1.  NATURE OF OPERATIONS
 
 Cairn India Limited (''the Company'') was incorporated in India on August
 21, 2006 and is a subsidiary of Cairn UK Holdings Limited, which in
 turn is a wholly owned subsidiary of Cairn Energy Plc., UK which is
 listed on London Stock Exchange.
 
 The Company is primarily engaged in the business of surveying,
 prospecting, drilling, exploring, acquiring, developing, producing,
 maintaining, refining, storing, trading, supplying, transporting,
 marketing, distributing, importing, exporting and generally dealing in
 minerals, oils, petroleum, gas and related by-products and other
 activities incidental to the above. As part of its business activities,
 the Company also holds interests in its subsidiary companies which have
 been granted rights to explore and develop oil exploration blocks in
 the Indian sub-continent.
 
 2.  SEGMENTAL REPORTING Business segments
 
 The primary reporting of the Company has been prepared on the basis of
 business segments. The Company has only one business segment, which is
 the exploration, development and production of oil and gas and operates
 in a single business segment based on the nature of the products, the
 risks and returns, the organisation structure and the internal fi
 nancial reporting systems. Accordingly, the fi gures appearing in these
 financial statements relate to the Company''s single business segment.
 
 Geographical segments
 
 Secondary segmental reporting is prepared on the basis of the
 geographical location of customers. The operating interests of the
 Company are confined to India in terms of oil and gas blocks and
 customers. Accordingly, the fi gures appearing in these financial
 statements relate to the Company''s single geographical segment, being
 operations in India.
 
 3.  RELATED PARTY TRANSACTIONS 
 
 (A) Names of related parties: Companies having control
 
 - Cairn UK Holdings Limited, UK Holding Company
 
 - Cairn Energy Plc., UK Ultimate holding company
 
 Subsidiary companies
 
 1 Cairn Energy Australia Pty Limited
 
 2 Cairn Energy India Pty Limited
 
 3 CEH Australia Pty Limited
 
 4 Cairn Energy Asia Pty Limited
 
 5 Sydney Oil Company Pty Limited
 
 6 Cairn Energy Investments Australia Pty Limited
 
 7 Wessington Investments Pty Limited
 
 8 CEH Australia Limited
 
 9 Cairn India Holdings Limited
 
 10 CIG Mauritius Holding Private Limited
 
 11 CIG Mauritius Private Limited
 
 12 Cairn Energy Holdings Limited
 
 13 Cairn Energy Discovery Limited
 
 14 Cairn Exploration (No. 2) Limited
 
 15 Cairn Exploration (No. 6) Limited
 
 16 Cairn Energy Hydrocarbons Limited
 
 17 Cairn Petroleum India Limited
 
 18 Cairn Energy Gujarat Block 1 Limited
 
 19 Cairn Exploration (No. 4) Limited
 
 20 Cairn Exploration (No. 7) Limited
 
 21 Cairn Energy Development Pte Limited (Liquidated during the year)
 
 22 Cairn Lanka (Pvt) Limited
 
 23 Cairn Energy Group Holdings BV
 
 24 Cairn Energy India West BV
 
 25 Cairn Energy India West Holding BV
 
 26 Cairn Energy Gujarat Holding BV
 
 27 Cairn Energy India Holdings BV
 
 28 Cairn Energy Netherlands Holdings BV
 
 29 Cairn Energy Gujarat BV
 
 30 Cairn Energy Cambay BV
 
 31 Cairn Energy Cambay Holding BV
 
 Key Management Personnel
 
 - Rahul Dhir, Managing Director and Chief Executive Officer
 
 - Winston Frederick Bott Jr., Executive Director and Chief Operating
 Officer
 
 - Indrajit Banerjee, Executive Director and Chief Financial Officer
 
 4.  Debenture redemption reserve aggregating to INR 831,913 thousand
 (previous year Nil) has not been created due to inadequacy of profits.
 
 CIPOP plan
 
 Options will vest (i.e. become exercisable) at the end of a
 performance period which have been set by the remuneration committee
 at the time of grant (although such period will not be less than three
 years). However, the percentage of an option which vests on this date
 will be determined by the extent to which pre-determined performance
 conditions have been satisfied.
 
 CIESOP plan
 
 There are no specific vesting conditions under CIESOP plan other than
 completion of the minimum service period.
 
 Volatility is the measure of the amount by which the price has fl
 uctuated or is expected to fl uctuate during the period. The measure of
 volatility used in Black-Scholes option-pricing model is the annualized
 standard deviation of the continuously compounded rates of return on
 the stock over a period of time. Time to maturity /expected life of
 options is the period for which the Company expects the options to be
 live. The time to maturity has been calculated as an average of the
 minimum and maximum life of the options.
 
 Impact of Fair Valuation Method on net profits and EPS
 
 In March 2005, the Institute of Chartered Accountants of India has
 issued a guidance note on Accounting for Employees Share Based
 Payments applicable to employee based share plan the grant date in
 respect of which falls on or after April 1, 2005. The said guidance
 note requires the Proforma disclosures of the impact of the fair value
 method of accounting of employee stock compensation accounting in the
 financial statements.
 
 5.  The Company has a gratuity plan, wherein every employee who has
 completed five years or more of service gets a gratuity on departure
 at 15 days salary (last drawn salary) for each completed year of
 service. The gratuity plan of the Company is an unfunded scheme.
 
 The following tables summarize the components of net benefit expense
 recognised in the profit and loss account and the amounts recognised
 in the balance sheet for the gratuity plans.
 
 6.  In accordance with the provisions of Accounting Standard 22
 ''Accounting for taxes on income'', the Company would have had deferred
 tax assets of INR 811,000 thousand (previous year INR 361,000 thousand)
 and INR 393,000 thousand (previous year INR 224,720 thousand) in
 respect of accumulated tax losses and differences in block of fi xed
 assets/exploration assets as per tax books and financial books
 respectively. However, as the management is not virtually certain of
 subsequent realization of the asset, the same has not been recognized
 in these financial statements.
 
 7.  The shareholders of the Company have approved a Scheme of
 Arrangement between the Company and some of its wholly owned
 subsidiaries, to be effective from 1st January 2010. The Scheme of
 Arrangement has been approved by the Hon''ble High Court of Madras and
 the Hon''ble High Court of Bombay. However, it is pending for approval
 from other regulatory authorities. Pending receipt of such approvals,
 no accounting impact of the scheme has been given in these financial
 statements. After the implementation of the scheme, the Company will
 directly own the Indian businesses, which are currently owned by some
 of its wholly owned subsidiaries and as contemplated in the scheme, any
 goodwill arising in the Company pursuant to the scheme, shall be
 adjusted against the securities premium account.
 
 8.  The reversal in fringe benefit tax (FBT) in the previous year is
 on account of the abolishment of FBT with effect from 1st April 2009,
 as the Company was accounting for FBT liability on stock options on a
 pro-rata basis over the vesting period.
 
 9. Details of amounts recoverable from subsidiary companies in which
 directors are interested are the same as disclosed in note 4 (c) above.
 The balance outstanding as at the year end is also the maximum amount
 outstanding during the year. No loans have been given to the
 subsidiaries, associates, fi rms and companies, in which directors are
 interested.
 
 10.  The Company has made equity investments in CIG Mauritius Holding
 Private Limited (''CMHPL'') mainly for funding the expenditure pertaining
 to block SL 2007-0-001 held by Cairn Lanka Private Limited (a wholly
 owned subsidiary of CMHPL). As the block is presently under exploration
 phase, no diminution in value of the said investments exists at the
 balance sheet date.
 
 11.  The holding company of Cairn India Limited, Cairn UK Holdings
 Limited, along with its holding company, Cairn Energy Plc. (Company''s
 ultimate holding company) has agreed to sell a substantial portion of
 its investment in the Company to Twin Star Holdings Ltd. and Vedanta
 Resources Plc.  This transaction has been approved by shareholders of
 both Cairn Energy Plc. and Vedanta Resources Plc. However, pending
 receipt of certain regulatory approvals, Cairn Energy Plc. continues to
 be treated as the promoter of the Company.
 
 12.  Previous year''s figures have been regrouped where necessary to
 confirm to current year''s classification.