1. Corporate information:
TATA Communications Limited (the Company) was incorporated on 19
March 1986. The Government of India vide its letter No. G-25015/6/86OC
dated 27 March 1986, transferred all the assets and liabilities of the
Overseas Communications Service (OCS) (part of the Department of
Telecommunications, Ministry of Communications) as appearing in the
Balance Sheet as at 31 March 1986 to the Company with effect from 01
April 1986. As per the letter No. G-25015/6/86-OC dated 23 October 2001
of Government of India, Department of Telecommunications, there was no
requirement to register a formal transfer deed or deed of sale in the
matter of such transfer of assets. During the year 2007-08, the Company
changed its name to Tata Communications Limited and the fresh
certificate of incorporation consequent upon the change of name was
issued by the Registrar of Companies, Maharashtra on 28 January 2008.
The authorized capital of the Company increased from Rs 300.00 crores to
Rs 400.00 crores during 2011-12 due to the Ministry of Corporate Affairs
giving effect to the merger of 100% subsidiary VSNL Broadband Limited
into the Company which was approved in December 2007 by the Company and
the Bombay High Court in April 2009.
b. Issued, Subscribed and Paid up:
There was no movement in the Issued, Subscribed and Paid up share
capital of the Company during the current and past five financial
c. Terms/ rights attached to equity shares:
The Company has only one class of equity shares with a face value of Rs
10 per share. Each shareholder of equity shares is entitled to one vote
per share at any General Meeting of Shareholders. The Company declares
and pays dividends in Indian rupees. The dividend proposed by the Board
of Directors is subject to the approval of the shareholders in the
ensuing Annual General Meeting
i. Capital Reserve includes Rs 205.22 crores in respect of foreign
exchange gains on unutilized proceeds from Global Depository Receipts
credited to Capital Reserve Rs 203.70 crores in 2000-01 and Rs 1.52
crores in 2001-02.
ii. Consequent to increasing the stake in Neotel Pty Ltd through VSNL
SNOSPV Pte Ltd., effective 11th April 2011, the Company assessed the
cash flow projection of Neotel operation and designated the loans given
to SNOSPV as a part of net investment in non-integral foreign
operation. Accordingly the Company has accounted for the effects of
revaluation of loans in foreign exchange translation reserve as per AS
- 11 on Accounting for effects of changes in Foreign Exchange Rates'';
An amount of Rs 22.59crores of foreign exchange gain (net of forward
cover loss of Rs 100.80 crores on this loan) has been transferred to
foreign exchange translation reserve.
iii. The Board of Directors of the Company at its meeting held on 31
January 2011 had approved the merger of the Company''s wholly owned
subsidiary, Tata Communications Internet Services Limited (TCISL) with
the Company with effect from 1 April 2010. The Company had obtained the
consent of the shareholders for the merger at the Extraordinary General
Meeting held on 27 April 2011.
In accordance with the final order dated 20 August 2011 of the Bombay
High Court, the financial statements were revised to reflect the merger
of TCISL with the Company effective 01 April 2010.
In accordance with the said Scheme, the Company accounted for the
amalgamation as one in the nature of a merger under the
pooling-of-interest method. Consequently:
- All the assets, debts, liabilities and obligations of TCISL were
vested in the Company with effect from 1 April 2010 and recorded at
their respective book values.
- The net asset value of TCISL as on the date of amalgamation was Rs
15.28 crores as against the investment of the Company of Rs 384.47
crores. The excess of the cost of investment of Rs 369.19 crores was
adjusted against the General Reserve to the extent of Rs 78.24 crores, Rs
0.56 crores against Capital Reserve and Rs 291.51 crores against the
opening balance in Statement of Profit and Loss.
- Consequent to the merger there has been a reduction in the current
tax expense of Rs 37.97 crores and increase in deferred tax benefit of Rs
39.65 crores in the year 2010-11.
i. Secured Debentures
During the year 2008-09, the Company issued Taxable Rated Secured
Non-convertible Redeemable Debentures in demat form for cash at par on
private placement basis aggregating Rs 1,250 crores, IDBI Trusteeship
Services Limited has been appointed as trustee to the debenture issue.
- Nature of Security
Rs 1,000 crores, 11.70% debentures (face value of Rs 1,000,000 each) are
secured by a first legal mortgage and charge on the Company''s immovable
property being the free hold land at Mouje Maharajpura, Gujarat and
Plant and machinery.
Rs 250 crores, debentures (interest ranging from 11.00% to 11.25%, face
value of Rs 1,000,000 each) are secured by a first legal mortgage and
charge on the Company''s free hold land at Perambur Barracks, Chennai
and Plant and machinery.
For facilitating the above redemptions, the Company has created a
Debenture Redemption Reserve of Rs 125.55 crores (2011: Rs 283.47
crores), an amount of Rs 242.08 crores (2011: Rs 244.70 crores) has been
appropriated during the current year.
During the year 4000, 7.74% debenture aggregating Rs 400 crores were
redeemed as per terms of issue and consequently debenture redemption
reserve of Rs 400 crores created to facilitate the redemption of above
debenture has been transferred to General reserve.
I. The Company has an investment of Rs 474.23 crores (2011: Rs 474.23
crores) in equity shares and Rs 139.32 crores (2011: Rs 139.32 crores) in
preference shares of Tata Communications International Pte. Ltd
(TCIPL), Rs 3.29 crores (2011: Rs 3.29 crores) in equity shares and Rs
118.71 crores (2011: Rs 118.71 crores) in preference shares of VSNL
SNOSPV Pte. Ltd (SNOSPV) wholly owned subsidiaries. In the opinion of
the management, having regard to the nature of these subsidiaries''
businesses and future business projections, there is no diminution,
other than temporary in the value of investments despite significant
i. As at 31 March 2012 the proportionate share of pension obligations
and payments of Rs 61.15 crores (2011: Rs 61.15 crores) to the erstwhile
Overseas Communications Service (OCS) employees was recoverable from
the Government of India (the Government). Pursuant to discussions
with the Government, the Company had made a provision of Rs 53.71 crores
(2011: Rs 53.71 crores) resulting in a net amount due from the
Government towards its share of pension obligations of Rs 7.44 crores
(2011: Rs 7.44 crores).
i. Interest receivable includes interest due from subsidiaries of Rs
1.97crores (2011: Rs 10.70 crores) 22. Revenue from Operations for the
current year includes Rs Nil (2011: Rs 25.60 crores) pertaining to
2. The Company had entered into an agreement with effect from 1
January 2007 with one of its customers for carriage of NLD traffic for
a period of two years. In view of disputes between the parties, the
agreement was truncated with effect from July 2008. The matter was
referred to conciliation in the earlier period and an award in favour
of the Company of Rs 29 crores was made leaving the modalities of
settlement to the parties. During the previous year based on the
settlement reached with the carrier, Rs 26.54 crores was recorded in
Revenue from Operations of Rs 2.46 crores was recorded in Other Income.
3. Employee Benefits
i. Defined Contribution Plan - Provident Fund:
The Company makes contributions towards a provident fund under a
defined contribution retirement benefit plan for qualifying employees.
The provident fund is administered by the Trustees of the Tata
Communications Employees'' Provident Fund Trust and by the Regional
Provident Fund Commissioner. Under this scheme, the Company is required
to contribute a specified percentage of payroll cost to fund the
The Rules of the Company''s Provident Fund administered by theTrust
require that if the Board of Trustees are unable to pay interest at the
rate declared for Employees'' Provident Fund by the Government under
para 60 of the Employees'' Provident Fund Scheme, 1952 for the reason
that the return on investment is less or for any other reason, then the
deficiency shall be made good by the Company. Having regard to the
assets of the Fund and the return on the investments, the Company does
not expect any deficiency in the foreseeable future. There has also
been no such deficiency since the inception of the Fund.
Provident fund contributions amounting to Rs 19.05 crores (2011: Rs17.85
crores) have been charged to the Statement of Profit and Loss.
ii. Defined Benefit Plan
The Company makes annual contributions under the Employees Gratuity
scheme to a fund administered by Trustees covering all eligible
employees. The plan provides for lump sum payments to vested employees
at retirement, death while in employment or on termination of
employment of an amount equivalent to 15 days salary for each completed
year of service or part thereof in excess of six months. Vesting occurs
upon completion of five years of service.
The Company reimburses domiciliary and hospitalization expenses not
exceeding specified limits incurred by eligible and qualifying
employees and their dependent family members under the Tata
Communications Employee''s Medical Reimbursement Scheme. The scheme
provides for cashless hospitalization where the claims are directly
settled by the Company.
The Company''s pension obligations relate to certain employees
transferred to the Company from the Overseas Communications Service
(OCS)an erstwhile department of Ministry of Commerce, Government of
India. The Company purchases life annuity policies from an insurance
company to settle such pension obligations. During the year the Company
has incurred a charge of Rs 14.24 crores (2011: Rs 7.00 crores) to meet
the additional pension obligation on account of increase in Dearness
IX. Leave plan and Compensated absences
Eligible employees can carry forward and encash leave on death,
permanent disablement and resignation subject to maximum accumulation
of 300 days.
The liability for leave encashment and compensated absences as at the
year end is Rs 60.02 crores (2011: Rs 40.78 crores).
The estimates of future compensation cost considered in the actuarial
valuation take account of inflation, seniority, promotion and other
4. In January 2008, an amount of Rs 290 crores was paid to the
Department of Telecommunications (DoT) under protest, towards payment
of licence fees, interest and penalty demanded by DoT before issue of
certain licences to the Company. Against this, the Company carried a
provision of Rs 174.15 crores for licence fees and interest thereon
which has been set off against the payment of Rs 290 crores for the
presentation in the financial statements. The Company has filed a
petition in the Honorable Supreme Court of India challenging the
judgment of The Telecom Disputes Settlement Appellate Tribunal (TDSAT)
relating to the computation of licence fee.
Additionally, the Company has also filed a petition with TDSAT
challenging applicability of penal provisions under International Long
Distance (ILD) and National Long Distance (NLD) licence agreements,
whereby DoT claimed penalty and interest on penalty amounting to Rs
115.73 crores (included in aforesaid Rs 290 crores). Consequently, the
amount of Rs115.73 crores was reflected as an asset in the books since
31 March 2009.
During the year 2009-10, TDSAT accepted the Company''s position and
decided in favour of the Company. However, DOT has filed an appeal in
the Honorable Supreme Court of India challenging the judgment of
TDSAT relating to the waiver of penalty and interest on penalty. A
claim of Rs 115.73crores along with interest was raised upon DOT in
financial year 2009-10 based on this TDSAT order, which DOT has
refused. The Company filed an appeal in TDSAT in financial year 2010-11
against this order of DOT which had been allowed in favors of the
Company by TDSAT in financial year 2011-12. Pending implementation of
this order by DOT, the Company had further filed execution petition in
TDSAT in financial year 2011- 12. TDSAT heard the matter and the ruling
5. Segment Reporting
a. Business Segments
The Company''s reportable business segments are Global Voice Solutions
(GVS) and Global Data and Managed Services (GDMS). The composition of
the reportable segments is as follows:
Global Voice Solutions (GVS)
GVS includes international and national long distance voice services
i. Revenues and interconnect charges are directly attributable to the
segments. Space segment utilization charges, rent of landlines and
other network and transmission costs are allocated based on utilization
of satellite and landlines. License fee for GVS and GDMS have been
allocated based on net revenues from these services. Segment result is
segment revenues less segment expenses. Depreciation and certain other
costs cannot be allocated to segments.
ii. Telecommunication services are provided utilizing the Company''s
assets which do not generally make a distinction between the types of
services. As a result, fixed assets are used interchangeably between
segments. Fixed assets and liabilities cannot be allocated to segments.
b. Geographical Segments
The secondary reportable segments are Geographical and revenues have
been allocated to countries based on location of the customers as
* Netherlands include amounts recorded as revenues from Tata
Communication (Netherlands) BV of Rs418.78 crores (2011: Rs167.39
crores). Tata Communication (Netherlands) BV is a Central contracting
party and a transfer pricing administrator for inter-company
transactions between Tata Communications Limited and its international
Pursuant to acquisitions of Tyco Global Network (TGN) and Teleglobe
(TLGB), the Company from 1 April 2006 adopted the Residual Profits
Split Method (RPSM) for recording transactions pertaining to
International Telecommunications Services under its Transfer Pricing
Policy. This policy governs the majority of the transactions between
the Company and its international subsidiaries. The Company''s
subsidiary in the Netherlands is designated as the Central Contracting
Party (CCP) and Transfer Pricing Administrator (TPA).
b. As lessor:
i. The Company has leased under operating lease arrangements certain
Indefeasible Rights of Use (IRU) with gross carrying amount and
accumulated depreciation of Rs 87.02 crores (2011: Rs 84.33 crores) and Rs
39.90 crores (2011: Rs 33.30 crores) respectively as at 31 March 2012.
Depreciation expense of Rs 6.60 crores (2011: Rs 5.50 crores) in respect
of these assets has been charged in the Statement of Profit and Loss
for the Year ended 31 March 2012.
In case of certain lease agreements aggregating Rs 457.45 crores (2011:
Rs 380.85 crores) for the year ended 31 March 2012, the gross block,
accumulated depreciation and depreciation expense of the assets given
on IRU basis cannot be identified as these assets are not exclusively
leased. The lease rentals associated with such IRU arrangements for the
year ended 31 March 2012 amount to Rs 27.95 crores (2011: Rs 10.65
In respect of IRU arrangements, rental income of Rs 34.62 crores (2011:
Rs 17.50 crores) has been recognized in the Statement of Profit and Loss
for the year ended 31 March 2012.
a. The provision for Asset Retirement Obligation has been recorded in
the books of the Company in respect of undersea cables and switches
owned by the Company.
b. Others include amounts provided towards claims made by a creditor
of the Company.
6. Contingent Liabilities and Commitments:
a. Contingent Liabilities:
As at As at
31 March 2012 31 March 2011
i. Guarantees given on behalf of
subsidiaries (Refer 1) 9,304.20 6,493.82
ii. Claims for taxes on income
- Income tax disputes where depar
tment is in appeal against
the Company. 469.93 1,009.60
- Income tax disputes where the
Company has a favorable
decision in other assessment years
for the same issue - 1.79
- Income tax disputes other than above 1,899.35 1,696.91
iii. Claims for other taxes 78.99 123.30
iv. Other claims 425.89 468.59
1. Guarantees given on behalf of subsidiaries:
The guarantees have been provided in the ordinary course of business
and no liability on the Company is expected to materialize in this
2. Significant claims by the revenue authorities in respect of income
tax matters relate to deductions claimed under Section 80 IA of the
Income Tax Act, 1961 from Assessment years 1996-97 onwards and
disallowed by the revenue authorities. The Company has contested the
disallowances and has preferred appeals which are pending.
3. The Company has taken appropriate professional advice in respect of
the claims / appeals and has taken all necessary steps to protect its
interest. Based on expert opinion, no provision is required in respect
of these claims / appeals.
i. Capital Commitments:
Estimated amount of contracts remaining to be executed on capital
account, not provided for and loan commitments to wholly owned
subsidiaries amount toRs 4,395.78 crores (2011: Rs 2,772.94 crores).
ii. Other Commitments:
1. As on 31 March 2012, the Company has issued Letters of Comfort for
the credit facility agreements in respect of various subsidiaries:
Name of the Subsidiary As at As at
31 March 2012 31 March 2011
Tata Communications Transformation
Services Ltd (TCTSL) 30.55 26.76
Tata Communications International
Pte. Ltd (TCIPL) 50.92 44.60
VSNL SNOSPV Ltd 9.97 -
Tata Communications (Netherland) Ltd 509.15 446.00
Tata Communications (Bermuda) Ltd 941.93 669.00
Tata Communications Banking InfraSo
lutions Ltd (TCBIL) 152.00 52.00
The Company has undertaken to the lenders of TCTSL and TCIPL that it
shall retain full management control so long as amounts are due to the
2. The Company has issued a support letter to Tata Communications
International Pte Limited (TCIPL), aggregating Rs 1,866.75 crores (2011:
Rs 1,245.71 crores) for providing financial support enabling, in turn,
TCIPL to issue such support letters to certain subsidiaries with
negative net worth as at 31 March 2012 in various geographies in order
that they may continue as going concerns.
The letters of comfort / support mentioned in 1 and 2 above have been
provided in the ordinary course of business and no liability on the
Company is expected to materialize in these respects
3. During the year 2008-09, in terms of the agreements entered into
between Tata Teleservices Ltd. (TTSL), Tata Sons Ltd. (TSL) and
NTT DOCOMO, Inc. of Japan (Strategic Partner - SP), TSL gave an option
to the Company to sell 36,542,378 equity shares in TTSL to the SP, as
part of a secondary sale of 253,163,941 equity shares effected along
with a primary issue of 843,879,801 shares by TTSL to the SP.
If certain performance parameters and other conditions are not met,
should the SP decide to divest its entire shareholding in TTSL,
acquired under the primary issue and the secondary sale, and should TSL
be unable to find a buyer for such shares, the Company is obligated to
acquire the shareholding of the SP, at the higher of fair value or 50
percent of the subscription purchase price, in proportion of the number
of shares sold by the company to the aggregate of the secondary shares
sold to the SP, or if the SP divests the shares at a lower price pay a
compensation representing the difference between such lower sale price
and the price referred to above.
Further, in the event of breach of the representations and warranties
(other than title and tax) and covenants not capable of specific
performance, the Company is liable to reimburse TSL, on a pro rata
basis, up to a maximum sum of Rs 548.50 crores. The exercise of the
option by SP being dependent on several variables, the liability, if
any, in this respect is remote and indeterminable.
i. Tata Communications International Pte Ltd which is a wholly owned
subsidiary of the Company has investments in 35 subsidiaries as at 31
ii. VSNL SNOSPV Pte Ltd has made the following investments in equity
and preference shares of its subsidiaries: 1,017,363,620 in Neotel Pty
Ltd and 1,343,468,261 in SEPCO Communications Pty Ltd.
7. These financial statements have been prepared to comply with the
Revised Schedule VI of the Companies Act, 1956 and the previous year
figures have been regrouped/ rearranged as necessary to make them
comparable with those of the current year.