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Auditor Report of Reliance Communications Ltd.

Mar 31, 2023

Reliance Communications Limited

Report on the Audit of the Standalone Financial Statements

Corporate Insolvency Proceedings as per Insolvency and Bankruptcy Code, 2016 (IBC)

The Hon''ble National Company Law Tribunal, Mumbai Bench ("NCLT") admitted an insolvency and bankruptcy petition filed by an operational creditor against Reliance Communications Limited ("the Company") and appointed Resolution Professional (RP) who has been vested with management of affairs and powers of the Board of Directors with direction to initiate appropriate action contemplated with extant provisions of the Insolvency and Bankruptcy Code, 2016 and other related rules.

Qualified Opinion

We have audited the standalone financial statements of Reliance Communications Limited ("the Company"), which comprise the balance sheet as at March 31, 2023, and the statement of Profit and Loss, and the statement of changes in equity and the statement of cash flows for the year then ended, and notes to the financial statements, including a summary of significant accounting policies and other explanatory information ("the standalone financial statements").

In our opinion and to the best of our information and according to the explanations given to us, except for the possible effects of the matter described in the Basis for Qualified Opinion section of our report, the aforesaid standalone financial statements give a true and fair view in conformity with the Indian Accounting Standards prescribed under section 133 of the Companies Act 2013 ("the Act") read with the Companies (Indian Accounting Standards) Rules, 2015, as amended, ("Ind AS") and other accounting principles generally accepted in India, of the state of affairs of the Company as at March 31, 2023, its changes in equity, and its loss (including other comprehensive loss) and its cash flows for the year ended on that date.

Basis for Qualified Opinion

a) We draw attention to Note no. 2.14, 2.31 and 2.39(d) of the standalone financial statements regarding, "Assets Held for Sale (AHS)" regarding Wireless Spectrum, Towers, Fibre and Media Convergence Nodes (MCNs) along with liabilities continues to be classified as held for sale at the value ascertained at the end of March 31, 2018, for the reasons referred to in the aforesaid note and impact of the non payment of spectrum instalments due to Department of Telecommunication (DOT). Non determination of fair value of Asset Held for Sale as on the reporting date is not in compliance with Ind AS 105 "Non-Current Assets Held for Sale and Discontinued Operations". Accordingly, we are unable to comment on the consequential impact, if any, on the carrying amount of Assets Held for Sale and on the reported losses for the year ended March 31, 2023.

b) We draw attention to Note no. 2.31 and 2.48 of the standalone financial statements regarding admission of the Company and its two subsidiaries into Corporate Insolvency Resolution Process ("CIRP"), and pending determination of obligations and liabilities with regard to various claims submitted by the Operational/financial/other creditors and employees including interest payable on loans during CIRP We are unable to comment the accounting impact thereof pending reconciliation and determination of final obligation.

The Company accordingly, has not provided interest on borrowings amounting to '' 4,456 crore for the year ended March 31, 2023 and '' 19,581 crore up to previous financial year calculated based on the basic rate of interest as per the terms of the loan. The Company further has not provided net foreign exchange loss amounting to '' 1,286 crore for the year ended March 31, 2023 and net foreign exchange loss of '' 2,142 crore up to previous financial year. Had such interest and foreign exchange variation as mentioned above been provided, the reported loss for the year ended March 31, 2023 would have been higher by '' 5,742 crore and Net worth of the Company would have been lower by '' 27,465 crore and '' 21,723 crore as on March 31, 2023 and March 31, 2022 respectively. Non provision of interest and non-recognition of foreign exchange variation is not in compliance with Ind AS 23 "Borrowing Costs" and Ind AS 21 "The Effects of Changes in Foreign Exchange Rates".

c) We draw attention to Note no. 2.31 of the standalone financial statements, regarding pending comprehensive review of carrying amount of all assets (including investments, receivables and balances lying under Goods & Service Tax) & liabilities and non-provision for impairment of carrying value of the assets and write back of liabilities if any, pending completion of CIRP. In the absence of comprehensive review as mentioned above for the carrying value of all the assets and liabilities, we are unable to comment that whether any adjustment is required in the carrying amount of such assets and liabilities and consequential impact, if any, on the reported losses for the year ended March 31, 2023. Non determination of fair value of financial assets & liabilities and impairment in carrying amount for other assets and liabilities are not in compliance with Ind AS 109 "Financial Instruments", Ind AS 36 "Impairment of Assets" and Ind AS 37 "Provisions, Contingent Liabilities & Contingent Assets".

d) We draw attention to Note no. 2.53 of the standalone financial statements regarding non adoption of Ind AS 116 "Leases" effective from April 01,2019 and the consequent impact thereof. The aforesaid accounting treatment is not in accordance with the relevant Ind AS 116.

e) We draw attention to Note no 2.31 of the standalone financial statements, regarding continuous losses incurred by the Company, current liabilities exceeding its current assets, default in repayment of borrowings and default in payment of regulatory and statutory dues and pending application of renewal of telecom licenses. This situation indicates that a material uncertainty exists that may cast significant doubt on the Company''s ability to continue as a going concern. The accounts however have been prepared by the management on a going concern basis for the reason stated in the aforesaid note. We however are unable to obtain sufficient and appropriate audit evidence regarding management''s use of the going concern basis of accounting in the preparation of the standalone financial statements, in view of ongoing CIRP and matters pending before regulatory authorities, the outcome of which cannot be presently ascertained..

The Networth of the Company excludes the effect of qualification

under (a), (c), (d) and (e) above which are non-quantifiable as

referred therein.

We conducted our audit in accordance with the Standards on Auditing (SAs) specified under section 143(10) of the Act. Our responsibilities under those Standards are further described in the Auditor''s Responsibilities for the Audit of the standalone financial statements section of our report. We are independent of the Company in accordance with the Code of Ethics issued by the Institute of Chartered Accountants of India together with the ethical requirements that are relevant to our audit of the standalone financial statements under the provisions of the Act and the Rules thereunder, and we have fulfilled our other ethical responsibilities in accordance with these requirements and the Code of Ethics. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for qualified opinion.

Emphasis of Matter Paragraph

We draw attention to Note no. 2.39(b) of the standalone financial statements, regarding provision of license fee and spectrum usage charges based on management estimates pending special audit from Department of Telecommunications, pursuant to the judgment of Hon''ble Supreme Court of India, vide its order dated October 24, 201 9 and status of payment thereof which may undergo revision based on any development in the said matter.

Our opinion is not modified in respect of above matter.

Key Audit Matters

Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the standalone financial statements of the current period. These matters were addressed in the context of our audit of the standalone financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. In addition to the matters stated in our Basis for Qualified opinion paragraph we have determined the matters described below to be the key audit matters to be communicated in our report.

For each matter below, our description of how our audit addressed the matter is provided in that context.

We have fulfilled the responsibilities described in the Auditor''s responsibilities for the audit of the standalone financial statements section of our report, including in relation to these matters. Accordingly, our audit included the performance of procedures designed to respond to our assessment of the risks of material misstatement of the standalone financial statements. The results of our audit procedures, including the procedures performed to address the matters below, provide the basis for our audit opinion on the accompanying standalone financial statements.

Key Audit Matter

How our audit addressed the Key Audit Matter

1. Revenue Recognition

The accuracy and completeness of revenue amounts recorded is an inherent industry risk. The revenue is categorised broadly into service and wholesale revenue. Service revenue mainly consists of income from fixed line, broadband, rentals and installations. Wholesale revenue comprises revenue from interconnection, external administration, capacity sales and from resellers.

We considered revenue recognition as a key audit matter as the amount involved is material to the financial statements and due to the complexity of the systems and processes used to record revenue. The accounting policy and relevant disclosures relating to revenue are set out in notes 1.12 and 2.24 respectively, to the standalone financial statements.

Our audit procedures included, amongst others, the following:

• Testing the end-to-end reconciliation from business support systems to billing and to the general ledger;

• Performing tests on the accuracy of customer bill generation process on a sample basis and testing of a sample of the credits and discounts applied to such customer bills;

• Performed substantive analytical procedures over the significant revenue streams;

• Involving verification of controls surrounding revenue invoicing;

• Assessed transactions taking place before and after year-end to ensure that revenue was recognised in the appropriate period;

• Performing specific procedures to test the accuracy and completeness of adjustments, and performing procedures to ensure that the revenue recognition criteria adopted by the Company is in line with the company''s accounting policies.

Key Audit Matter

How our audit addressed the Key Audit Matter

2. Valuation and disclosure of accrual estimates for legal c deposits against the same legal matters including provisi judgment of Hon''ble Supreme Court of India, vide its ord

The Company is involved as a party in legal proceedings, including regulatory and other governmental proceedings. The Company has also deposited substantial amounts with regulatory authorities against the demands in dispute, which has been classified as deposit.

This area is significant to our audit, since the accounting and disclosure for (contingent) legal liabilities is complex and judgmental (due to the difficulty in predicting the outcome of the matter and estimating the potential impact if the outcome is unfavourable), and the amounts Involved are, or can be, material to the financial statements as a whole. Further reference is made to Note no. 2.36 Contingent liabilities and note no. 2.39(b) on provision of Licence fees and Spectrum Usage Charges.

laims, litigations, regulatory matters and contingencies and n of license fee and spectrum usage charges, pursuant to the er dated October 24, 2019

Our audit procedures included, amongst others, testing the effectiveness of the Company''s internal controls around the identification and evaluation of claims/provisions, proceedings and investigations at different levels in the Company, and the recording and continuous re-assessment of the related (contingent) liabilities and provisions and disclosures. We inquired with both internal legal staff including Resolution Professional (RP) as well as with the Company''s financial staff in respect of ongoing investigations or claims, proceedings and investigations, inspected relevant correspondence, inspected the minutes of the meetings of the Audit Committee and requested a confirmation from the group''s in-house responsible officials and RP. Also the Company has obtained legal opinions in past against these disputes. For claims settled during the year, we vouched the payments, as appropriate, and read the related orders to verify whether the settlements were properly accounted for.

We also assessed the adequacy of the Company''s disclosure around legal claims, litigations, regulatory matters and contingencies as included in Note no. 2.36, Contingent liabilities.

We consider management''s conclusion on the predicted outcome and estimation of potential impact reasonable and we assessed that the disclosures in Note no. 2.36, Contingent liabilities are reasonable.


Information Other than the Standalone Financial Statements and Auditor''s Report Thereon

The Company''s Board of Directors is responsible for the preparation of the other information. The other information comprises the information included in the Board''s Report including Annexures to Board''s Report but does not include the standalone financial statements and our auditor''s report thereon. Our opinion on the standalone financial statements do not cover the other information and we do not express any form of assurance conclusion thereon.

In connection with our audit of the standalone financial statements, our responsibility is to read the other information identified above and, in doing so, consider whether the other information is materially inconsistent with the standalone financial statements or our knowledge obtained during the course of our audit or otherwise appears to be materially misstated. When we read the report containing other information, if we conclude that there is a material misstatement therein, we are required to communicate the matter to those charged with governance.

Responsibility of Management and Those Charged with Governance for the Standalone Financial Statements

The standalone financial statements, which is the responsibility of the Company''s Management is relied upon by the Resolution Professional based on the assistance provided by the Directors and taken on record by the Resolution Professional as fully described in Note no. 2.57 of standalone financial statements. The Company''s Management is responsible for the matters stated in section 134(5) of 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 (changes in equity) 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.

This responsibility also includes maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding of 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 statement that give a true and fair view and are free from material misstatement, whether due to fraud or error.

In preparing the standalone financial statements, Directors / Resolution Professional (RP) is responsible for assessing the Company''s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless Director /RP either intends to liquidate the Company or to cease operations, or has no realistic alternative but to do so.

The Director /RP are also responsible for overseeing the Company''s financial reporting process.

Auditor''s Responsibilities for the Audit of the Standalone Financial Statements

Our objectives are to obtain reasonable assurance about whether the standalone financial statements as a whole are free from

material misstatement, whether due to fraud or error, and to issue an auditor''s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with SAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these standalone financial statements.

As part of an audit in accordance with SAs, we exercise professional judgment and maintain professional scepticism throughout the audit. We also:

• Identify and assess the risks of material misstatement of the standalone financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.

• Obtain an understanding of internal financial controls relevant to the audit in order to design audit procedures that are appropriate in the circumstances. Under section 143(3)(i) of the Act, we are also responsible for expressing our opinion on whether the company has adequate internal financial controls system in place and the operating effectiveness of such controls.

• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.

• Conclude on the appropriateness of management''s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Company''s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor''s report to the related disclosures in the standalone financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor''s report. However, future events or conditions may cause the Company to cease to continue as a going concern.

• Evaluate the overall presentation, structure and content of the standalone financial statements, including the disclosures, and whether the standalone financial statements represent the underlying transactions and events in a manner that achieves fair presentation.

We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.

We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.

From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the standalone financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor''s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.

Other Matter

(a) Pursuant to applications filed by Ericsson India Pvt. Ltd. before the National Company Law Tribunal, Mumbai Bench ("NCLT") in terms of Section 9 of the Insolvency and Bankruptcy Code, 2016 read with the rules and regulations framed thereunder ("Code"), the NCLT had admitted the applications and ordered the commencement of corporate insolvency resolution process ("CIRP") of Reliance Communications Limited ("the Company") and two of its subsidiaries namely Reliance Infratel Limited (RITL, ceased w.e.f December 22, 2022) and Reliance Telecom Limited (RTL) (collectively, the "Corporate Debtors") vide its orders dated May 15, 2018. The committee of creditors ("CoC") of the Corporate Debtors, at the meetings of the CoC held on May 30, 2019, in terms of Section 22 (2) of the Code, resolved with the requisite voting share, to replace the Interim Resolution Professionals with the Resolution Professional ("RP") for the Corporate Debtors, which has been confirmed by the NCLT in its orders dated June 21, 2019 (published on the website of the NCLT on June 28, 2019).

(b) During an earlier year, Reliance Communication Infrastructure Limited (RCIL) a wholly owned subsidiary of the Company, had been admitted by NCLT for resolution process under the Code and Mr. Anish Nanavaty was appointed as the Resolution Professional by the NCLT.

(c) Further, during the earlier year Reliance Tech Services Limited (RTSL) a wholly owned subsidiary of the Company, has been admitted by NCLT on August 4, 2020 for resolution process under the Code and Mr. Anjan Bhattacharya has been appointed as the Resolution Professional by the NCLT. During the year, NCLT vide order dated March 03, 2023 ordered the liquidation of the RTSL and appointed Mr. Ashok Mittal as Liquidator.

(d) The standalone financial statements of the Company shall be signed by the Chairperson or Managing Director or Whole Time Director or in absence of all of them, it should be signed by any Director of the Company who is duly authorized by the Board of Directors to sign the standalone

financial statements. As mentioned in Note No 2.57 of the standalone financial statements, in view of the ongoing Corporate Insolvency Resolution Process, the powers of the board of directors stand suspended and are exercised by the Resolution Professional.

Report on Other Legal and Regulatory Requirements

1. As required by the Companies (Auditor''s Report) Order, 2020 ("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" a statement on the matters specified in paragraphs 3 and 4 of the Order, to the extent applicable.

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

(a) Except for the matters stated in Basis for Qualified Opinion paragraph above, 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) Except for the possible effects of the matters described in the Basis of Qualified opinion paragraph above, 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, the Statement of Cash Flows and Statement of Changes in Equity 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 Indian Accounting Standards (Ind AS) specified under Section 133 of the Act, read with Rule 7 of the Companies (Indian Accounting Standards) Rules, 2015 as amended, except requirement of Ind AS 105 "Non-Current Assets Held for Sale and Discontinued Operations", Ind AS 23 "Borrowing Cost" , Ind AS 21 "Effects of Changes in foreign exchanges", Ind AS 36 "Impairment of Assets", Ind AS 37 "Provisions, Contingent Liabilities and Contingent Assets", Ind AS 109 "Financial Instruments" and Ind AS 116 "Leases" with regard to matters described in the Basis of Qualified Opinion paragraph above.

(e) The matters described under the basis for qualified opinion paragraph above and Qualified Opinion paragraph of "Annexure B" to this report in our opinion, may have an adverse effect on functioning of the Company and on the amounts disclosed in standalone financial statements of the Company;

(f) On the basis of the written representations received from two directors of the Company as on March 31, 2023 taken on record by the Board of Directors and based on legal opinion obtained by the Company with regard to non-payment of debenture holder''s due, these two directors are not disqualified as on March 31, 2023 from being appointed as a director in terms of Section 164 (2) of the Act. Further as mentioned in Note no. 2.52 of the standalone financial statements, other directors of the Company have resigned from the

position of director, however their resignation has not been accepted for the reason stated in the said note and Company has not received declarations from these directors in this regard, accordingly we are unable to comment whether these directors are disqualified as on March 31, 2023 from being appointed as a director in terms of Section 164(2) of the Act.

(g) The qualification relating to the maintenance of accounts and other matters connected therewith are as stated in the Basis for Qualified Opinion paragraph above.

(h) With respect to the adequacy of the internal financial controls with reference to standalone financial statements of the Company and the operating effectiveness of such controls, refer to our separate Report in "Annexure B".

(i) With respect to the other matters to be included in the Auditor''s Report in accordance with the requirements of section 197(16) of the Act, as amended:

In our opinion and to the best of our information and according to the explanation given to us, the managerial remuneration has been paid / provided in accordance with the requisite approval by shareholders as mandated by the provisions of section 197 read with schedule V of the Act.

The Ministry of Corporate Affairs has not prescribed other details under section 197(16) which are required to be commented upon by us.

(j) 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.

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

iii. There were no amounts which were required to be transferred to the Investor Education and Protection Fund by the Company.

iv. (a) The management has represented to us

that, to the best of its knowledge and belief no funds have been advanced or loaned or invested (either from borrowed funds or share premium or any other sources or kind of funds) by the Company to or in any other person or entity, including foreign entities ("Intermediaries"), with the understanding, whether recorded in writing or otherwise, that the Intermediary shall, whether, directly or indirectly lend or invest in other persons or entities identified in any manner whatsoever by or on behalf of the company ("Ultimate Beneficiaries") or provide any guarantee, security or the like on behalf of the Ultimate Beneficiaries;

(b) The management has represented to us that, to the best of its knowledge and belief no funds have been received by the Company from any person or entity, including foreign entities ("Funding Parties"), with the understanding, whether recorded in writing or otherwise, that the Company shall, whether, directly or indirectly, lend or invest in other persons or entities identified in any manner whatsoever by or on behalf of the Funding Party ("Ultimate Beneficiaries") or provide any guarantee, security or the like on behalf of the Ultimate Beneficiaries; and

(c) Based on our audit procedure that has been considered reasonable and appropriate in the circumstances, nothing has come to our notice that has caused us to believe that the representations under sub-clause (a) and (b) contain any material misstatement.

v. The Company has not declared or paid any dividend during the year.

vi. Pursuant to Rule 3 (1) of the Companies (Accounts) Rules, 2014 for maintaining books of account using accounting software which has a feature of recording audit trail (edit log) facility is applicable with effect from April 01, 2023 to the Company which are companies incorporated in India and accordingly, reporting under Rule 11(g) of Companies (Audit and Auditors) Rules, 2014 is not applicable for the financial year ended March 31, 2023.

For Pathak H. D. & Associates LLP

Chartered Accountants

Firm''s Registration No: 107783W/W100593

Jigar T. Shah

Partner

Membership No: 161851

UDIN: 23161851 BGSWYC6569

Date : May 27, 2023

Place: Mumbai


Mar 31, 2018

1. Report on the Standalone Ind AS Financial Statements

We have audited the accompanying standalone Ind AS financial statements of Reliance Communications Limited (‘the Company’), which comprise the Balance Sheet as at 31 March 2018, the Statement of Profit and Loss (including other comprehensive income), the Statement of Cash Flows and the Statement of changes in Equity for the year then ended and a summary of significant accounting policies and other explanatory information (hereinafter referred to as ‘standalone Ind AS financial statements’).

2. Management’s Responsibility for the Standalone Ind AS 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 Ind AS financial statements that give a true and fair view of the financial position, financial performance including other comprehensive income, cash flows and changes in equity of the Company in accordance with the accounting principles generally accepted in India, including the Indian Accounting Standards (Ind AS) specified under Section 133 of the Act read with relevant rules issued there under.

This responsibility also includes the 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 Ind AS financial statements that give a true and fair view and are free from material misstatement, whether due to fraud or error.

3. Auditor’s Responsibility

Our responsibility is to express an opinion on these standalone Ind AS 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 of the standalone Ind AS financial statements 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 standalone Ind AS financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and the disclosures in the standalone Ind AS financial statements. The procedures selected depend on the auditor’s judgement, including the assessment of the risks of material misstatement of the standalone Ind AS 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 standalone Ind AS 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 Ind AS 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 Ind AS financial statements.

4. Basis for Qualified Opinion

We draw attention to note 2.50 of the standalone Ind AS financial statements regarding non provision of interest on borrowings amounting to Rs.3,055 crore for the year ended 31 March 2018 for the reason provided by the management therein. Had such interest been provided then the reported loss for the year ended 31st March, 2018 would have been Rs.12,925 crore and networth of the Company would have been Rs.6,261 crore.

5. Qualified Opinion

In our opinion and to the best of our information and according to the explanations given to us, except for the matters described in Basis for Qualified Opinion paragraph above, the aforesaid standalone Ind AS 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 including the Ind AS, of the state of affairs (financial position) of the Company as at 31 March 2018 and it’s loss (financial performance including other comprehensive income), its cash flows and the changes in equity for the year ended on that date.

6. Emphasis of Matters

a. We draw your attention to Note 2.34.1 (vi) of the standalone Ind AS 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 and 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 ended the company has withdrawn Rs.280 crore (previous year Rs.1 205 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 Ind AS 8 ‘Accounting Policies, Changes in Accounting Estimates and Errors’. Our opinion is not qualified in respect of this matter

b. We further draw attention to Note 2.41 of the standalone Ind AS financial statements regarding the Scheme of Arrangements (‘the Scheme’) sanctioned by the Hon’ble High Court of Judicature at Mumbai and Gujarat. These schemes permit 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 and Reserve for Business Restructuring, which is considered to be an override to the relevant provisions of Ind AS 8. The Company has identified net foreign exchange gain of Rs.25 crore (previous year net foreign exchange Rs.8 crore), amortisation of Foreign Currency Monetary Items Translation Account (FCMITDA) Rs.252 crore (previous year Rs.238 crore), depreciation on exchange losses capitalised of Rs.221 crore (previous year Rs.433 crore) and impairment charge arising on account of asset held for sale and dimunition in the value of investments Rs.5,948 crore (previous year Rs. Nil crore), as in the opinion of the Board, such exchange variations are considered to be of an exceptional nature and accordingly, these expenses have been met by corresponding withdrawal from General Reserve and Reserve for Business Restructuring. 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 and Reserve for Business Restructuring, the Company would have reflected a loss after tax for the year of Rs.16,546 crore (previous year Rs.3,680 crore).

c. We draw attention to Note 2.50 of the Standalone Ind AS financial statement, regarding the Definitive Binding Agreement for monetization of assets of the company and its subsidiaries and National Company Law Appellate Tribunal (NCLAT) order dated 30 May 2018 staying NCLT order dated 15 May 2018 admitting the Company under Insolvency and Bankruptcy Code (IBC), 2016. The Company is confident that suitable resolution plan would be formulated by lenders in view of order admitting the Company under IBC proceedings is vacated/stayed, accordingly financial statements of the Company have been prepared on going concern basis.

Our opinion is not modified in respect of above matters.

7. Report on Other Legal and Regulatory Requirements

1. 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) except for the possible effects of the matters described in the Basis of Qualified opinion paragraph above, 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, the Statement of Cash Flows and Statement of Changes in Equity dealt with by this Report are in agreement with the books of account;

(d) in our opinion, the aforesaid standalone Ind AS financial statements comply with the Indian Accounting Standards prescribed under Section 133 of the Act read with relevant rules issued thereunder, except requirement of Ind AS 23 on Borrowing Cost with regard to matters described in the Basis of Qualified Opinion paragraph above and read with Emphasis of Matter paragraph above, regarding exercise of option available as per the Court Order which overrides the requirement of Ind AS 8;

(e) The going concern matter described in paragraph 6 (c) under Emphasis of Matter paragraph above, in our opinion, may have an adverse effect on the functioning of the Company;

(f) on the basis of the written representations received from the directors as on 31 March 2018 taken on record by the Board of Directors, none of the directors is disqualified as on 31 March 2018 from being appointed as a director in terms of subsection 2 of Section 164 of the Act;

(g) 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

(h) 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 Ind AS financial statements -Refer Note 2.37 to the standalone Ind AS 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 Ind AS financial statements for the year ended 31 March 2018, 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. 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 2.01 to the standalone Ind AS 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 land

Building

No of cases

18

4

Gross block as at 31 (Rs. in crores)

March 2018

3

4

Net block as at 31 (Rs. in crores)

March 2018

3

3

(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, income tax, service tax, goods and services tax, duty of customs, 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 delay in certain cases. As explained to us, the Company did not have any dues on account of duty of excise.

According to the information and explanations given to us, undisputed amounts payable in respect of provident fund, income tax, service tax, goods and services tax, duty of customs, sales tax, value added tax, entry tax, employees’ state insurance, cess and other material statutory dues which were in arrears as at 31 March 2018 for a period of more than six months from the date they became payable are as under:

Name of Statute

Nature of Dues

Amount (Rs. In Crore)

Period to which the amount relates

Due Date

Date of Payment

Goods and Service Tax Act, 2017

Goods and Service Tax Payable

78.59

Jul-17

20-Aug-17

Unpaid

Goods and Service Tax Act, 2017

Goods and Service Tax Payable

62.41

Aug-17

20-Sep-17

Unpaid

Maharastra Value Added Tax Act, 2002

Value Added Tax Payable

0.36

FY 2017-18

Various Dates

Unpaid

Delhi Value Added Tax Act, 2004

Value Added Tax Payable

0.04

FY 2017-18

Various Dates

Unpaid

Karnataka Value Added Tax Act, 2003

Value Added Tax Payable

0.05

FY 2017-18

Various Dates

Unpaid

Orissa Value Added Tax Act, 2004

Value Added Tax Payable

0.00

FY 2017-18

Various Dates

Unpaid

West Bengal Added Tax Act,

Value Added Tax

0.01

FY 2017-18

Various Dates

Unpaid

2003

Payable

Maharastra Value Added Tax Act,

Works Contract Tax

0.01

FY 2017-18

Various Dates

Unpaid

2002

Payable

Rajasthan Value Added Tax Act,

Works Contract Tax

0.03

FY 2017-18

Various Dates

Unpaid

2003

Payable

Income Tax Act, 1961

Tax Deducted at source

18.88

Jul-17

7-Aug-17

Unpaid

Income Tax Act, 1961

Tax Deducted at source

0.03

Aug-17

7-Sep-17

Unpaid

(b) According to the information and explanations given to us, there are no dues of cess which have not been deposited on account of any dispute. The dues of income tax, duty of customs, service tax, sales tax, value added tax and entry tax as disclosed below have not been deposited by the Company on account of disputes:

Name of Statue

Nature of Dues

Amount* (Rs. In Crore)

Period

Forum

Central Sales Tax, Bihar

Central Sales Tax

0.04

2005-06

Appellate Tribunal

0.43

2011-12

Asst. Commissioner of Commercial Taxes

Central Sales Tax, Chattisgarh

Central Sales Tax

0.00

2011-12

Dy. Commissioner (Appeals)

Central Sales Tax, Madhya Pradesh

Central Sales Tax

0.03

2011-12 to 2013-14

Dy. Commissioner (Appeals)

Central Sales Tax, Maharashtra

Central Sales Tax

0.27

2011-12

Dy. Commissioner of Sales Tax

0.35

2013-14

Dy. Commissioner of Sales Tax

Central Sales Tax, Orissa

Central Sales Tax

0.00

2009-10

Addl. Commisoner (Appeals)

0.02

Oct ‘06 to March ‘09

Sales Tax Appellate Tribunal

Central Sales Tax, Uttar Pradesh

Central Sales Tax

0.07

2006-07

High Court

0.08

2010-11

Additional Commissioner (Appeals)

0.50

2013-14

Dy. Commisioner of Commercial Taxes

1.25

2014-15

Dy. Commisioner of Commercial Taxes

Central Sales Tax, Uttarakhand

Central Sales Tax

0.12

2009-10 to

2010-11

Dy. Commissioner of Commercial Taxes

0.14

2012-13

Jt. Commisioner of Commercial Taxes (Appeals)

Central Sales Tax, West Bengal

Central Sales Tax

0.34

2007-08

Tax Revision Board

0.36

2014-15

Jt.Commisioner Commercial Taxes

Central Sales Tax, Punjab

Central Sales Tax

0.05

2010-11

Dy. Excise and Taxation Commissioner (Appeals)

Entry Tax, Bihar

Entry Tax

0.38

2007-08 to

2008-09

Commercial Tax Tribunal

0.25

2011-12

Asst. Commissioner of Commercial Taxes

Entry Tax, Chattisgarh

Entry Tax

0.63

2006-07 to

2007-08

Dy. Commissioner (Appeals)

0.25

2010-11 to

2011-12

Dy. Commissioner (Appeals)

Entry Tax, Himachal Pradesh

Entry Tax

1.01

2011-11 to 2013-14

High Court

Entry Tax, Madhya Pradesh

Entry Tax

0.48

2002-03 to

2003-04

Asst. Commissioner of Commercial Taxes

1.58

2005-06 to 2008-09 & 2010-11

MP Taxation Board

0.21

2011-12

Dy. Commissioner (Appeals)

Entry Tax, Orissa

Entry Tax

0.08

2009-10

Addl. Commisoner (Appeals)

0.05

Oct

06-March

09

Sales Tax Appellate Tribunal

Entry Tax, Uttar Pradesh

Entry Tax

0.13

2003-04

Commercial Tax Tribunal

0.02

2013-14

Dy. Commisioner of Commercial Taxes

0.02

2014-15

Dy. Commisioner of Commercial Taxes

Entry Tax, West Bengal

Entry Tax

0.17

2014-15

Jt.Commisioner Commercial Taxes

Entry Tax, Rajasthan

Entry Tax

1.70

2013-14 to

2014-15

Appellate Authority

14.73

2005-06, 2007-08 to 2012-13

Supreme Court

Entry Tax, Jammu & Kashmir

Entry Tax

9.69

2008-09 to 2011-12

High Court

Entry Tax, Punjab

Entry Tax

0.01

Oct 2012 to Dec 2012

High Court

VAT, Bihar

VAT

0.24

2005-06

Commercial Tax Tribunal

8.33

2011-12

High Court

VAT, Haryana

VAT

1.15

2011-12

Commercial Tax Tribunal

VAT, Kerala

VAT

0.01

2006-07

Deputy Commisoner (Appeals)

2.79

2010-11

High Court

0.02

2011-12

Deputy Commisoner (Appeals)

0.32

2012-13

High Court

2.80

2013-14

High Court

2.15

2014-15

High Court

VAT, Punjab

VAT

0.05

2010-11

Deputy Commisoner (Appeals)

VAT, Uttarakhand

VAT

0.78

2009-10 to

2010-11

Dy. Commissoner of Commercial Taxes

0.03

2007-08

Jt. Commisioner (Appeals)

0.41

2012-13

Jt. Commissioner of Commercial Taxes (Appeals)

VAT, West Bengal

VAT

4.17

200506,2007-08 to 2008-09

Tax Revision Board

0.03

2012-13

Jt. Commisioner of Commercial Taxes (Appeals)

0.02

2014-15

Jt. Commisioner Commercial Taxes

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, Jan 08 to March 08

Dy. Commissioner of Commercial Taxes

0.20

2010-11

Addl. Commisoner (Appeals)

2.38

2013-14

Dy. Commissioner of Commercial Taxes

1.83

2014-15

Dy. Commisioner of Commercial Taxes

VAT, Chattisgarh

VAT

0.02

2011-12

Dy. Commisooner (Appeals)

Finance Act, 1994

CENVAT Credit

2.60

01.04.2004 to 31.03.2015

Commisoner, CGST & Central Excise

3.33

01.4.2010 to 31.03.2014

Commisoner, CGST & Central Excise

1.32

2014-15

CESTAT

Income Tax Act, 1961

Income Tax

2.76

2009-10

Commissioner of Income Tax (Appeals)

Income Tax Act, 1961

Income Tax

2.52

2010-11

Commissioner of Income Tax (Appeals)

Income Tax Act, 1961

Income Tax

1.34

2011-12

Joint Commissioner of Income Tax

*Net of amounts paid under protest.

(viii) (a) The Company has defaulted in repayment of following dues to the financial institution, banks and debentures, which were paid on or before the Balance Sheet date:

Name of Lender

Amount (Rs. in crore) Borrowings

Amount (Rs. in crore) Interest

Period (Maximum days) Borrowings

Period (Maximum days) Interest

Loan from Banks

Axis Bank

100

5

87

80

Bank of Baroda

-

24

-

87

Bank of India

-

16

-

87

Bank of Maharashtra

27

-

85

-

Canara Bank

59

8

25

25

Central Bank of India

-

6

-

87

Corporation Bank

-

5

-

87

Credit Agricole Corporate & Investment Bank

-

1

-

14

DBS Bank

112

4

60

7

Deutsche Bank

180

4

82

7

HDFC Bank

56

18

-

China Development Bank

768

7

305

197

Industrial and Commercial Bank of China

130

7

305

197

Export Import Bank of China

264

7

305

197

IDBI Bank

-

18

-

87

Indian Overeseas Bank

-

3

-

87

IndusInd Bank

1,500

26

59

61

Oriental Bank of Commerce

-

4

-

87

Punjab National Bank

70

-

169

-

Standard Chartered Bank

293

3

111

56

State Bank of India

-

40

-

87

Syndicate Bank

-

9

-

87

UCO Bank

-

17

-

87

Union Bank of India

-

5

-

3

United Bank of India

13

4

147

87

Yes Bank

71

6

92

112

Debenture

Life Insurance Corporation of India

375

72

62

40

Other Loans

India Infrastructure Finance Corporation Limited

-

2

-

88

Reliance Cleangen Limited

9

21

Total

4,018

312

(b) The Company has defaulted in repayment of following dues to the financials institution, banks and debenture holders during the year, which were not paid as at Balance Sheet date:

Name of Lender

Amount (Rs. in crore) Borrowings

Amount (Rs. in crore) Interest

Period (Maximum days) Borrowings

Period (Maximum days) Interest

Loan from Banks

Ahli United Bank B.S.C.

98

111

Bank of Baroda

802

11

389

366

Bank of India

280

9

366

366

Bank of Maharashtra

473

-

318

-

Canara Bank

237

-

275

-

Central Bank of India

112

3

366

366

Corporation Bank

266

8

388

366

Credit Agricole Corporate & Investment Bank

192

-

377

-

DBS Bank

300

-

185

-

Dena Bank

250

-

53

-

Deutsche Bank

391

1

111

284

China Development Bank

2,185

128

398

398

Industrial and Commercial Bank of China

551

33

398

398

Export Import Bank of China

814

47

398

398

IDBI Bank

331

9

370

366

Indian Overeseas Bank

52

1

366

366

Oriental Bank of Commerce

91

2

366

366

Punjab National Bank

593

-

367

-

Standard Chartered Bank

1,072

-

355

-

State Bank of India

1,258

21

366

366

Syndicate Bank

423

5

389

366

UCO Bank

296

9

366

366

Union Bank of India

599

3

366

366

United Bank of India

341

2

366

366

Debenture

Life Insurance Corporation of India

375

-

53

-

Other Loans

Industrial Finance Corporation of India

125

4

382

382

Limited

India Infrastructure Finance

4

4

183

397

Corporation Limited Reliance Capital Limited

-

3

-

366

Reliance Unicorn Enterprise Private Limited

-

53

-

366

Reliance Cleangen Limited

-

14

-

366

Kunjbihari Developers Private Limited

-

1

-

366

Total

12,511

371

c) During the year, there was a delay of 11days in case of installment payment of Rs.22 crore to Department of Telecommunications. Further, as at March 31, 2018, Rs.281 crore was outstanding, delayed by 10 days which was subsequently paid.

(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, prima facie, 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 total managerial remuneration amounting to Rs.2 crore to the managerial person of the company for which the company is in the process of getting requisite approval of shareholders in ensuing annual general meeting.

(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 standalone Ind AS financial statements as required by the applicable accounting standards.

(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, however the company has issued equity shares to Sistema Shyam Teleservices Limited in terms of Scheme of Demerger sanctioned by the Hon’ble High Court of Judicature of Bombay and Jaipur.

(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.

Report on the Internal Financial Controls under Clause (i) of Subsection 3 of Section 143 of the Companies Act, 2013 (“the Act”).

We have audited the internal financial controls over financial reporting of Reliance Communications Limited (“the Company”) as of 31 March 2018 in conjunction with our audit of the standalone Ind AS financial statements of the Company for the year ended on that date.

Management’s Responsibility for Internal Financial Controls

The Company’s management is responsible for establishing and maintaining internal financial controls based on the internal control over financial reporting criteria established by the Company considering the essential components of internal control stated in the Guidance Note on Audit of Internal Financial Controls Over Financial Reporting issued by the Institute of Chartered Accountants of India (ICAI). These responsibilities include the design, implementation and maintenance of adequate internal financial controls that were operating effectively for ensuring the orderly and efficient conduct of its business, including adherence to company’s policies, the safeguarding of its assets, the prevention and detection of frauds and errors, the accuracy and completeness of the accounting records, and the timely preparation of reliable financial information, as required under the Act.

Auditor’s Responsibility

Our responsibility is to express an opinion on the Company’s internal financial controls over financial reporting based on our audit. We conducted our audit in accordance with the Guidance Note on Audit of Internal Financial Controls Over Financial Reporting (the “Guidance Note”) and the Standards on Auditing issued by ICAI and deemed to be prescribed under Section 143

(10) of the Act, to the extent applicable to an audit of internal financial controls, both applicable to an audit of Internal Financial Controls and both issued by the ICAI. Those Standards and the Guidance Note require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether adequate internal financial controls over financial reporting was established and maintained and if such controls operated effectively in all material respects.

Our audit involves performing procedures to obtain audit evidence about the adequacy of the internal financial controls system over financial reporting and their operating effectiveness. Our audit of internal financial controls over financial reporting included obtaining an understanding of internal financial controls over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. The procedures selected depend on the auditor’s judgement, including the assessment of the risks of material misstatement of the standalone Ind AS financial statements, whether due to fraud or error.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion on the Company’s internal financial controls system over financial reporting.

A company’s internal financial control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal financial control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles and that receipts and expenditures of the company are being made only in accordance with authorisations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorised acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Inherent Limitations of Internal Financial Controls Over Financial Reporting

Because of the inherent limitations of internal financial controls over financial reporting, including the possibility of collusion or improper management override of controls, material misstatements due to error or fraud may occur and not be detected. Also, projections of any evaluation of the internal financial controls over financial reporting to future periods are subject to the risk that the internal financial control over financial reporting may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Opinion

In our opinion, the Company has, in all material respects, an adequate internal financial controls system over financial reporting and such internal financial controls over financial reporting were operating effectively as at 31 March 2018, based on the internal control over financial reporting criteria established by the Company considering the essential components of internal control stated in the Guidance Note on Audit of Internal Financial Controls Over Financial Reporting issued by the ICAI.

For Pathak H.D. & Associates

Chartered Accountants

Firm’s Registration No: 107783W

Parimal Kumar Jha

Partner

Membership No: 124262

Mumbai

30 May 2018


Mar 31, 2017

Independent Auditor''s Report on Financial Statement To

The Members of Reliance Communications Limited

Report on the Standalone Ind AS Financial Statements

We have audited the accompanying Standalone Ind AS financial statements of Reliance Communications Limited (''the Company''), which comprise the Balance Sheet as at 31 March 2017, the Statement of Profit and Loss (including other comprehensive income), the Statement of Cash Flows and the Statement of changes in Equity for the year then ended and a summary of significant accounting policies and other explanatory information (hereinafter referred to as ''standalone Ind AS financial statements'').

Management''s Responsibility for the Standalone Ind AS 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 Ind AS financial statements that give a true and fair view of the financial position, financial performance including other comprehensive income, cash flows and changes in equity of the Company in accordance with the accounting principles generally accepted in India, including the Indian Accounting Standards (Ind AS) specified under Section 133 of the Act read with relevant rules issued thereunder. This responsibility also includes the 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 judgements 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 Ind AS 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 Ind AS 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 there under.

We conducted our audit of the standalone Ind AS financial statements 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 standalone Ind AS financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and the disclosures in the standalone Ind AS financial statements. The procedures selected depend on the auditor''s judgment, including the assessment of the risks of material misstatement of the standalone Ind AS 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 standalone Ind AS 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 Ind AS 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 Ind AS financial statements.

Opinion

In our opinion and to the best of our information and according to the explanations given to us, the aforesaid standalone Ind AS 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 including the Ind AS, of the financial position of the Company as at 31 March 2017 and its loss (financial performance) including other comprehensive income, its cash flows and the changes in equity for the year ended on that date.

Emphasis of Matters

a. We draw attention to Note 2.36.1 (vi) of the standalone Ind AS 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/ amortization, 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 1,205 crore (previous year Rs1,190 crore) to offset additional depreciation/amortization on account of fair valuation of certain assets which may be considered to override the relevant provisions of Schedule II of the Act and Ind AS 8 ''Accounting Policies, Changes in Accounting Estimates and Errors''. Our opinion is not qualified in respect of this matter.

b. We further draw attention to Note 2.44 of the standalone Ind AS 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 Ind AS 8. The Company has identified net foreign exchange variations of Rs 8 crore (previous year Rs 3 crore), amortization of Foreign Currency Monetary Items Translation Difference Account (FCMITDA) of Rs 238 crore (previous year Rs 274 crore) and depreciation on exchange losses capitalised of Rs 433 crore (previous year Rs 467 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 3,680 crore (previous year Rs 2,313 crore).

c. As stated in Note 2.18.4 of the standalone Ind AS financial statements, pending formal confirmation, the borrowings are continued to be classified as non-current liabilities. Our opinion is not qualified in respect of this matter.

Other Matters

a. The comparative financial information of the Company for the year ended 31 March, 2016 and the transition date opening Balance Sheet as at 1 April, 201 5 included in these standalone Ind AS financial statements, are based on the statutory financial statements prepared in accordance with the Companies (Accounting Standards) Rules, 2006 and other accounting principles generally accepted in India audited by BSR & Co. LLP, Chartered Accountants (one of the joint auditors) and Chaturvedi & Shah, Chartered Accountants (predecessor joint auditor), whose report for the year ended 31 March 2016 and 31 March 2015 dated 30 May 2016 and 29 May 2015 respectively expressed an unmodified opinion on those standalone financial statements, as adjusted for the differences in the accounting principles adopted by the Company on transition to the Ind AS, which have been audited by us.

Report on Other Legal and Regulatory Requirements

1. 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) i n 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, the Statement of Cash Flows and Statement of Changes in Equity dealt with by this Report are in agreement with the books of account;

(d) in our opinion, the aforesaid standalone Ind AS financial statements comply with the Indian Accounting Standards prescribed under Section 1 33 of the Act read with relevant rule issued there under; read with Emphasis of Matter paragraph above, regarding exercise of option available as per the Court Order which overrides the requirement of Ind AS 8;

(e) on the basis of the written representations received from the directors as on 31 March 2017 taken on record by the Board of Directors, none of the directors is disqualified as on 31 March 2017 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 as amended by notification no. G.S.R. 307 (E) issued by MCA dated 30 March 2017, 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 Ind AS financial statements - Refer Note 2.39 to the standalone Ind AS financial statements;

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

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

iv. The Company has provided requisite disclosures in the standalone Ind AS financial statements as regards its holding and dealings in Specified Bank Notes as defined in the Notification S.O. 3407(E) dated the 8 November, 2016 of the Ministry of Finance, during the period from 8 November, 2016 to 30 December, 2016. Based on audit procedures performed and the representations provided to us by the management, we report that the disclosures are in accordance with the books of account maintained by the Company and as produced to us by the Management. Refer Note 2.52 to the standalone Ind AS financial statements.

With reference to Annexure A referred to in the Independent Auditors'' Report to the Members of Reliance Communications Limited (''the Company'') on the standalone Ind AS financial statements for the year ended 31 March 2017, 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 2.01 to the standalone Ind AS 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 its name as these were acquired through various schemes of arrangement entered in the earlier years:

Particulars

Freehold

Leasehold

Building

land

land

No of cases

394

16

413

Gross block as at 31

196

13

295

March 2017 (Rs in crore)

Net block as at 31 March

196

11

201

2017 (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 1 48 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, Income Tax, Service Tax, Duty of Customs, 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 duty of excise.

According to the information and explanations given to us, no undisputed amounts payable in respect of Provident Fund, Income Tax, Service Tax, Duty of Customs, Sales Tax, Value Added Tax, Entry Tax, Employees'' State Insurance, cess and other material statutory dues were in arrears as at 31 March 2017 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 cess which have not been deposited on account of any dispute. The dues of Income Tax, Duty of Customs, Service Tax, Sales Tax, Value Added 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)

Period

Forum where the dispute is pending

Central Sales Tax, Uttar Pradesh

Central Sales Tax

0.07

0.08

0.50

2006-07

2010-11

2013-14

High Court

Additional Commissioner (Appeals)

Dy. Commissioner of Commercial Taxes

Central Sales Tax, Maharashtra

Central Sales Tax

0.27

2011-12

Dy. Commissioner of Sales Taxes

Central Sales Tax, Bihar

Central Sales Tax

0.04

0.43

2005-06

2011-12

Appellate Tribunal

Asst. Commissioner of Commercial Taxes

0.09

2013-14

Dy. Commissioner of Commercial Taxes

Central Sales Tax, Madhya Pradesh

Central Sales Tax

0.03

2011-12 to 2013-14

Dy. Commissioner (Appeals)

Central Sales Tax, Uttarakhand

Central Sales Tax

0.12

0.14

2009-10 to

2010-11 2012-13

Dy. Commissioner of Commercial Taxes

Jt. Commissioner of Commercial Taxes (Appeals)

Central Sales Tax, Orissa

Central Sales Tax

0.02

0.01

Oct-06 to March-09 2009-10

Sales Tax Appellate Tribunal Addl. Commissioner (Appeals)

Central Sales Tax, Chhattisgarh

Central Sales Tax

0.01

2011-12

Dy. 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

2003-04

Asst. Commissioner of Commercial Taxes

1.58

2005-06 to 2008-09 and 2010-11

MP Taxation Board

0.21

2011-12

Dy. Commissioner (Appeals)

Entry Tax, Rajasthan

Entry Tax

14.73

2005-06, 2007-08 to 2012-13

Supreme Court

1.70

2013-14 to

2014-15

Appellate Authority

Entry Tax, Orissa

Entry Tax

0.05

Oct 06 - Mar 09

Sales Tax Appellate Tribunal

0.08

2009-10

Addl. Commissioner (Appeals)

Entry Tax, Uttar Pradesh

Entry Tax

0.13

0.02

2003-04

2013-14

Commercial Tax Tribunal#

Dy. Commissioner of Commercial Taxes

Entry Tax, Chhattisgarh

Entry Tax

0.63

2006-07 to

2007-08

Dy. Commissioner (Appeals)

0.25

2010-11 to

2011-12

Dy. Commissioner (Appeals)

Name of the Statute

Nature of dues

Amount1 (Rs in crore)

Period

Forum where the dispute is pending

Entry Tax, Himachal Pradesh

Entry Tax

1.01

2010-11 to 2013-14

High Court#

Entry Tax, Bihar

Entry Tax

0.38

0.25

2007-08 to

2008-09 2011-12

Commercial Tax Tribunal

Asst. Commissioner of Commercial Taxes

VAT, Bihar

VAT

0.24

8.33

2005-06

2011-12

Commercial Tax Tribunal High Court

VAT/Sales Tax, Uttar Pradesh

VAT/Sales Tax

0.24

0.93

0.52

0.20

2.38

2003-04

2004-05

2005-06, Jan Rs08 to March Rs08 2010-11 2013-14

UP Trade Tax Tribunal#

High Court#

Dy. Commissioner of Commercial Taxes

Addl. Commissioner (Appeals)

Dy. Commissioner of Commercial Taxes

VAT,

VAT

0.03

2007-08

Jt. Commissioner (Appeals)

Uttarakhand

0.78

0.41

2009-10 to

2010-11 2012-13

Dy. Commissioner of Commercial Taxes

Jt. Commissioner of Commercial Taxes (Appeals)

VAT, West Bengal

VAT

4.17

0.03

2005-06,

2007-08 to

2008-09 2012-13

Tax Revision Board

Jt. Commissioner of Commercial Taxes (Appeals)

VAT, Kerala

VAT

0.01

2.79

0.02

0.32

2006-07

2010-11

2011-12

2012-13

Deputy Commissioner (Appeals)# High Court#

Deputy Commissioner (Appeals) High Court#

VAT, Punjab

VAT

0.05

2010-11

Deputy Commissioner (Appeals)

VAT Haryana

VAT

1.15

2011-12

Commercial Tax Tribunal

VAT Chhattisgarh

VAT

0.02

2011-12

Dy. Commissioner (Appeals)

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

216.20

2009-10

Income Tax Appellate Tribunal

Income Tax Act, 1961

Income Tax

83.23

2010-11

Income Tax Appellate Tribunal

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 the debenture holders except for the following instances of delay/ default in repayment of principal amount and interest:

Lenders'' Name

As on March 31, 2017 (Rs in crore)

Period of delay

Axis Bank

63

Less than 90 days

Bank of Baroda

91

Less than 90 days

Bank of India

72

Less than 90 days

Canara Bank

59

Less than 90 days

Central Bank of India

28

Less than 90 days

Corporation Bank

30

Less than 90 days

Credit Agricole Corporate and Investment Bank

193

Less than 90 days

China Development Bank

593

Less than 90 days

DBS Bank Limited

116

Less than 90 days

Deutsche Bank

54

Less than 90 days

IDBI Bank

87

Less than 90 days

India Infrastructure Finance Company Limited

5

Less than 90 days

Indian Overseas Bank

13

Less than 90 days

IndusInd Bank Limited

1,526

Less than 90 days

Industrial Finance Corporation Of India Limited

27

Less than 90 days

Industrial and Commercial Bank of China

220

Less than 90 days

Oriental Bank of Commerce

20

Less than 90 days

Punjab National Bank

86

Less than 90 days

Standard Chartered Bank India

249

Less than 90 days

State Bank of India

160

Less than 90 days

Syndicate Bank

61

Less than 90 days

The Export Import Bank of China

313

Less than 90 days

UCO Bank

76

Less than 90 days

United Bank of India

34

Less than 90 days

Union Bank of India

11

Less than 90 days

Life Insurance Corporation of India

410

Less than 90 days

Total

4,597

Further, during the year, the Company has delayed in repayment of Loans amounting Rs 2,619 crore which were made good before the 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 standalone Ind AS financial statements as required by the applicable accounting standards.

(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, 1 934. Accordingly, the provisions of Clause (xvi) of the Order are not applicable to the Company.

Report on the Internal Financial Controls under Clause (i) of subsection 3 of Section 143 of the Companies Act, 2013 ("the Act").

We have audited the internal financial controls over financial reporting of Reliance Communications Limited ("the Company") as of 31 March 2017 in conjunction with our audit of the standalone Ind AS financial statements of the Company for the year ended on that date.

Management''s Responsibility for Internal Financial Controls

The Company''s management is responsible for establishing and maintaining internal financial controls based on the internal control over financial reporting criteria established by the Company considering the essential components of internal control stated in the Guidance Note on Audit of Internal Financial Controls over Financial Reporting issued by the Institute of Chartered Accountants of India (ICAI). These responsibilities include the design, implementation and maintenance of adequate internal financial controls that were operating effectively for ensuring the orderly and efficient conduct of its business, including adherence to company''s policies, the safeguarding of its assets, the prevention and detection of frauds and errors, the accuracy and completeness of the accounting records, and the timely preparation of reliable financial information, as required under the Act.

Auditor''s Responsibility

Our responsibility is to express an opinion on the Company''s internal financial controls over financial reporting based on our audit. We conducted our audit in accordance with the Guidance Note on Audit of Internal Financial Controls over Financial Reporting (the "Guidance Note") and the Standards on Auditing issued by the ICAI and deemed to be prescribed under Section 143 (10) of the Act, to the extent applicable to an audit of internal financial controls, both applicable to an audit of Internal Financial Controls and both issued by the ICAI. Those Standards and the Guidance Note require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether adequate internal financial controls over financial reporting was established and maintained and if such controls operated effectively in all material respects.

Our audit involves performing procedures to obtain audit evidence about the adequacy of the internal financial controls system over financial reporting and their operating effectiveness. Our audit of internal financial controls over financial reporting included obtaining an understanding of internal financial controls over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. The procedures selected depend on the auditor''s judgment, including the assessment of the risks of material misstatement of the standalone Ind AS financial statements, whether due to fraud or error.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion on the Company''s internal financial controls system over financial reporting.

Meaning of Internal Financial Controls over Financial Reporting

A company''s internal financial control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company''s internal financial control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company''s assets that could have a material effect on the financial statements.

Inherent Limitations of Internal Financial Controls over Financial Reporting

Because of the inherent limitations of internal financial controls over financial reporting, including the possibility of collusion or improper management override of controls, material misstatements due to error or fraud may occur and not be detected. Also, projections of any evaluation of the internal financial controls over financial reporting to future periods are subject to the risk that the internal financial control over financial reporting may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Opinion

In our opinion, the Company has, in all material respects, an adequate internal financial controls system over financial reporting and such internal financial controls over financial reporting were operating effectively as at 31 March, 2017, based on the internal control over financial reporting criteria established by the Company considering the essential components of internal control stated in the Guidance Note on Audit of Internal Financial Controls over Financial Reporting issued by the ICAI.

For Pathak H.D. & Associates For B S R & Co. LLP

Chartered Accountants Chartered Accountants

Firm''s Reg. No: 107783W Firm''s Reg. No: 101248W/

W-100022

Parimal Kumar Jha Vijay Bhatt

Partner Partner

Membership No: 1 24262 Membership No: 036647

Mumbai Mumbai

May 27, 2017 May 27, 2017


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


Mar 31, 2010

1 We have audited the attached Balance Sheet of Reliance Communications Limited (‘the Company) as at 31 March 2010 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 Companys 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 (Auditors 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 31st March 2010 and taken on record by the Board of Directors, we report that none of the directors is disqualified as at 31 March 2010 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 2010;

(ii) in the case of the Profit and Loss Account, 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.

Annexure to Auditors Report - 31st March, 2010 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 2010, 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 Optic 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 Companys 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 31st March 2010 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 the Dues (Rs crores)

The Central Excise and Salt Act, 1944 Excise duty 2.08

Entry Tax Act, Uttar Pradesh Entry Tax 0.13

Trade Tax Act, Uttar Pradesh Sales Tax 0.93

10.53 0.24







Name of the Statue Period to which Forum where dispute is pending the amount relates

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

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

Trade Tax Act, Uttar Pradesh 2004-05 Trade tax Tribunal, (Appeals) 2005-06 Joint Commissioner (Appeals)

2003-04 Trade Tax Tribunal, Lucknow

Name of the Statute Nature of Amount the Dues (Rs crores)

Entry Tax Act, Madhya Pradesh Entry Tax 0.29

0.16 0.15

Entry Tax Act, Chhattisgarh Entry Tax 0.09

Punjab VAT Act VAT 0.01

Entry Tax Act, Madhya Pradesh Entry Tax 0.20

Entry Tax Act, Chhattisgarh Entry Tax 0.03

Entry Tax Act, Chattisgarh Entry Tax 0.08

0.09

Uttarakhand VAT Act VAT 0.01

West Bengal VAT Act VAT 1.49

1.80 Entry Tax Act, Rajasthan Entry tax 0.03

Delhi VAT Act VAT 36.48



Name of the Period to which Forum where dispute is pending Statue the amount relates

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

2005-06 Deputy Commissioner of Appeals (Commercial Taxes)

2006-07 Deputy Commissioner of Appeals (Commercial Taxes)

Entry Tax Act, Chhattisgarh 2002-03 Deputy Commissioner of Appeals (Commercial Taxes)

Punjab VAT Act 2007-08 Deputy Commissioner (Appeals)

Entry Tax Act, Madhya Pradesh 2003-04 Deputy Commissioner (Appeals) (Commercial Taxes)

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

Entry Tax Act, Chattisgarh 2004-05 Assistant Commissioner of Commercial Taxes

2005-06 Assistant Commissioner of Commercial Taxes

Uttarakhand VAT Act 2005-06 Deputy Commissioner of Commercial Taxes

West Bengal VAT Act 2005-06 First appellate authority

2006-07 First appellate authority

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

Delhi VAT Act 2007-08 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, 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 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 Natrajan Ramkrishna

Partner Partner

Membership No: 35671 Membership No: 032815

Mumbai

15 May, 2010

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