Tata Communications

1. We have audited the attached Balance Sheet of TATA COMMUNICATIONS
 LIMITED (the Company) as at 31 March, 2009, 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 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 (CARO)
 issued by the Central Government of India in terms of sub-section (4A)
 of Section 227 of the Companies Act, 1956, we enclose in the Annexure a
 statement on the matters specified in paragraphs 4 and 5 of the said
 Order to the extent applicable.
 
 4.  Attention is invited to note B10 of Schedule 20 relating to the
 amalgamation of the Company’s wholly owned subsidiary, VSNL Broadband
 Limited, with the Company. The excess of the carrying value of the
 investment over the net assets has been adjusted against Securities
 Premium account in terms of the Court Scheme instead of to goodwill as
 required by Accounting Standard 14 - Accounting for Amalgamations, as
 notified under the Companies (Accounting Standard) Rules, 2006.
 Consequently balance in the Securities Premium account is lower by
 Rs.109.87 crores.
 
 5.  Further to our comments in the Annexure referred to in paragraph 3
 above, we report that:
 
 (i) 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;
 
 (ii) 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;
 
 (iii) the Balance Sheet, Profit and Loss Account and Cash Flow
 Statement dealt with by this report are in agreement with the books of
 account;
 
 (iv) in our opinion, the Balance Sheet, Profit and Loss Account and
 Cash Flow Statement dealt with by this report, read with our comment in
 paragraph 4 above, comply with the accounting standards referred to in
 sub-section (3C) of Section 211 of the Companies Act, 1956;
 
 (v) 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:
 
 (a) in the case of the Balance Sheet, of the state of affairs of the
 Company as at 31 March, 2009;
 
 (b) in the case of the Profit and Loss Account, of the profit for the
 year ended on that date; and
 
 (c) in the case of the Cash Flow Statement, of the cash flows for the
 year ended on that date.
 
 (vi) on the basis of written representations received from the
 directors, as on 31 March, 2009, and taken on record by the Board of
 Directors, we report that none of the directors is disqualified as on
 31 March, 2009 from being appointed as a director in terms of clause
 (g) of sub-section (1) of Section 274 of the Companies Act, 1956.
 
                                           For S. B. BILLIMORIA & CO.
                                               Chartered Accountants
                                                          P.R.RAMESH
                                                             Partner
                                                Membership No: 70928
 
 Mumbai, 26 May, 2009
 
 ANNEXURE TO THE AUDITORS REPORT
 
 (Referred to in paragraph 3 of our report of even date)
 
 (i) (a) The Company has maintained proper records showing full
 particulars including quantitative details and situation of fixed
 assets.
 
 (b) According to the information and explanations given to us, the
 fixed assets were physically verified by the Management in accordance
 with the programme of verification, which in our opinion, provides for
 physical verification of all fixed assets at reasonable intervals
 having regard to the size of the Company and nature of its assets. The
 differences identified pursuant to the physical verification have been
 duly adjusted in the books of account. Having regard to the size of the
 operations of the Company and on the basis of explanations received, in
 our opinion, the net unadjusted differences were not significant.
 
 (c) The fixed assets disposed off during the year, in our opinion, do
 not constitute substantial part of the fixed assets of the Company and
 such disposal has, in our opinion, not affected the going concern
 status of the Company.
 
 (ii) (a) As explained to us, the stocks of stores and spares have been
 verified during the year by the Management in accordance with the
 programme of verification. In our opinion, the frequency of
 verification is reasonable.
 
 (b) In our opinion and according to the information and explanations
 given to us, the procedures of physical verification of stocks followed
 by the Management are reasonable and adequate in relation to the size
 of the Company and the nature of its business.
 
 (c) In our opinion and according to the information and explanations
 given to us, the Company is maintaining proper records of inventory.
 The discrepancies noticed on verification between the physical stocks
 and the book records were not material having regard to the size of the
 operations of the Company.
 
 (iii) According to the information and explanations given to us, the
 Company has not taken or granted any loans secured or unsecured from or
 to companies, firms or other parties covered by the register maintained
 under Section 301 of the Companies Act, 1956.
 
 (iv) In our opinion and according to the information and explanations
 given to us, there is adequate internal control system commensurate
 with the size of the Company and the nature of its business for the
 purchase of inventory and fixed assets. The internal control systems
 for rendering of certain enterprise data services need to be suitably
 strengthened. Except for the foregoing, we have not observed any
 continuing major weakness in the internal control systems.
 
 (v) (a) To the best of our knowledge and belief and according to the
 information and explanations given to us, we are of the opinion that
 the transactions that need to be entered into the register maintained
 under Section 301 of the Companies Act, 1956 have been so entered.
 
 (b) In our opinion and having regard to our comments in paragraph (v)
 (a) above, and according to the information and explanations given to
 us, transactions made in pursuance of contracts or arrangements entered
 in the register maintained under Section 301 of the Companies Act, 1956
 and exceeding the value of Rupees five lakhs in respect of any party
 during the year have been made at prices which are reasonable having
 regard to prevailing market prices at the relevant time, where such
 market prices are available.
 
 (vi) In our opinion and according to the information and explanations
 given to us, the Company has not accepted deposits from the public to
 which the provisions of Section 58A, 58AA or any other relevant
 provisions of the Companies Act, 1956 are applicable during the period
 covered by our audit report.
 
 (vii) In our opinion, the Company has an internal audit system
 commensurate with the size and nature of its business.
 
 (viii) We have broadly reviewed the books of account and records
 maintained by the Company relating to telecommunication activities
 pursuant to the Rules made by the Central Government for the
 maintenance of cost records under Section 209 (1) (d) of the Companies
 Act, 1956 and, are of the opinion that prima facie, the prescribed
 accounts and records have been made and maintained. We have not,
 however, made a detailed examination of the records with a view to
 determining whether they are accurate or complete.
 
 (ix) (a) According to the information and explanations given to us, the
 Company is generally regular in depositing with appropriate authorities
 undisputed statutory dues including provident fund, investor education
 and protection fund, employees’ state insurance, income tax, sales tax,
 wealth tax, service tax, customs duty, excise duty, cess and other
 material statutory dues applicable to it.
 
 (b) According to the information and explanations given to us, no
 undisputed amounts payable in respect of provident fund, investor
 education and protection fund, employees’ state insurance, income tax,
 wealth tax, sales tax, service tax, customs duty, excise duty and cess
 were in arrears, as at 31 March, 2009 for a period of more than six
 months from the date they became payable.
 
 (c) According to the information and explanations given to us, details
 of dues of sales tax which have not been deposited on account of any
 dispute are given below:
 
 Particulars     Period to     Forum where        Amount
                 which the    the dispute         (Rs. in
                 amount       is pending          crores)
                 relates
 
 WBST            2005-06     Jt. Commissioner      48.86
 
 CST             2005-06     Jt. Commissioner       0.78
 
 (x) The Company does not have accumulated losses. The Company has not
 incurred cash losses during the financial year covered by our audit and
 the immediately preceding financial year.
 
 (xi) In our opinion and according to the information and explanations
 given to us, the Company has not defaulted in repayment of dues to a
 financial institution, bank or debenture holder.
 
 (xii) The Company has not granted any loans and advances on the basis
 of security by way of pledge of shares, debentures and other securities
 during the year.  Accordingly, the provisions of clause 4 (xii) of the
 Companies (Auditor’s Report) Order, 2003 are not applicable to the
 Company.
 
 (xiii) In our opinion, the Company is not a chit fund or a nidhi/mutual
 benefit fund/society. Accordingly, the provisions of clause 4 (xiii) of
 the Companies (Auditor’s Report) Order, 2003 are not applicable to the
 Company.
 
 (xiv) In our opinion and according to the information and explanations
 given to us, the Company is not dealing in or trading in shares,
 securities, debentures and other investments. Accordingly, the
 provisions of clause 4 (xiv) of the Companies (Auditor’s Report) Order,
 2003 are not applicable to the Company.
 
 (xv) 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 loans taken by others from banks or financial
 institutions are not prima facie prejudicial to the interest of the
 Company.
 
 (xvi) To the best of our knowledge and belief and according to the
 information and explanations given to us, in our opinion, term loans
 availed by the Company were prima facie applied by the Company during
 the year for the purpose for which the loans were obtained.
 
 (xvii) According to the information and explanations given to us, and
 on an overall examination of the Balance Sheet of the Company, funds
 raised on short-term basis have prima facie not been used during the
 year for long-term investment.
 
 (xviii)According to the information and explanations given to us, the
 Company has not made any preferential allotment of shares to parties
 and companies covered in the register maintained under Section 301 of
 the Companies Act, 1956.
 
 (xix) In our opinion and according to the information and explanations
 given to us, the Company has issued secured debentures during the
 period covered by our report and securities/ charges have been created
 in respect of debentures issued.
 
 (xx) During the period covered by our audit report, the Company has not
 raised any money by way of public issue.
 
 (xxi) To the best of our knowledge and belief and according to the
 information and explanations given to us, no material instances of
 fraud on or by the Company has been noticed or reported during the
 course of our audit.
 
                                        For S. B. BILLIMORIA & CO.
                                             Chartered Accountants
                                                        P.R.RAMESH
                                                           Partner
                                              Membership No: 70928
 
 Mumbai, 26 May, 2009