Himachal Futuristic Communication

As at          As at
                                         31.03.2009      31.03.2008
                                               (Rs)            (Rs)
 
 1 Contingent Liabilities not
   provided for in respect of: 
 
 
 (a) Unexpired Letters of Credit          26,170,384     34,679,788 
 (margin money paid Rs.2,617,038 
 Previous year Rs.4,554,544)
 
 (b) Guarantees given by banks on        440,057,738    834,176,692
 behalf of the Company (margin money
  kept by way of fixed deposits 
 Rs. 123,704,763 Previous year 
 Rs. 153,700,542)
 
 (c) Counter Guarantees given by
  the Company to the financial
 institutions/banks for                7,225,671,621*  7,225,671,621 
 providingguarantees on behalf of 
 companies promoted by the Company.
 (margin money kept by the banks by
 way of fixed deposits Rs. Nil;
 Previous year Rs. Nil)
 
 * This excludes Companys counter guarantees of Rs.56.70 crore in
 respect of guarantees provided by the banks and institutions on behalf
 of HFCL Bezeq Telecom Ltd. for bid bonds to Department of
 Telecommunications (DoT) towards tender for operation of basic
 telephone services as the guarantees have already expired and the
 Honble Delhi High Court vide its order dated 19.09.97 granted
 permanent injunction restraining the DoT from invoking the said
 guarantees. The appeal filed by Do against this also stands dismissed.
 The DoT has filed application for restoration of appeal before the
 Double Bench of the Honble High Court of Delhi which has been allowed
 and matter is now pending for decision.
 
 (d) Arrears of Dividend on Cumulative 
 redeemable preference shares (net
 of advances)                            596,181,325      543,856,325
 
 2 Estimated amount of contracts          18,019,868       18,318,194
 remaining to be executed on capital
 account and not
 provided for (net of advances)
 
 * As the Company has no profits to pay remuneration to managerial
 personnels, the appointment of and remuneration to the managerial
 personnels required approval of Central Government. Pending the
 approval of the Central Government, tbi remuneration of Rs.16,572,014
 (Previous year Rs. 18,204,389) has been paid to the managerial
 personnels during the year 2008-09. Accordingly amount paid
 aggregating to Rs.34,776,403(Previous year Rs. 18,204,389) is shown as
 recoverable from them as at 31st March,2009.
 
 3 Interest income from loans and advances and others is net of interest
 charges amounting to Rs.l,014,949/-(Previous year Rs.782,875/ -) on
 loans raised and utilised for the purpose.
 
 4 a The Company had approached its lenders viz. Banks and Financial
 Institutions for financial restructuring and a financial restructuring
 package, has been approved under the Corporate Debt Restructuring (CDR)
 mechanism by the CDR Empowered Group of lenders vide letter dated 6th
 April ,2004. Subsequently the CDR Empowered Group in its meeting held
 on 8th June, 2005 has approved modifications to the aforesaid CDR
 package with the cut off date as 1st April 2005 and communicated to the
 company vide their letter No. BY CDR(ALB)/No 404 dated 24.06.2005. The
 modification in the CDR package include, inter-alia, reduction of
 interest rate on loans with effect from new cut off date,
 re-schedulement of repayment of loans and Cumulative Redeemable
 Preference Shares (CRPS) and conversion of certain loan amounts into
 Zero Coupon Premium Bonds (ZCPBs) . The said CDR package also
 stipulates conditions to be complied with by the Company and
 arrangement of additional infusion of working capital from existing or
 new lenders.  
 
 b The Company has complied with most of the conditions as stipulated in
 CDR package and Master Restructuring Agreement (MRA) has been signed
 with the lenders. Pursuant to the modified CDR package :
 
 i) Interest to banks and financial institutions has been accounted for
 at the rates specified in the said package.
 
 ii) The Cumulative Redeemable Preference Shares (CRPS) aggregating to
 Rs. 805,000,000 shall be. redeemed at the rate of 25% and 75% of the
 face value in the financial years ending 31st March 2018 and 31st
 March, 2019, respectively and will carry the coupon rate of 9% from old
 cut off date till new cut off date and 6.50% from new cut off date.
 (Also refer Note no.8(d) below)
 
 iii) The Company has issued 23,600,000 and 8,318,000 Zero Coupon
 Premium Bonds (ZCPBs) of Rs.100 each on 30th October, 2004 and 8th
 October, 2005 respectively in lieu of the part of term loans and
 debentures from financial institutions and banks. ZCPBs are to be
 redeemed in 48 monthly installments, from 30th April 2011 and ending
 31st March 2015 on ballooning basis to ensure yield of 8.5% p.a. on
 simple interest basis by way of premium payable in 36 monthly interest
 free installments commencing from 30th April, 2015 till 31st March,
 2018.
 
 iv) Secured and unsecured working capital loans from banks amounting to
 Rs. 315,000,000 and Rs. 76,405,937 respectively have been converted
 into working capital term loans to be repaid in 48 monthly
 installments, on ballooning basis, from 30th April 2011 and ending 31st
 March 2015 to ensure yield of 8.5% p.a.on simple interest basis.
 
 v) The outstanding principal amount of secured and unsecured term loans
 (after conversion into OFCDs and ZCPBs) amounting to Rs. 1,756,819,801
 (Previous year Rs.1,756,819,801) and Rs. 131,594,949 (Previous year Rs.
 131,594,949) respectively from financial institutions and banks have
 been rescheduled so as to be repaid on ballooning basis in monthly
 installments commencing from 30th April, 2007 till 31st March 2013. The
 installments fallen-due/repayable during the year amounted to
 Rs.89,204,858 (Previous year Rs.61,927,498) and Rs. 6,705,512 (Previous
 year Rs.4,190,330) which have not been paid respectively for Secured
 and unsecured loans.
 
 vi) Funded Interest Term Loan (FITL) amounting to Rs.889,683,307
 (Previous year Rs.871,947,456) is repayable in twenty four monthly
 installments commencing from 30th April 2017 till 31st March 2019 and
 shall not carry any interest.
 
 vii) The Company is required to open and operate Trust and Retention
 Account and the rights, title and interest in all bank accounts have to
 be assigned to the lenders by way of first ranking security interest.
 
 viii) The Company has to create securities as stipulated by the CDR
 Empowered Group.
 
 c Due to continued cash losses and very tight liquidity conditions, the
 company could not meet its interest and repayment obligations towards
 its lenders under CDR package its over due amount towards such lenders
 as on 31st March, 2009 is Rs. 556,912,155 including interest Rs.
 394,883,957/-. However the company is in continuous discussions with
 lenders in respect of such default / possibility of further
 restructuring /modification in the CDR package in view of this, the
 company does not expect withdrawal of any relief.
 
 d Some of the Cumulative Redeemable Preference Share (CRPS)
 shareholders have disputed the modified terms of redemption and rate of
 dividend as per CDR package on the ground that they have not agreed to
 any of the restructuring granted by CDR empowered group and hence
 original terms and conditions of 12% CRPS continues to be in force and
 accordingly are insisting for redemption and dividend as per the
 original terms of the issue of CRPS. The management has requested the
 said CRPS shareholders to accord their approval to revised package in
 view of the present financial position of the company. One of the
 shareholders, has, however filed case against the company for recovery
 which is being contested.
 
 e The company is in process of reconciliation of balances with the
 lenders i.e. financial institutions and banks. Adjustments, if any, on
 account of interest/ principal will be made when the same are confirmed
 by them.
 
 5 In terms of the modified CDR package, Company has to pay interest on
 term loans on ballooning basis over the period 2006 to 2013 at the
 ballooning rates of interest from 2% to 15.5% p.a. . The Company
 accounts for interest at the rate it is required to pay during the
 respective year in terms of the aforesaid package on monthly rests for
 this year, in place of @ 8.50% p.a. i.e. on YTM basis. Had the interest
 been provided for on YTM basis, the loss for the year would have been
 lower by Rs 88,862,684/- and the accumulated debit balance in the
 Profit and Loss Account would have been higher by Rs.218,951,740/-.
 
 6 Advances recoverable in cash or in kind or for value to be received
 includes an amount of Rs.22,170,704 (Previous year Rs.22,170,704) on
 account of work contract undertaken by the Company which was terminated
 by the customer on the ground of non completion in the agreed time. The
 Company had disputed the same and took the dispute in arbitration for
 decision. The Arbitral Tribunal has given the award in favour of the
 Company. However, the other party has appealed against the award in the
 Honble High Court at Delhi which is still pending for decision by the
 High Court. Pending final outcome of the appeal, the above amount is
 shown under the head advances recoverable and the loss, if any, arising
 therefrom shall be adjusted/accounted for on receipt of the order of
 the High Court.
 
 7 Pursuant to the disinvestment by the Government of India, the
 Company had acquired 1,110,000 equity shares of Rs.100/- each of HTL
 Limited representing 74% of its equity capital at total consideration
 of Rs. 550,000,000 in terms of Shareholders Agreement dated 16.10.2001.
 The above consideration paid by the Company is subject to post closing
 adjustments on account of difference in net worth of HTL Limited as on
 31.03.2001 and as on the date of purchase of shares in terms of Share
 Purchase Agreement dated 16.10,2001.The Company has submitted its claim
 on account of Closing Date Adjustment to the Government in respect of
 such reduction in net assets of HTL Limited which has not been settled
 by the Government. Due to this, the Company has invoked the provisions
 of the Share Purchase Agreement for settlement of dispute by
 Arbitration. The Honble Arbitral Tribunal has since given the award in
 favour of the company on 10th October, 2007 upholding the claim of the
 company on account of the above to the extent of Rs. 550,000,000/- and
 interest from the date of award. Since the Government of India has gone
 in appeal against the above arbitral award which is yet to be decided
 by the Honble High Court, no adjustment has been made in the accounts
 in respect of above award.  It shall be made as and when the appeal is
 decided finally.
 
 8 The Company had made a payment of Rs.113,375,183 to certain
 cumulative preference shareholders as per contractual obligations in
 the earlier years. The said amounts paid have been treated as
 advances to be adjusted against future expected liability of dividend
 on cumulative preference shares.
 
 9 In the previous year Company had inadvertently sold 1,500,000,
 equity share of Rs.10/ each of HFCL Infotel Ltd, which were locked- in-
 period in terms of BSE letter no. DCS/SMG/RCG/2005/511li6 dated
 14/03/2006, at a consideration of Rs.20/- per share and accounted for
 profit of Rs. 15,000,000/- accordingly. The transaction has been
 reversed during the year and the profit accounted for in pervious year
 has been reversed during the year under prior period, as the said
 shares could not be transferred.
 
 10 During the year the Company has paid Guarantee contract/obligation
 amounting to Rs. 107,405,392/-. It includes Rs.94,673,033/- on account
 of compensation to its customers/ invocation of performance bank
 guarantees due to non fulfillment of contractual obligations in terms
 of work orders and Rs. 12,732,359/- towards obligation payments ( as
 Corporate guarantor ) to the lenders of promoted companies against
 their over dues.
 
 11 In earlier year, one of the banks has transferred 30,000,000 equity
 shares of Rs.10/- each of HFCL Infotel Ltd, which were pledged with
 them as security against loan, in their name as beneficial owner and
 adjusted their loan amount against the value of those shares.  The
 difference between the cost of the said securities and loan outstanding
 has been accounted for in earlier year as loss on sale of investment.
 Adjustment, if any, on account of actual realisation of securities by
 the bank shall be made as and when the same are disposed off.
 
 12 The Accumulated losses of the company as at the end of the financial
 year have resulted in erosion of more than fifty per cent of its peak
 net worth during the immediately preceding four financial years. The
 Company, has reported the fact of such erosion to the BIFR and such
 erosion was considered by the shareholders in the Extra Ordinary
 General Meeting held on 25/02/2008, in compliance with the provisions
 of section 23 of the Sick Industrial Companies (Special Provision) Act,
 1985.
 
 13 Sundry debtors include debtors outstanding for more than two years
 amounting to Rs. 1,584,058,706/- after assignment to third party and
 provisioning. The Company is in continuous process of working out
 different modalities of recovery for its remaining long outstanding
 debtors. Pending outcome of such exercise, provision of Rs.
 1,112,043,706/- made during the year, is considered adequate in the
 opinion of the management.
 
 14 Excise duty on sales has been deducted from gross sales on the face
 of profit and loss account and Tncrease/(decrease) in excise duty on
 finished goods has been shown under the head  manufacturing and other
 expenses in schedule 17 as required by Accounting Standard - 9,
 Revenue Recognition read with Accounting Standard Interpretation 14
 (Revised) Disclosure of Revenue from Sales Transactions.
 
 15 During the year, Company has recognised the following amounts in the
 financial statements as per Accounting Standard 15 (Revised) Employees
 Benefits issued by the ICAI :
 
 b) Defined Benefit Plan
 
 The employees gratuity fund scheme managed by HDFC Standard Life
 Insurance Company Limited a defined benefit plan. The present value of
 obligation is determined based on actuarial valuation using the
 Projected Unit Credit Method, which recognises each period of service
 as giving rise to additional unit of employee benefit entitlement and
 measures each unit separately to build up the final obligation and the
 obligation for leave encashment is recognised in the same manner as
 gratuity.
 
 Note-1: The estimates of rate of escalation in salary considered in
 actuarial valuation, take into account inflation, seniority, promotion
 and other relevant factors including supply and demand in the
 employment market. The above information is certified by the actuary.
 
 Note-2: The discloser requirements and accounting treatment as required
 under Accounting Standard 15 (Revised 2005) are being first time
 implemented during the previous year accordingly the difference
 amounting to Rs.55,26,287/- between existing provisions for employees
 benefits (Rs.92,61,197/-, as per erstwhile company policy) and
 provision for employees benefits in terms of AS-15(R) as at 01/04/ 2007
 (Rs. 1,47,87,484/-), have been added with accumulated Losses as at
 01/04/2007.
 
 16 In accordance with the Accounting Standard (AS-28) on-Impairment of
 Assets the management has appointed an outside agency for conducting
 an exercise of identifying the assets that may have been impaired, if
 any. Since the exercise still in process,- the effect of diminution in
 value of assets due to impairment if any shall be given in the accounts
 upon such determination.
 
 17 Balances of some of the sundry debtors, creditors, lenders Joans and
 advances are subject to confirmations from the respective parties and
 consequential adjustments arUiBg from reconciliation, if any. The
 Management, however is of the view that there will be no material
 adjustments in this regara.,
 
 18 As required hy Accounting Standard 18 Related Party Disclosures A.
 Name of related parties and description of relationship:
 
 Relationship                           Name of Related Party
 
 (a) Subsidiaries:                     
 
 Name of Related Party
 
 HFCL Infotel Ltd.
 HTLLtd.
 Moneta Finance Pvt. Ltd.
 Infotel Tower Infrastructure Pvt. Ltd.
 
 (b) Associates: 
 
 HFCL Bezeq Telecom Ltd
 
 HFCL Dacom Infochek Ltd (HDIL)
 
 Infotel Business Solutions Ltd.( formerly known as HFCL
 
 Internet Services Ltd)
 
 HFCL Kongsung Telecom Ltd
 
 HFCL Satellite Communications Ltd
 
 Exicom Tele-systems Ltd. (formerly known as Himachal
 
 Exicom Communications Ltd )
 
 The Investment Trust of India Limited
 
 Microwave Communications Ltd.
 
 Pagepomt Services (India) Pvt. Ltd.
 
 Westel Wireless Ltd
 
 WPPLLtd.
 
 (c) Key management personnel : 
 
 Mr. Mahendra Nahata
 Dr. RMKastia
 Mr. Arvind Kharabanda
 
 (d) Relatives of key management personnel : Mrs. Kamala Kastia
 
 (with whom transactions have taken place during the year)
 
 Note : Related party relationship is as identified by the Company and
 relied upon by the auditors.
 
 (b) Secondary segment information
 
 The Company caters mainly to the needs of Indian market and the export
 turnover being 3.77% (Previous year 1.16%) of the total turnover of the
 Company, there are no reportable geographical segments.
 
 19.  Previous years figures have been regrouped/reclassified wherever
 necessary and the figures have been rounded off to the nearest rupee.
 
 20 Additional information pursuant to Paragraphs 3,4C and 4D of Part-II
 of the Schedule VI to The Companies Act, 1956 (Previous years figures
 are in brackets unless otherwise shown in separate columns).