under its Transfer Pricing Policy. This policy governs the majority of the transactions between the Company and its international subsidiaries. The Company''s subsidiary in the Netherlands is designated as the Central Contracting Party ("CCP") and Transfer Pricing Administrator ("TPA").

All of the segment assets are located in India or in International territorial waters.

5. Contingent Liabilities and Commitments:

a. Contingent Liabilities: Rs. Lakhs

As at As at 31 March 2013 31 March 2012

i. Guarantees given on behalf of subsidiaries 11,836.69 9,304.20

ii. Claims for taxes on income (Refer 1)

- Income tax disputes where department is in appeal against the Company. 457.08 469.93

- Other disputes related to income tax 2,067.27 1,899.35

iii. Claims for other taxes 1.28 78.99

iv. Other claims (Refer 2) 691.83 425.89

v. Also Refer 4

1. Claims for taxes on income:

Significant claims by the revenue authorities in respect of income tax matters relate to disallowance of deductions claimed section 80 IA of the Income Tax Act, 1961 from Assessment years 1996-97 onwards and transfer pricing adjustments carried out by revenue authorities. The Company has contested the disallowances/ adjustments and has preferred appeals which are pending.

2. Other claims:

i. Telecom Regulatory Authority of India ("TRAI") reduced the Access Deficit Charge ("ADC") rates effective 1 April 2007. All telecom services providers including National Long Distance ("NLD") and International Long Distance ("ILD") operators in India are bound by the TRAI regulations; accordingly the Company has recorded the cost relating to ADC at revised rates as directed by TRAI. However, BSNL continued to bill at the ADC rate applicable prior to 1 April 2007. BSNL had filed an appeal against the TRAI Interconnect Usage Charges ("IUC") regulation of reduction in ADC and currently this matter is pending with the Supreme Court. The possible liability on Company is Rs. 311.84 crores (2012: Rs. 311.84 crores).

ii. On 19 February 2013, DoT issued license fee demand for financial year 2006-07 and 2007-08, based on special audit reports of auditors appointed by DoT. The total demand is for Rs. 193.05 crores, being Rs. 92.86 crores for financial year 2006-07 and Rs.100.19 crores for financial year 2007-08, including Rs. 102.06 crores, being interest as on 28 February 2013. The Company has challenged the said demand notice in the Madras High Court which has vide its orders dated 1 March 2013, granted a stay-order against the said demand. Further, the Company is also contesting a license fee claim of Rs. 101.24 crores (2012: Rs. 83.40 crores) (including interest and penalty) for financial year 2005-06. However, the said demand notice includes the items which are already the subject-matter of petitions/appeals, pending for hearing in the Supreme Court of India, for the previous years.

iii. Other claims of Rs. 85.70 crores (2012: Rs. 30.65 crores) mainly pertains to routine suits for collection, commercial disputes, claims from customers and/or suppliers and claims from Employee State Insurance Corporation (ESIC).

3. The Company has taken appropriate professional advice in respect of the claims / appeals and has taken all necessary steps to protect its interest. Based on expert opinion, no provision is required in respect of these claims / appeals.

4. During the year 2008-09, in terms of the agreements entered into between Tata Teleservices Ltd. ("TTSL"), Tata Sons Ltd. ("TSL") and NTT DoCoMo, Inc. of Japan (Strategic Partner - SP), TSL gave an option to the Company to sell 36,542,378 equity shares in TTSL to the SP, as part of a secondary sale of 253,163,941 equity shares effected along with a primary issue of 843,879,801 shares by TTSL to the SP.

If certain performance parameters and other conditions are not met by TTSL by 31 March 2014 and should the SP decide to divest its entire shareholding in TTSL, and TSL is unable to find a buyer for such shares, the Company is obligated to acquire the shareholding of the SP, at the higher of fair value or 50 percent of the subscription purchase price in proportion of the number of shares sold by the company to the aggregate of the secondary shares sold to the SP, subject to compliance with applicable exchange control regulations, or should the SP decide to divest its entire shareholding in TTSL and TSL is unable to find a buyer for such shares and the SP divests the shares at a lower price, subject to compliance with applicable exchange control regulations, the Company is obliged to pay a compensation representing the difference between such lower sale price and the price referred to above in proportion of the number of shares sold by the company to the aggregate of the secondary shares sold to the SP.

Under the above mentioned agreements with SP, TSL and TTSL have jointly and severally agreed to indemnify SP within the agreed limits against claims arising on account of any failure of certain warranties provided by TSL and TTSL to be true and correct in all respects (amount not determinable) and in respect of specified contingent liabilities (Company''s share Rs. 41.70 crores). The Company is liable to reimburse TSL, on a pro-rata basis.

5. Future cash flows in respect of above matters are determinable only on receipt of judgements/ decisions pending at various forums/ authorities.

6. United Telecom Limited ("UTL") is a joint venture between the Company, Mahanagar Telephone Nigam Limited, Telecommunications Consultant India Limited and Nepal Ventures Private Limited. The Company has 26.66 percent equity ownership in UTL. UTL operates basic telephony services in Nepal based on wireless-in-local loop technology.

7. Micro and Small Enterprises

According to information available with the management, on the basis of intimation received from suppliers regarding their status under the Micro, Small and Medium Enterprises Development Act, 2006 (MSMED Act), the Company has amounts due to Micro and Small Enterprises under the said Act as at 31 March 2013 as follows :

8. During the year, the Company has submitted to the Bombay and the National Stock Exchange the proposed "Scheme of Arrangement" under Section 391 to 394 of the Companies Act, 1956, between the Company and the S&A Internet Services Private Limited ("the subsidiary company"), for transfer of the Internet Data Center ("IDC") division (Colocation service division of the Company) on going concern basis to the subsidiary company. The Scheme is under review of the Bombay and the National Stock Exchanges. The appointed date of the proposed Scheme is 1 January 2012. The Scheme has been approved by the Board of Directors of the Company at its meeting held on 1 March 2013, and is subject to the approval of the shareholders and the Bombay High Court. The financial statements as on 31 March 2013 do not include any adjustments that may arise on implementation of the Scheme.

9. Previous year figures have been regrouped/ rearranged wherever necessary to conform to the current year''s classifications.


Mar 31, 2012

1. Corporate information:

TATA Communications Limited ("the Company") was incorporated on 19 March 1986. The Government of India vide its letter No. G-25015/6/86OC dated 27 March 1986, transferred all the assets and liabilities of the Overseas Communications Service (OCS) (part of the Department of Telecommunications, Ministry of Communications) as appearing in the Balance Sheet as at 31 March 1986 to the Company with effect from 01 April 1986. As per the letter No. G-25015/6/86-OC dated 23 October 2001 of Government of India, Department of Telecommunications, there was no requirement to register a formal transfer deed or deed of sale in the matter of such transfer of assets. During the year 2007-08, the Company changed its name to Tata Communications Limited and the fresh certificate of incorporation consequent upon the change of name was issued by the Registrar of Companies, Maharashtra on 28 January 2008.

a. Authorized:

The authorized capital of the Company increased from Rs 300.00 crores to Rs 400.00 crores during 2011-12 due to the Ministry of Corporate Affairs giving effect to the merger of 100% subsidiary VSNL Broadband Limited into the Company which was approved in December 2007 by the Company and the Bombay High Court in April 2009.

b. Issued, Subscribed and Paid up:

There was no movement in the Issued, Subscribed and Paid up share capital of the Company during the current and past five financial years.

c. Terms/ rights attached to equity shares:

The Company has only one class of equity shares with a face value of Rs 10 per share. Each shareholder of equity shares is entitled to one vote per share at any General Meeting of Shareholders. The Company declares and pays dividends in Indian rupees. The dividend proposed by the Board of Directors is subject to the approval of the shareholders in the ensuing Annual General Meeting

i. Capital Reserve includes Rs 205.22 crores in respect of foreign exchange gains on unutilized proceeds from Global Depository Receipts credited to Capital Reserve Rs 203.70 crores in 2000-01 and Rs 1.52 crores in 2001-02.

ii. Consequent to increasing the stake in Neotel Pty Ltd through VSNL SNOSPV Pte Ltd., effective 11th April 2011, the Company assessed the cash flow projection of Neotel operation and designated the loans given to SNOSPV as a part of net investment in non-integral foreign operation. Accordingly the Company has accounted for the effects of revaluation of loans in foreign exchange translation reserve as per AS - 11 on "Accounting for effects of changes in Foreign Exchange Rates'; An amount of Rs 22.59crores of foreign exchange gain (net of forward cover loss of Rs 100.80 crores on this loan) has been transferred to foreign exchange translation reserve.

iii. The Board of Directors of the Company at its meeting held on 31 January 2011 had approved the merger of the Company's wholly owned subsidiary, Tata Communications Internet Services Limited (TCISL) with the Company with effect from 1 April 2010. The Company had obtained the consent of the shareholders for the merger at the Extraordinary General Meeting held on 27 April 2011.

In accordance with the final order dated 20 August 2011 of the Bombay High Court, the financial statements were revised to reflect the merger of TCISL with the Company effective 01 April 2010.

In accordance with the said Scheme, the Company accounted for the amalgamation as one in the nature of a merger under the pooling-of-interest method. Consequently:

- All the assets, debts, liabilities and obligations of TCISL were vested in the Company with effect from 1 April 2010 and recorded at their respective book values.

- The net asset value of TCISL as on the date of amalgamation was Rs 15.28 crores as against the investment of the Company of Rs 384.47 crores. The excess of the cost of investment of Rs 369.19 crores was adjusted against the General Reserve to the extent of Rs 78.24 crores, Rs 0.56 crores against Capital Reserve and Rs 291.51 crores against the opening balance in Statement of Profit and Loss.

- Consequent to the merger there has been a reduction in the current tax expense of Rs 37.97 crores and increase in deferred tax benefit of Rs 39.65 crores in the year 2010-11.

i. Secured Debentures

During the year 2008-09, the Company issued Taxable Rated Secured Non-convertible Redeemable Debentures in demat form for cash at par on private placement basis aggregating Rs 1,250 crores, IDBI Trusteeship Services Limited has been appointed as trustee to the debenture issue.

- Nature of Security

Rs 1,000 crores, 11.70% debentures (face value of Rs 1,000,000 each) are secured by a first legal mortgage and charge on the Company's immovable property being the free hold land at Mouje Maharajpura, Gujarat and Plant and machinery.

Rs 250 crores, debentures (interest ranging from 11.00% to 11.25%, face value of Rs 1,000,000 each) are secured by a first legal mortgage and charge on the Company's free hold land at Perambur Barracks, Chennai and Plant and machinery.

For facilitating the above redemptions, the Company has created a Debenture Redemption Reserve of Rs 125.55 crores (2011: Rs 283.47 crores), an amount of Rs 242.08 crores (2011: Rs 244.70 crores) has been appropriated during the current year.

During the year 4000, 7.74% debenture aggregating Rs 400 crores were redeemed as per terms of issue and consequently debenture redemption reserve of Rs 400 crores created to facilitate the redemption of above debenture has been transferred to General reserve.

I. The Company has an investment of Rs 474.23 crores (2011: Rs 474.23 crores) in equity shares and Rs 139.32 crores (2011: Rs 139.32 crores) in preference shares of Tata Communications International Pte. Ltd ("TCIPL"), Rs 3.29 crores (2011: Rs 3.29 crores) in equity shares and Rs 118.71 crores (2011: Rs 118.71 crores) in preference shares of VSNL SNOSPV Pte. Ltd ("SNOSPV") wholly owned subsidiaries. In the opinion of the management, having regard to the nature of these subsidiaries' businesses and future business projections, there is no diminution, other than temporary in the value of investments despite significant accumulated losses.

i. As at 31 March 2012 the proportionate share of pension obligations and payments of Rs 61.15 crores (2011: Rs 61.15 crores) to the erstwhile Overseas Communications Service ("OCS") employees was recoverable from the Government of India ("the Government"). Pursuant to discussions with the Government, the Company had made a provision of Rs 53.71 crores (2011: Rs 53.71 crores) resulting in a net amount due from the Government towards its share of pension obligations of Rs 7.44 crores (2011: Rs 7.44 crores).

i. Interest receivable includes interest due from subsidiaries of Rs 1.97crores (2011: Rs 10.70 crores) 22. Revenue from Operations for the current year includes Rs Nil (2011: Rs 25.60 crores) pertaining to previous years.

2. The Company had entered into an agreement with effect from 1 January 2007 with one of its customers for carriage of NLD traffic for a period of two years. In view of disputes between the parties, the agreement was truncated with effect from July 2008. The matter was referred to conciliation in the earlier period and an award in favour of the Company of Rs 29 crores was made leaving the modalities of settlement to the parties. During the previous year based on the settlement reached with the carrier, Rs 26.54 crores was recorded in Revenue from Operations of Rs 2.46 crores was recorded in Other Income.

3. Employee Benefits

i. Defined Contribution Plan - Provident Fund:

The Company makes contributions towards a provident fund under a defined contribution retirement benefit plan for qualifying employees. The provident fund is administered by the Trustees of the Tata Communications Employees' Provident Fund Trust and by the Regional Provident Fund Commissioner. Under this scheme, the Company is required to contribute a specified percentage of payroll cost to fund the benefits.

The Rules of the Company's Provident Fund administered by theTrust require that if the Board of Trustees are unable to pay interest at the rate declared for Employees' Provident Fund by the Government under para 60 of the Employees' Provident Fund Scheme, 1952 for the reason that the return on investment is less or for any other reason, then the deficiency shall be made good by the Company. Having regard to the assets of the Fund and the return on the investments, the Company does not expect any deficiency in the foreseeable future. There has also been no such deficiency since the inception of the Fund.

Provident fund contributions amounting to Rs 19.05 crores (2011: Rs17.85 crores) have been charged to the Statement of Profit and Loss.

ii. Defined Benefit Plan

Gratuity:

The Company makes annual contributions under the Employees Gratuity scheme to a fund administered by Trustees covering all eligible employees. The plan provides for lump sum payments to vested employees at retirement, death while in employment or on termination of employment of an amount equivalent to 15 days salary for each completed year of service or part thereof in excess of six months. Vesting occurs upon completion of five years of service.

Medical Benefit:

The Company reimburses domiciliary and hospitalization expenses not exceeding specified limits incurred by eligible and qualifying employees and their dependent family members under the Tata Communications Employee's Medical Reimbursement Scheme. The scheme provides for cashless hospitalization where the claims are directly settled by the Company.

Pension Plan:

The Company's pension obligations relate to certain employees transferred to the Company from the Overseas Communications Service ("OCS")an erstwhile department of Ministry of Commerce, Government of India. The Company purchases life annuity policies from an insurance company to settle such pension obligations. During the year the Company has incurred a charge of Rs 14.24 crores (2011: Rs 7.00 crores) to meet the additional pension obligation on account of increase in Dearness Allowance.

IX. Leave plan and Compensated absences

Eligible employees can carry forward and encash leave on death, permanent disablement and resignation subject to maximum accumulation of 300 days.

The liability for leave encashment and compensated absences as at the year end is Rs 60.02 crores (2011: Rs 40.78 crores).

The estimates of future compensation cost considered in the actuarial valuation take account of inflation, seniority, promotion and other relevant factors.

4. In January 2008, an amount of Rs 290 crores was paid to the Department of Telecommunications (DoT) under protest, towards payment of licence fees, interest and penalty demanded by DoT before issue of certain licences to the Company. Against this, the Company carried a provision of Rs 174.15 crores for licence fees and interest thereon which has been set off against the payment of Rs 290 crores for the presentation in the financial statements. The Company has filed a petition in the Honorable Supreme Court of India challenging the judgment of The Telecom Disputes Settlement Appellate Tribunal (TDSAT) relating to the computation of licence fee.

Additionally, the Company has also filed a petition with TDSAT challenging applicability of penal provisions under International Long Distance (ILD) and National Long Distance (NLD) licence agreements, whereby DoT claimed penalty and interest on penalty amounting to Rs 115.73 crores (included in aforesaid Rs 290 crores). Consequently, the amount of Rs115.73 crores was reflected as an asset in the books since 31 March 2009.

During the year 2009-10, TDSAT accepted the Company's position and decided in favour of the Company. However, DOT has filed an appeal in the Honorable Supreme Court of India challenging the judgment of TDSAT relating to the waiver of penalty and interest on penalty. A claim of Rs 115.73crores along with interest was raised upon DOT in financial year 2009-10 based on this TDSAT order, which DOT has refused. The Company filed an appeal in TDSAT in financial year 2010-11 against this order of DOT which had been allowed in favors of the Company by TDSAT in financial year 2011-12. Pending implementation of this order by DOT, the Company had further filed execution petition in TDSAT in financial year 2011- 12. TDSAT heard the matter and the ruling is awaited.

5. Segment Reporting

a. Business Segments

The Company's reportable business segments are Global Voice Solutions (GVS) and Global Data and Managed Services (GDMS). The composition of the reportable segments is as follows:

Global Voice Solutions (GVS)

GVS includes international and national long distance voice services

i. Revenues and interconnect charges are directly attributable to the segments. Space segment utilization charges, rent of landlines and other network and transmission costs are allocated based on utilization of satellite and landlines. License fee for GVS and GDMS have been allocated based on net revenues from these services. Segment result is segment revenues less segment expenses. Depreciation and certain other costs cannot be allocated to segments.

ii. Telecommunication services are provided utilizing the Company's assets which do not generally make a distinction between the types of services. As a result, fixed assets are used interchangeably between segments. Fixed assets and liabilities cannot be allocated to segments.

b. Geographical Segments

The secondary reportable segments are Geographical and revenues have been allocated to countries based on location of the customers as follows:

* Netherlands include amounts recorded as revenues from Tata Communication (Netherlands) BV of Rs418.78 crores (2011: Rs167.39 crores). Tata Communication (Netherlands) BV is a Central contracting party and a transfer pricing administrator for inter-company transactions between Tata Communications Limited and its international subsidiaries.

Pursuant to acquisitions of Tyco Global Network ("TGN") and Teleglobe ("TLGB"), the Company from 1 April 2006 adopted the Residual Profits Split Method ("RPSM") for recording transactions pertaining to International Telecommunications Services under its Transfer Pricing Policy. This policy governs the majority of the transactions between the Company and its international subsidiaries. The Company's subsidiary in the Netherlands is designated as the Central Contracting Party ("CCP") and Transfer Pricing Administrator ("TPA").

b. As lessor:

i. The Company has leased under operating lease arrangements certain Indefeasible Rights of Use ("IRU") with gross carrying amount and accumulated depreciation of Rs 87.02 crores (2011: Rs 84.33 crores) and Rs 39.90 crores (2011: Rs 33.30 crores) respectively as at 31 March 2012. Depreciation expense of Rs 6.60 crores (2011: Rs 5.50 crores) in respect of these assets has been charged in the Statement of Profit and Loss for the Year ended 31 March 2012.

In case of certain lease agreements aggregating Rs 457.45 crores (2011: Rs 380.85 crores) for the year ended 31 March 2012, the gross block, accumulated depreciation and depreciation expense of the assets given on IRU basis cannot be identified as these assets are not exclusively leased. The lease rentals associated with such IRU arrangements for the year ended 31 March 2012 amount to Rs 27.95 crores (2011: Rs 10.65 crores).

In respect of IRU arrangements, rental income of Rs 34.62 crores (2011: Rs 17.50 crores) has been recognized in the Statement of Profit and Loss for the year ended 31 March 2012.

a. The provision for Asset Retirement Obligation has been recorded in the books of the Company in respect of undersea cables and switches owned by the Company.

b. Others include amounts provided towards claims made by a creditor of the Company.

6. Contingent Liabilities and Commitments:

a. Contingent Liabilities:

(Rs.in crores) As at As at 31 March 2012 31 March 2011

i. Guarantees given on behalf of subsidiaries (Refer 1) 9,304.20 6,493.82 ii. Claims for taxes on income (Refer 2)

- Income tax disputes where depar tment is in appeal against the Company. 469.93 1,009.60

- Income tax disputes where the Company has a favorable decision in other assessment years for the same issue - 1.79

- Income tax disputes other than above 1,899.35 1,696.91

iii. Claims for other taxes 78.99 123.30

iv. Other claims 425.89 468.59

1. Guarantees given on behalf of subsidiaries:

The guarantees have been provided in the ordinary course of business and no liability on the Company is expected to materialize in this respect.

2. Significant claims by the revenue authorities in respect of income tax matters relate to deductions claimed under Section 80 IA of the Income Tax Act, 1961 from Assessment years 1996-97 onwards and disallowed by the revenue authorities. The Company has contested the disallowances and has preferred appeals which are pending.

3. The Company has taken appropriate professional advice in respect of the claims / appeals and has taken all necessary steps to protect its interest. Based on expert opinion, no provision is required in respect of these claims / appeals.

b. Commitments:

i. Capital Commitments:

Estimated amount of contracts remaining to be executed on capital account, not provided for and loan commitments to wholly owned subsidiaries amount toRs 4,395.78 crores (2011: Rs 2,772.94 crores).

ii. Other Commitments:

1. As on 31 March 2012, the Company has issued Letters of Comfort for the credit facility agreements in respect of various subsidiaries:

(Rs.in crores)

Name of the Subsidiary As at As at 31 March 2012 31 March 2011

Tata Communications Transformation Services Ltd (TCTSL) 30.55 26.76

Tata Communications International Pte. Ltd (TCIPL) 50.92 44.60

VSNL SNOSPV Ltd 9.97 -

Tata Communications (Netherland) Ltd 509.15 446.00

Tata Communications (Bermuda) Ltd 941.93 669.00

Tata Communications Banking InfraSo lutions Ltd (TCBIL) 152.00 52.00

The Company has undertaken to the lenders of TCTSL and TCIPL that it shall retain full management control so long as amounts are due to the lenders.

2. The Company has issued a support letter to Tata Communications International Pte Limited (TCIPL), aggregating Rs 1,866.75 crores (2011: Rs 1,245.71 crores) for providing financial support enabling, in turn, TCIPL to issue such support letters to certain subsidiaries with negative net worth as at 31 March 2012 in various geographies in order that they may continue as going concerns.

The letters of comfort / support mentioned in 1 and 2 above have been provided in the ordinary course of business and no liability on the Company is expected to materialize in these respects

3. During the year 2008-09, in terms of the agreements entered into between Tata Teleservices Ltd. ("TTSL"), Tata Sons Ltd. ("TSL") and NTT DOCOMO, Inc. of Japan (Strategic Partner - SP), TSL gave an option to the Company to sell 36,542,378 equity shares in TTSL to the SP, as part of a secondary sale of 253,163,941 equity shares effected along with a primary issue of 843,879,801 shares by TTSL to the SP.

If certain performance parameters and other conditions are not met, should the SP decide to divest its entire shareholding in TTSL, acquired under the primary issue and the secondary sale, and should TSL be unable to find a buyer for such shares, the Company is obligated to acquire the shareholding of the SP, at the higher of fair value or 50 percent of the subscription purchase price, in proportion of the number of shares sold by the company to the aggregate of the secondary shares sold to the SP, or if the SP divests the shares at a lower price pay a compensation representing the difference between such lower sale price and the price referred to above.

Further, in the event of breach of the representations and warranties (other than title and tax) and covenants not capable of specific performance, the Company is liable to reimburse TSL, on a pro rata basis, up to a maximum sum of Rs 548.50 crores. The exercise of the option by SP being dependent on several variables, the liability, if any, in this respect is remote and indeterminable.

i. Tata Communications International Pte Ltd which is a wholly owned subsidiary of the Company has investments in 35 subsidiaries as at 31 March 2012.

ii. VSNL SNOSPV Pte Ltd has made the following investments in equity and preference shares of its subsidiaries: 1,017,363,620 in Neotel Pty Ltd and 1,343,468,261 in SEPCO Communications Pty Ltd.

7. These financial statements have been prepared to comply with the Revised Schedule VI of the Companies Act, 1956 and the previous year figures have been regrouped/ rearranged as necessary to make them comparable with those of the current year.


Mar 31, 2011

1. The Company was incorporated on 19 March 1986. The Government of India vide its letter No. G-25015/6/86OC dated 27 March 1986, transferred all the assets and liabilities of the Overseas Communications Service (OCS) (part of the Department of Telecommunications, Ministry of Communications) as appearing in the Balance Sheet as at 31 March 1986 to the Company with effect from 01 April 1986. As per the letter no G-25015/6/86-OC dated 23 October 2001 of Government of India, Department of Telecommunications, there was no requirement to register a formal transfer deed or deed of sale in the matter of such transfer of assets. During the year 2007-08, the Company changed its name to Tata Communications Limited and the fresh certificate of incorporation consequent upon the change of name was issued by the Registrar of Companies, Maharashtra on 28 January 2008.

2. Capital reserve includes Rs. 205.22 crores in respect of foreign exchange gains on unutilized proceeds from Global Depository Receipts credited to Capital Reserve Rs. 203.70 crores in 2000-01 and Rs. 1.52 crores in 2001-02.

3. The Board of Directors have recommended a dividend of Rs. 2 (2010: Rs. Nil) per share for the year ended 31 March 2011.

4. The Company has an investment of Rs. 474.23 crores (2010: Rs. 474.23 crores) in equity shares and Rs. 139.32 crores (2010: Rs. 139.32 crores) in preference shares of Tata Communications International Pte. Ltd ("TCIPL"), Rs. 3.29 crores (2010: Rs. 3.29 crores) in equity shares and Rs. 118.71 crores (2010: Rs. 118.71 crores) in preference shares of VSNL SNOSPV Pte. Ltd ("SNOSPV") wholly owned subsidiaries. In the opinion of the management, having regard to the nature of these subsidiaries' businesses and future business projections, there is no diminution, other than temporary in the value of investments despite the significant accumulated losses.

5. As at 31 March 2011 the proportionate share of pension obligations and payments of Rs. 61.15 crores (2010: Rs. 61.15 crores) to the erstwhile Overseas Communications Service ("OCS") employees were recoverable from the Government of India ("the Government"). Pursuant to discussions with the Government, the Company had made a provision of Rs. 53.71 crores (2010: Rs. 53.71 crores) thereby having a net amount due from the Government towards its share of pension obligations of Rs. 7.44 crores (2010: Rs. 7.44 crores).

6. Pursuant to acquisitions of Tyco Global Network ("TGN") and Teleglobe ("TLGB"), the Company from 1 April 2006 adopted the Residual Profits Split Method ("RPSM") for recording transactions pertaining to International Telecommunications Services under its Transfer Pricing Policy. This policy governs the majority of the transactions between the Company and its international subsidiaries. The Company's subsidiary in the Netherlands is designated as the Central Contracting Party ("CCP") and Transfer Pricing Administrator ("TPA").

7. During the previous year, the Company received a favourable order from Income tax Appellate Tribunal (ITAT) pertaining to financial year 1993-94, which was further supported by a favourable legal advice. Consequently, the Company had written back the corresponding tax provision of Rs. 280.01 crores. Interest on the above of Rs. 215.56 crores was included in Rs. 218.28 crores of interest on Income tax refund reflected as exceptional item in Profit and loss account for the year ended 31 March 2010. Income tax department has appealed against this order in the Honourable High Court of Bombay which is yet to come up for admission.

8. The Company had entered into an agreement with effect from 1 January 2007 with one of its customers for carriage of NLD traffic for a period of two years. In view of disputes between the parties, the agreement was truncated with effect from July 2008. The matter was referred to Conciliation in the earlier period and an award of Rs. 29 crores was made leaving the modalities of settlement to the parties. During the current year based on the settlement reached with the carrier, Rs. 26.54 crores is recorded in Revenue from telecommunication and other services and interest of Rs. 2.46 crores is recorded in Other income.

9. The Board of Directors of the Company at its meeting held on 31 January 2011 had approved the merger of the Company's wholly owned subsidiary, Tata Communications Internet Services Limited (TCISL) with the Company with effect from 1 April 2010. The Company had obtained the consent of the shareholders for the merger at Extra Ordinary General Meeting held on 27 April 2011.

In accordance to the final order dated 20 August 2011 as pronounced by the Bombay High Court the financials have been revised to reflect the merger of TCISL with the Company effective 01 April 2010.

In accordance to the said Scheme, the Company has accounted for this amalgamation in the nature of merger under the pooling-of-interest method. Consequently:

i. All the assets, debts, liabilities and obligations of TCISL have been vested in the Company with effect from 1 April 2010 and have been recorded at their respective book values.

ii. The net asset value of TCISL as on the date of amalgamation was Rs. 15.28 crores as against the investment of the Company of Rs. 384.47 crores. The excess of the cost of investment of Rs. 369.19 crores is adjusted against the general reserve to the extent of Rs. 78.24 crores, Rs. 0.56 crores against capital reserve and Rs. 291.51 crores against the opening profit and loss account.

iii. Consequent to the merger there has been a reduction in the current tax expense of Rs. 37.97 crores and increase in deferred tax benefit of Rs. 39.65 crores.

10. In January 2008, an amount of Rs. 295 crores was paid to the Department of Telecommunications (DoT) under protest, towards payment of licence fees, interest and penalty demanded by DoT before issue of certain licences to the Company. Against this, the Company carried a provision of Rs. 174.15 crores for licence fees and interest thereon which has been set off against the payment of Rs. 295 crores for the presentation in the financial statements. The Company has filed a petition in the Honourable Supreme Court of India challenging the judgement of The Telecom Disputes Settlement Appellate Tribunal (TDSAT) relating to the computation of licence fee.

Additionally, the Company has also filed a petition with TDSAT challenging applicability of penal provisions under International Long Distance (ILD) and National Long Distance (NLD) licence agreements, whereby DoT claimed penalty and interest on penalty amounting to Rs. 115.73 crores (included in aforesaid Rs. 295 crores). Consequently, the amount of Rs.115.73 crores together with the excess licence fee paid of Rs. 5.12 crores (Payment of Rs. 295 crores as reduced by Rs. 289.88 crores computed by the Company for licence fees, interest thereon and penalty) totalling Rs. 120.85 crores was reflected as an asset in the books as at 31 March 2009.

During the previous year, TDSAT accepted the Company's position and decided in favour of the Company. However, DoT has filed an appeal in the Honourable Supreme Court of India challenging the judgement of TDSAT relating to the waiver of penalty and interest on penalty. Further, DoT completed the assessment for year ended 31 March 2006 in the previous fiscal year and adjusted the aforesaid excess licence fee of Rs. 5.12 crores; as a result, the balance amount of Rs. 115.73 crores (2010: Rs. 115.73 crores) is reflected as an asset in the books as at 31 March 2011.

11. Revenue from Telecommunication and other Services for the current year includes Rs. 25.60 crores (2010: Rs. Nil) pertaining to previous years.

12. Debentures

i. Secured Debentures

During the year 2008-09, the Company issued Rated Taxable Secured Redeemable Non-convertible Debentures in demat form for cash at par on private placement basis aggregating Rs. 1,250 crores, IDBI Trusteeship Services Limited has been appointed as trustee to the debenture issue.

a. Nature of Security

Rs. 1,000 crores, 11.70% debentures (face value of Rs. 1,000,000 each) are secured by a first legal mortgage and charge on the Company's immovable property being the free hold land at Mouje Maharajpura, Gujarat and Plant and machinery represented by earth stations, network equipments, Land and sea cables, transmission equipments and other telecom equipments.

Rs. 250 crores, debentures (interest ranging from 11.00% to 11.25%, face value of Rs. 1,000,000 each) are secured by a first legal mortgage and charge on the Company's immovable property being the free hold land at Parambur Barracks, Chennai and Plant and machinery represented by land cable network and equipments.

ii. Unsecured Debentures

During the last year, the Company issued Rated, Unsecured, Taxable, Redeemable Non-convertible Debentures of face value Rs. 1,000,000 each, in demat form for cash at par on private placement basis aggregating Rs. 700 crores.

13. Employee benefits:

Retirement Benefits

i. Defined Contribution Plan

Provident Fund:

The Company makes contribution towards provident fund under a defined contribution retirement benefit plan for qualifying employees. The provident fund is administered by the Trustees of the Tata Communications Employees' Provident Fund Trust and by Regional Provident Fund Commissioner. Under this scheme, the Company is required to contribute a specified percentage of payroll cost to fund the benefits.

The Rules of the Company's Provident Fund administered by a Trust require that if the Board of Trustees are unable to pay interest at the rate declared for Employees' Provident Fund by the Government under para 60 of the Employees' Provident Fund Scheme, 1952 for the reason that the return on investment is less or for any other reason, then the deficiency shall be made good by the Company. Having regard to the assets of the Fund and the return on the investments, the Company does not expect any deficiency in the foreseeable future. There has also been no such deficiency since the inception of the Fund.

Provident fund contributions amounting to Rs. 17.85 crores (2010: Rs. 13.45 crores) have been charged to the profit and loss account.

ii. Defined Benefit Plan

Gratuity:

The Company makes annual contributions under the Employees Gratuity scheme to a fund administered by Trustees covering all eligible employees. The plan provides for lump sum payments to vested employees at retirement, death while in employment or on termination of employment of an amount equivalent to 15 days salary for each completed year of service or part thereof in excess of six months. Vesting occurs upon completion of five years of service.

Medical Benefit:

The Company reimburses domiciliary and hospitalization expenses not exceeding specified limits incurred by eligible and qualifying employees and their dependent family members under the Tata Communications Employee's Medical Reimbursement Scheme. The scheme provides for cashless hospitalization where the claims are directly settled by the Company.

Pension Plan:

The Company's pension obligations relate to certain employees transferred to the Company from the Overseas Communications Service ("OCS"). The Company purchases life annuity policies from an insurance company to settle such pension obligations. During the year the Company has incurred a charge of Rs. 7.00 crores (2010: Rs. 7.77 crores) to meet the additional pension obligation on account of increase in Dearness Allowances.

19. Segment reporting

i. Business Segments

Effective 1 April 2010, the Company's reportable business segments have been re-aligned into Global Voice Solutions, Global Data and Managed Services (GDMS) and Others to reflect change in the Company's Business and Organization Structure. Accordingly, all network and managed services in the Company have been aligned to GDMS and Retail Business have been aligned to Others.

(I) Revenues and expenses, which are directly identifiable to the segments, have been attributed to the relevant segments. The allocable enterprise expenses have been allocated on reasonable basis to the relevant segments. Segment result is segment revenues less segment expenses. Certain costs including depreciation which are not allocable to segments have been classified as "Other Unallocable Expenses (net)".

(II) Telecommunication services are provided utilizing the Company's assets which do not generally make a distinction between the types of services. As a result, fixed assets are used interchangeably between segments. In the absence of a meaningful basis to allocate assets and liabilities between segments, no allocation has been made.

20. Related party transactions

i. Names of related parties and nature of relationship

Sr. Category of related parties Names

No

1 Investing Parties (Promoters) Panatone Finvest Limited

Tata Sons Limited

2 Subsidiaries (Held Directly) Tata Communications Internet Services Limited

(Refer note B-9 Schedule 19)

Tata Communications Banking InfraSolutions Limited

Tata Communications Transformation Services Limited

Tata Communications International Pte. Ltd.

VSNL SNOSPV Pte Ltd

S&A Internet Services Private Limited

Tata Communications Lanka Limited

3 Subsidiaries (Held Indirectly) Tata Communications (Australia) Pty Limited

Tata Communications (Belgium) SPRL

Tata Communications Services (Bermuda) Limited

Tata Communications (Bermuda) Limited

Tata Communications (Canada) ULC

VSNL International (ITXC) Corp

Tata Communications (America) Inc.

Tata Communications Services (America) Inc. (Upto 31 March 2011)

Tata Communications (Middle East) FZ-LLC

Tata Communications (UK) Limited

Tata Communications (France) SAS

Tata Communications Deutschland GmbH

Tata Communications (Guam) LLC

Tata Communications (Hong Kong) Limited

Tata Communications (Hungary) LLC

Tata Communications (Ireland) Limited

TCPoP Communication GmbH

Tata Communications (Taiwan) Limited

Tata Communications (Italy) S.r.l

Tata Communications (Japan) KK

ITXC IP Holdings S.a r.l

Tata Communications (Nordic) AS

Tata Communications (Poland) Sp. z oo

Tata Communications (Portugal) Unipessoal LDA

Tata Communications (Portugal) Instalacao E Manutencao De Redes LDA

No

Tata Communications (Puerto Rico) Inc

Tata Communications (Russia) LLC

Tata Communications Services (International) Pte. Ltd.

Videsh Sanchar Nigam Spain Srl

Tata Communications (Sweden) AB

Tata Communications (Switzerland) GmbH

Tata Communications (Netherlands) B.V.

BitGravity Inc. (Held through Tata Communications International Pte. Ltd.) (Subsidiary w.e.f 16 February 2011)

4 Joint Venture United Telecom Limited

Cochin Submarine Cable Depot (INDIA) Private Limited (Under liquidation)

5 Joint Venture / Associate of wholly owned subsidiary

Neotel (Pty) Ltd. (Held through VSNL SNOSPV Pte Ltd.)

SEPCO Communications Pty Ltd. (Held through VSNL SNOSPV Pte Ltd.)

6 Key Managerial Personnel

Mr. N. Srinath Managing Director and Chief Executive Officer TCL Group

(till 31 January 2011)

Mr Vinod Kumar Managing Director and Group CEO

(w.e.f 1 February 2011)

ii. As lessor:

a. The Company has leased under operating lease arrangements certain Indefeasible Rights of Use ("IRU") with gross carrying amount and accumulated depreciation of Rs. 84.33 crores (2010: Rs. 84.33 crores) and Rs. 33.30 crores (2010: Rs. 27.80 crores) respectively as at 31 March 2011. Depreciation expense of Rs. 5.50 crores (2010: Rs. 5.50 crores) in respect of these assets has been charged in the Profit and Loss Account for the year ended 31 March 2011.

In case of certain lease agreements aggregating Rs. 380.85 crores (2010: Rs. 331.85 crores) for the year ended 31 March 2011, the gross block, accumulated depreciation and depreciation expense of the assets given on IRU basis is not readily determinable and hence not disclosed. The lease rentals associated with such IRU arrangements for the year ended 31 March 2011 amount to Rs. 10.65 crores (2010: Rs. 27.74 crores).

In respect of such leases, rental income of Rs. 17.50 crores (2010: Rs. 34.59 crores) has been recognized in the profit and loss account for the year ended 31 March 2011.

23. Contingent Liabilities and Capital Commitments:

I. Contingent Liabilities:

(Rs. in crores)

As at As at

31 March 2011 31 March 2010

i. Guarantees given on behalf of subsidiaries (Refer Note 1) 6,493.82 5,512.76

ii. Claims for taxes on income (Refer Note 2)

a. Income tax disputes where department is in appeal against the Company. 1,009.60 322.00

b. Income tax disputes where the Company has a favourable decision in other assessment years for the same issue 1.79 22.39

c. Income tax disputes other than above 1,696.91 1,448.89

iii. Claims for other taxes 123.30 118.08

iv. Other claims 468.59 495.08

Notes:

1. Guarantees given on behalf of subsidiaries:

The guarantees have been provided in the ordinary course of business and no liability on the Company is expected to materialize in this respect.

2. Significant claims by the revenue authorities in respect of income tax matters relate to deductions claimed under Section 80 IA of the Income Tax Act, 1961 from Assessment years 1996-97 onwards and disallowed by the revenue authorities. The Company has contested the disallowances and has preferred appeals which are pending.

3. The Company has taken appropriate professional advice in respect of the claims / appeals and has taken all necessary steps to protect its interest. Based on expert opinion, no provision is required in respect of these claims / appeals.

5. The Company has issued a support letter to Tata Communications International Pte Limited (TCIPL), regarding providing financial support enabling, in turn, TCIPL to issue such support letters to certain subsidiaries having negative net worth as at 31 March 2011 aggregating Rs. 1,245.71 crores (2010: Rs. 1,508.41 crores) in various geographies in order that they may continue to be accounted for as going concern.

The letters of comfort / support mentioned in 4 and 5 above have been provided in the ordinary course of business and no liability on the Company is expected to materialize in these respects

6. During the year 2008-09, in terms of the agreements entered into between Tata Teleservices Ltd. ("TTSL"), Tata Sons Ltd. ("TSL") and NTT DoCoMo, Inc. of Japan (Strategic Partner - SP), TSL gave an option to the Company to sell 36,542,378 equity shares in TTSL to the S P, as part of a secondary sale of 253,163,941 equity shares effected along with a primary issue of 843,879,801 shares by TTSL to the SP.

If certain performance parameters and other conditions are not met, should the SP decide to divest its entire shareholding in TTSL, acquired under the primary issue and the secondary sale, and should TSL be unable to find a buyer for such shares, the Company is obligated to acquire the shareholding of the S P, at the higher of fair value or 50 percent of the subscription purchase price, in proportion of the number of shares sold by the company to the aggregate of the secondary shares sold to the S P, or if the SP divests the shares at a lower price pay a compensation representing the difference between such lower sale price and the price referred to above.

Further, in the event of breach of the representations and warranties (other than title and tax) and covenants not capable of specific performance, the Company is liable to reimburse TSL, on a pro rata basis, up to a maximum sum of Rs. 548.50 crores. The exercise of the option by SP being dependent on several variables, the liability, if any, in this respect is remote and indeterminable.

II. Capital Commitments:

Estimated amount of contracts remaining to be executed on capital account, not provided for and loan commitment to wholly owned subsidiaries for Rs. 2,772.94 crores (2010: Rs. 2,489.86 crores).

26. United Telecom Limited ("UTL") is a Joint Venture between the Company, Mahanagar Telephone Nigam Limited, Telecommunications Consultant India Limited and Nepal Ventures Private Limited. The Company has 26.66 percent equity ownership in UTL. UTL operates basic telephony services in Nepal based on Wireless-in-local loop technology.

29. Disclosure as required under clause 32 of Listing Agreement

Amounts of loans and advances in the nature of loans outstanding from subsidiaries during the year ended 31 March 2011

31. Previous year figures have been regrouped / reclassified wherever necessary to conform to the current year's classifications. The results for the current year ended 31 March 2011 include the operations of Tata Communications Internet Service Limited. In view of this, the results for the current year are not comparable with the corresponding period of the previous financial year.

 
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