Notes to Accounts of Prithvi Information Solutions Ltd.

Mar 31, 2013

Nature of Operations

Prithvi Information solutions Ltd is an Information and Communication technology (ICT) service provider. Prithvi is divided into IT- services and Telecom Products and Services. Prithvi IT services division provides multiple services and solutions to meet the IT requirements of various industries across geographies. Prithvi telecom solutions division provide service that covers all aspects of a telecom operator ecosystem including providing telecom software, building telecom networks and supplying telecom hardware product.

1. Gratuity Plan

The company has an unfunded defined benefit gratuity plan. Employees are eligible for gratuity benefits on termination or retirement in accordance with Payment of Gratuity Act, 1972. The following tables summarises the components of net benefit expense recognised in the profit and loss account and the provision status and amounts recognised in the balance sheet for the plan:

There are no capital expenditure commitments and contingent liabilities of the joint venture as on March 31, 2013.

2. Contingent Liabilities

Particulars As at As at March 31, 2013 March 31, 2012 Rs. Rs.

Interest and FX losses Claimed by Deutsche Bank 80,300,860

Suguna Technologies - Interest Claimed 180,531 180,531 Income Tax-AY - 2008-09 136,042,560

TDS demand for the FY 2004-05 2,501,310 2,501,310

TDS demand for the FY 2005-06 1,825,026 1,825,026

TDS demand for the FY 2006-07 26,093,828 26,093,828

TDS demand for the FY 2008-09 405,790 405,790

3. Foreign Currency Convertible Bonds (FCCB)

The Company issued Zero Coupon Foreign Currency Convertible Bonds amounting to USD 50,000,000 due in 2012, convertible into ordinary shares of the Company. The bonds are issued in denomination of USD 100,000 each and integral multiples there of. The bonds will constitute direct un-conditional and secured obligations of the Company and will rank pari passu, without any preference among " themselves, with all other outstanding secured and unsubordinated obligation of the Company, present and future, but in the event of insolvency, only to the extent permitted by applicable laws relating to the creditors'' right. The bond will be secured by a second charge on all consolidated receivables. The Bond will have yield to maturity @ 8.58% per annum compounded semi-annually.

The bondholders can convert the bonds into equity share of the Company at conversion price of Rs. 346.30 per share at fixed exchange rate of 1 USD = Rs. 44.09 during Bondholder Conversion Period, which starts on March 12, 2007 and ends at the place where certificate is deposited forconversion of a Bond on January 26, 2012.

The Company may, at its absolute discretion at any time on or after February 26, 2008 and prior to February 26, 2010, elect to convert all (but not some) of the Bonds into Shares at the Conversion Price subject to the terms and conditions mentioned in the offer circular.

These bonds matured on February 29, 2012 with a maturity value of USD 50 million towards principal and USD 26.37 million towards premium totaling USD 76.37 million. The Company entered into an agreement with the Bond Holders and the same is under process for its redemption.

Pursuant to members resolution dated 10th May, 2013, company intends to issue and allot 5,04.87,926 fully compulsorily convertible warrants under preferential basis subject to approval of FIPB. Now, our application being rejected by FIPB, Company is planning to issue and allot equity shares to the investors to liquidate the entire FCCB liability after obtaining necessary approvals.

Note

i. As the future liability for gratuity and leave encashment is provided on an actuarial basis for the company as a whole, the amount pertaining to the directors is not ascertainable and therefore, not included above.

**Customs duty of Rs.'' 2667 lakhs is disputed and under adjudication.

4. The Company had entered into an agreement with a creditor with whom there was a disputed liability of Rs. 331.60 crores and has made payments of Rs. 128.28 crores. As per the settlement entered into the Company was to have made a payment of USD 4.5 mln in Dec 2012 which is not yet paid. Another instalment of USD 4.5 mln is due in Jun 2013.

5. The Company is in the final stages of negotiation for settlement of Derivative losses with a Bank. According to the draft agreement the Company is to pay interest at the rate of 2% p.a. on the outstanding principal amount from the date of the agreement. The Company has provided for the interest from January 1, 2013 and is confident of signing the agreement at the earliest.

6. Previous year''s figures have been regrouped where necessary to confirm to this year''s classification.

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Mar 31, 2010

1. Nature of Operations

Prithvi Information Solutions Limited (‘the Company’) is a global provider of customized information technology solutions and software services for various businesses. The Company provides intelligent IT solutions which enables its client’s to achieve operational and tactical advantages from the deployment of the Company’s technology.

2. Gratuity plan

The Company has an unfunded defined benefit gratuity plan. Employees are eligible for gratuity benefits on termination or retirement in accordance with Payment of Gratuity Act, 1972. The following tables summaries the components of net benefit expense recognised in the profit and loss account and the funded status and amounts recognised in the balance sheet for the plan:

3. Segment Information

The company is engaged in the business of

1. Software Services

2. Telecom Services and Products

The business is in single geographical segment and therefore geographical segment information is not applicable.

4. Related Parties

During the year ended March 31, 2010 and March 31, 2009 the Company has entered into commercial transactions with its related parries. The details of such transactions, balances as at March 31, 2010 and March 31,2009 and names of related parties and the nature of relationship is given below.

5. Operating lease

The Company has obtained office premises on non-cancellable operating lease. The operating lease term is for eleven months to ten years. There are no restrictions imposed by lease agreement. There are no sub-leases. Some of the leases have escalation and renewal clauses. The Company does not have purchase option. The lease payments for the year ended March 31, 2010 is Rs. 4,20,64,024/-(Previous Year- Rs. 2,80,75,672).

6. Interest in joint venture

The Company has a 49% interest in the assets, Liabilities, income and expenses of Prithvi Qatar WLL, incorporated in the State of Qatar, Doha, which is engaged in Software Development.

The Company has wounded up Joint Venture with Prithvi Qatar WLL. The Company has invested Rs.12.26 lakhs and realized Rs. 9.17 lakhs in June, 2010. The balance amount will be written off in the FY. 2010-11.

There are no capital expenditure commitments and contingent liabilities of the joint venture as on 31st March 2010.

7. Contingent liabilities - Claims against the Company not acknowledged as debts (In Rupees)

March 31, 2010 March 31, 2009

Income tax demand for the FY – 2001-02, 2002-03, 2003-04, 2004-05 and 2005-06.*** NIL 543,700,260

Fixed deposits placed as security with UTI Bank Limited on behalf of Vuppalamritha Magnetic Components Limited. NIL 35,000,000

Amount to be paid for Acquisition of SRDGA Assets payable after 18 months from the date of Acquisition. NIL $ 5,00,000.

Interest and Fx Losses payable to Deutsche Bank - As per their Communication 80300860 NIL

Sojitz Corporation - Excess of Interest payable over amount provided 11193804 NIL

Marubeni Corporation - Out of Pocket Expenses claimed 25831824 NIL

Standard Chartered Bank - Derivative Losses difference 315000 NIL

Suguna Technologies - Interest Claimed 180531 NIL



8. Derivative Instruments

a) As per the announcement of the Institute of Chartered Accountants of India, accounting for derivative contracts, other than those covered under AS 11, are marked to market on a portfolio basis.

9. Foreign currency Convertible Bonds (FCCB)

The Company issued Zero Coupon Foreign Currency Convertible Bonds amounting to USD 50,000,000 due in 2012, convertible into ordinary shares of the Company. The bonds are issued in denomination of USD 100,000 each and integral multiples there of. The bonds will constitute direct un-conditional and secured obligations of the Company and will rank pari passu, without any preference among themselves, with all other outstanding secured and unsubordinated obligation of the Company, present and future, but in the event of insolvency, only to the extent permitted by applicable laws relating to the creditors’ right. The bond will be secured by a second charge on all consolidated receivables. The Bond will have yield to maturity @ 8.58% per annum compounded semi-annually.

The bondholders can convert the bonds into equity share of the Company at conversion price of Rs. 346.30 shares at fixed exchange rate of 1 USD= Rs. 44.0900 during Bondholder Conversion Period, which starts on March 12, 2007 and ends at the place where certificate is deposited for conversion of a Bond on January 26, 2012.

The Company may, at its absolute discretion at any time on or after February 26, 2008 and prior to February 26, 2010, elect to convert all (but not some) of the Bonds into Shares at the Conversion Price subject to the terms and conditions mentioned in the Offering circular.

If the bonds are not redeemed or converted earlier, the Company will redeem each bond at 100% of their principal amount plus the redemption premium due on the maturity date.

In the opinion of the Company, bonds are convertible into equity shares, the creation of Debenture Redemption Reserve is not required.

10. Previous Year Comparatives

Previous year’s figures have been regrouped where necessary to confirm to this years classification.

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Mar 31, 2009

1. Operating lease

The Company has obtained office premises on non- cancelable operating lease. The operating lease term is for eleven months to ten-years. There are no restrictions imposed by lease agreement. There are no sub-leases. Some of the leases have escalation and renewal clauses. The Company does not have purchase option.

2. Interest in Joint Venture

The Company has a 49% interest in the assets, liabilities, income and expenses of Prithvi Qatar WLL, Prithvi Middle East incorporated in the State of Qatar, Doha & Behrain which is engaged in Software Development. There are no capital expenditure commitments and .contingent liabilities of the joint venture as on March 31, 2009.

3. Contingent liabilities

Rs. Millions

Particulars march 31,2009 March 31, 2008

Provident fund demand issued by Provident Fund Departmentfor the period-October2002 to February-2005 - -

Income tax demand for the FY 2000-01 - -

Fixed deposits placed as security with UTI Bank Limited on 35.00 35.00 behalf of Vuppalamritha Magnetic Components Limited.

TOTAL 35.00 35.00

4. Gratuity plan

The Company has an unfunded defined benefit gratuity plan. Employees are eligible for gratuity benefits on termination or retirement in accordance with Payment of Gratuity Act, 1972.

The following tables summaries the components of net benefit expense recognised in the Profit & Loss Account and the funded status and amounts recognised in the balance sheet for the plan:

5. Derivative Instruments

a. As per the announcement of the Institute of Chartered Accountants of India, accounting for derivative . contracts, other than those covered under AS 11, are marked to market on a portfolio basis.

6. Foreign currency Convertible Bonds (FCCB)

During the previous year, the Company issued Zero Coupon Foreign Currency Convertible Bonds amounting to USD 50,000,000 due in 2012, convertible into ordinary shares of the Company. The bonds are issued in denomination of USD 100,000 each and integral multiples there of. The bonds will constitute direct un- . conditional and secured obligations of the Company and will rank pari passu, without any preference among themselves, with all other outstanding secured and unsubordinated obligation of the Company, present and future, but in the event of insolvency, only to the extent permitted by applicable laws relating to the creditors right. The bond will be secured by a second charge on all consolidated receivables. The Bond will have yield to maturity @ 8.58% per annum compounded "semi-annually.

The bondholders can convert the bonds into equity share of the Company at conversion price of Rs.346.30 shares at fixed exchange rate of 1 USD= Rs.44.0900 during Bondholder Conversion Period, which starts on March 12, 2007 and ends at the place where certificate is deposited for conversion of a Bond on January 26, 2012 The Company may, at its absolute discretion at any time on or after February 26, 2008 and prior to February 26, 2010, elect to convert all (but not some) of the Bonds into Shares at the Conversion Price subject to the terms and conditions mentioned in the Offering Circular.

If the bonds are not redeemed or converted earlier, the Company will redeem each bond at 100% of their principal amount plus the redemption premium due on the maturity date.

In the opinion of the Company, bonds are convertible into equity shares, the creation of Debenture Redemption Reserve is not required.

7. Previous year figures have been re-grouped/rearranged, wherever necessary to confirm to current years classification.