Notes to Accounts of Tulip Telecom Ltd.

Mar 31, 2013

Rs. In lacs

As at As at

A Contingent Liabilities not Provided for Mar 31 2013 Sep 30 2012

I Guarantee issued by the Banks on Behalf of the company 13,919.08 25,110.05

II Claims against the company by DOT not acknowledge as debt. 41,036.41 41,036.41

III Disputed Income Tax Demand under Appeal 39,656.21 39,656.21

IV Disputed Sales Tax/VAT Demandunder Appeal 193.49 193.49

V Disputed Customduty demand under Appeal 23.36 23.36

VI The Company on 3rd April, 2010 has given a Corporate Guarantee to M/s. Axis Trustee Services Limited acting as the Debenture Trustee of M/s. Beeta Infocom Pvt. Ltd. in terms of its issue of Non Convertible Debentures (NCDs) aggregating to Rs. 84 crores outstanding as on 31st March, 2013.

VII Also, the Company had issued a Corporate Guarantee on 18th May, 2009 in favour of M/s. Cisco Systems Capital India Pvt. Ltd ("the Lender") for guaranteeing the monetary obligations w.r.t. loan availed by its wholly owned subsidiary i.e M/s. Tulip SWAN IT Services Limited from the Lender.

VIII The company has given corporate guarantee to ICICI Bank Ltd. amounting to Rs. 250 cores against the term loan facility taken by its wholly owned subsidiary, Tulip Data Centre Services Pvt Ltd. The terms and conditions of such guarantee are not prejudicial to the interest of the company.

IX The company has given corporate guarantees to Karur Vysya Bank, J&K Bank, IDFC ltd & Standard Chartered Bank for the long term loans amounting to Rs. 35 Crores, Rs. 35 Crores, Rs. 95 Crores & Rs. 36.93 Crores respectively on behalf of TULIP DATA CENTRE SERVICES PVT LTD, whollyowned subsidiary of the company.

B Foreign Currency Convertible Bonds (FCCB)

USD $150 Million Zero Coupon Foreign Currency Convertible Bonds

During the year 2007-08, the Company issued at par 5 year, Zero Coupon Foreign Currency Convertible Bond (FCCB) at an Exercise Price of Rs. 227.444 per share (Rs. 1137.22 per share before split of share into 1:5) aggregating to US$ 150 Million (Rs. 6040.5 miilion as on the date of issue) for financing Capital Expenditures, Overseas Acquisitions and other expenditure as per RBI Regulation. As per terms and conditions of the Offering Circular issued by the Company for FCCB, the bonds are convert- ible by holders of the Bond (the Bondholders) into fully paid equity shares of the Company with full voting rights with par value of Rs. 21- per share (Rs. 10/- per share before split of share into 1:5) of the Company (the shares) at any time on or after 5th Septem- ber, 2007 (or such earlier date as is notified to the Bondholders by the Company) and prior to the Close of the business on 19th August, 2012 unless previously redeemed, converted or repurchased and cancelled.

The Bond may redeemed in cash in whole, but not in part, at their Early Redemption Amount, at the option of the company at anytime on or after 26th August, 2010 and on and prior to 19th August, 2012, subject to satisfaction of certain conditions. These bonds are redeemable at 144.506% of the principal amount on 26th August, 2012 unless previously converted, redeemed or purchased and cancelled.

The company has incurred an expenditure of Rs. 1467.70 lacs towards issue expenses of these bonds. These expenses have been charged to the securities premium account as provided under section 78 of the Companies Act, 1956.

During the F.Y. 2008-09 & 2009-10, the company has bought back Zero Coupon Foreign Currency Convertible Bonds (FCCBs) aggregating to USD 52.99 Millions, resulting in outstanding FCCB liability to USD 97 Million.

The company has defaulted in repayment of aforesaid unsecured Foreign Currency Convertible bonds (FCCB) amounting to approx. USD 145 million (Rs. 78533.73 Lacs approx.) (including Premium approx. Rs. 25808.83 Lacs) in respect of FCCB were due for redemption on 26th August, 2012. In order to redeem aforesaid FCCB, the management is actively pursuing various options which includes raising of additional finance in the form of debt and other various options. Discussion on each of these options is in process and the management is confident that the company will be able to arrange the required funds for its redemp- tion shortly.

C Employees Stock Option Scheme

a. During the year 2010-11, Consequent to shareholders approval on the Company''s Employees Stock Option Scheme "TULIP ESOS" 2011, the Compensation Committee of the Board of Directors at their meeting held on February 14,2011, have granted 27,00,000 stock options convertible into equal number of equity shares of Rs.2 each to the eligible employees to be vested over a period offouryears at an exercise price of Rs. 164.55, determined as per the SEBI guidelines.

b. During the period 2011-12, consequent to shareholders approval on the Company''s Employees Stock Option Scheme "TULIP ESOS" 2011, the Compensation Committee of the Board of Directors at their meeting held on July 28, 2011, have granted 3,87,500 stock options convertible into equal number of equity shares of Rs.2 each to the eligible employees to be vested over a period offouryears at an exercise price of Rs. 153.00, determined as per the SEBI guidelines.

D "The Company has approached the CDR CELL through lenders to restructure its debt under the CDR mechanism in view of economic slowdown, unfavourable market conditions, increased competition, liquidity constraints, capital blocked in government projects coupled with rising interest cost. Further, the Company had incurred large capital investment in long gestation projects with short-term debt. In addition, FCCB default resulted in downgrade of the Company''s credit rating. Ail these factors together resulted in insufficient cash flows to meet the Company debt obligations.

SBI Capital Markets Ltd has been appointed to advise the Company in its Debt Recast exercise. The Company undertook a detailed and critical analysis of its inventories, receivables and creditors along with its business model in consultation with its Advisor. After careful consideration and observation by stock auditors and valuers appointed for this purpose, a onetime charge has been taken in the Statement of Profit & Loss to provide for impairment in the value of current assets in view of present business conditions and reworked business model. This is reflected in the Statement of Profit & Loss and consist of Rs. 1462 Lacs for non moving inventories and its written down value and Rs. 46786.71 Lacs as written off for Receivables/Advances doubtful of recovery, (these figures are being included in the Statement of Profit & Loss as Exceptional items).

The CDR proposal of the company has been approved by the CDR Empowered Group in their meeting held on March 25,2013. The CDR package of the company covers 12 years door to door repayment plan, reduction in interest rates by approximately two and half percent, one and half year moratorium period for the payment of interest and two and half year moratorium period for the repayment of principal loan amount."

E In the opinion of the management and to the best of their knowledge and belief the realisable value of current assets, loans and advances if realised in ordinary course of business would not be less than the amount at which they are stated in the balance sheet. The company has filed suits for recovery of debt against certain clients but relying on the opinion of the advocates these have been considered as fully realisable.

F The company does not have any dues payable to any Micro and Small Enterprises as at the period end. The identification of Micro and Small Enterprises is based on management''s knowledge of their status. The company has not received any intimation from suppliers regarding their status under the MSMED Act, 2006. Hence, disclosures, if any relating to amounts unpaid as at the period end, together with interest paid/payable as required underthe said Act have not been given.

G The Company operates in single segment i.e., ''Corporate Data Connectivity Business'' and therefore segment reporting is not applicable. The Company''s own generated products and services are sold primarily within India and as such there are no reportable geographical segment.

H The company has continued the business of Telecommunication (Referred to in the above Balance Sheet and Statement of Profit & loss as Tulip Connect) and the company is maintaining separate accounts under section 80(IA) of Income Tax Act, for the same and acordingly a separate set of Balance Sheet and Statement of Profit & loss has been prepared for Income Tax purposes, but all the figures have been merged with the above Balance Sheet and Statement of Profit & loss

I Balances of Debtors and Creditors are subject to confirmation.

J The figures for current period are for 6 months as against 18 months in the previous period. Hence, the figures are not compa- rable with those of previous period

K The figures of the previous year have been regrouped, rearranged and reclassified wherever necessary to conform to current year''s classification.

L Figures in brackets relate to the previous year unless otherwise stated.

M The company is a multi-locational company. This Balance sheet is the consolidated Balance sheet of all the Branches of the company.

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Mar 31, 2011

Rs. In lacs

A Contingent Liabilities not Provided for As On March 31, 2011 As On March 31, 2010

I Guarantee issued by the Banks on Behalf of the Company 12,126.32 9,192.81

II Claims againstthe Company not acknowledge as debt. - 23.94

III The Company on 3rd April, 2010 has given a Corporate Guarantee to M/s. Axis Trustee Services Limited acting as the Debenture Trustee of M/s. Beeta Infocom Pvt. Ltd. in terms of its issue of Non Convertible Debentures (NCDs) aggregating to Rs. 119 crores outstanding as on 31st March, 2011, for duly and timely payment of its obligations under the Issue. Also, the Company had issued a Corporate Guarantee on 18th May, 2009 in favour of M/s. Cisco Systems Capital India Pvt. Ltd ("the Lendor") for guaranteeing the monetary obligations w.r.t. loan availed by its wholly owned subsidiary i.e M/s.Tulip SWAN IT Services Limited from the Lendor.

B Foreign Currency Convertible Bonds (FCCB)

USD $150 Million Zero Coupon Foreign Currency Convertible Bonds During the year 2007-08, the Company issued at par 5 year, Zero Coupon Foreign Currency Convertible Bond (FCCB) at an Exercise Price of Rs. 227.444 per share (Rs. 1137.22 per share before split of share into 1:5) aggregating to US$ 150 Million (Rs. 60,405 lacs as on the date of issue) for financing Capital Expenditures, Overseas Acquisitions and other expenditure as per RBI Regulation. As per terms and conditions of the Offering Circular issued by the Company for FCCB, the bonds are convertible by holders of the Bond (the Bondholders) into fully paid equity shares of the Company with full voting rights

with par value of Rs. 21- per share (Rs. 10/- per share before split of share into 1:5) of the Company (the shares) at any time on or after 5th September, 2007 (or such earlier date as is notified to the Bondholders by the Company) and prior to the Close of the business on 19th August, 2012 unless previously redeemed, converted or repurchased and cancelled.

The Bond may redeemed in cash in whole, but not in part, at their Early Redemption Amount, at the option of the Company at any time on or after 26th August, 2010 and on and prior to 19th August, 2012, subject to satisfaction of certain conditions. These bonds are redeemable at 144.506% of the principal amount on 26th August, 2012 unless previously converted, redeemed or purchased and cancelled.

The Company has incurred an expenditure of Rs. 1467.70 lacs towards issue expenses of these bonds. These expenses have been charged to the securities premium account as provided under section 78 of the Companies Act, 1956. Out of the proceeds of the bond issue, Rs. Nil (Previous year Rs. 68.11 lacs(equivalent to US$ 0.15 Millions)) is lying infixed deposits at March 31st, 2011 in foreign currency with Bank of India, London.

The Company has repurchased and cancelled Bonds aggregating to USD 52.999 Million under the Automatic Route, in accordance with the guidelines issued by the RBI. As on the balance sheet date the Company's liability with regard to FCCB has reduced to USD 97.001 million, therefore now upon conversion of bonds number of shares to be issued are reduced to 17,460,185 equity shares (3,492,037 equity shares before split of share into 1:5).

C Employees Stock Option Scheme

Consequent to shareholders approval on the Company's Employees Stock Option Scheme "TULIP ESOS" 2011, the Compensation Committee of the Board of Directors at their meeting held on February 14, 2011, have granted 27,00,000 stock options convertible into equal number of equity shares of Rs.2 each to the eligible employees to be vested over a period of four years at an exercise price of Rs. 164.55, determined as per the SEBI guidelines.

D. Derivative Instrument

The Company has outstanding foreign exchange forward contract of US$165 million (Previous year US$165 million) as at 31st March 2011, for hedging its exposure in respect of highly probable forecast transaction relating to foreign currency convertible bonds(FCCB) liability.

G In the opinion of the management and to the best of their knowledge and belief the realisable value of current assets, loans and advances if realised in ordinary course of business would not be less than the amount at which they are stated in the balance sheet. The Company has filed suits for recovery of debt against certain clients but relying on the opinion of the advocates these have been considered as fully realisable. Out of book debt outstanding for period more than six months, Rs. 60 crore of book debt pertains to Beeta Infocom Pvt. Ltd. on account of assignment of receivables related to SWAN projects on the basis of percentage completion method, however actual billing milestone to end client has not yet been reached.

H The Company had no amounts payable to Micro, Small and Medium Enterprise Suppliers as defined under section 7 of the Micro, Small and Medium Enterprises Development Act, 2006. The identification of Micro, Small and Medium Enterprise Suppliers is based on management's knowledge of their status.

P The Company operates in single segment i.e., 'Telecom' and therefore segment reporting is not applicable. The Company's own generated products and services are sold primarily within India and as such there are no reportable geographical segment.

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Mar 31, 2010

A. Contingent liabilities As on As on not Provided for March 31, 2010 March 31, 2009

i) Guarantee issued by 9,192.81 8,08,817 the Banks on Behalf of the company

ii) Claims against the 23.94 32.56 company not acknowledge as debt.

iii) The Company on 3rd April, 2010 has given a Corporate Guarantee to M/s. Axis Trustee Services Limited acting as the Debenture Trustee of M/s. Beeta Infocom Pvt. Ltd. in terms of its issue of Non Convertile Debentures (NCDs) aggregating to Rs. 140 crores, for duly and timely payment of its obigations under the issue.

iv) Also, the Company had issued a Corporate Guarantee on 18th May, 2009 in favour of M/s. Cisco Systems Capital India Pvt. Ltd. ("the Lendor") for guaranteeing the monetary obigations w.r.t. loan availed by its wholly owned subsidiary i.e. M/s. Tulip SWAN IT Service Limited from the Lendor.

b. Foreign Currency Convertible bonds (FCCb)

USD $150 Million Zero Coupon Foreign Currency Convertible Bonds

During the year 2007-08, the Company issued at par 5 year, Zero Coupon Foreign Currency Convertible Bond (FCCB) at an Exercise Price of Rs. 1137.222 per share aggregating to US$ 150 Million (Rs. 60,405 Lacs as on the date of issue) for financing Capital Expenditures, Overseas Acquisitions and other expenditure as per RBI Regulation. As per terms and conditions of the Offering Circular issued by the Company for FCCB, the bonds are convertible by holders of the Bond (the Bondholders) into fully paid equity shares of the Company with full voting rights with par value of Rs. 10/- per share of the Company (the shares) at any time on or after 5th September, 2007 (or such earlier date as is notified to the Bondholders by the Company) and prior to the Close of the business on 19th August, 2012 unless previously redeemed, converted or repurchased and cancelled.

The Bond may be redeemed in cash in whole, but not in part, at their Early Redemption Amount, at the option of the company at any time on or after 26th August, 2010 and on and prior to 19th August, 2012, subject to satisfaction of certain conditions. These bonds are redeemable at 144.506% of the principal amount on 26th August, 2012 unless previously converted, redeemed or purchased and cancelled.

The company has incurred an expenditure of Rs. 1467.70 Lacs towards issue expenses of these bonds. These expenses have been charged to the securities premium account as provided under section 78 of the Companies Act, 1956.

Out of the proceeds of the bond issue, Rs. 68.11 Lacs (equivalent to US$ 0.15 Millions)(Previous year Rs. 20,528.93 Lacs (equivalent to US$ 39.35 Millions) is lying in fixed deposits at March 31st, 2010 in foreign currency with Bank of India, London.

During the year the company has repurchased and cancelled Bonds aggregating to USD 19.6 Million under the Automatic Route, in accordance with the guidelines issued by the RBI. As on the balance sheet date the Companys liability with regard to FCCB has reduced to USD 97.001 million, therefore now upon conversion of bonds number of shares to be issued are reduced to 3,492,037 equity shares. The buy back of bonds has resulted in savings of Rs. 21.82 Crores which has been reflected as part of other income.

C. employees stock option scheme

Pursuant to shareholders resolution dated 2nd February, 2008, the company introduced Employees Stock Option Scheme, "TULIP ESOS- 2007" which provides for the issue of 1,00,000 equity shares to employees of the company. The option vesting period was for Five years from the date of award of option to employees at an exercise price approved by the ESOS Compensation committee. Till date No Stock options have been granted under this scheme.

D. Derivative instrument]

The company has outstanding foreign exchange forward contract of US$165 million as at 31st March 2010, for hedging its exposure in respect of highly probable forecast transaction relating to foreign currency convertible bonds (FCCB) liability and external commercial borrowings (ECB).

F. In the opinion of the management and to the best of their knowledge and belief the realisable value of current assets, loans and advances if realised in ordinary course of business would not be less than the amount at which they are stated in the balance sheet. The company has filed suits for recovery of debt against certain clients but relying on the opinion of the advocates these have been considered as fully realisable, however some has been classified as doubtful debt amounting Rs. 32,85,174/- H. The company had no amounts payable to Micro, Small and Medium Enterprise Suppliers as defined under section 7 of the Micro, Small and Medium Enterprises Development Act, 2006. The identification of Micro, Small and Medium Enterprise Suppliers is based on managements knowledge of their status.

G. Related party Disclosures:-

As per Accounting Standard 18, issued by the Institute of Chartered Accountants of India, the disclosures of transactions with related parties as defined in Accounting Standard are given as below:- i) List of Related parties with whom transactions have taken place and their Relationships:-

ii) Transactions during the year with related parties:-

Name of Related Party Relationship

- Lt. Col. Hardeep Singh Bedi Key Managerial Personnel

- Mrs. Maninder Bedi

- Mr. Deepinder Singh Bedi

- Ms Sukhmani Bedi

- Sukhmani Financial Advisors Pvt. Ltd. Associate Concerns

- Cedar Infonet Pvt. Ltd.

- Encore Technologies Pvt. Ltd.

- Sukhmani Technologies Pvt Ltd.

- Sharad Enterprises Pvt. Ltd.

- Tulip IT Services Singapore Pte Ltd. Subsidiary Companies

- Tulip SWAN IT Services Ltd.

- Tulip Telecom Inc.

H. The company operates in single segment i.e., ‘Telecom and therefore segment reporting is not applicable. The companys own generated products and services are sold primarily within India and as such there are no reportable geographical segment.

I. Balances of Debtors and Creditors are subject to confirmation.

J. The figures of the previous year are regrouped/reclassified wherever necessary to make them comparable with that of the current year.

K. Figures in brackets relate to the previous year unless otherwise stated.

L. The company is a multi-locational company. This Balance sheet is the consolidated Balance sheet of all the Branches of the company.

M. The company continue to do the business as per earlier year of Providing Electronic Data Inter- Change Services (referred to in the above Balance Sheet and Profit & Loss Account as Division -EDICS) and the company is maintaining separate set of books of accounts for the same and accordingly a separate set of Balance Sheet and Profit & Loss Account has been prepared for Income Tax purposes, but all the figures have been merged with the above Balance Sheet and Profit & Loss Account. During the current financial year the company has not done any business in this segment

N. During the year the company has continued the business of a manufacturing unit at Jammu for manufacturing the various Networking Equipments (referred to in the above Balance Sheet and Profit & Loss Account as Division - Jammu), the company is duly registered with Department of Industries & Commerce, Jammu and Central Excise Department, Jammu and the company is maintaining separate set of books of accounts for the same and accordingly a separate set of Balance Sheet and Profit & Loss Account has been prepared for Income Tax purposes, but all the figures have been merged with the above Balance Sheet and Profit & Loss Account.

O. AMC Billed but not accrued at the closing of accounting year has been reduced from the Gross amount of Sundry Debtors due as on the date of Balance Sheet and Service Charges accrued but not billed has been added in the Gross amount of Sundry Debtors.

P. During the year the company has continued the business of Data Telecommunication (referred to in the above Balance Sheet and Profit & Loss Account as Tulip-Connect) and the company is maintaining separate set of books of accounts under section 80(IB) of Income Tax Act, for the same and accordingly a separate set of Balance Sheet and Profit & Loss Account has been prepared for Income Tax purposes, but all the figures have been merged with the above Balance Sheet and Profit & Loss Account.