31 March March 2013 Authorised 10,000,000,000 (previous year: 10,000,000,000) equity shares of Rs. 10/- each 1,000,000 1,000,000

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Benedict Mosley
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1 3. SHARE CAPITAL Authorised 10,000,000,000 (previous year: 10,000,000,000) equity shares of Rs. 10/- each 1,000,000 1,000,000 Issued, subscribed and fully paid up 750, ,000 1,750,000 1,750,000 5,000,000,000 (previous year : 5,000,000,000) equity shares of Rs. 10/- each 500, , , ,000 1,250,000 1,250,000 a) Reconciliation of number of shares 31 March March 2013 Number of shares Amount Number of shares Amount Equity shares Balance at the beginning/end of the year 5,000,000, ,000 5,000,000, ,000 Preference shares Balance at the beginning/end of the year 7,500,000, ,000 7,500,000, ,000 b) Details of shares held by shareholders having more than 5% shares in the Company Equity shares The Central Government of India (No.) 4,999,998,400 4,999,998,400 Holding (%) Preference shares The Central Government of India (No.) 7,500,000,000 7,500,000,000 Holding (%) a) Out of the shares issued by the Company, 4,999,998,400 (previous year 4,999,998,400) equity shares of Rs. 10/- each and 7,500,000,000 (previous year 7,500,000,000) preference share of Rs. 10/- each were allotted as fully paid up for consideration other than cash in the financial year and respectively. The President of India through its nominees is holding 1,600 shares of Rs. 10/- each as subscribers to the Memorandum and Articles of association. b) The Company for the period of five years immediately preceding the date of Balance Sheet has not : i) Allotted fully paid up shares by way of bonus shares. ii) Brought back any class of shares. c) d) 7,500,000,000 (previous year: 7,500,000,000) 9% non-cumulative preference shares of Rs.10/- each 7,500,000,000 (previous year: 7,500,000,000) 9% non-cumulative preference shares of Rs.10/- each Vote of members : Every member present on person and being a holder of equity share shall have one vote and every person either as a general proxy on behalf of a holder of equity share, shall have one vote or upon a poll, every member shall have one vote for every share held by him. On poll, the voting rights of holder of equity share shall be as specified in Section 87 of the Companies Act, The holder of preference share have a right to vote on resolution placed before the Company which directly affects the rights attached to their preference shares and subject to aforesaid, the holders of preference shares shall in respect of such capital be entitled to vote on every resolution placed before the Company at a meeting if the dividend due on such capital or any part of such dividend remains unpaid in respect of an aggregate period of not less than two years preceding the date of commencement of the meeting and where the holders of any preference shares have a right to vote as aforesaid on any resolution every such member personally present shall have one vote and on a poll his voting right in respect of such preference share bears to the total paid up equity capital of the Company. Division of profit : The profit of the Company, subject to any special rights relating thereto created or authorised to be created by the articles subject to the provisions of the articles and also subject to the provisions of section 205(2A) of the Companies Act, 1956 and, regarding transfer of the amount to reserve of the Company, shall be divisible among the members with the approval of the President of India, in the proportion of the amount of capital paid or credited as paid-up on the shares held by them respectively. 9

2 4. RESERVES AND SURPLUS Capital reserves [refer note 28] Balance at the beginning of the year 4,023,839 4,026,257 Add: Waiver of loan from the Government of India [note a] 98,318 - Add/(Less): Assets identified and accounted for (2,340) (2,388) Add/(Less): Liabilities identified and accounted for 53 (30) Balance at the end of the year 4,119,870 4,023,839 General reserves 430, ,084 Contingency reserves [note b] 200, ,000 Surplus/ (Deficit) in Statement of Profit and Loss Balance at the beginning of the year 422,317 1,210,761 Add: Profit/(Loss) for the year (701,976) (788,444) Balance at the end of the year (279,659) 422,317 4,470,295 5,076,240 a) During the current year, the loan from the Government of India amounting to Rs. 98,318 lacs has been waived vide letter no.1-43/2008-b, dated 11 April 2014 and the same has been taken to the capital reserve created at the time of formation of the Company. b) The contingency reserve was created in the financial year by appropriation of profits to meet various contingencies that may arise in future, based on the decision made by the board of directors. 5. DEFERRED GOVERNMENT GRANT Grant in aid 33,037 37,633 33,037 37,633 Note : a) Since , an amount of Rs. 61,332 lacs (Rs. 17,000 lacs for wireline and Rs 44,332 lacs for wireless services) has been received from Department of Information Technology (DIT) for providing wireline and wireless connectivity to 41,500 common service centers. Since this grant cannot be linked to creation of any particular asset; as telecom network is a seemless entity, the same is being disclosed under 'Grant in aid' as a Deferred Grant in accordance with the notified Accounting Standard-12 on 'Accounting for Government Grants' and is being written back in the Statement of Profit and Loss by applying the depreciation rate on Base Transceiver Station (i.e %). 6. LONG-TERM BORROWINGS Unsecured loans - Loan from the Government of India [note a] - 98,318 - Government of India (non refundable and non interest bearing ) [note b] 72,000 72,000 72, ,318 a) Loan from the Government of India The notional loan of Rs. 750,000 lacs, which is a part of the capital structure of the Company, had a moratorium on repayment of the principal and interest thereon up to 31 March The Company has been representing since long to the Government of India for reduction in the rate of interest and withdrawal of terms and conditions towards penal interest and prepayment charges. However, since the Ministry of Finance, Government of India has not agreed to extend any relief in the form of reduction of interest rate on the loan, as informed by the DoT through letter No. I B, dated 21 June 2011, the difference of Rs. 18,868 lacs between the books of the Company and DoT in respect of outstanding principal amount of the loan has been accounted in the books of the Company in the financial year However, during the current year, this outstanding loan from the Government of India and the interest thereon has been waivedoff by the Government (Department of Telecommunication) vide its letter no. 1-43/2008-B, dated 11 April 2014, consequently the principal amount of loan has been credited to capital reserves and the outstanding interest provision has been written back. 10

3 b) Non-refundable and non-interest bearing loan from Government of India The Government of India has sanctioned a non-refundable and non-interest bearing advance of Rs 72,000 lacs as budgetary support for the ongoing Village Panchayat Telephones (VPT) program of the Company vide letter no.25-1/2001-sat/pp(pt), dated 13 January The amount has already been expensed off for the purpose for which it was sanctioned. The Company has sought approval from DoT for writing back this loan, being non-refundable in nature. 7. OTHER LONG-TERM LIABILITIES Deposits from customers and others Security deposits 38,289 38,430 After connection deposits 291, , , , LONG-TERM PROVISIONS Provision for employee benefits Post retirement benefit of serving employees [refer note 30.2] 783, , , , SHORT TERM BORROWINGS Loan from banks (unsecured) [note a] 373, , , ,114 Note: a) Short term unsecured loans, repayable on demand, comprise of the following : i) Rs. 50,000 lacs (previous year ) from Canara Bank carries an interest rate of 10.20% p.a. (floating) with monthly rests. ii) Rs. 150,000 lacs (previous year ) from Bank of India carries an interest rate of 10.20% p.a. (floating) with monthly rests. iii) Rs. 173,853 lacs (previous year Rs. 169,809 lacs) from Union Bank of India carries an interest rate of 10.50% p.a. (floating) with monthly rests. iv) Rs.Nil ( Previous year Rs. 86,305 lacs) from Corporation bank which carries an interest rate of 10.50% p.a. (floating) with monthly rests. 10. TRADE PAYABLES Sundry creditors [note a] 744, ,057 Claims payable to Mahanagar Telephone Nigam Limited (MTNL) [note b] 99,602 97,747 Claims payable on interconnection usage charges (IUC) 24,715 49,120 Satellite Based Broadband (SBB) and access network services 1, Claims payable on Universal Service Obligation (USO) towers Internet data center (IDC) , ,092 a) Thirty one circles (previous year twenty seven) of the Company has identified Micro, Small and Medium Enterprises under the Micro, Small and Medium Enterprises Development Act, 2006 (MSMED Act). The required information in terms of section 22 of MSMED Act to the extent available in respect of thirty one circles (previous year twenty seven circles) are given below : b) Particulars The principal amount due to suppliers 131 The amount of interest paid by the buyer in terms of section 16 of the MSMED Act, 2006 The amount of interest due and payable for the period of delay in making payment The amount of interest accrued and remaining unpaid at the end of each accounting year The amount of further interest remaining due and payable even in the succeeding years as per Section 23 of MSMED Act, 2006 An IUC agreement is being finalised between the Company and MTNL in the current year. Till the finalisation of the agreement interconnect charges are based on the rates prescribed by Telecom Regulatory Authority of India (TRAI) in IUC regulation. The net claim receivable/payable as on 31 March 2014 from MTNL is subject to confirmation and reconciliation. 11

4 11. OTHER CURRENT LIABILITIES Interest accrued but not due on bank loan Interest accrued and due on the Government loan [refer note 6(a)] - 50,570 Advances received from customers and others 32,659 36,730 Advance received from Defense telecom network project (net) 12,394 13,962 Advance received from Bharat Broadband Nigam Limited (net) 22,568 13,146 Deposits from customers and others 101, ,159 Income received in advance against service 204, ,818 Claims payable to DoT [refer note 32] 39,109 47,207 Claims payable to other Government departments 9,553 9,286 Statutory dues - Tax deducted at source (TDS) 16,010 13,727 - Service tax (net) 44,044 47,835 - Employees' provident fund (EPF) 2,275 1,757 License fee, spectrum charges and transponder charges payable 33,614 24,213 Payable for revised wages Liability towards employees 22,642 22,028 Liability towards subscribers 19,222 16,395 Liability towards construction account 34,780 25,164 Liability towards services and others 86,888 76, , , SHORT-TERM PROVISIONS Provision for : - Wealth tax Leave encashment of retired employees 2,742 2,525 - Gratuity [refer note 30.2] 6,435 7,187 - Post retirement benefit of serving employees [refer note 30.2] 57,893 43,082 67,459 53,184 This space has been intentionally left blank 12

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6 14. NON-CURRENT INVESTMENTS (At cost, unquoted, non-trade) 20,000,000 (previous year 20,000,000) 7% redeemable cumulative Preference shares of Rs. 100/- each fully paid in Indian Telephone 20,000 20,000 Industries (ITI) Limited (A Government of India owned Company) [note a] Investments in retirement benefit plan [note 30] 698, , , ,511 Note : a) All the five installments of Rs. 4,000 lacs each are overdue for redemption of 7% redeemable cumulative preference shares in respect of investment in M/s ITI Limited at the end of the year and no dividend has been received till date. ITI Limited will redeem preference shares to the Company immediately on release of Financial Assistance by the Government of India to ITI as a part of revival package. Hence, no provision for the aforesaid investment is made in the books of accounts of the Company. 15. DEFERRED TAX ASSETS (net) Deferred tax assets Provision for bad and doubtful debts 123, ,336 Unabsorbed depreciation 259, ,055 Provision for leave encashment 98,412 99,525 Provision for decommissioned assets, wage revision, etc. 6,606 14,485 Others 15,076 15,126 A 502, ,527 Deferred tax liabilities Depreciation 461, ,829 Others 17,368 17,368 B 479, ,197 A-B 23,773 13,330 a) The deferred tax has been dealt with in accordance with the contention of the Company before the tax authorities. The depreciation has been calculated on the book value of assets taken over from DoT, contrary to the Income Tax Department's contention of treating capital reserve as relief/ grant/ subsidy deductable from book value of assets.the Company contends that the capital reserve arising out of the capital structure at the time of incorporation of the Company is not in the nature of financial relief and hence not to be reduced from the value of fixed assets. According to the Company s contention, the depreciation provided in the books on the value of assets without deducting the amount involved in capital reserve is admissible in income tax. The stand of Company was upheld by the Hon'ble High Court of Delhi and the income tax department has not contested against this yet in the higher court. The Company is recognising deferred tax assets/liabilities accordingly. b) The Company, being a Company providing telecommunication services is eligible to claim deduction under Section 80 IA of the Income Tax Act, 1961 with respect to 100 % of the profits and gains derived from this business for the first five years and thereafter at 30% of the profits for the second five years (referred to as the Tax Holiday Period). The Company has opted for tax holiday period from financial year and the period ends in the previous financial year c) d) In accordance with Accounting Standard Interpretation (ASI)-3 issued by the Institute of Chartered Accountants of India, the deferred tax provision in respect of timing differences which originates and gets reversed during the tax holiday period have not been recognised. Deferred tax in respect of timing differences which originate during the tax holiday period but gets reversed after the tax holiday period, have been recognized in the year in which the timing differences have originated. For this purpose, as a conservative measure, deferred tax provision has been made in respect of the period when only 30% of the profits would be tax free assuming that only 70% of the timing differences would reverse. The Company has not recognised any deferred tax asset during the year following the notified Accounting Standard 22 "Accounting for taxes on income', only reversal relating to deferred tax assets and deferred tax liability created during the earlier years have been made. 14

7 16. LONG-TERM LOANS AND ADVANCES Advances recoverable in cash or in kind or for value to be received - Secured and considered good Security deposits 10,077 10,232 Loans and advances to staff 4,581 6,612 - Unsecured but considered good Security deposits 19,290 16,450 Loans and advances to staff 1,372 3,130 Other loans and advances - Capital advance,unsecured but considered good 24,116 24,097 - Advance income tax 467, ,951 [Net of provision for tax Rs. 717,196 lacs (previous year Rs. 717,196 lacs)] - Advance payment of fringe benefit tax 5,898 5,898 [Net of provision for tax Rs. 15,300 lacs (previous year Rs. 15,300 lacs)] 532, , INVENTORIES Building materials Lines and wires 8,332 9,433 Cables 90,889 89,422 Apparatus and plants 200, ,494 Telephone instruments 17,801 14,777 Telegraph and telex instruments Broad band equipments 27,498 26,821 Raw material and scrap (at factory) 8,376 16,928 Finished goods and work in progress (at factory) 7, Finished stock(at various circles) 3,233 8,427 Other stores 18,275 25,716 (Excess)/Short in inventory account Inventory for construction account , ,207 Less: Provision for obsolete inventory/short inventory 28,528 24, , ,209 a) Physical verification of stock has been conducted by the management during the year and is reconciled with the detailed inventory records. Where ever the difference is found the same is provided for. In seven circles (previous year six circles) difference between the store ledger and the general ledger is identified and provided for in the current financial year. b) The Company is in the process of identification of non-moving, slow moving and obsolete inventories in eleven circles (previous year five circles). Pending finalisation of the process, no provision if any, that may be required, has been made. c) In certain cases, the Company has placed orders for procuring inventory at provisional prices around 80-90% of the previous purchase price. Final purchase price in such cases is determined at a later date. Price difference in such cases is adjusted on the total material available in stock at the time of finalization of purchase price. The proportionate price differential on the already consumed material is adjusted on the existing stock. These cases were arising mainly due to price variation in Copper cable. However, with the introduction of Optical Fiber Cables (OFC) these cases have reduced to very minuscule level. 15

8 18. TRADE RECEIVABLES Trade receivables 752, ,748 Less : Advance income booked but not collected 20, , ,748 Less : Provision for doubtful receivables 456, , , ,339 a) In twenty four circles (previous year twenty six circles), there is difference in the closing balance of trade receivables between the subsidiary ledger and the general ledger. To the extent identified, the net difference between general ledger and subsidiary ledger balances is Rs. 22,590 lacs (previous year Rs. 22,917 lacs). The management is in the process of reconciling these differences, however an amount of Rs. 23,561 lacs is provided for the circles where general ledger is more than subsidiary ledger. The provision for doubtful receivables is made on the basis of information available in the subsidiary ledger. b) The age-wise analysis of the trade receivables as per subsidiary ledger is given below: Particulars Trade receivable exceeding six months 551, ,861 Other trade receivables 178, , , ,831 c) Particulars Considered good secured 140, ,244 Considered good unsecured 158, ,203 Doubtful receivable 431, , , , CASH AND BANK BALANCES Cash and cash equivalents - Balances with bank In current account including sweep-in-deposit 83, ,234 In fixed deposits accounts with original maturity within 3 months 1, Cheques in hand 4,473 3,962 - Cash in hand 2,344 1,557 92, ,753 Other bank balances - Earmarked deposits with bank 1, (including bank guarantee, margin money, etc) 93, ,125 a) In eight circles (previous year ten circles), it has been noticed that cheques deposited with the bank and Telegraphic Transfer (TT) sent, have not been credited in the relevant bank accounts of the Company amounting to Rs. 2,704 lacs (previous year Rs. 3,442 lacs) as on 31 March The management has already taken up the case with the concerned banks for timely crediting the amount in the respective account. b) In nine circles (previous year ten circles), unlinked credit items amounting to Rs. 470 lacs (previous year Rs. 482 lacs) and in ten circles (previous year eight circles) unlinked debit items amounting to Rs. 223 lacs (previous year Rs. 428 lacs) are appearing in the bank reconciliation statement as at 31 March The management is in the process of reconciling all such items in due course. c) The classification of the trade receivables as secured (to the extent of the security deposits held by the Company), unsecured/considered good and considered doubtful, to the extent available as per sub ledger is as follows: Bank balances in one circle (previous year three circles) includes cheques in hand pending to be deposited in bank on 31 March

9 20. SHORT TERM LOANS AND ADVANCES Advances recoverable in cash or in kind or for value to be received - Secured, considered good Security deposits 1,224 1,304 - Unsecured, considered good Advances to contractors 63,916 84,948 Purchase advances 6,467 3,164 Loans and advances to staff 4,234 4,450 Security deposits Other advances ,344 93,975 Note : a) In one circle (previous year fifteen circles), it has been noticed that there are differences in the subsidiary ledger of loans and advances with those appearing in general ledger. The management is in the process of reconciling the differences of current assets as well as other current liabilities. 21. OTHER CURRENT ASSETS Amount recoverable in cash or in kind or for value to be received 23,461 19,541 Accrued revenue 130, ,704 Amount recoverable from DoT - On current account [refer note 32 and note c below] 846, ,985 - For employees on deputation 1,745 1,581 Amount recoverable from - Government departments 3,979 4,895 - Government companies 356, ,830 Claims recoverable from others 21,576 21,922 Operating lease charges recoverable 1,189 1,298 Sales tax recoverable from customers Service tax recoverable from customers 82,294 77,213 Balances with excise and other tax authorities 54,257 54,119 Interest accrued - on bank deposits on loans advances and investments Call Detail Record based claims recoverable 12,337 4,033 1,534, ,502 Less: Provision for doubtful items 212, ,992 1,321, ,510 a) No circles (previous year four circles) has reported that there is a difference between the subsidiary ledger and the general ledger, under claims recoverable from MTNL to the extent identified, the general ledger balance which are considered for preparation of financial statement,was more by Rs. 141 lacs in the previous year than the subsidiary ledger. b) Cenvat on account of service tax, excise duty and custom duty on capital goods and inputs is under reconciliation in some circles. c) Amount recoverable from DOT on current account includes an amount of Rs. 672,451 lacs recoverable on account of refund of BWA Spectrum confirmed by DOT vide letter no.10-20/2012-su.i (vol. II) dated 15 January This space has been intentionally left blank 17

BHARAT SANCHAR NIGAM LIMITED SCHEDULES FORMING PART OF THE FINANCIAL STATEMENTS

BHARAT SANCHAR NIGAM LIMITED SCHEDULES FORMING PART OF THE FINANCIAL STATEMENTS SCHEDULE A : CAPITAL (Refer Note 2.2 on Schedule U) Authorised 10,000,000,000 (P. Y.: 10,000,000,000) Equity Shares of Rs. 10/- each 1,000,000 1,000,000 7,500,000,000 (P.Y.: 7,500,000,000) Preference Shares