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Contents Highlights Information
95 Consolidated Profit
bopd 75,000 bopd, designed to
accommodate production from
Naresh Chandra
Rahul Dhir
and Loss Account (barrels of oil per day) Bhagyam and Aishwariya and
further expansion. Will be
96 Consolidated Statement At peak production which is commissioned by 2011
of Cash Flows estimated to account for more
than 20% of India’s crude oil
97 Schedules to Consolidated production
Financial Statements
123 Glossary
Cairn is ready to produce Building facilities Estimated Rajasthan The 24” heated &
first oil from Rajasthan, to handle Upstream operating insulated pipeline runs
which can go up to expenses for approximately
80,000
30,000 bopd around 700 km
bopd by Q4 2009 US$ 3.50
per barrel during field life
Given the progress at the MPT, Cairn is targeting completion of If one were to add to that the It runs from the MPT at Barmer
we are targeting producing the pipeline in time to evacuate cost of pipeline operating to a marine terminal on the
oil from Train 2 — up to an crude oil by the time Train 2 is expenses, the total opex of Gujarat Coast. Of the 700 km
additional 50,000 bopd — by operational. The Company is Rajasthan crude is targeted at of pipeline, 154 km is located
Q4 2009 building facilities that will have around US$ 5 per barrel during in Rajasthan and the rest is in
the capacity to handle 80,000 field life Gujarat
bopd by Q4 2009
The current assessment of the The field direct operational During 2008, contractor While many businesses faced
enhanced oil recovery (EOR) expense for the current vehicles travelled for more reducing employee numbers
resource base is greater than producing blocks, Ravva and than 15 million km without any or revisited their recruitment
300 mmbbls of incremental Cambay is one of the lowest in fatalities or serious accidents. plans, Cairn has been hiring
recoverable oil from Mangala, the world The motor vehicle accident throughout 2008, and will
Bhagyam and Aishwariya fields frequency rate was 1.33 per continue to do so in 2009
million km travelled — which
is well below international
benchmark in this industry
H I G H L I G H TS 1
Board of
Directors
sir bill gammell jann brown aman mehta dr omkar goswami indrajit banerjee
Chairman and Non-Executive Director Non-Executive and Non-Executive and Executive Director
Non-Executive Director Independent Director Independent Director and CFO
BOARD OF DIRECTORS 3
Letter from
the CEO
Dear Shareholder,
If I were to describe the progress of your Company from the previous annual
report to this one, the most apt phrase would be: “From Concept to Reality”.
Let me explain what this means
LE T T E R FR OM TH E C E O 5
Management
Discussion
& Analysis
Much has happened at Cairn India Limited (‘Cairn’ or ‘the Company’) between what
was reported in last year’s Management Discussion and Analysis and this one —
changes that can be described in a single phrase: “From Concept to Reality”
rajasthan upstream
The discovery of the Mangala oil field among
others in Rajasthan, spurred the flotation and
the creation of a separate Indian business.
It has provided the Company with the right
platform to translate the exploration success
into real and tangible operational excellence.
The flow of oil from the fields in Rajasthan at
a planned peak of 175,000 barrels of oil per
day (bopd) will help meet more than one fifth
of the country’s domestic production and is
a significant contribution to aid the nation’s
energy security.
Cairn first came into Rajasthan in the late
1990s, when it acquired an interest in the block
RJ-ON-90/1. The Company firmly believed that
the area was not only rich in hydrocarbons but
also had all the key ingredients for successful
commercial production. By 2003, Cairn had
acquired 100% of the exploration interest and
assumed the role of operator of this acreage.
In 2004, a major discovery of crude oil was
made in the Mangala field which has been the
largest onshore discovery in India over the last
25 years. This was followed by key discoveries
at Bhagyam and Aishwariya which, along with
Mangala, comprise the MBA fields. In all, 25
discoveries have now been made in Rajasthan.
Today, Cairn is the operator of the Rajasthan
block, with a 70% development and production
interest. The balance 30% is held by India’s
public sector oil and gas major, the Oil and
Natural Gas Corporation Limited (ONGC) fol- train 4 Capacity of 75,000 bopd, designed to
lowing their exercise of an option provided for accommodate production from Bhagyam and
in the PSC. Aishwariya and further expansion. Will be com-
Chart A gives the location of the Rajasthan missioned by 2011.
resources.
The development areas in Rajasthan consist After Train 4 is commissioned, the MPT will
of three contiguous areas: (i) Mangala, Aish- have the capacity to process not only the pla-
wariya, Raageshwari and Saraswati (MARS) teau production of the MBA fields of 175,000
fields; (ii) Bhagyam; and (iii) Kaameshwari bopd, but will also have additional capacity to
West. The total acreage of the development support further potential production from EOR
areas in Rajasthan accounts for 3,111 square and the 22 other fields.
kilometers (km2). This is nearly the same as Spread over an area of 1.6 square km, or
the combined area of national capital region approximately 400 acres, the size of the MPT is
of Delhi and Greater London. More than 350 equivalent to 200 football grounds, or 27 times
wells and over 40 well pads are currently the size of the Eden Garden cricket ground at
planned throughout the Rajasthan fields. Kolkata, or three times the area of the Red Fort
Peak production from the MBA fields is complex in Delhi.
planned at a rate of 175,000 bopd — which The processing of crude oil from four trains
is estimated to account for more than 20% of requires the MPT to have an extensive water
India’s crude oil production. heating, circulating and recycling system; gas
recovery systems; heat and power systems; and
mangala processing terminal built-in fire and safety systems. The infrastruc-
In order to produce the oil and separate associ- ture to and from the MPT involves some 500 km
ated gas and water, the Company has set up of intra- and inter-field pipelines (more than the
the Mangala Processing Terminal (MPT). The distance from Delhi to Lucknow), and 80 km of
capacity to produce 30,000 bopd will be devel- inter-field roads.
oped at the MPT by Q3 2009, to be evacuated Steam will be the main source of heat to help
by road tankers. As stated in last year’s annual produce the Rajasthan crude, with the use of
report, the next phase is targeting a capac- five 115 metric ton / hour boilers. The advan-
ity to handle 80,000 bopd before the end of tage of steam is that it is an efficient, pollution-
2009 — all of which is planned to be evacuated free and renewable resource. All power require-
ultimately by the insulated heated pipeline. ments of the MPT will be met by captive power
The MPT will have four crude oil processing plants, comprising four 12 megawatt (MW)
trains, designed to handle a total capacity of steam turbine generators, plus three 2 MW
205,000 bopd with scope for expansion: emergency diesel generators. There will be 20
water and oil storage tanks, 16 buildings hous-
train 1 Capacity of 30,000 bopd from the ing various equipment, including the power sta-
Mangala field which is ready to start production. tions and different control systems, and several
Initial evacuation will be by trucking. kilometres of pipe racks to carry all the pipes
and cables across the facility. When completed,
train 2 Capacity of 50,000 bopd, also from the MPT will have used up more than 98,000
the Mangala field is targeted for completion by cubic metres of concrete and 23,600 metric
Q4 2009, along with the heated pipeline. tons of steel — excluding the steel used for the
insulated heated pipeline.
train 3 Capacity of 50,000 bopd — targeted Chart B gives a geographical snapshot of the
for completion in H1 of 2010 — will access the Rajasthan Field and the MPT. The water to cre-
plateau production of the Mangala field. ate steam and for flooding the oil reservoirs to
MANGALA
The measurement originated in the Pennsylvania PROCESSING
oil fields in the 1860s, when there was no TERMINAL (MPT)
standard container for oil. To remove distrust, the
oil producers decided to use the 40 gallon whisky KAAMESHWARI WEST
barrel, and add a couple more gallons to ensure DEVELOPMENT AREA
buyers’ confidence — like the baker’s dozen.
Of course, nobody uses barrels any more
INDIA
MANGALA,
AISHWARIYA,
RAAGESHWARI
& SARASWATI
DEVELOPMENT AREA
TO EXPORT
PIPELINE
ASSOCIATED
GAS
48 MW Power
for Plant Utilities Steam Turbine Injection Boilers
Generators Heaters
TO INJECTION MAKE UP WATER FROM THUMBLI SALINE WELLS MAKE UP
AND POWER GAS FROM
RECOVERED WATER
WATER SYSTEMS Thumbli Well RAAGESHWARI
Barrels of oil equivalent is a unit based on the The water to create steam and
approximate energy released by burning one barrel for flooding the oil reservoirs
(42 US gallons) of crude oil.
for extraction of crude comes
1 boe = 5.8 x 10 6 BTU (British Thermal Unit) from the Thumbli saline water
= 6.1178632 x 10 9 J (joule), or approximately
6.1 GJ (giga joule).
aquifer discovered by Cairn in
2004. The Thumbli reservoir is
A boe is roughly 6,000 cubic feet (170 cubic 22 km away from the MPT
metres) of typical natural gas. The boe or mmboe
is used by oil and gas companies as a way of
combining oil and natural gas reserves and
production into a single measure.
Slug Catcher Heater Separator Settling Tank Dehydrator Export Oil Oil
Storage Tank Pump
INJECTED PRODUCED WATER TREATMENT
BACK INTO TO EXPORT
MAKEUP WATER FROM THUMBLI SALINE WELLS
OIL WELLS PIPELINE
that the oil is maintained at the required tem- At the time of writing this Management
perature. Discussion and Analysis:
There are more than 450 engineers from
The water recovered from well injection is then the Indian construction major, Larsen and
stripped of its oil, desalinated, re-heated and Toubro (L&T), 100 engineers from Cairn and
re-used for further injection in the wells or for more than 6,000 workmen at the MPT site,
generating steam at the boilers. all focused on the goal of producing oil from
The scheme of the processing system at the Train 1 by Q3 2009, from Train 2 by Q4 2009
MPT is depicted in Chart D. The crude goes and from Train 3 by H1 2010.
through various stages of separation to yield oil, Work is on schedule for the completion of
associated gas and water. The associated gas is the 20 tanks at the MPT along with the facili-
recovered for use as fuel for steam generation. ties at the Raageshwari Gas Terminal. At the
The water is separated out and re-injected into MPT the boilers have been erected and the
the wells following treatment. The separated oil steam turbine generators are being erected
goes through a dehydrator, where any remain- according to schedule.
ing water is removed. Finally the oil is sent to
the oil storage tanks from where it is pumped to In addition to all these activities, Cairn has built
the heated pipeline. a wide channel and a Gabion Wall running
The process system is designed in such a way across the MPT as a flood mitigation measure.
that there is no flaring of gas during the normal Barmer was flooded by unseasonal and unprec-
course of operation and also all the water edented heavy rains in August 2006. Despite
produced is re-used in the crude extraction the statistically improbable nature of the heavy
process. This ensures minimal impact to the rains at Barmer, the Company decided to create
environment. a floodwater outflow channel and protect the
Desalinated water from the Thumbli saline MPT by a Gabion Wall through an innovative
water system is injected into the wells to extract engineering solution that reduced the cost from
crude oil. The crude goes through a first stage an initial estimate of US$ 57 to US$ 30 million.
separation of oil, associated gas and water. The A full schematic presentation of the entire
associated gas is recovered to fire the steam tur- crude oil extraction process at the MPT is given
bines; and the separated water is treated. The in Chart E.
crude then goes through a heater for the sec- Cairn is ready to produce first oil from Rajast-
ond stage of separation, with the same results. han via the first train, which can be scaled up to
Thereafter, it goes to a settling tank, where the 30,000 bopd. The completion of Train 2 — with
final associated residual gas is taken off from the an additional capacity of 50,000 bopd — is
top, as is the water that settles at the bottom. targeted for Q4 2009.
Thereafter, it is processed through a dehydrator
to take out the last remnants of water. Finally it
goes to the oil storage tanks, from where it is
pumped to the heated pipeline. All separated
water is recycled.
Heater
Vertical Horizontal Water Saline Water
TO EXPORT
Well Well Injector Abstraction Export Oil PIPELINE
Storage Tank
WATER TABLE
A FRESH WATER
C B OIL
RAAGESHWARI
GAS SUPPLY VIRAMGAM
Distribution
INTERMEDIATE
TERMINAL to buyer
Storage,
COASTAL TERMINAL
STORAGE AND EXPORT
Pumping
and Export
Distribution Wankaner
to Refiners Pigging Station
Kilometers
20
will tie in to the MPT. use of alkali and surfactant makes the injected
An example of the potential for future growth water act like soap, further helping to wash
was highlighted at the end of 2008. In addition more oil off the reservoir rock. Both these EOR
to the existing Raageshwari gas field, Cairn test- processes will aim to increase the overall recov-
ed a new play in the southern part of the Barmer ery from the MBA fields.
Basin and made another oil and gas discovery Studies conducted by two independent labo-
in an adjacent field in December 2008 named ratories show favourable results of 30%–40%
as the Shaheed Tukaram Ombale ASI (Tukaram) incremental recovery from the application of
field. This is located approximately 1.5 km east EOR. However, field recoveries are expected
of the Raageshwari 1 well in the southern part of to be lower. Detailed field scale modelling and
the MARS development area. Early tests indicate simulation studies carried out incorporating the
a potential oil flow of around 500 bopd, plus 0.4 findings of the laboratory evaluation indicate
mmscfd gas. Other such finds could easily tie incremental recoveries of some 15% from the
into the infrastructure that is being built. MBA fields.
Cairn intends to make use of all the viable If the pilot is successful, the intention is to
Rajasthan fields — so as to optimise both the implement chemical flooding on a field scale in
life of the different hydrocarbon resources and Mangala, followed by Bhagyam and Aishwariya.
the associated revenue streams. The current assessment of the EOR resource
base is greater than 300 mmbbls of incremental
enhanced oil recovery recoverable oil from the MBA fields.
EOR techniques are exactly what they mean
— methods of increasing recovery from oil funding rajasthan and the
fields. Historically, EOR has been considered as pipeline: securing finance
a tertiary recovery method — to be applied at and optimising costs
the late stage of field life after the primary and
secondary recovery schemes. Innovations in Securing Finance
Cairn recognised the opportunity to imple- As covered in last year’s Management Discus-
ment EOR techniques in MBA very early in the sion and Analysis, April 2008 saw Cairn obtain
field life, and is planning to conduct a field pilot US$ 625 million through a private placement
to demonstrate its applicability in the Mangala of its shares — the largest private placement
field. The reservoir quality, oil properties and in the Indian equity market during 2008–09.
temperature make these fields ideal for chemical
flooding EOR methods such as polymer or Alkali
Surfactant Polymer (ASP) flooding. The potential
benefits of such applications are: an increase
in reserves, extended oil plateau production
period, reduced water production thereby ac-
J Effect of Enhanced Oil Recovery
SCHEMAT IC R E P R E S E N TAT ION
1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 200
60
Net to Cairn 1.4 Cash flow from operations * 0.2
2010 & 2011 Preferential allotment of equity (2008) 0.6
30
Gross 1.5–1.8 Existing debt facility 0.9
0 Net to Cairn ~1.1-1.3 Total 2.1
04 2005 2006 2007 2008 2009
* from Ravva and CB, for January 2008 – March 2009
What if global crude oil prices crash once What if the pipeline is delayed?
again, as occurred in the second half of The pipeline is targeting completion by Q4
2008? 2009, in line with the additional oil to be pro-
It is indeed true that oil prices have been ex- duced through Train 2. As of now, we remain
tremely volatile in recent times, especially since committed to this date. However, in spite of
the beginning of 2007. The price of West Texas the hard work put in by the teams, some risk
Intermediate (WTI), a leading benchmark crude, remains — particularly on account of the
rose from US$ 54 per barrel in January 2007 and monsoons. Trucking shall continue to be an
hit an intra-day peak of over US$ 145 per barrel interim measure.
in July 2008. Thereafter, it fell to a low of
US$ 40 per barrel in December 2008, before What if Cairn ran out of funds for the
rising again. At the time of writing this Manage- Rajasthan project?
ment Discussion and Analysis, the crude oil The prompt action to raise funds through
price is above US$ 60 per barrel. Chart K plots private placement of equity, re-phasing of Bhag-
the average weekly FOB spot price of WTI since yam and Aishwariya and the targeting of cost
January 1986. savings through innovative project design and
What Chart K shows is that, despite volatility, planning has placed Cairn in a strong financial
crude oil prices have been above US$ 40 per position. With most of the contracts entered
barrel since May 2004. The average long term into — providing a level of certainty over the
analysts’ expectation for the oil price is in the cost base — the Company believes it has taken
range of US$ 75 to US$ 100 per barrel. the necessary steps to prevent a funding short-
We remain focussed on leveraging our low fall. Table 1 gives the estimated costs for 2008
cost operations to drive the competitive advan- to 2011, versus the funding already in place.
tage. With opex of the existing operations at Moreover, Cairn will have additional sources
Ravva and CB/OS-2 of US$ 2.4 per barrel and of funds. These are:
the estimated Rajasthan opex costs of US$ 5 • Continuous cash flows from existing opera-
per barrel, we are well placed to create greater tions from Ravva and CB/OS-2
shareholder value even at lower oil prices. • Start of cash generation from the Rajasthan
operations
What if MPT doesn’t produce oil according Thus we believe that there is adequate
to schedule? funding for Rajasthan. Equally, we continue
Train 1 is completed and is ready to start pro- to explore possibilities for additional financing
duction in Q3 2009 with a capacity of 30,000 — if necessary and available at terms that can
bopd via trucking to the Gujarat coast. We are enhance long term corporate value.
targeting completion of Train 2 by Q4 2009,
with a capacity of up to 80,000 bopd by the
end of 2009.
In CB/OS-2 block, the Lakshmi and Gauri off- Average gross from the Ravva field for 2008
shore fields are currently producing oil and gas, was 52,539 boepd — comprising average oil
while the onshore field, CB-X, is producing only production of 41,227 bopd and average gas
gas. The average gross production from the production of 68 mmscfd.
CB/OS-2 block for 2008 was 13,607 boepd — Ravva has been producing for more than 14
comprising average oil production 7,376 bopd years. Well optimisation measures and surface
and average gas production of 37.4 mmscfd. de-bottlenecking in the last quarter of 2008
The drilling and work-over campaign carried helped extend the plateau and arrest the ex-
out during 2007–08 has not only transformed pected production decline. The RD-9 and RB-4
the CB/OS-2 block from a predominately gas LM sands are producing under extended well
to an oil producing asset, but has also extended test at an average rate of 1,600 bopd. Reservoir
its economic life. Two development wells were pressure was maintained by optimal water injec-
drilled successfully. The onshore facilities were tion. 4D time-lapse seismic surveys have been
fully upgraded to handle and process 10,000 initiated to locate potential bypassed oil, and
bopd, and the field is currently producing preparations are underway for the execution
around 8,500 bopd. of critical development projects to maintain
Cambay has some notable field milestones; production rates.
Discovery to delivery took just 28 months; Ravva field milestones are: increased produc-
health, safety and environment (HSE) — tion from 3,700 bopd to 50,000 bopd; plateau
1.4 million hours of work with no lost time extended to nine years and reserves doubled;
injury (LTI); the facility is both ISO14001 and produced over 200 mmbbls; 2.4 million hours
OHSAS18001 certified. Cambay generated its worked with no LTI; ISO14001 and OH-
historically highest revenues during 2008 aided SAS18001 certified; around US$ 4 billion profit
by greater oil production from the new wells on petroleum paid to GoI.
and higher oil prices. Cairn intends to maintain and consolidate its
position as a low cost operator. The field direct
operational expenses for the current producing
blocks, Ravva and Cambay, were US$ 2.4 per
barrel in 2008 — one of the lowest in the world.
operated blocks
r ajas t h an ga n g a va l l e y b a s i n
rj-onn-2003/1
cairn india 30%, eni
operator
vn-onn-2003/1 B H U TA N
rj-on-90/1 cairn india 49%, operator
cairn india 70%,
operator, ongc 30% gv-onn-2003/1
cairn india 24%, operator
gv-onn-2002/1
cairn india 50%, operator
cb-x
gauri INDIA
gs-osn-2003/1 lakshmi
cairn india 49%,
ongc operator ambe
cb/os-2
lakshmi, gauri, cb-x, ambe
cairn india 40%, operator
k ri s h n a - g od ava r i b a s i n
kk-dwn-2004/1
cairn india 40%,
ongc operator
ravva
cairn india 22.5%, operator
kg-dwn-98/2
cairn india 10%, ongc operator
kg-onn-2003/1
cairn india 49%, operator
pr-osn-2004/1
cairn india 35%, operator
ARABIAN SEA
ma n n a r b a s i n
B AY O F B E N G A L
sl2007-01-001
cairn india 100%, operator
Chart L shows the map with Cairn’s exploration • Successful drilling at Ravva and CB/OS-2
assets. • Maintain low operating cost base
Last year’s Management Discussion and • Time lapse (4D) seismic in Ravva
Analysis presented a detailed overview of
Cairn’s exploration assets. This time, the focus 2 Execute Rajasthan development
is on key developments that have occurred • First production Mangala Q3 2009
since then. • Major regulatory clearances obtained
• Delivery point shifted
discoveries in rajasthan • Major contracts awarded
In December 2008, Cairn made a separate • Mangala FDP revision submitted
oil and gas discovery adjacent to the existing
Raageshwari gas field in Rajasthan. Early tests 3 Maximize potential in Rajasthan
indicate a waxy oil of 40° API gravity with a • Over 3,000 km2 under long term contract
potential flow of around 500 bopd, plus 0.4 • Growing resource base
mmscfd gas. • Increased Mangala recovery
Also in Rajasthan, a third development area • EOR
was awarded to Cairn by the GoI. This is the • Monetise Barmer Hill and other fields
Kaameshwari West Development Area measur-
ing 822 km2, where there have been three dis- 4 Identify new growth opportunities
coveries: Kaameshwari West 2, 3 and 6 — with • Unrisked potential of 1.4 billion bbls
Kaameshwari West 2 and 3 lying in a new play • New leads in existing portfolio
in the Upper Barmer Hill / Lower Dharvi Dungar • Seismic programmes completed
sandstones. • Acreage in Sri Lanka
If each of these work according to plan,
sri lanka Cairn will witness transformational growth —
In September 2008, the Sri Lanka Board of with production rising from roughly 63,000
Investment (BoI) and Cairn India signed a com- bopd (gross) in Q4 of calendar 2008 to around
mitment to explore the Mannar Basin, a frontier 200,000 bopd (gross) in 2011.
8.91
MAY 95 Production 1998 Cairn farmed DEC 1999 Cairn farmed NOV 2001
Sharing Contract signed in for 27.5% in for an additional 22.5% Saraswati discovery
1999 Guda
(discovered by Shell)
SEPT 2001
RAVVA MILESTONES Ravva Satellite Gas
Development Project
K RI SH N A G O DAVA RI BA SI N
JULY 2001
Zero flaring
1999
OCT 1994 DEC 1996 Phase-II of Ramped up production to JUN 2001
Production Sharing development commissioned 50,000 bopd Third associate gas
Contract signed recovery compressor
CB/OS-2 MILESTONES
CAM B AY B A SIN
JUN 1998
Production Sharing
Contract signed
JAN 2001
Gauri oil & gas
DATE DATE DATE Oil produced field discovery
Description of milestone Description of milestone Description of milestone in bopd
for Rajasthan Field for CBOS2 Field for Ravva Field
DISCOVERY DATE DISCOVERY DATE 100 million barrels 100 million barrels JAN 2001
Well discovered in Well discovered in of oil produced of oil produced Ambe oil & gas
the Rajasthan Field the CBOS2 Field field discovery
MAY 2000
Lakshmi oil & gas
field discovery
Fastest progress in India
Discovery to production
in only 28 months
1 9 9 5 1 9 9 6 1 9 9 7 1 9 9 8 1 9 9 9 2 0 0 0 2 0 0 1
O N D J F M A M J J A S O N D J F M A M J J A S O N D J F M A M J J A S O N D J F M A M J J A S O N D J F M A M J J A S O N D J F M A M J J A S O N D J F M A M J J A S O N D
32
JAN 2004 NOV 2005 GSV & JAN 2007
Mangala discovery N-C-West discovered IPO of Cairn India
JUL 2002 DEC 2004 APR 2005 CB/OS-2 onshore & offshore MAY 2009 Upgraded oil
Safety case Hydrocarbon facilities certified for ISO 14001:2004 standards processing capacity to
APR 2004 Gauri field developed and NOV 2005 Gauri Oil Development
Gas production commenced First oil from Gauri
OCT 2002 Lakshmi gas field developed and MAR 2005 Lakshmi field Phase-II development – JUNE 2007
Gas production commenced 5 new wells drilled CB-X field development completed and
Gas sales commenced
FEB 2004
CB-X onshore discovery
2 0 0 2 2 0 0 3 2 0 0 4 2 0 0 5 2 0 0 6 2 0 0 7 2 0 0 8 2 0 0 9
J F M A M J J A S O N D J F M A M J J A S O N D J F M A M J J A S O N D J F M A M J J A S O N D J F M A M J J A S O N D J F M A M J J A S O N D J F M A M J J A S O N D J F M A M
VA LUED
AT $133.9
33
Corporate Social
Responsibility
CO R P OR AT E S OC IA L R E S P O NS I B I L I TY 35
A self-employment
programme focusing on
making handicrafts and
establishing linkages with
locally-based exporters has
brought economic benefits to
more than 200 women
— in enhancing their well-being and wealth more than 5,000 local people — enabling them
by increasing their opportunities and access to be associated with construction-related job
In Bihar, more than 5,500 to services opportunities. Efforts were made to strengthen
Infrastructure development to facilitate the relationships with the local community, espe-
farmers were given training
process of economic regeneration cially those who had contributed land to Cairn
in organic farming techniques Effective protection of the environment and for the Rajasthan project, so as to enhance their
and organised into farmers’ prudent use of natural resources. economic possibilities and outreach.
clubs for sustainability. Cairn In 2008, Cairn achieved a number of In Bihar, the major CSR objective was to address
supported more than 20,000 milestones in CSR across all its operations. the socio-economic needs of the communities
around our project areas and build an environ-
flood affected families by We won the prestigious TERI (The Energy ment of trust and cooperation. More than 5,500
providing shelters in relief Research Institute) CSR Award, 2008, for our farmers were given training in organic farming
camps and by making micro-vendor programme at Ravva. techniques and organised into farmers’ clubs
for sustainability. Cairn supported more than
provisions for medical aid, At a corporate level, the framework for our 20,000 flood affected families by providing shel-
water and sanitation Pubic Consultation and Disclosure Plan (PCDP) ters in relief camps and by making provisions for
and the Land Acquisition and Compensation medical aid, water and sanitation.
Plan (LACP) has been defined; and this has
been aligned with the requirements of the CSR initiatives were also launched in the
IFC’s Policies and Performance Standards on exploration blocks of Uttar Pradesh (UP). The
Social and Environmental Sustainability. This major focus in UP is on improving reproduc-
framework has been embedded within the tive and child health care practices through a
systems and operations of Cairn throughout the project called ‘Janani Pariyojna’ in four districts
project life cycle. During 2008, IFC carried out of eastern UP, namely Gorakhpur, Maharajganj,
independent audits of Cairn, which showed that Deoria, and Kushinagar.
the Company is progressing well towards full
compliance with the IFC standards. The CSR programmes at Ravva and Suvali focus
on promoting health, education, sustainable
In Rajasthan, the IFC–Cairn Linkage Programme livelihoods and improving local infrastructure
launched in 2007 led to skills development of together with the local administration.
Supporting the construction of 200 houses Supporting infrastructure improvements for Developing capabilities of SMEs /general
for the poor at Ravva, under the Indira Awaas rural schools in our operational areas which suppliers /contractors /micro-entrepreneurs
Yojana. has aided enrolment and reduced the numbers to act as vendors to large industries and supply
dropping out of schools. them with goods and services.
Supporting schools around its operational area
by constructing classrooms, providing drinking Partnering with All India Radio to broadcast Developing the skills of locals to match the
water facilities, building boundary walls and two community awareness programmes ‘Gaon market requirements for employment.
establishing computer learning centres. Ki Dhani’ and ‘Hello Doctor’. ‘Gaon Ki Dhani’
provides expert advice on agriculture, livestock Cairn received the TERI Corporate Award for
Constructing panchayat offices, community rearing; while ‘Hello Doctor’ advises on health Social Responsibility, 2008, in recognition of
halls and internal roads in Ravva, benefiting related issues. The programmes have been very its efforts for the Micro-Vendor Programme at
over 35,000 villagers. effective and have reached out to more than Ravva. The programme was initiated in 2005.
10,000 villagers. It registers local people as potential suppliers
Constructing an emergency ward in the Com- and provides training in quality, safety and en-
munity Health Centre, Baitu (Barmer) which will Supporting a computer literacy programme in vironmental skills. The training helped create a
cater to the needs of more than 25,000 people various government schools in Bihar since 2007. pool of vendors that can supply goods and ser-
and handle several emergency cases, especially The objective is to give students of Classes IX vices to Cairn and other business enterprises.
road accidents. and X exposure to computers to improve their Contracts worth over US$ 1 million have been
academic options and career opportunities. awarded to about 80 micro-vendors at Ravva.
CO R P OR AT E S OC IA L R E S P O NS I B I L I TY 37
More than 780 economically marginal households have
become members of 13 milk collection societies which are
supplying milk to the Barmer district cooperative society
(SARAS). Over 400,000 litres of milk was collected in 2008,
compared with 200,000 litres in 2007 — and generated total
revenue of over Rs.4.8 million
CO R P OR AT E S OC IA L R E S P O NS I B I L I TY 39
Report on
Corporate
Governance
The philosophy of Cairn India Limited (‘Cairn India’ or ‘the Company’) is to assist the
management in conducting its business in a fair, ethical, efficient and transparent
manner to ensure higher long term stakeholder and shareholder value
company»s philosophy on As on 31 March 2009, the Company’s Board Company i.e. do not own two percent or more
corporate governance comprised ten Directors, including seven of a block of voting Shares.
Transparency, integrity, professionalism and non-executive Directors, four of whom are also
accountability are the cornerstones of our value independent. The Chairman of the Board is a Are not less than 21 years of age.
system. These guide the Company’s manage- non-executive promoter Director. All non-
ment in all aspects of business conduct, and executive Directors are professionals who have information supplied
in its relationship with all its stakeholders — rich experience in a wide spectrum of functions to the board
including shareholders, customers, employees including management, finance, economics, oil The Board has complete access to all informa-
and the communities in which it operates. and gas exploration and general administration. tion with the Company. The quantum and qual-
In India, corporate governance standards for The executive Directors have been ap- ity of information supplied by the management
listed companies are regulated by the Securities pointed for a term of five years barring Mr Rick to the Board goes well beyond the minimum
and Exchange Board of India (SEBI) through Bott, who has a three-year contract. requirement stipulated in Clause 49. All infor-
Clause 49 of the Listing Agreement of the Stock mation, except critical price sensitive informa-
Exchanges. This chapter, along with those on As mandated by the Clause 49, the indepen- tion (which is considered immediately by the
Management Discussion and Analysis, reports dent Directors on the Company’s Board: Board), is given to the Directors well in advance
Cairn India’s compliance with Clause 49. of the Board and Committee meetings.
Apart from receiving Director’s remuneration, The Board periodically reviews compliance
board of directors do not have any material pecuniary relationships reports of all applicable laws as well as steps
composition of the board or transactions with the Company, its promot- taken by the Company to rectify instances of
The Company believes that good corporate ers, its Directors, its senior management or its non-compliances, if any. Significant transactions
governance begins with setting the tone at the holding company, its subsidiaries and associates and arrangements entered into by the unlisted
top. Its Board of Directors, therefore, com- which may affect their independence. subsidiary companies are also discussed and
prises not only eminent experts from various deliberated in advance by the Board.
fields, but also people who are committed to Are not related to promoters or persons occu-
all the key underlying principles and values pying management positions at the Board level board procedure
that constitute the best standards of corporate or at one level below the Board. The Company follows a structured process
governance. of decision-making by the Board and its
For most of 2008-09, the Company had an Have not been executives of the Company in Committees. The meeting dates are usually
appropriate mix of independent and executive the immediately preceding three financial years. finalised at the beginning of the year. Meetings
/ promoter Directors, as specified by Clause 49 are generally convened by fixing dates a year in
of the Listing Agreement. However, subsequent Are not partners or executives, or were not advance. The meetings are usually held at the
to the SEBI clarification issued on 23 October partners or executives, during the preceding Company’s corporate office in Gurgaon. Detailed
2008, the Company was required to increase three years of the: agenda, management reports and other explana-
the number of independent Directors to at least • Statutory audit firm or the internal audit firm tory statements are circulated at least seven days
half the strength of the Board. To this end, the that is associated with the Company. ahead of the meeting for facilitating meaningful,
Company has inducted Mr Edward T. Story — • Legal firm(s) and consulting firm(s) that have informed and focused discussions and decision-
an international expert in oil exploration and a material association with the Company. making. To address specific urgent needs, meet-
production — as an independent Director. It is ings are also called at shorter notice — but never
actively in the process of inducting two more Are not material suppliers, service providers or less than a minimum of seven days. In some
independent Directors with requisite expertise. customers or lessors or lessees of the Company instances, resolutions are passed by circulation.
By the end of 2009-10, Cairn India intends to which may affect their independence. Directors have complete access to all
have half of the Board comprising independent information of the Company. The Board is also
Directors. Are not substantial shareholders of the free to recommend inclusion of any matter in
* Includes Foundations
** Only the Audit Committee and the Shareholders’ / Investors’ Grievance Committee of Indian public limited companies have been considered
1
Appointed as an additional Director with effect from 19 December 2008
2
Appointed as an additional Director with effect from 29 April 2008
3
Appointed as an additional Director with effect from 18 March 2009
4
Appointed as an alternate Director to Sir William B.B. Gammell with effect from 18 March 2009 and ceased to be alternate Director with effect from 26 May 2009
CO R P OR AT E GOV E RNA NC E 41
Report on Corporate
Governance Continued
Name of the Director No. of meetings held during the No. of Meetings attended Presence at the last AGM
period the Director was on Board
Sir William B. B. Gammell 10 5* Yes
1
Ms Jann Brown 1 1 NA
Mr Norman L. Murray 2 9 7 Yes
Mr Rahul Dhir 10 8 Yes
Mr Malcolm Shaw Thoms 10 7 Yes
Mr Aman Mehta 10 9 No
Mr Naresh Chandra 10 10 Yes
Dr Omkar Goswami 10 8 Yes
Mr Indrajit Banerjee 10 10 Yes
3
Mr Rick Bott 5 5 Yes
Mr Edward T. Story 4 - - NA
5
Mr Philip Tracy 1 1 NA
Mr Lawrence W. Smyth 6 - - NA
* Sir William B. B. Gammell also participated in the proceedings of 3 Board Meetings through audio conference
1
Appointed as an additional Director with effect from 19 December 2008
2
Resigned from an the Board with effect from 18 December 2008
3
Appointed as additional Director with effect from 29 April 2008
4
Appointed as an additional Director with effect from 18 March 2009
5
Appointed as an alternate Director to Sir William B.B. Gammell with effect from 18 March 2009 and ceased to be alternate Director with effect from 26 May 2009
6
Resigned from the Board with effect from 21 January 2008
Name of the Director Salary Bonus and Retirement Commission Sitting Fee Total
Performance Benefits
incentives
Sir William B. B. Gammell - - - - - -
1
Ms Jann Brown - - - - - -
Mr Norman L. Murray 2 - - - - - -
Mr Rahul Dhir * 56,334,353 13,423,473 1,701,442 - - 71,459,268
Mr Malcom Shaw Thoms - - - - - -
Mr Aman Mehta - - - - 440,000 440,000
Mr Naresh Chandra - - - - 480,000 480,000
Dr Omkar Goswami - - - - 400,000 400,000
Mr Indrajit Banerjee ** 16,274,192 8,099,000 1,749,600 - - 26,122,792
Mr Rick Bott 3 *** 26,783,554 86,598,000 1,169,703 - - 114,551,257
Mr Edward T. Story 4 - - - - - -
5
Mr Lawrence W. Smyth **** 11,373,143 14,141,503 - - - 25,514,646
1
Appointed as an additional Director with effect from 19 December 2008
2
Resigned from the Board with effect from 18 December 2008
3
Appointed as an additional Director with effect from 29 April 2008
4
Appointed as an additional Director with effect from 18 March 2009
5
Resigned from the Board with effect from 21 January 2008
* Rs. 71,459,268 includes Rs. 3,000,000 paid by Cairn India Limited as salary and retiral benefits. Further benefits and perquisites valued at Rs. 54,000,436 were provided by Cairn Energy
India Pty Limited (CEIPL, incorporated in Australia).
** Salary of Rs. 2,008,929 and retirement benefits / perquisites of Rs. 241,071 was paid by Cairn India Limited and balance by CEIPL.
*** Rs. 114,551,257 includes Rs. 950,000 paid by Cairn India Limited as salary and retiral benefits. Further benefits and perquisites valued at Rs. 67,936,605 were provided by CEIPL.
**** Lawrence W. Smyth, who resigned from the Board on 21 January 2008, was paid salary of Rs.11,373,143 and perquisites of Rs. 14,141,503 by CEIPL. Further benefits
and perquisites valued at Rs. 13,821,800 were provided by CEIPL.
Mr Philip Tracy, alternate Director was paid retirement benefits / perquisites of Rs. 1,353,642 by CEIPL for the period for which he was alternate Director.
Name of the Director No. of Options No. of Options No. of Options No. of Options No. of Options Exercise Price
granted vested exercised cancelled outstanding (in Rs.)
Mr Rahul Dhir 6,714,233 4,476,156 4,476,156 - 2,238,077 * 33.70
1
Mr Lawrence W. Smyth 1,584,480 792,240 792,240 792,240 - 33.70
1
Resigned from the Board with effect from 21 January 2008
* The outstanding options of Mr Rahul Dhir will vest on Company’s achieving 30 days’ consecutive production of over 150,000 bopd from the Rajasthan Block and can be exercised within a
period of eighteen months from the date of vesting
CO R P OR AT E GOV E RNA NC E 43
Report on Corporate
Governance Continued
of statutory and internal auditors, and the Reviewing the Company’s financial and risk of annual general meeting held on 25 June
adequacy of the internal control systems of the management policies 2008, Mr Naresh Chandra attended the meet-
Company ing as an Interim Audit Committee Chairman to
Monitoring the utilisation of funds to be raised answer queries from the shareholders.
Approving the appointment, removal and terms pursuant to a public issue
of remuneration of the chief internal auditor (b) shareholders’/ investors’
Carrying out any other function as the Board grievance committee
Reviewing the adequacy of the internal audit may from time to time refer to the Audit The Company has constituted a Shareholders’/
function, if any, including the structure of the Committee Investors’ Grievance Committee primarily with
internal audit department, staffing and seniority the objective of redressal of shareholders’ and
of the official heading the department, reporting The Audit Committee also reviews the investors’ complaints such as relating to transfer
structure coverage and frequency of internal following information: of shares, non-receipt of Balance Sheet and
audit non-receipt of declared Dividends.
Management discussion and analysis of finan- During the year, the terms of reference of the
Discussing with internal auditors any significant cial condition and results of operations Shareholders’ / Investors’ Grievance Committee
findings and following up on any such signifi- was amended with the addition of following
cant findings Statement of significant related party transac- powers and duties:
tions (as defined by the Audit Committee),
Reviewing the findings of any internal investiga- submitted by management To approve / refuse / reject registration of trans-
tion by internal auditors into matters relating fer / transmission / transposition of shares
to irregularities, fraud, or a failure in internal Management letters / letters of internal control
control systems of a material nature, and report- weaknesses issued by the statutory auditors To authorise issue of duplicate share certificates
ing such matters to the Board and issue of share certificates after split / con-
Internal audit reports relating to internal control solidation / rematerialisation of shareholding
Having pre-audit discussions with the statutory weaknesses
auditors as to the nature and scope of the audit, To authorise printing of share certificates
and post-audit discussions to ascertain any During the financial year ended 31 March
areas of concern 2009, the Audit Committee met six times: on 21 To authorise affixation of common seal of the
January 2008, 27 March 2008, 29 April 2008, Company on share certificates of the Company
Looking into the reasons for any substantial 29 July 2008, 29 October 2008 and 29 January
defaults in payments to debenture holders, 2009. The attendance record of the Audit To authorise directors / managers / officers
shareholders (in case of the non-payment of Committee is given in Table 5. / signatories for signing / endorsing share
declared Dividends) and creditors As Mr Aman Mehta, Chairman of the Audit certificates
Committee was out of the country on the date
Name of the Member Position Status No. of Meetings held No. of Meetings
during the period the attended
Director was a Member
of the Committee
Mr Aman Mehta Independent Director Chairman 6 6
Mr Naresh Chandra Independent Director Member 6 6
Dr Omkar Goswami Independent Director Member 6 5
Mr Norman L. Murray 1 Non-executive Director Member 5 5
Ms Jann Brown 2 Non-executive Director Member 1 -
3
Mr Edward T. Story Non-executive Director Member - -
1
Resigned from the Board with effect from 18 December 2008
2
Appointed as an additional Director and co-opted on the Audit Committee with effect from 19 December 2008
3
Appointed as an additional Director and co-opted on the Audit Committee with effect from 18 March 2009
CO R P OR AT E GOV E RNA NC E 45
Report on Corporate
Governance Continued
Procedure laid down for Shareholders’ / Company and the Registrar and Share Transfer the executive Directors. The Committee en-
Investors’ Grievance Committee Agent is given in Table 7. sures that a significant proportion of executive
The Company has appointed Link Intime India Directors’ remuneration is structured so as to
Private Limited (formerly Intime Spectrum (c) remuneration committee link rewards to corporate and individual perfor-
Registry Limited) as the Registrar and Transfer The Board has a Remuneration Committee to mance. In determining packages of remunera-
Agent to handle the investor grievances in make recommendations to the Board as to the tion, the Committee consults with the Chairman
co-ordination with the Compliance Officer. All Company’s framework or broad policy for the as appropriate.
grievances can be addressed to the Registrar remuneration of the Chairman, the executive The Committee is responsible for overseeing
and Share Transfer Agent. The Company moni- Directors of the Board, and senior executives the Company’s share option schemes and long
tors the work of the Registrar to ensure that the one level below the Board. term incentive plans, including determining
investor grievances are settled expeditiously The objective of the Company’s remunera- eligibility for benefits and approving total annual
and satisfactorily. The Shareholders’/ Investors’ tion policy is to ensure the Company’s execu- payments. The Committee also recommends
Grievance Committee oversees redressal of tive Directors and senior executives receive suf- and monitors the level and structure of remu-
shareholders’ grievances. ficient incentive for enhanced performance and neration for the first layer of management below
As on 31 March 2009, the Committee are fairly rewarded for their contribution to the Board level.
comprised three Directors: Dr Omkar Goswami Company’s overall performance. In determining As on 31 March 2009, the Remuneration
(Chairman), Mr Naresh Chandra and Mr this policy, the Committee takes into account all Committee comprised five non-executive
Rahul Dhir. Two of these members, including factors it deems relevant and give due regard to Directors: Mr Naresh Chandra (Chairman),
the Chairman, are independent. Ms Neerja the interests of the shareholders and to the fi- Sir William B.B. Gammell, Mr Malcolm Shaw
Sharma, Company Secretary, is the Compliance nancial and commercial health of the Company. Thoms, Mr Aman Mehta and Dr Omkar
Officer of the Company and the Secretary of the The Committee ensures that levels of remunera- Goswami. Three of these members are
Committee. The Committee met twice during tion are sufficient to attract and retain executive independent. Ms Neerja Sharma, Company
the financial year: on 29 April 2008 and directors and senior executives of the quality Secretary, is the Secretary to the Committee.
10 December 2008. Table 6 details the atten- required to run the Company successfully. During the financial year ended 31 March
dance record of the Committee. Within the terms of the agreed policy, the 2009, six meetings of the Remuneration
The status of complaints received during the Committee determines the entire individual Committee were held: on 21 January 2008,
15-month period ended 31 March 2009 by the remuneration packages for the Chairman and 27 March 2008, 29 April 2008, 29 July 2008,
Name of the Member Position Status No. of Meetings held No. of Meetings attended
Dr Omkar Goswami Independent Director Chairman 2 2
Mr Naresh Chandra Independent Director Member 2 2
Mr Rahul Dhir Managing Director and CEO Member 2 2
10 December 2008 and 18 March 2009. bers of the Board in the future code for prevention of
The attendance record of the Remuneration insider trading practices
Committee is given in Table 8. Ensuring that on appointment to the Board, In compliance with the SEBI regulation on
the non-executive Directors receive a formal prevention of insider trading, the Company has
(d) nomination committee letter of appointment setting out clearly what is instituted a comprehensive Code of Conduct
As on 31 March 2009, the Nomination expected of them in terms of time commitment, for its management and staff. The Code lays
Committee comprised five Directors: Sir William committee service and involvement outside down guidelines which advise management
B.B. Gammell (Chairman), Mr Rahul Dhir, Board meetings and staff on procedures to be followed and
Ms Jann Brown, Mr Malcolm Shaw Thoms disclosures to be made while dealing with
and Mr Edward T. Story. Ms Jann Brown and The Nomination Committee met once during shares of the Company, and cautions them of
Mr Edward T. Story were inducted on the the financial year on 10 January 2009. the consequences of violations.
Committee on 19 December 2008 and
18 March 2009 respectively. management risk management
management discussion Cairn India follows well-established and detailed
The functions of the Nomination and analysis risk assessment and minimisation procedures,
Committee are: This Annual Report has a detailed chapter on which are periodically reviewed by the Board.
Management Discussion and Analysis.
Reviewing the structure, size and composition ceo / cfo certification
of the Board, with a view to ensuring continued disclosures The CEO and CFO certification of the financial
ability of the Company to compete effectively in The Company follows the accounting standards statements for the financial year under review is
the market place, and make recommendations and guidelines laid down by the Institute enclosed at the end of the report.
to the Board with regard to any changes of Chartered Accountants of India (ICAI) in
preparation of its financial statements. No mate- subsidiary companies
Identifying and nominating, for the approval of rial financial and commercial transactions were All subsidiaries of the Company are unlisted
the Board, appropriate individuals to fill Board reported by the management to the Board, in wholly owned subsidiary companies and are
vacancies as and when they arise which the management had any personal inter- foreign subsidiaries. These subsidiaries have
est that either had or could have had a conflict their own Board of Directors having the rights
Evaluating the balance of skills, knowledge and with the interest of the Company at large. and obligations to manage such companies in
experience of the Board and, in the light of this There were no transactions with the best interest of the Company. The Company has
evaluation, preparing a description of the role Directors or Management, their associates or its representatives on the Boards of subsidiary
and capabilities required for particular appoint- their relatives etc. that either had or could have companies and monitors the performance of
ments; and then identifying suitable candidates had a conflict with the interest of the Company such companies regularly.
for the Board at large.
Name of the Member Position Status No. of Meetings held No. of Meetings attended
Mr Naresh Chandra Independent Director Chairman 6 6
Sir William B.B. Gammell Non-Executive Director Member 6 2
Dr Omkar Goswami Independent Director Member 6 5
Mr Aman Mehta Independent Director Member 6 6
Mr Malcolm Shaw Thoms Non-Executive Director Member 6 5
CO R P OR AT E GOV E RNA NC E 47
Report on Corporate
Governance Continued
shareholders Soco International has E&P interests in South Boards of Prudential Inc, USA and CapitaLand
disclosure regarding East Asia and Africa. Ltd of Singapore.
appointment or re-appointment
of directors Ms Jann Brown, 54, was appointed as an ad- Dr Omkar Goswami, 52, holds a Master of
Brief profiles of the persons to be appointed / ditional Director with effect from 19 December Economics Degree from the Delhi School of
re-appointed as Director at the annual general 2008. She holds an MA degree from Edinburgh Economics and a D. Phil. in Economics from
meeting of the Company are given below. University and joined Cairn Energy PLC in 1998 Oxford University. He has authored various
after a career in the accountancy profession, books and research papers on economic history,
Mr Edward T. Story, 65, was appointed mainly with KPMG. She was appointed Finance industrial economics, public sector, bank-
as an additional Director with effect from 18 Director of Cairn Energy PLC in 2006. Prior ruptcy laws and procedures, economic policy,
March 2009. He is a science graduate from to her appointment as Finance Director, she corporate finance, corporate governance, public
Trinity University, San Antonio, Texas and holds served on the Group Management Board for finance, tax enforcement and legal reforms.
a Masters degree in Business Administration seven years. She is a member of the Institute Dr Goswami was Chief Economist for the
from the University of Texas. He has also been of Chartered Accountants of Scotland and the Confederation of Indian Industry and the Editor
conferred an honorary Doctorate degree by the Chartered Institute of Taxation. of Business India. He is founder and chairman
Institute of Finance and Economics of Mongolia of CERG Advisory Private Limited which advises
and is Chairman of the North America Mongolia Mr Aman Mehta, 62, is an Economics gradu- companies on corporate governance, investor
Business Council. ate from Delhi University. He was earlier the relations, business restructuring and economic
Mr Story has more than 40 years experience Chief Executive Officer of HSBC Asia Pacific research. Dr Goswami is currently a non-exec-
in the international oil and gas industry and is until 2003. Mr Mehta is currently an indepen- utive Director on a number of Boards of other
the Founder, President and Chief Executive dent non-executive Director of several public companies.
Officer of SOCO International PLC, an inter- companies in India as well as overseas. Besides The directorships and committee positions
national exploration and production (E&P) this he is also a member of the Advisory Council held by these Directors as at 31 March 2009 is
company listed on the London Stock Exchange. of INSEAD, France and International Advisory detailed in Table 9 below.
Name of Director Name of the Company in which Directorship held Committee Chairmanship# Committee Membership#
Mr Edward T. Story SOCO International PLC - -
Ms Jann Brown Cairn Energy PLC - -
Hansen Transmissions International N.V. - Audit Committee
Cairn India Holdings Limited - -
Cairn Energy Birganj Limited - -
Cairn Energy Dhangari Limited - -
Cairn Energy Exploration & Production Company Limited - -
Cairn Energy Karnali Limited - -
Cairn Energy Lumbini Limited - -
Cairn Energy Malangawa Limited - -
Cairn Energy Nepal Holdings Limited - -
Cairn Energy Search Limited - -
Cairn Exploration (No. 1) Limited - -
Cairn Resources Management Limited - -
Capricorn Energy Limited - -
Cairn Resources (2002) PLC - -
Medoil PLC - -
Cairn UK Holdings Limited - -
Capricorn Oil Limited - -
Capricorn Exploration Limited - -
Name of Director Name of the Company in which Directorship held Committee Chairmanship# Committee Membership#
Ms Jann Brown Capricorn Greenland Exploration 1 Limited - -
Capricorn Greenland Exploration 2 Limited - -
Capricorn Greenland Exploration 3 Limited - -
Capricorn Greenland Exploration 4 Limited - -
Capricorn Greenland Exploration 5 Limited - -
Capricorn Greenland Exploration 6 Limited - -
Capricorn Greenland Exploration 7 Limited - -
Capricorn Greenland Exploration 8 Limited - -
Capricorn Petroleum Limited - -
Capricorn Oil and Gas Limited - -
Plectrum Oil and Gas Limited - -
Plectrum Oil Limited - -
Plectrum Petroleum Limited - -
Banchory Exploration Limited - -
Medoil Resources Limited - -
Capricorn Albania Limited - -
Capricorn Atammik Limited - -
Capricorn Lady Franklin Limited - -
Capricorn Greenland Exploration 9 Limited - -
Capricorn Greenland Exploration 10 Limited - -
Capricorn Greenland Exploration 11 Limited - -
Capricorn Bangladesh Limited - -
Capricorn Spain Limited - -
Mr Aman Mehta PCCW Ltd, Hongkong Audit Committee -
Tata Consultancy Services Limited Audit Committee -
Vedanta Resources PLC, UK Audit Committee -
Godrej Consumer Products Limited - Audit Committee
Emaar MGF Land Limited - Audit Committee
ING Group N.V.Netherlands - -
Max India Limited - -
Jet Airways Limited Audit Committee -
Wockhardt Pharmaceuticals Limited - Audit Committee, Shareholders/
Investor Grievance Committee
Dr Omkar Goswami Dr Reddy’s Laboratories Limited Audit Committee -
Infosys Technologies Limited - Audit Committee,
Shareholders Committee
DSP BlackRock Investment Managers Limited - -
IDFC Limited - Audit Committee,
Shareholders Committee
Crompton Greaves Limited - Audit Committee
Ambuja Cements Limited - -
Godrej Consumer Products Limited - Audit Committee
Max New York Life Insurance Company Limited - -
CERG Advisory Private Limited - -
CO R P OR AT E GOV E RNA NC E 51
Additional Shareholder
Information
For the year ending 31 March 2010, results will National Stock Exchange of India Limited CAIRN
be announced by Bombay Stock Exchange Limited 532792
Last week of July 2009: First quarter
Last week of October 2009: Half yearly
Last week of January 2010: Third quarter
Last week of June 2010: Fourth quarter market price data
and full financial year’s results. Table 2 and Chart A and B give the details.
2 High, low and volume of Company’s Shares traded at BSE and NSE
FIN AN CIAL YEAR END ED 31 MAR CH 2009
150
SENSEX
CAIRN
125
100
75
50
25
JAN FEB MAR APR MAY JUN JUL AUG SEPT OCT NOV DEC JAN FEB MAR
2008 2008 2008 2008 2008 2008 2008 2008 2008 2008 2008 2008 2009 2009 2009
150
NIFTY
CAIRN
125
100
75
50
25
JAN FEB MAR APR MAY JUN JUL AUG SEPT OCT NOV DEC JAN FEB MAR
2008 2008 2008 2008 2008 2008 2008 2008 2008 2008 2008 2008 2009 2009 2009
Share prices, BSE Sensex and Nifty indexed to 100 as on the first working day of the financial year 2008–09 i.e.1 January 2008
3 Distribution of Shareholding
AS ON 31 MARCH 2009
CO R P OR AT E GOV E RNA NC E 53
Additional Shareholder
Information Continued
promoters holding
Indian Promoters - -
Foreign Promoters 1,226,843,791 64.68
Persons acting in concert - -
non-promoters holding
(a) Banks, Financial Institutions, Insurance Companies
(Central / State Govt. / Non-Government Institutions) 75,162,817 3.96
(b) Foreign Institutional Investors 166,620,923 8.78
(c) Foreign Company 49,700,000 2.62
(d) Public 50,560,707 2.67
(e) Mutual Funds 31,842,774 1.68
(f) NRI (Repatriable) 1,067,598 0.06
(g) NRI (Non-Repatriable) 381,195 0.02
(h) Bodies Corporate 43,588,865 2.30
(i) Foreign Bodies Corporate 246,882,573 13.02
(j) Clearing Member 3,973,515 0.21
(k) Trusts 43,058 -
Grand Total 1,896,667,816 100.00
* The vesting period is minimum three years, subject to the fulfillment of performance conditions as defined in the Plan. The
exercise period is three months from the date of vesting of options.
CO R P OR AT E GOV E RNA NC E 55
Additional Shareholder
Information Continued
We, Rahul Dhir, Chief Executive Officer, and Indrajit Banerjee, Chief To
Financial Officer, of Cairn India Limited hereby certify to the Board that: The Members of
Cairn India Limited
a. We have reviewed financial statements and the cash flow statement
for the financial year ended 31 March 2009 and that to the best of our We have examined the compliance of conditions of corporate gover-
knowledge and belief: nance by Cairn India Limited (‘the Company’), for the fifteen months
i. These statements do not contain any materially untrue statement period ended on 31 March 2009, as stipulated in clause 49 of the Listing
or omit any material fact or contain statements that might be Agreement of the said Company with stock exchanges.
misleading; The compliance of conditions of corporate governance is the responsi-
ii. These statements together present a true and fair view of the bility of the management. Our examination was limited to procedures and
Company’s affairs and are in compliance with existing accounting implementation thereof, adopted by the Company for ensuring the com-
standards, applicable laws and regulations. pliance of the conditions of Corporate Governance. It is neither an audit
nor an expression of opinion on the financial statements of the Company.
b. There are, to the best of our knowledge and belief, no transactions en- In our opinion and to the best of our information and according to the
tered into by Cairn India Limited during the year which are fraudulent, explanations given to us, subject to the fact that the proportion of the
illegal or violative of the Company’s Code of Ethical Conduct. independent directors to the total strength of the Board being 40% is less
than the minimum prescribed limit of 50%, the Chairman of the Board
c. We are responsible for establishing and maintaining internal controls being related to the promoter of the Company in terms of clarification
for financial reporting in Cairn India Limited, and we have evaluated dated 23 October 2008 issued by the Securities and Exchange Board
the effectiveness of the internal control systems of the Company per- of India, we certify that the Company has complied with the conditions
taining to financial reporting. We have disclosed to the auditors and of Corporate Governance as stipulated in the above mentioned Listing
the Audit Committee, deficiencies in the design or operation of such Agreement.
internal controls, if any, of which we are aware and the steps we have We further state that such compliance is neither an assurance as to the
taken or propose to take to rectify these deficiencies. future viability of the Company nor the efficiency or effectiveness with
which the management has conducted the affairs of the Company.
d. We have indicated to the auditors and the Audit Committee
i. Significant changes in internal control over financial reporting dur- For S. R. Batliboi & Associates
ing the year; Chartered Accountants
ii. Significant changes in accounting policies during the year and the
same have been disclosed in the notes to the financial statements; per Raj Agrawal
and Partner
iii. Instances of significant fraud of which we have become aware and Membership No. 82028
the involvement therein, if any, of the management or an employee
having a significant role in the Company’s internal control system Place Gurgaon
over financial reporting. Date 27 May 2009
e. We affirm that we have not denied any personnel access to the Audit
Committee of the Company (in respect of matters involving alleged
misconduct).
Rahul Dhir
Managing Director & CEO
Indrajit Banerjee
Executive Director & CFO
Place Gurgaon
Date 27 May 2009
CO R P OR AT E GOV E RNA NC E 57
Directors’
Report
Your Directors have pleasure in presenting the third Annual Report, together with
the Audited Accounts of your Company for the Financial Year ended 31 March 2009
Financial Results
I N R U PEES T HO U SAN DS
Standalone Consolidated
For the financial year ended For the financial year ended
31 March 2009 31 December 2007 31 March 2009 31 December 2007
(Fifteen months) (Twelve months) (Fifteen months) (Twelve months)
Total income 2,980,403 339,623 20,271,368 11,446,716
Total expenditure 1,859,687 807,300 10,392,502 10,187,488
Profit / (Loss) before tax 1,120,716 (467,677) 9,878,866 1,259,228
Taxes 578,309 320,489 1,844,360 1,504,669
Profit / (Loss) after tax 542,407 (788,166) 8,034,506 (245,441)
DIRECTORS’ REPORT 59
Directors’ Report
Continued
conservation of energy,
technology absorption and
foreign exchange earnings
and outgo
Information on Conservation of Energy,
Technology Absorption and Foreign Exchange
Earnings and Outgo is given in Annexure II to
this report.
DIRECTORS’ REPORT 61
Annexures to the
Directors’ Report
annexure i
Disclosure pursuant to the provisions of Securities and Exchange Board of India
(Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999
S.No. Particulars Cairn India Senior Cairn India Cairn India
Management Plan Performance Employee Stock
Option Plan (2006) Option Plan (2006)
1 Options granted during January 2008 - March 2009 Nil 789,567 3,809,896
2 The Pricing Formula Rs. 33.70 per Share Rs. 10 per Share Price determined by
the Remuneration
Committee but not
less than the fair
market value of a share
on the date of grant
3 Options Vested during January 2008 - March 2009 2,238,078 NIL NIL
4 Options Exercised during January 2008 - March 2009 5,268,396 NIL NIL
5 Total number of Shares arising as a result of exercise of options during 5,268,396 NIL NIL
January 2008 - March 2009
6 Options lapsed during January 2008 - March 2009 792,240 2,344,715 1,441,362
7 Variation of terms of options None None None
8 Money realized by exercise of options during January 2008 - March 2009 Rs. 177,544,945 NIL NIL
9 Total number of options in force as on 31 March 2009 2,238,077 3,200,096 10,914,244
10 Employee wise details of options granted during the year to:
(i) Senior Managerial Person None Indrajit Banerjee : 69,630 None
Santosh Chandra : 48,676
Elango P. : 78,269
Senthil Kumar P. : 32,605
S. V. Nair : 89,195
Ananthakrishnan B. : 48,024
(ii) Any other employee who receives a grant in any one year of option None Venkateshan T. K. : 45,978 None
amounting to 5% or more of options granted during the year Narayanan P. S. : 49,204
Ajay Gupta : 75,191
(iii) Identified employees who were granted options during any 1 year, equal None None None
to or exceeding 1% of the issued capital (excluding outstanding warrants &
conversions) of the Company at the time of grant
11 Diluted Earnings Per Share (EPS) pursuant to issue of Shares on exercise of Rs. 0.29 NA NA
options calculated in accordance with Accounting Standard 20
12 (i) Method of calculation of employee compensation cost Intrinsic Value Method
(ii) Difference between the employee compensation cost so computed at 485,151
12(i) above and the employee compensation cost that shall have been
recognised if it had used the fair value of the options (Rs. in thousands)
(iii) The impact of this difference on profits and on EPS of the Company
Profit after Tax (PAT) (Rs. in thousands) 542,407
Less: Additional employee Compensation cost based on fair value (Rs. in thousands) 485,151
Adjusted PAT (Rs. in thousands) 57,256
Adjusted EPS Basic (Rs.) 0.03
Adjusted EPS Diluted (Rs.) 0.03
13 Weighted-average exercise prices of options granted during NA 10.00 226.21
January 2008 - March 2009
Weighted-average fair value of each option outstanding as on 131.50 165.46 101.47
31 March 2009
DIRECTORS’ REPORT 63
Annexures to the
Directors’ Report Continued
Expenditure on R&D
IN R S.
Particulars Amount
(i) Capital 3,704,225 *
(ii) Recurring -
(iii) Total 3,704,225
(iv) Total R&D expenditures as a % of total turnover 0.02%
* These are consolidated numbers for the fifteen months period ended 31 March 2009
Benefits derived as a result of this R&D Foreign exchange used and earned.
Cairn ’s research in EOR applications for the During the period ended 31 March 2009, the
MBA fields has the potential to unlock addi- Company earned Rs. 37.58 million and incurred
tional oil reserves within these fields and a long expenditure of Rs. 1036.31 million in foreign
term strategy for EOR is being developed with exchange.
this end in mind.
Cairn ’s study with the National Geophysical For and on behalf of the Board of Directors
Research Centre (NGRI) on salinity changes of
ground water sets an example of ‘good industry Sir William B.B. Gammell
practice’. We are reassured that our operation Chairman
in Ravva does not have an adverse impact on
ground water and the environment. Place Gurgaon
Date 27 May 2009
Expenditure on R&D
Details outlined in the Table above.
TO
THE MEMBERS OF CAIRN INDIA LIMITED
1. We have audited the attached balance sheet of Cairn India Limited ('the Company') as at March 31, 2009 and also the profit and loss account and
the cash flow statement for the fifteen months period ended on that date annexed thereto, which include the Company's share of net liabilities,
expenses and cash outflows aggregating to Rs. 44,467 thousand, Rs. 213,225 thousand and Rs. 20,344 thousand, respectively in the
unincorporated joint ventures ('JVs') not operated by the Company or its subsidiaries, the accounts of which have been audited by the auditors of
the respective JVs and further include the Company's share of net assets, expenses and cash flows aggregating to Rs. 1,871 thousand,
Rs. 137,193 thousand and Rs. Nil, respectively in certain JVs, the accounts of which have been certified by the operators of the respective JVs
(for which, as informed to us, the audits are in progress) and relied upon by us. These financial statements are the responsibility of the Company's
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 (Auditor's Report) Order, 2003 (as amended) ('the Order') 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. In respect of clauses (ix)(a), (ix)(b), (ix)(c) and (xxi), our comments are restricted to the operations of the Company and
the JV's where the Company is the operator and does not cover the JV's where any third party is the operator.
Place : Gurgaon
Date : 27th May, 2009
65
Auditors' Report
(xix) The Company did not have any outstanding debentures during the year.
(xx) We have verified that the end use of money raised by public issue is as disclosed in the note no. 5 of schedule 18 to the financial
statements.
(xxi) Based upon the audit procedures performed for the purpose of reporting the true and fair view of the financial statements and as per
the information and explanations given by the management, we report that no fraud on or by the Company has been noticed or
reported during the course of our audit.
Place : Gurgaon
Date : 27th May, 2009
67
Balance Sheet
AS AT MARCH 31, 2009
Schedules As at As at
March 31, 2009 December 31, 2007
SOURCES OF FUNDS
Shareholders’ funds
Share capital 1 18,966,678 17,783,994
Stock options outstanding 2 388,978 947,084
Reserves and surplus 3 301,090,274 276,084,115
320,445,930 294,815,193
APPLICATION OF FUNDS
Fixed assets 4
Gross cost 974 –
Less: Accumulated amortisation 365 –
Net book value 609 –
Exploratory work in progress 5 540,299 –
Investments 6 292,253,966 294,137,285
Current assets, loans and advances
Sundry debtors 7 17,942 12,708
Cash and bank balances 8 27,632,762 7,757
Other current assets 9 633,645 –
Loans and advances 10 220,814 35,950
28,505,163 56,415
Less: Current liabilities and provisions
Current liabilities 11 1,076,734 138,410
Provisions 12 315,373 320,504
1,392,107 458,914
Net current assets 27,113,056 (402,499)
Profit and loss account 538,000 1,080,407
320,445,930 294,815,193
Notes to accounts 18
The schedules referred to above and the notes to accounts form an integral part of the balance sheet.
As per our report of even date
For S. R. Batliboi & Associates For and on behalf of the Board of Directors
Chartered Accountants Rahul Dhir Managing Director and Chief Executive Officer
per Raj Agrawal Aman Mehta Director
Partner Indrajit Banerjee Executive Director and Chief Financial Officer
Membership No.: 82028 Neerja Sharma Company Secretary
Place : Gurgaon
Date : 27th May, 2009
INCOME
Revenue from operating activities 37,331 12,708
Other income 13 2,943,072 326,915
2,980,403 339,623
EXPENDITURE
Staff costs 14 212,519 623,374
Data acquisition and pre exploration cost 36,235 –
Administrative expenses 15 793,554 174,838
Unsuccessful exploration costs 5 813,568 8,879
Amortisation 4 365 –
Finance costs 16 3,446 209
1,859,687 807,300
Profit/(Loss) before taxation 1,120,716 (467,677)
Current tax 543,800 –
Fringe Benefit Tax 34,509 320,489
Profit/(Loss) for the period / year 542,407 (788,166)
Add: Accumulated losses at the beginning of (1,080,407) (292,241)
the period / year
Deficit carried forward to balance sheet (538,000) (1,080,407)
Earnings/(Loss) per share in INR 17
Basic 0.29 (0.44)
Diluted (previous year considered anti-dilutive) 0.29 (0.44)
[Nominal value of shares Rs. 10]
Notes to accounts 18
The schedules referred to above and the notes to accounts form an integral part of the profit and loss account.
As per our report of even date
For S. R. Batliboi & Associates For and on behalf of the Board of Directors
Chartered Accountants Rahul Dhir Managing Director and Chief Executive Officer
per Raj Agrawal Aman Mehta Director
Partner Indrajit Banerjee Executive Director and Chief Financial Officer
Membership No.: 82028 Neerja Sharma Company Secretary
Place : Gurgaon
Date : 27th May, 2009
69
Statement of Cash Flows
FOR THE PERIOD ENDED MARCH 31, 2009
For S. R. Batliboi & Associates For and on behalf of the Board of Directors
Chartered Accountants Rahul Dhir Managing Director and Chief Executive Officer
per Raj Agrawal Aman Mehta Director
Partner Indrajit Banerjee Executive Director and Chief Financial Officer
Membership No.: 82028 Neerja Sharma Company Secretary
Place : Gurgaon
Date : 27th May, 2009
As at As at
March 31, 2009 December 31, 2007
SCHEDULE - 1
Share capital
Authorised:
2,250,000,000 (previous year 2,250,000,000) equity shares of INR 10 each 22,500,000 22,500,000
Issued, subscribed and fully paid up:
1,896,667,816 (previous year 1,778,399,420) equity shares of INR 10 each 18,966,678 17,783,994
18,966,678 17,783,994
Note:
1) Issued, subscribed and fully paid up share capital includes 1,226,843,791 equity shares (previous year - 1,226,843,791 equity shares) of INR 10
each held by Cairn UK Holdings Limited, the holding company together with its nominees.
2) Shares held by the holding company includes 861,764,893 equity shares (previous year - 861,764,893 equity shares) of INR 10 each, allotted as
fully paid up pursuant to contracts for consideration other than cash.
3) For stock options outstanding refer note no. 6 in schedule 18.
SCHEDULE - 2
Stock options outstanding
Employee stock options outstanding 782,548 2,496,095
Less: Deferred employee compensation outstanding 393,570 1,549,011
388,978 947,084
SCHEDULE - 3
Reserves and surplus
Securities premium account
Opening balance 276,084,115 275,017,837
Add: Additions during the period / year 25,006,159 1,962,756
Less: Adjustment against share issue expenses – 896,478
Closing Balance 301,090,274 276,084,115
SCHEDULE - 4
Fixed assets
Intangible Assets - Computer Software
Gross Block
Additions during the period / year 974 –
Closing balance 974 –
Accumulated amortisation
For the period / year 365 –
Closing balance 365 –
Net Block 609 –
71
Schedules to the Financial Statements Continued
As at As at
March 31, 2009 December 31, 2007
SCHEDULE - 5
SCHEDULE - 6
Investments
Long term investments in Subsidiary Companies (at cost)
Unquoted, trade and fully paid-up
292,929,752 equity shares (previous year: 272,389,192 equity shares) of 290,524,514 289,083,710
GBP 1 each in Cairn India Holdings Limited, U.K.
2,509,960 equity shares (previous year: Nil) of USD 1 each in CIG Mauritius 121,980 –
Holding Pvt Limited
Current Investments (at lower of cost and market value)
Unquoted and non trade
Mutual Funds (Refer note no. 21 in Schedule 18 for details) * 1,607,472 5,053,575
292,253,966 294,137,285
Aggregate amount of unquoted investments 292,253,966 294,137,285
Repurchase price of mutual fund units, represented by Net Asset Value 1,607,472 5,114,006
* Includes unutilized monies of the public issue. (Refer note no. 5 in Schedule 18)
SCHEDULE - 7
Sundry Debtors
Debts outstanding for a period exceeding six months
– Unsecured, considered good 7,609 8,587
Other debts
– Unsecured, considered good 10,333 4,121
17,942 12,708
SCHEDULE - 8
Cash and bank balances
Cash in hand 15 –
Balances with scheduled banks *
– on current accounts 13,936 7,757
– on deposit accounts ** 27,618,811 –
27,632,762 7,757
* Includes unutilized monies of the public issue (refer note no.5 in Schedule 18)
** Includes INR 1,530,000 thousand, previous year Nil, pledged with the banks
As at As at
March 31, 2009 December 31, 2007
SCHEDULE - 9
Other current assets
Interest accrued on bank deposits 633,645 –
633,645 –
SCHEDULE - 10
Loans and advances
Unsecured considered good:
Advances recoverable in cash or in kind or for value to be received 12,855 417
Advances recoverable from subsidiary companies 192,795 663
Deposits 15,164 –
Advance income tax / tax deducted at source (Net of provisions Nil, previous year Nil) – 34,870
220,814 35,950
SCHEDULE - 11
Current liabilities
Sundry Creditors
– Total outstanding dues to Micro and Small Enterprises (refer note no. 20 in schedule 18) 6 –
– Total outstanding dues to other than Micro and Small Enterprises 97,773 111,964
Amounts payable to Cairn Energy Plc., the ultimate holding company 24,109 25,000
Amounts payable to subsidiary companies 753,778 –
Other liabilities 201,068 1,446
1,076,734 138,410
SCHEDULE - 12
Provisions
Provision for taxation (net of advance tax -INR 338,382 thousand, previous year Nil) 205,118 –
Provision for fringe benefit tax (net of advance tax payments INR 266,883 thousand, 105,235 320,231
previous year - INR 258 thousand)
Provision for gratuity 3,994 233
Provision for leave encashment 1,026 40
315,373 320,504
73
Schedules to the Financial Statements Continued
SCHEDULE - 13
Other income
Interest on bank deposits (Gross, tax deducted at source INR 304,879 thousand, 1,341,377 96,166
previous year INR 23,103 thousand)
Dividend from non-trade current investments 200,225 203,117
Profit on sale of non-trade current investments (net) 1,245,686 27,632
Miscellaneous income 61 –
Exceptional gain (refer note no. 8 in schedule 18) 155,723 –
2,943,072 326,915
SCHEDULE - 14
Staff costs
Salary, wages and bonus 74,089 19,904
Contribution to provident fund 3,314 349
Contribution to superannuation fund 1,716 904
Gratuity expenses 3,720 192
Leave encashment expenses 1,103 –
Staff welfare expenses 6,179 –
Employee compensation expense (stock options) 122,398 602,025
212,519 623,374
SCHEDULE - 15
Administrative expenses
Legal and professional expenses 254,050 109,461
Contract employee charges 4,517 –
Rent 1,377 –
Auditor’s remuneration
As Auditors
– Fees for statutory audit and consolidated financial statements 5,314 2,921
– Fees for tax audit 828 563
– Fees for limited review 7,595 1,014
– Fees for certification 506 –
– Fees for statutory reporting for parent companies consolidated 10,566 13,847
financial statements
– Other services 2,997 10,637
– Out of pocket expenses 443 28,249 552 29,534
Directors’ sitting fees 1,320 700
Advertisement and publicity 14,385 14,321
Public relation expenses 42,959 14,329
Sponsorship 15,666 –
Repairs and maintenance (others) 303 140
Travel expenses 30,954 1,308
Insurance expenses 197 –
Communication expenses 5,983 4,777
Share issue expenses (refer note no. 13 in schedule 18) 208,410 –
Exchange differences (net) 180,632 –
Miscellaneous expenses 4,552 268
793,554 174,838
SCHEDULE - 16
Finance costs
Interest on bank overdraft – 200
Other interest 388 –
Bank charges 3,058 9
3,446 209
SCHEDULE - 17
Earnings / (Loss) per share
Profit/(Loss) for the period / year as per profit and loss account 542,407 (788,166)
Weighted average number of equity shares in 1,866,146,993 1,777,001,292
calculating basic earning / (loss) per share
Add: Number of equity shares arising on grant of stock options 10,052,076 11,017,256
Weighted average number of equity shares in 1,876,199,069 1,788,018,548
calculating diluted earning / (loss) per share
Earning/(Loss) per share in INR
Basic 0.29 (0.44)
Diluted (previous year considered as anti-dilutive) 0.29 (0.44)
75
Schedules to the Financial Statements Continued
SCHEDULE 18 - NOTES TO ACCOUNTS
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.
The Company is participant in various Oil and Gas blocks/fields granted by the Government of India through Production Sharing Contracts (‘PSC’)
entered into between the Company and Government of India and other venture partners. The Company has interest in the following Oil and Gas
blocks/fields-
Oil and Gas blocks/fields Area Participating Interest
Operated block (through subsidiaries)
1 VN-ONN-2003/1* Vindhyan Onshore 25%
2 PR-OSN-2004 Palar Basin Offshore 25%
3 KG-ONN-2003/1* Krishna Godavari Onshore 25%
Non – operated block
4 RJ-ONN-2003/1* Rajasthan Onshore 30%
5 GS-OSN-2003/1* Gujarat Saurashtra Onshore 49%
6 KK-DWN-2004 Kerala Konkan Basin Offshore 40%
7 CB-ONN-2002/1* Cambay Onshore 30%
(proposed to be relinquished)
*Acquired during current period through assignment of interest from subsidiary companies
(c) Depletion
The expenditure on producing properties is depleted within each cost centre.
Depletion is charged on a unit of production basis, based on proved reserves for acquisition costs and proved and developed reserves for
other costs.
(d) Site restoration costs
At the end of the producing life of a field, costs are incurred in restoring the site of production facilities. The Company recognizes the full cost of
site restoration as a liability when the obligation to rectify environmental damage arises. The site restoration expense forms part of the cost of
producing properties of the related asset. The amortization of the asset, calculated on a unit of production basis based on proved and developed
reserves, is included in the “depletion and site restoration costs” in the profit and loss account.
(e) Impairment
i. The carrying amounts of assets are reviewed at each balance sheet date if there is any indication of impairment based on internal/external
factors. An impairment loss is recognized where the carrying amount of an asset exceeds its recoverable amount. The recoverable amount is
the greater of the asset’s net selling price and value in use. In assessing value in use, the estimated future cash flows are discounted to their
present value at the weighted average cost of capital.
ii. After impairment, depreciation/depletion is provided in subsequent periods on the revised carrying amount of the asset over its remaining
useful life.
(f) Other tangible fixed assets, depreciation and amortization
Tangible assets, other than oil and gas assets, are stated at cost, less accumulated depreciation and impairment losses, if any. Cost comprises the
purchase price and any attributable cost of bringing the asset to its working condition for its intended use. Borrowing costs relating to acquisition
of fixed assets which take a substantial period of time to get ready for its intended use are also included to the extent they relate to the period till
such assets are ready to be put to use. Depreciation is provided using the Straight Line Method as per the useful lives of the assets estimated by
the management, or at the rates prescribed under Schedule XIV of the Companies Act 1956, whichever is higher. The expected useful economic
lives are as follows:
Vehicles 2 to 5 years
Freehold buildings 10 years
Computers 2 to 5 years
Furniture and fixtures 2 to 5 years
Office equipments 2 to 5 years
Plant and Equipment 2 to 5 years
Leasehold improvements are amortized over the remaining period of the primary lease or expected useful economic lives, whichever is shorter.
(g) Intangible fixed assets and amortization
Intangible assets, other than oil and gas assets, have finite useful lives and are measured at cost and amortized over their expected useful
economic lives as follows:
Computer software 2 to 4 years
Goodwill arising on acquisition is capitalized and is subject to review for impairment.
(h) Leases
Finance leases, which effectively transfer substantially all the risks and benefits incidental to ownership of the leased item, are capitalised at the
lower of the fair value and present value of the minimum lease payments at the inception of the lease term and disclosed as leased assets. Lease
payments are apportioned between the finance charges and reduction of the lease liability based on the implicit rate of return. Finance charges are
charged directly against income. Lease management fees, legal charges and other initial direct costs are capitalised.
If there is no reasonable certainty that the Company will obtain the ownership by the end of the lease term, capitalised leased assets are
depreciated over the shorter of the estimated useful life of the asset or the lease term.
Leases where the lessor effectively retains substantially all the risks and benefits of ownership of the leased item, are classified as operating
leases. Operating lease payments are recognised as an expense in the profit and loss account on a straight-line basis over the lease term.
(i) Investments
Investments that are readily realisable and intended to be held for not more than a year are classified as current investments. Current investments
are measured at cost or market value, whichever is lower, determined on an individual investment basis. All other investments are classified as
long-term investments. Long term investments are measured at cost. However, provision for diminution in value is made to recognise a decline
other than temporary in the value of the investments.
(j) Joint Ventures
The Company participates in several Joint Ventures which involve the joint control of assets used in the oil and gas exploration, development and
producing activities. It accounts for its share of the assets and liabilities of Joint Ventures along with attributable income and expenses in such Joint
Ventures, in which it holds a participating interest. Joint venture cash and cash equivalent balances are considered by the Company to be the
amounts contributed in excess of the Company’s obligations to the joint ventures and are, therefore, disclosed within loans and advances.
(k) Revenue recognition
Revenue is recognized to the extent that it is probable that the economic benefits will flow to the Company and the revenue can be reliably
measured.
77
Schedules to the Financial Statements Continued
SCHEDULE 18 - NOTES TO ACCOUNTS
Short term compensated absences are provided for based on estimates. Long term compensated absences are provided for based actuarial
valuation made at the end of each financial year. The actuarial valuation is done as per projected unit credit method.
Actuarial gains / losses are immediately taken to profit and loss account and are not deferred.
Employee Stock Compensation Cost
Measurement and disclosure of the employee share-based payment plans is done in accordance with SEBI (Employee Stock Option Scheme and
Employee Stock Purchase Scheme) Guidelines, 1999 and the Guidance Note on Accounting for Employee Share-based Payments, issued by the
Institute of Chartered Accountants of India. The Company measures compensation cost relating to employee stock options using the intrinsic
value method. Compensation expense is amortized over the vesting period of the option on a straight line basis.
(s) Use of estimates
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent liabilities at the date of the financial statements
and the results of operations during the reporting period end. Although these estimates are based upon management’s best knowledge of current
events and actions, actual results could differ from these estimates.
(t) Segment Reporting Policies
Identification of segments: The Company’s operating businesses are organized and managed separately according to the nature of products and
services provided, with each segment representing a strategic business unit that offers different products and serves different markets. The
analysis of geographical segments is based on the areas in which major operating divisions of the Company operate.
3. 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 financial reporting systems. Accordingly, the figures 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 figures appearing in these financial statements relate to the
Company’s single geographical segment being operations in India.
Nature of the Balance Related Party 31st March 2009 31st December 2007
Remuneration payable Rahul Dhir Nil 3,261
Winston Frederick Bott Jr. Nil Nil
Indrajit Banerjee Nil 1,500
Lawrence Smyth Nil 1,800
Total Nil 6,561
Note: The remuneration to the key managerial personnel does not include the provisions made for gratuity and leave encashment benefits, as they
are determined on an actuarial basis for the Company as a whole.
5. As at 31st March 2009, the Company and its subsidiaries together have utilized INR 82,563,170 thousand (previous year – 71,682,135 thousand)
for the purposes listed in the prospectus issued for the Initial Public Offer. The details of utilization of funds is as follows-
Particulars Upto 31st March 2009 Upto 31st December 2007
Acquisition of shares of Cairn India Holdings Limited from Cairn UK Holdings Limited 59,580,837 59,580,837
Exploration and development expenses 21,152,714 10,411,239
General corporate purposes 230,000 90,440
Issue expenses 1,599,619 1,599,619
Total 82,563,170 71,682,135
The details of the unutilized monies out of the public issue proceeds is as follows-
Particulars 31st March 2009 31st December 2007
Mutual funds 718,277 7,337,856
Balances with banks 4,967,454 9,228,910
Total 5,685,731 16,566,766
CIPOP plan
Options will vest (i.e become exercisable) at the end of a “performance period” which will be 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.
Details of activities under Employees Stock Option Plans
CISMP Plan Current period Previous year
Number Weighted average Number Weighted average
of options exercise of options exercise
Price in INR Price in INR
Outstanding at the beginning of the year 8,298,713 33.70 8,298,713 33.70
Granted during the year Nil NA Nil NA
Forfeited during the year Nil NA Nil NA
Exercised during the year 5,268,396 33.70 Nil NA
Expired during the year 792,240 33.70 Nil NA
Outstanding at the end of the year 2,238,077 33.70 8,298,713 33.70
Exercisable at the end of the year Nil NA Nil NA
Weighted average fair value of options granted 131.50 NA 131.50 NA
on the date of grant (INR)
The weighted average share price on the dates of exercise of stock options was INR 220.09
CIPOP Plan Current period Previous year
Number Weighted average Number Weighted average
of options exercise of options exercise
Price in INR Price in INR
Outstanding at the beginning of the year 4,755,244 10.00 Nil NA
Granted during the year 789,567 10.00 4,943,389 10.00
Forfeited during the year Nil NA Nil NA
Exercised during the year Nil NA Nil NA
Expired during the year 2,344,715 10.00 188,145 10.00
Outstanding at the end of the year 3,200,096 10.00 4,755,244 10.00
Exercisable at the end of the year Nil NA Nil NA
Weighted average fair value of options granted 165.46 NA 165.46 NA
on the date of grant (INR)
CIESOP Plan Current period Previous year
Number Weighted average Number Weighted average
of options exercise of options exercise
Price in INR Price in INR
Outstanding at the beginning of the year 8,545,710 164.49 Nil NA
Granted during the year 3,809,896 226.21 8,982,755 164.27
Forfeited during the year Nil NA Nil NA
Exercised during the year Nil NA Nil NA
Expired during the year 1,441,362 169.33 437,045 160.00
Outstanding at the end of the year 10,914,244 185.39 8,545,710 164.49
Exercisable at the end of the year Nil NA Nil NA
Weighted average fair value of options granted 101.47 NA 89.40 NA
on the date of grant (INR)
The details of exercise price for stock options outstanding as at March 31, 2009 are:
Scheme Range of No. of Weighted average Weighted
exercise options remaining contractual average
price (INR) outstanding life of options exercise
(in years) price (INR)
CISMP Plan 33.70 2,238,077 2.08 33.70
CIPOP Plan 10.00 3,200,096 1.51 10.00
CIESOP Plan 143-227 10,914,244 1.60 185.39
The details of exercise price for stock options outstanding as at December 31, 2007 are:
CISMP Plan 33.70 8,298,713 1.04 33.70
CIPOP Plan 10.00 4,755,244 2.49 10.00
CIESOP Plan 160-166.95 8,545,710 2.47 164.49
Inputs for Fair valuation of Employees Stock Option Plans
The Share Options have been fair valued using an Option Pricing Model (Black Scholes Model). The main inputs to the model and the Fair Value
of the options, based on an independent valuation, are as under:
Variables - CISMP A B
Grant date 24th Nov 2006 24th Nov 2006
Stock Price/fair value of the equity shares on the date of grant (INR) 160.00 160.00
Vesting date Refer vesting Refer vesting
conditions conditions
Vesting % Refer vesting Refer vesting
conditions conditions
Volatility (Weighted average) 44.08% 46.59%
Risk free rate (Weighted average) 7.05% 6.94%
Time to maturity in years (Weighted average) 2.45 2.00
Exercise price – INR 33.70 33.70
Fair Value of the options (Weighted average) - INR 131.69 130.69
Variables – CIESOP
Grant date 1st Jan 2007 20th Sept 2007 29th July 2008 10th Dec 2008
Stock Price/fair value of the equity shares on 160.00 166.95 228.55 150.10
the date of grant (INR)
Vesting date 1st Jan 2010 20th Sept 2010 29th July 2011 10th Dec 2011
Vesting % 100% 100% 100% 100%
Volatility 41.04% 40.24% 39.43% 38.19%
Risk free rate 7.50% 7.65% 9.20% 6.94%
Time to maturity (years) 6.50 6.50 6.50 6.50
Exercise price (INR) 160.00 166.95 227.00 143.00
Fair Value of the options (INR) 87.30 90.72 130.42 79.80
Variables – CIPOP
Grant date 1st Jan 2007 20th Sept 2007 29th July 2008
Stock Price/fair value of the equity shares on 160.00 166.95 228.55
the date of grant (INR)
Vesting date 1st Jan 2010 20th Sept 2010 29th July 2011
Vesting % Refer vesting Refer vesting Refer vesting
conditions conditions conditions
Volatility 41.61% 36.40% 37.49%
Risk free rate 7.33% 7.23% 9.37%
Time to maturity (years) 3.12 3.12 3.12
Exercise price (INR) 10.00 10.00 10.00
Fair Value of the options (INR) 152.05 158.97 221.09
83
Schedules to the Financial Statements Continued
SCHEDULE 18 - NOTES TO ACCOUNTS
Volatility is the measure of the amount by which the price has fluctuated or is expected to fluctuate 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.
Effect of Employees Stock Option Plans on Financial Position
Effect of the employee share-based payment plans on the profit and loss account and on its financial position:
Particulars Current Period Previous Year
Total Employee Compensation Cost pertaining to equity settled share-based (33,325) 602,025
payment plans (including exceptional gain of INR 155,723 thousand in the
current period-refer note no. 8 below)
Liability for employee stock options outstanding as at period / year end 388,978 947,084
Deferred Compensation Cost 393,570 1,549,011
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.
Applying the fair value based method defined in the said guidance note, the impact on the reported net profit and earnings per share would be as
follows:
Particulars Current Period
Profit as reported 542,407
Add: Employee stock compensation under intrinsic value method (33,325)
(net of exceptional gain of INR 155,723 thousand-refer note no. 8 below)
Less: Employee stock compensation under fair value method 451,826
Proforma profit 57,256
Earnings Per Share in INR
Basic
– As reported 0.29
– Proforma 0.03
Diluted
– As reported 0.29
– Proforma 0.03
7. The Company has offered certain share options to some of the employees of one of its subsidiary companies and it was bearing the charge in its
profit and loss account till 31st March 2008. With effect from 1st April 2008, the management decided that this charge would be borne by the
immediate employer company of those employees. Accordingly, the stock option charge for the current period is lower and the profit after tax is
higher by INR 140,617 thousand.
8. During the current period, the Company decided to retrospectively account for stock options using the Intrinsic Value Method as against the Fair
Value Method (Black Scholes) followed till the financial year ended 31st December 2007. Accordingly, the excess stock option provision up to
31st December 2007 was reversed during the current period ended 31st March 2009, resulting in an exceptional gain of INR 155,723 thousand.
Further, the stock option charge for the current period is lower and the profit after tax is higher by INR 485,151 thousand (including exceptional
gain of INR 155,723 thousand) due to this change.
11. 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. However, one of the
subsidiary companies has taken an insurance policy with the Life Insurance Corporation of India to cover the gratuity liability of the entire group.
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.
Profit and Loss account
Net employee benefit expense (recognised in Employee Cost)
Particulars 31st March 2009
Current service cost 1,011
Interest cost on benefit obligation 200
Net actuarial (gain) / loss recognised in the year 2,509
Past service cost Nil
Net benefit expense 3,720
Balance sheet
Details of Provision for Gratuity
Particulars 31st March 2009
Defined benefit obligation 3,994
Less: Unrecognized past service cost Nil
Plan asset / (liability) (3,994)
Changes in the present value of the defined benefit obligation are as follows:
Particulars 31st March 2009
Opening defined benefit obligation 274
Current service cost 1,011
Interest cost 200
Benefits paid Nil
Actuarial (gains) / losses on obligation 2,509
Closing defined benefit obligation 3,994
The principal assumptions used in determining gratuity liability for the Group's plans are shown below:
Particulars 31st March 2009
Discount rate 7.00 %
Future salary increase 10.00 %
Employee turnover 13.13 %
Mortality Rate LIC (1994-96) Ultimate Table
Note: The estimates of future salary increases, considered in actuarial valuation, take account of inflation, seniority, promotion and other relevant
factors, such as supply and demand in the employment market.
Gratuity liabilities for the current period are as follows:
Particulars 31st March 2009
Defined benefit obligation 3,994
Surplus / (deficit) (3,994)
Experience adjustments on plan liabilities (loss) / gain (45)
Note - The Company has adopted AS-15 (Revised 2005) Employee Benefits for the first time during the current period, as the liability as at
31st December 2007 was not material. Disclosures required by paragraph 120 (n) of AS-15 (Revised 2005) are required to be furnished
prospectively from the date of transition and hence have been furnished for the current period only.
85
Schedules to the Financial Statements Continued
SCHEDULE 18 - NOTES TO ACCOUNTS
13. Share issue expenses of INR 208,410 thousand incurred on the preferential allotment of 113,000,000 equity shares have been charged to the
profit and loss account and not adjusted from the securities premium account on conservative basis.
14. In accordance with the provisions of Accounting Standard 22 'Accounting for taxes on income', the Company would have had deferred tax assets
of approximately INR 511,000 thousand, primarily comprising of accumulated tax losses and unamortized issue expenses. However, as the
management is not virtually certain of subsequent realization of the asset, no deferred tax asset has been computed or recognized in these
financial statements.
18. The Company has neither imported any goods nor consumed any stores and spares during the current period/previous year. Further, none of the
joint ventures where the Company has participating interest has commenced commercial production. Accordingly, no additional disclosures, other
than those furnished, are required in terms of paragraphs 3, 4C and 4D of Part-II of Schedule-VI to the Companies Act, 1956.
20. DETAILS OF DUES TO MICRO, SMALL AND MEDIUM ENTERPRISES AS PER MSMED ACT, 2006
31st March 2009 31st December 2007
The principal amount (interest-nil) remaining unpaid to any supplier as at the end of each accounting year 6 Nil
The amount of interest paid by the buyer in terms of section 16, of the Micro Small and Medium Nil Nil
Enterprise Development Act, 2006 along with the amounts of the payment made to the supplier
beyond the appointed day during each accounting year
The amount of interest due and payable for the period of delay in making payment (which have Nil Nil
been paid but beyond the appointed day during the year) but without adding the interest specified
under Micro Small and Medium Enterprise Development Act, 2006.
The amount of interest accrued and remaining unpaid at the end of each accounting year; and Nil Nil
The amount of further interest remaining due and payable even in the succeeding years, Nil Nil
until such date when the interest dues as above are actually paid to the small enterprise for the
purpose of disallowance as a deductible expenditure under section 23 of the Micro Small and
Medium Enterprise Development Act, 2006
87
Schedules to the Financial Statements Continued
SCHEDULE 18 - NOTES TO ACCOUNTS
The following mutual fund units were purchased and sold during the current period :-
1 288,767,315.348 units of Birla Sunlife mutual fund under Birla Sunlife Cash Plus - Institutional Premium - Daily Dividend Reinvestment
2 396,375,092.433 units of Birla Sunlife mutual fund under Birla Sunlife Cash Plus - Institutional Premium - Growth
3 22,951,572.183 units of Birla Sunlife mutual fund under Birla Sunlife Interval Income - Institutional - Quarterly - Series 2 - Growth
4 76,578,714.912 units of Birla Sunlife mutual fund under Birla Sunlife Liquid Plus - Institutional - Daily Dividend Reinvestment
5 185,222,322.210 units of Birla Sunlife mutual fund under Birla Sunlife Liquid Plus - Institutional - Growth
6 15,000,000.000 units of Canara Robeco mutual fund under Canara Robeco FMP - Series 3 - 90 Days - IP - Growth
7 48,919,527.434 units of Canara Robeco mutual fund under Canara Robeco Liquid Plus Super Institutional - Daily Dividend Reinvestment
8 31,366,504.158 units of Fidelity mutual fund under Fidelity Cash - SIP - Growth
9 62,263,785.752 units of Fidelity mutual fund under Fidelity Liquid Plus - SIP - Daily Dividend Reinvestment
10 57,042,071.083 units of Fidelity mutual fund under Fidelity Liquid Plus - SIP - Growth
11 128,735,016.559 units of HDFC mutual fund under HDFC Cash Mgmt - Savings Plan - Daily Dividend Reinvestment
12 193,231,349.459 units of HDFC mutual fund under HDFC Cash Mgmt - Savings Plus Plan - Wholesale - Daily Dividend Reinvestment
13 174,864,026.065 units of HDFC mutual fund under HDFC Cash Mgmt - Savings Plus Plan - Wholesale - Growth
14 166,891,417.599 units of HDFC mutual fund under HDFC Floating Rate Income - Short Term Plan - Wholesale - Daily Dividend Reinvestment
15 193,913,572.172 units of HDFC mutual fund under HDFC Floating Rate Income - Short Term Plan - Wholesale - Growth
16 24,000,000.000 units of HDFC mutual fund under HDFC FMP 90D (VIII)(3) - Wholesale - Growth
17 62,847,681.039 units of HDFC mutual fund under HDFC Liquid - Premium Plan - Daily Dividend Reinvestment
18 303,956,967.062 units of HDFC mutual fund under HDFC Liquid - Premium Plan - Growth
19 41,003,275.892 units of HDFC mutual fund under HDFC Liquid - Premium Plus Plan - Weekly Dividend Reinvestment
20 23,586,685.788 units of HDFC mutual fund under HDFC Quarterly Interval -Plan B Wholesale Growth - Growth
21 106,509,667.336 units of HSBC mutual fund under HSBC Cash - Inst Plus - Daily Dividend Reinvestment
22 155,825,133.036 units of HSBC mutual fund under HSBC Cash - Inst Plus - Growth
23 146,239,354.262 units of HSBC mutual fund under HSBC Liquid Plus - IP - Daily Dividend Reinvestment
24 229,632,812.180 units of HSBC mutual fund under HSBC Liquid Plus - IP - Growth
25 150,719,932.352 units of ICICI Prudential mutual fund under ICICI Prudential Flexible Income Plan - Daily Dividend Reinvestment
26 208,534,658.087 units of ICICI Prudential mutual fund under ICICI Prudential Flexible Income Plan - Growth
27 32,963,478.576 units of ICICI Prudential mutual fund under ICICI Prudential FRF - Plan D - Growth
28 475,076,846.158 units of ICICI Prudential mutual fund under ICICI Prudential Inst Liquid Plan - Super Iinst - Daily Dividend Reinvestment
29 446,678,299.784 units of ICICI Prudential mutual fund under ICICI Prudential Inst Liquid Plan - Super Iinst - Growth
30 24,485,318.603 units of ICICI prudential mutual fund under ICICI Prudential Interval II Quarterly Interval Plan B - Retail Cumulative - Growth
31 49,165,295.525 units of IDFC mutual fund under IDFC Cash - Super Institutional Plan C - Daily Dividend Reinvestment
32 81,765,529.637 units of IDFC mutual fund under IDFC Floating Rate -LT-Inst Plan B - Growth
33 24,000,000.000 units of IDFC mutual fund under IDFC FMP Qtr Series 31 - Growth
34 64,428,611.450 units of IDFC mutual fund under IDFC Liquid Plus - Investment Plan - Inst Plan B - Daily Dividend Reinvestment
35 15,341,933.611 units of IDFC mutual fund under IDFC Quarterly Interval - Plan A - Inst - Daily Dividend Reinvestment
36 15,984,796.682 units of IDFC mutual fund under IDFC Quarterly Interval - Plan A - Inst - Growth
37 18,000,000.000 units of ING mutual fund under ING Interval - Quarterly-C-Institutional - Growth
38 115,482,013.676 units of ING mutual fund under ING Liquid Super Institutional - Growth
39 128,337,221.108 units of ING mutual fund under ING Liquid Plus - Institutional - Growth
40 23,518,230.356 units of ING mutual fund under ING Vysya Liquid Plus - IP - Growth
41 66,088,564.716 units of JP Morgan mutual fund under JP Morgan India Liquid Plus - Growth
42 20,913,376.793 units of Kotak Mahindra mutual fund under Kotak Liquid - Institutional Premium - Growth
43 3,165,848.830 units of Principal mutual fund under Principal Cash Mgmt LO- Institutional Plan - Growth
44 50,350,377.553 units of Principal mutual fund under Principal Cash Mgmt LO- Institutional Premium Plan - Daily Dividend Reinvestment
45 150,114,424.840 units of Principal mutual fund under Principal Floating Rate - FMP - Institutional - Daily Dividend Reinvestment
46 197,490,161.056 units of Principal mutual fund under Principal Floating Rate - FMP - Institutional - Growth
47 20,583,956.929 units of Reliance mutual fund under Reliance Liquid - Treasury Plan-Institutional Option - Daily Dividend Reinvestment
48 82,564,434.800 units of Reliance mutual fund under Reliance Liquid - Treasury Plan-Institutional Option - Growth
49 2,052,210.472 units of Reliance mutual fund under Reliance Liquid Plus - Institutional - Daily Dividend Reinvestment
50 2,380,813.521 units of Reliance mutual fund under Reliance Liquid Plus - Institutional - Growth
51 23,091,764.916 units of Reliance mutual fund under Reliance Liquidity - Daily Dividend Reinvestment
52 36,180,904.523 units of Reliance mutual fund under Reliance Liquidity - Growth
53 158,916,208.254 units of Reliance mutual fund under Reliance Medium Term - Daily Dividend Reinvestment
54 21,680,412.651 units of Reliance mutual fund under Reliance Monthly Interval - Series I Institutional - Growth
55 23,407,582.184 units of Reliance mutual fund under Reliance Quarterly Interval - Series II Institutional - Growth
56 29,168,603.376 units of SBI mutual fund under SBI Magnum Insta Cash - Daily Dividend Reinvestment
57 20,444,600.000 units of SBI mutual fund under SBI SDFS - 90 Days - Growth
58 98,778,981.505 units of SBI mutual fund under SBI SHF - Liquid Plus - IP - Daily Dividend Reinvestment
59 233,026,708.605 units of SBI mutual fund under SBI SHF - Liquid Plus - IP - Growth
60 859,254.684 units of Standard Chartered mutual fund under Standard Chartered Liquidity Manager Plus - Growth
61 259,059,637.734 units of Tata mutual fund under Tata Floater - Daily Dividend Reinvestment
62 206,755,712.884 units of Tata mutual fund under Tata Floater - Growth
63 38,774,117.501 units of Tata mutual fund under Tata Floating Rate - STP - Institutional Plan - Growth
64 2,457,011.120 units of Tata mutual fund under Tata Liquid - SHIP - Daily Dividend Reinvestment
65 329,826.757 units of Tata mutual fund under Tata Liquid - SHIP - Growth
89
Schedules to the Financial Statements Continued
SCHEDULE 18 - NOTES TO ACCOUNTS
The following mutual fund units were purchased and sold during the previous year:-
1 18,535,141.015 units of ABN AMRO Mutual Fund under ABN AMRO Cash Fund - Institutional Plus Plan - Daily Dividend Reinvestment
Option
2 50,701,760.398 units of ABN AMRO Mutual Fund under ABN AMRO Money Plus Fund-Institutional Plan- Daily Dividend Option
3 22,604,265.015 units of ABN AMRO Mutual Fund under ABN AMRO Money Plus Fund-Institutional Plan-Growth Option
4 51,286,477.010 units of Birla Sun Life Mutual Fund under Birla Cash Plus-Institutional Premium Plan - Daily Dividend
5 51,393,934.559 units of Birla Sun Life Mutual Fund under Birla Floating Rate Fund-Long Term Plan-Weekly Dividend
6 1,175,375.415 units of Birla Sun Life Mutual Fund under Birla Cash Plus-Institutional (Growth)
7 62,395,963.596 units of Birla Sun Life Mutual Fund under Birla Sunlife Liquid Plus Fund - Institutional - Daily Dividend
8 1,055,356.222 units of Birla Sun Life Mutual Fund under Birla Sunlife Liquid Plus Fund - Institutional - Growth
9 799,966.925 units of DSP Merrill Lynch Mutual Fund under DSP Merrill Lynch Liquid Fund - Institutional Plan - Daily Dividend
Reinvestment Option
10 810,376.138 units of DSP Merrill Lynch Mutual Fund under DSP Merrill Lynch Liquid Plus Fund - Institutional Plan - Daily Dividend
Reinvestment Option
11 30,429,402.715 units of Standard Chartered Mutual Fund under Grindlays Floating Rate Fund - Long Term - Institutional Plan B - Daily
Dividend Reinvestment Option
12 25,141,266.651 units of Standard Chartered Mutual Fund under Grindlays Floating Rate Fund - Long Term - Institutional Plan B - Growth
13 74,125,061.345 units of HDFC Mutual Fund under HDFC Cash Management Fund - Savings Plan - Daily Dividend Reinvestment Option
14 79,686,483.778 units of HDFC Mutual Fund under HDFC Cash Management Fund - Savings Plus Plan - Wholesale - Daily Dividend
Reinvestment Option
15 32,404,919.325 units of HDFC Mutual Fund under HDFC Floating Rate Income Fund - Short Term Plan - Retail Option Dividend
Reinvestment - Daily
16 24,820,364.948 units of HDFC Mutual Fund under HDFC Floating Rate Income Fund - Short Term Plan - Retail Option - Growth
17 18,698,998.482 units of HDFC Mutual Fund under HDFC Floating Rate Income Fund - Short Term Plan - Wholesale - Growth
18 59,976,612.345 units of HSBC Mutual Fund under HSBC Cash Fund - Institutional Plus - Daily Dividend Reinvestment Option
19 62,786,020.733 units of HSBC Mutual Fund under HSBC Liquid Plus Fund - Institutional Plus - Daily Dividend Reinvestment Option
20 57,943,951.333 units of HSBC Mutual Fund under HSBC Liquid Plus Fund - Institutional Plus - Growth
21 686,242.889 units of ICICI Prudential Mutual Fund under ICICI Prudential Flexible Income Plan - Growth
22 100,777,456.602 units of ICICI Prudential Mutual Fund under ICICI Prudential Floating Rate Plan D - Daily Dividend - Reinvest Dividend
23 131,634,015.968 units of ICICI Prudential Mutual Fund under ICICI Prudential Liquid Plan - Super Institutional Dividend Daily
24 61,166,842.849 units of ING Mutual Fund under ING Liquid Plus Fund - Institutional Daily Dividend Option
25 58,606,580.178 units of ING Mutual Fund under ING Liquid Plus Fund - Institutional Growth Option
26 32,523,815.818 units of Kotak Mahindra Mutual Fund under Kotak Flexi Debt Fund - Daily Dividend
27 40,671,100.686 units of PRINCIPAL Mutual Fund under Principal Cash Management-Liquid Option-Institutional Premium - Daily Dividend
28 40,602,212.009 units of PRINCIPAL Mutual Fund under Principal Floating Rate Fund - SMP - Institutional - Growth
29 502,053.962 units of Reliance Mutual Fund under Reliance Liquid Plus Fund - Institutional Option - Daily Dividend Plan
30 234,933.967 units of Reliance Mutual Fund under Reliance Liquid Plus Fund - Institutional Option - Growth Plan
31 406,648.782 units of Standard Chartered Mutual Fund under Standard Chartered Liquidity Manager Plus-A-Dividend Daily
32 60,938,518.404 units of Sundaram BNP Paribas Mutual Fund under Sundaram BNP Paribas Liquid Plus Super Institutional Daily Dividend
33 58,603,615.153 units of Sundaram BNP Paribas Mutual Fund under Sundaram BNP Paribas Liquid Plus Super Institutional Growth
34 64,847,479.846 units of Tata Mutual Fund under Tata Floater Fund Growth
35 594,550.430 units of Tata Mutual Fund under Tata Liquid Super High Investment Plan - Daily
36 808,048.384 units of Franklin Templeton Mutual Fund under Templeton India Treasury Management Account-Super Institutional
Plan - Daily Dividend
22. Details of outstanding advances given to subsidiary companies in which directors are interested are same as disclosed in note 4 (c) above. The
balance outstanding as at the period/year end is also the maximum amount outstanding during the period/year.
For S. R. Batliboi & Associates For and on behalf of the Board of Directors
Chartered Accountants Rahul Dhir Managing Director and Chief Executive Officer
per Raj Agrawal Aman Mehta Director
Partner Indrajit Banerjee Executive Director and Chief Financial Officer
Membership No. 82028 Neerja Sharma Company Secretary
Place : Gurgaon
Date : 27th May, 2009
91
Balance Sheet Abstract and Company’s General Business Profile
i) Registration Details
Registration No. L11101MH2006PLC163934
State Code 11
Balance Sheet Date 31/03/2009
ii) Capital raised during the year* (Amount in INR Thousands)
Public Issue –
Rights Issue –
Bonus Issue –
Private Placement (Includes stock options exercised) 1,182,684
*Does not include securities premium
iii) Position of Mobilisation and Deployment of Funds (Amount in INR Thousands)
Total Liabilities 321,300,037
Total Assets 321,300,037
Source of Funds
Paid up Capital 18,966,678
Reserves & Surplus (Includes stock options outstanding) 301,479,252
Secured Loans Nil
Unsecured Loans Nil
Application of Funds
Net Fixed Assets (Includes exploratory work-in-progress) 540,908
Investments 292,253,966
Net Current Assets 27,113,056
Miscellaneous Expenditure Nil
Accumulated losses 538,000
iv) Performance of the Company (Amount in INR Thousands)
Turnover (Total Income) 2,980,403
Total Expenditure 1,859,687
Profit/(Loss) before tax 1,120,716
Profit/(Loss) after tax 542,407
Profit per Share in Rs. (Basic & Diluted) 0.29
Dividend rate % Nil
v) Generic Names of Principal Products/Services of Company (as per monetary terms)
Item Code No. (ITC Code) 27090000
Product Description Crude Oil
Item Code No. (ITC Code) 27112100
Product Description Natural Gas
Place : Gurgaon
Date : 27th May, 2009
TO
THE BOARD OF DIRECTORS OF CAIRN INDIA LIMITED
1. We have audited the attached consolidated balance sheet of Cairn India Limited (the Company) and its subsidiaries (collectively called 'the Cairn
India Group') as at March 31, 2009 and also the consolidated profit and loss account and the consolidated cash flow statement for the fifteen
months period ended on that date, annexed thereto. These financial statements are the responsibility of the Company's 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. We report that the consolidated financial statements have been prepared by the Company's management in accordance with the requirements of
Accounting Standard (AS) 21, Consolidated Financial Statements notified under the Companies (Accounting Standard) Rules, 2006.
4. In our opinion and to the best of our information and according to the explanations given to us, the consolidated financial statements give a true
and fair view in conformity with the accounting principles generally accepted in India:
(a) in the case of the consolidated balance sheet, of the state of affairs of the Cairn India Group as at March 31, 2009;
(b) in the case of the consolidated profit and loss account, of the profit of the Cairn India Group for the fifteen months period ended on that date;
and
(c) in the case of the consolidated cash flow statement, of the cash flows of the Cairn India Group for the fifteen months period ended on that
date.
Place : Gurgaon
Date : 27th May, 2009
93
Consolidated Balance Sheet
AS AT MARCH 31, 2009
Schedules As at As at
March 31, 2009 December 31, 2007
SOURCES OF FUNDS
Shareholders’ funds
Share capital 1 18,966,678 17,783,994
Stock options outstanding 2 388,978 947,084
Reserves and surplus 3 308,667,596 276,084,115
328,023,252 294,815,193
Loan funds
Secured loans (Finance lease liabilities) 222,402 169,361
Unsecured loans 4 43,341,500 2,955,000
43,563,902 3,124,361
Deferred tax liabilities (net) 5 5,623,782 4,916,494
377,210,936 302,856,048
APPLICATION OF FUNDS
Fixed assets 6
Gross cost 1,434,686 1,092,632
Less: Accumulated depreciation / amortisation 801,843 606,126
Net book value 632,843 486,506
Exploration, Development and Site-restoration costs 7
Cost of producing facilities (net) 3,013,742 4,389,517
Exploratory and development work in progress 62,027,323 24,670,264
Net book value 65,041,065 29,059,781
Goodwill 253,192,675 253,192,675
Investments 8 1,712,806 7,128,909
Deferred tax assets (net) 5 83,935 –
Current assets, loans and advances
Inventories 9 1,682,808 1,216,048
Sundry debtors 10 1,516,418 1,348,578
Cash and bank balances 11 65,270,674 13,317,907
Other current assets 12 704,244 134,533
Loans and advances 13 3,505,102 4,867,071
72,679,246 20,884,137
Less: Current liabilities and provisions
Current liabilities 14 11,794,353 4,691,797
Provisions 15 4,337,281 3,661,347
16,131,634 8,353,144
Net current assets 56,547,612 12,530,993
Profit & Loss account – 457,184
377,210,936 302,856,048
Notes to accounts 23
The schedules referred to above are an integral part of the consolidated balance sheet.
As per our report of even date
For S. R. Batliboi & Associates For and on behalf of the Board of Directors
Chartered Accountants Rahul Dhir Managing Director and Chief Executive Officer
per Raj Agrawal Aman Mehta Director
Partner Indrajit Banerjee Executive Director and Chief Financial Officer
Membership No. 82028 Neerja Sharma Company Secretary
Place : Gurgaon
Date : 27th May, 2009
94 CAIRN INDIA LIMITED ANNUAL REPORT 2008-2009
Consolidated Profit and Loss Account
FOR THE PERIOD ENDED MARCH 31, 2009
INCOME
Income from operations 16 14,326,716 10,122,627
Other income 17 5,944,652 1,324,089
20,271,368 11,446,716
EXPENDITURE
For S. R. Batliboi & Associates For and on behalf of the Board of Directors
Chartered Accountants Rahul Dhir Managing Director and Chief Executive Officer
per Raj Agrawal Aman Mehta Director
Partner Indrajit Banerjee Executive Director and Chief Financial Officer
Membership No. 82028 Neerja Sharma Company Secretary
Place : Gurgaon
Date : 27th May, 2009
95
Consolidated Statement of Cash Flows
FOR THE PERIOD ENDED MARCH 31, 2009
AS at As at
March 31, 2009 December 31, 2007
SCHEDULE - 1
Share capital
Authorised:
2,250,000,000 (previous year 2,250,000,000) equity shares of INR 10 each 22,500,000 22,500,000
Issued, subscribed and paid up:
1,896,667,816 (previous year 1,778,399,420) equity shares of INR 10 each 18,966,678 17,783,994
18,966,678 17,783,994
Note:
1) Issued, subscribed and fully paid up share capital includes 1,226,843,791 equity shares (previous year - 1,226,843,791 equity shares) of INR 10
each held by Cairn UK Holdings Limited, the holding company together with its nominees.
2) Shares held by the holding company includes 861,764,893 equity shares (previous year - 861,764,893 equity shares) of INR 10 each, allotted as
fully paid up pursuant to contracts for consideration other than cash.
3) For stock options outstanding refer note no. 7 in schedule 23.
SCHEDULE - 2
Stock Options Outstanding
Employee stock options outstanding 782,548 2,496,095
Less: Deferred employee compensation outstanding (393,570) (1,549,011)
Closing Balance 388,978 947,084
SCHEDULE - 3
Reserves and Surplus
Securities premium account
Opening Balance 276,084,115 275,017,837
Add:- Additions during the period / year 25,006,159 1,962,756
Less:- Adjustment against preliminary expenses / share issue expenses – (896,478)
Closing Balance 301,090,274 276,084,115
Profit and Loss Account 7,577,322 –
308,667,596 276,084,115
SCHEDULE - 4
Unsecured Loans
Long term loans
– from International Finance Corporation 7,648,500 521,471
– from banks 35,693,000 2,433,529
43,341,500 2,955,000
97
Schedules to the Consolidated Financial Statements Continued
As at As at
March 31, 2009 December 31, 2007
SCHEDULE - 5
Deferred tax asset / liabilities (net)
Effect of differences in block of fixed assets as per tax books and financial books 6,178,716 5,208,962
Gross deferred tax liabilities 6,178,716 5,208,962
Effect of lease accounting 8,972 8,972
Expenditure debited to profit and loss but allowed for tax purposes in following years 629,897 283,496
Gross deferred tax assets 638,869 292,468
Net Deferred tax liabilities * 5,539,847 4,916,494
* After setting off net deferred tax assets aggregating to INR 83,935 thousand, previous year Nil in respect of certain group companies
SCHEDULE - 6
Fixed Assets
Description Gross Block Accumulated Depreciation / Amortisation Net Block
As on Additions Deletions/ As on As on For the Deletions/ As on As on As on
01.01.2008 Adjustments 31.03.2009 01.01.2008 period Adjustments 31.03.2009 31.03.2009 31.12.2007
A) Tangible Assets
Freehold land 43,583 – – 43,583 – – – – 43,583 43,583
Buildings 5,247 – – 5,247 1,109 1,224 – 2,333 2,914 4,138
Office equipments 364,752 182,623 (35,353) 512,022 233,766 145,535 (34,862) 344,439 167,583 130,986
Furniture and fittings 200,962 116,416 (17,508) 299,870 76,094 66,627 (15,961) 126,760 173,110 124,868
Vehicles 945 10,038 – 10,983 915 1,745 – 2,660 8,323 30
B) Intangible Assets
Computer software 477,143 153,531 (67,693) 562,981 294,242 99,102 (67,693) 325,651 237,330 182,901
Grand Total 1,092,632 462,608 (120,554) 1,434,686 606,126 314,233 (118,516) 801,843 632,843 486,506
Previous period 1,326,837 176,058 (410,263) 1,092,632 831,387 170,677 (395,938) 606,126 486,506 495,450
Notes:
1. Furniture and fittings includes Leasehold improvements of INR 278,895 thousand (previous year INR 165,013 thousand), accumulated depreciation thereon INR 110,482
thousand (previous year INR 49,882 thousand).
2. Leasehold improvements and Office equipments of INR 278,271 thousand (previous year INR 164,389 thousand) and INR 210,192 thousand (previous year INR 135,539
thousand) respectively have been acquired under finance lease. The depreciation charge for the period on these assets is INR 60,569 thousand (previous year INR 25,096
thousand) and INR 61,040 thousand (previous year INR 24,181 thousand) respectively and the accumulated depreciation thereon is INR 110,355 thousand (previous year INR
49,786 thousand) and INR 139,781 thousand (previous year INR 78,741 thousand) respectively.
3. Depreciation charge for the period includes INR 251,640 thousand (previous year INR 136,976 thousand) allocated to joint ventures.
4. Fixed assets include INR 176,798 thousand (previous year INR 120,805 thousand) jointly owned with the joint venture partners. Accumulated depreciation on these assets is
INR 82,643 thousand (previous year INR 60,932 thousand) and net book value is INR 94,155 thousand (previous year INR 59,873 thousand).
As at As at
March 31, 2009 December 31, 2007
SCHEDULE - 7
Exploration, Development and Site restoration costs
Opening balance of producing properties 4,389,517 2,976,132
Additions / Deletions / Transfer for the period / year 1,259,656 3,319,764
5,649,173 6,295,896
Less: Depletion and site restoration costs 2,635,431 1,906,379
Net producing properties 3,013,742 4,389,517
SCHEDULE - 8
Investments
Long term investments (at cost)
Quoted and non-trade
755,275 (previous year 755,275) equity shares of INR 10 each 105,334 105,334
fully paid up in Videocon Industries Limited
Current Investments (at lower of cost and market value)
Unquoted and non trade
Mutual Funds 1,607,472 7,023,575
1,712,806 7,128,909
SCHEDULE - 9
Inventories
Stores and spares 1,595,774 906,672
Finished goods 87,034 309,376
1,682,808 1,216,048
SCHEDULE - 10
Sundry Debtors
Debts - Unsecured and outstanding for a period exceeding six months :
– Considered Good 94,261 8,587
– Considered doubtful – 62,025
99
Schedules to the Consolidated Financial Statements Continued
As at As at
March 31, 2009 December 31, 2007
SCHEDULE - 11
Cash and bank balances
Cash in hand 626 108
SCHEDULE - 12
Other Current Assets
Interest accrued on bank deposits 660,639 28,614
Dividend receivable – 8,260
Outstanding option contracts 43,605 97,659
704,244 134,533
SCHEDULE - 13
Loans and advances
Unsecured and considered good, unless otherwise stated:
Advances recoverable in cash or kind or for value to be received* 5,789,515 5,921,540
Deposits 169,469 25,169
Advance tax and tax deducted at source (net of tax provisions 599,367 565,441
INR 1,921,505 thousand, (previous year INR 3,011,025 thousand)
Fringe benefit tax paid (net of provisions INR 266, 883 thousand, 13,290 1,920
previous year INR 6,000 thousand)
6,571,641 6,514,070
Less: Provision for doubtful advances (3,066,539) (1,646,999)
3,505,102 4,867,071
*Includes doubtful balances INR 3,066,539 thousand (previous year INR 1,646,999 thousand)
SCHEDULE - 14
Current liabilities
Amount payable to Cairn Energy Plc., the ultimate holding company 1,296,164 1,033,919
Sundry creditors 8,647,926 3,587,844
Lease equalisation liability 9,279 –
Interest accrued but not due 94,471 21,383
Other liabilities 1,746,513 48,651
11,794,353 4,691,797
As at As at
March 31, 2009 December 31, 2007
SCHEDULE - 15
Provisions
Provision for taxation (net of advance tax - INR 356,794 thousand, previous year Nil) 250,643 222,901
Provision for fringe benefit tax (net of advance tax payments, INR 127,956 thousand, 105,235 320,231
previous year - INR 258 thousand)
Site restoration provision * 3,886,882 2,714,913
Provision for Government share of profit petroleum ** 11,444 362,382
Provision for leave encashment 16,305 3,941
Provision for gratuity 39,571 36,979
Provision for employee stock options (cash settled) *** 27,201 –
4,337,281 3,661,347
* Site restoration provision
Opening balance 2,714,913 2,232,264
Additions for the period / year 1,388,000 482,649
Reversed during the period / year (216,031) –
Closing balance 3,886,882 2,714,913
SCHEDULE - 16
Income from operations
Revenue from sale of oil, gas and condensate 24,476,702 16,287,379
Less: Government share of Profit Petroleum (10,829,219) (6,438,550)
13,647,483 9,848,829
101
Schedules to the Consolidated Financial Statements Continued
SCHEDULE - 17
Other income
Interest on bank deposits 1,858,924 727,431
Profit on sale of non trade current investments (net) 1,245,686 27,632
Dividend income from non trade current investments 216,589 568,031
Dividend income from non trade long term investments 5,287 –
Exchange fluctuation (net) 2,319,158 –
Miscellaneous income 143,285 995
Exceptional gain (refer note no. 8 in schedule 23) 155,723 –
5,944,652 1,324,089
SCHEDULE - 18
Operating expenses
Production expenses 952,510 943,863
Data acquisition and analysis 66,266 32,884
Insurance 56,677 39,630
Royalty 393,787 342,907
Cess 546,365 487,569
Production bonus 114,138 98,959
2,129,743 1,945,812
SCHEDULE - 19
Administrative expenses
Salaries, wages and bonus 3,408,323 2,325,513
Employee compensation expense (stock options) 454,546 780,365
Contribution to Provident fund 97,356 35,490
Contribution to Superannuation fund 53,226 30,865
Leave encashment expenses 29,916 1,041
Gratuity expenses 40,888 33,137
Staff welfare expenses 280,312 32,519
Contract employee charges 1,295,828 1,534,541
Legal and professional expenses 1,488,580 464,776
Share issue expenses (refer note no. 15 in schedule 23) 208,410 –
Repair and maintenance 260,933 206,779
Rent 455,648 212,806
Travelling and conveyance expenses 511,320 192,505
Communication expenses 150,906 56,944
Exchange Fluctuation (net) – 2,057,001
Insurance 3,127 6,464
Directors' sitting fees 1,320 700
Loss on sale / discard of fixed assets (net) 1,835 10,055
Loss on derivative contracts 434,328 63,010
Miscellaneous expenses 357,706 246,298
9,534,508 8,290,809
Less: Cost allocated to joint ventures (6,223,101) (4,405,954)
3,311,407 3,884,855
SCHEDULE - 20
(Increase) / Decrease in inventories
Inventories at the beginning of the period / year
Finished goods 309,376 197,661
Inventories at the end of the period / year
Finished goods 87,034 309,376
222,342 (111,715)
SCHEDULE - 21
Finance costs
Interest on bank overdraft – 199
Other interest 38,581 –
Finance lease charges 40,855 7,524
Bank charges 20,734 19,326
100,170 27,049
Less: Cost allocated to joint ventures (36,080) (10,875)
64,090 16,174
SCHEDULE - 22
Earnings / (Loss) Per Share
Profit / (Loss) for the period / year as per profit and loss account 8,034,506 (245,441)
Weighted average number of equity shares in calculating basic 1,866,146,993 1,777,001,292
earnings / (loss) per share
Add: Number of equity shares arising on grant of stock options 10,052,076 11,017,255
Weighted average number of equity shares in calculating diluted 1,876,199,069 1,788,018,547
earnings / (loss) per share
Earnings / (Loss) per share in INR
Basic 4.31 (0.14)
Diluted (previous year considered anti-dilutive) 4.28 (0.14)
103
Schedules to the Consolidated Financial Statements Continued
SCHEDULE 23 - NOTES TO ACCOUNTS
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.
The Company along with its subsidiaries are herein referred to as 'Cairn India Group'. The entities under the Cairn India Group are participants in
various Oil and Gas blocks/fields granted by the Government of India/Sri Lanka through Production Sharing Contract ('PSC')/Production
Resources Agreement ('PRA') entered into between these entities and Government of India/Sri Lanka and other venture partners.
Cairn India Group has interest in the following Oil and Gas blocks/fields-
S. No. Oil and Gas blocks/fields Area Participating Interest
Operated block
i Ravva Krishna Godavari 22.50%
ii CB-OS/2 - Exploration area Cambay Offshore 60%
CB-OS/2 - Development area Cambay Offshore 40%
iii RJ-ON-90/1 - Exploration area Rajasthan Onshore 100%
RJ-ON-90/1 - Development area Rajasthan Onshore 70%
iv GV-ONN-2003/1 Ganga Valley Onshore 24%
v VN-ONN-2003/1 Vindhyan Onshore 49%
vi PR-OSN-2004 Palar Basin Offshore 35%
vii SL 2007-01-001 North West Sri Lanka Offshore 100%
viii KG-ONN-2003/1 Krishna Godavari Onshore 49%
ix GV-ONN-2002/1 Ganga Valley Onshore 50%
Non - operated block
x KG-DWN-98/2 Krishna Godavari Deep water 10%
xi RJ-ONN-2003/1 Rajasthan Onshore 30%
xii GS-OSN-2003/1 Gujarat Saurashtra Onshore 49%
xiii KK-DWN-2004 Kerala Konkan Basin Offshore 40%
xiv CB-ONN-2002/1 Cambay Onshore 30%
(proposed to be relinquished)
xv GV-ONN-97/1 Ganga Valley Onshore 15%
(relinquished in 2008)
xvi CB-ONN-2001/1 Cambay Onshore 30%
(relinquished in 2007)
105
Schedules to the Consolidated Financial Statements Continued
SCHEDULE 23 - NOTES TO ACCOUNTS
payments are apportioned between the finance charges and reduction of the lease liability based on the implicit rate of return. Finance charges are
charged directly against income. Lease management fees, legal charges and other initial direct costs are capitalised.
If there is no reasonable certainty that Cairn India Group will obtain the ownership by the end of the lease term, capitalised leased assets are
depreciated over the shorter of the estimated useful life of the asset or the lease term.
Leases where the lessor effectively retains substantially all the risks and benefits of ownership of the leased item, are classified as operating
leases. Operating lease payments are recognised as an expense in the profit and loss account on a straight-line basis over the lease term.
(i) Investments
Investments that are readily realisable and intended to be held for not more than a year are classified as current investments. Current investments
are measured at cost or market value, whichever is lower, determined on an individual investment basis. All other investments are classified as
long-term investments. Long term investments are measured at cost. However, provision for diminution in value is made to recognise a decline
other than temporary in the value of the investments.
(j) Inventory
Inventories of oil and condensate held at the balance sheet date are valued at net realizable value based on the estimated selling price. Inventory
of stores and spares related to exploration, development and production activities are stated at cost, determined on First in First out (FIFO) basis.
(k) Joint Ventures
Cairn India Group participates in several Joint Ventures which involve the joint control of assets used in the oil and gas exploration, development
and producing activities. It accounts for its share of the assets and liabilities of Joint Ventures along with attributable income and expenses in such
Joint Ventures, in which it holds a participating interest. Joint venture cash and cash equivalent balances are considered by the Cairn India Group
to be the amounts contributed in excess of the Cairn India Group's obligations to the joint ventures and are, therefore, disclosed within Loans and
Advances.
(l) Revenue recognition
Revenue is recognized to the extent that it is probable that the economic benefits will flow to the Cairn India Group and the revenue can be
reliably measured.
Revenue from operating activities
From sale of oil, gas and condensate
Revenue represents the Cairn India Group's share of oil, gas and condensate production, recognised on a direct entitlement basis, when
significant risks and rewards of ownership are transferred to the buyers.
As operator from the joint venture
Cairn India Group recognizes operators fees as revenue from joint ventures based on the provisions of respective PSCs.
Tolling income
Tolling income represents Cairn India Group's share of revenues from Pilotage and Oil Transfer Services from the respective joint ventures, which
is recognized based on the rates agreed with the customers, as and when the services are rendered.
Interest income
Interest income is recognised on a time proportion basis.
Dividend income
Revenue is recognized when the shareholders' right to receive payment is established by the balance sheet date. Dividend from subsidiaries is
recognized even if same are declared after the balance sheet date but pertains to period on or before the date of balance sheet as per the
requirement of schedule VI of the Companies Act, 1956.
(m) Borrowing costs
Borrowing costs include interest and commitment charges on borrowings, amortisation of costs incurred in connection with the arrangement of
borrowings, exchange differences to the extent they are considered a substitute to the interest cost and finance charges under leases. Costs
incurred on borrowings directly attributable to development projects, which take a substantial period of time to complete, are capitalised within
the development/producing asset for each cost centre.
All other borrowing costs are recognised in the profit and loss account in the period in which they are incurred.
(n) Foreign currency transactions and translations
Cairn India Group translates foreign currency transactions into Indian Rupees at the rate of exchange prevailing at the transaction date. Monetary
assets and liabilities denominated in foreign currency are translated into Indian Rupees at the rate of exchange prevailing at the Balance Sheet
date. Non-monetary items which are carried in terms of historical cost denominated in a foreign currency are reported using the exchange rate at
the date of the transaction.
Exchange differences arising on the settlement of monetary items or on reporting the Cairn India Group's monetary items at rates different
from those at which they were initially recorded during the year, or reported in previous financial statements, are recognised as income or as
expenses in the year in which they arise except those arising from investments in non-integral operations.
All transactions of integral foreign operations are translated as if the transactions of those foreign operations were the transactions of the
group itself. In translating the financial statements of a non-integral foreign operation for incorporating in the group's financial statements, the
Cairn India Group translates the assets and liabilities at the rate of exchange prevailing at the balance sheet date. Income and expenses of non-
107
Schedules to the Consolidated Financial Statements Continued
SCHEDULE 23 - NOTES TO ACCOUNTS
integral operations are translated using rates at the date of transactions. Resulting exchange differences are disclosed under the foreign currency
translation reserve until the disposal of the net investment in non-integral operations.
(o) Income taxes
Tax expense comprises of current, deferred and fringe benefit tax. Current income tax and fringe benefit tax are measured at the amount
expected to be paid to the tax authorities in accordance with the Indian Income Tax Act. Fringe benefit tax also includes the proportionate
amount of tax likely to be paid by Cairn India Group, on the exercise of share options of the Company. Deferred income tax reflects the impact of
current period timing differences between taxable income and accounting income for the period and reversal of timing differences of earlier
period.
Deferred tax assets and liabilities are measured, based on tax rates and laws enacted or substantively enacted at the balance sheet date.
Deferred tax assets and deferred tax liabilities across various subsidiaries or countries of operation are not set off against each other as Cairn India
Group does not have a legal right to do so. Current and deferred tax assets and liabilities are only offset where they arise within the same entity
and tax jurisdiction.
Deferred tax assets are recognised only to the extent that there is reasonable certainty that sufficient future taxable income will be available
against which such deferred tax assets can be realised. If Cairn India Group has carry forward of unabsorbed depreciation and tax losses, deferred
tax assets are recognised only if there is virtual certainty, supported by convincing evidence, that such deferred tax assets can be realised against
future taxable profits. Unrecognised deferred tax assets of earlier periods are re-assessed and recognised to the extent that it has become
reasonably certain that future taxable income will be available against which such deferred tax assets can be realised.
The carrying amount of deferred tax assets are reviewed at each balance sheet date. The Company writes-down the carrying amount of a
deferred tax asset to the extent that it is no longer reasonably certain or virtually certain, as the case may be, that sufficient future taxable income
will be available against which deferred tax asset can be realised. Any such write-down is reversed to the extent that it becomes reasonably
certain or virtually certain, as the case may be, that sufficient future taxable income will be available.
Minimum Alternative Tax (MAT) credit is recognised as an asset only when and to the extent there is convincing evidence that the company
will pay normal income tax during the specified period. In the year in which the MAT credit becomes eligible to be recognized as an asset in
accordance with the recommendations contained in guidance note issued by the Institute of Chartered Accountants of India, the said asset is
created by way of a credit to the profit and loss account and shown as MAT Credit Entitlement. The Company reviews the same at each balance
sheet date and writes down the carrying amount of MAT Credit Entitlement to the extent there is no longer convincing evidence to the effect that
Company will pay normal Income Tax during the specified period.
(p) Earnings Per Share
Basic earnings per share are calculated by dividing the net profit or loss for the year attributable to equity shareholders by the weighted average
number of equity shares outstanding during the period. The weighted average number of equity shares outstanding during the period is adjusted
for events of bonus issue, bonus element in a rights issue to existing shareholders, share split and reverse share split (consolidation of shares).
For the purpose of calculating diluted earnings per share, the net profit or loss for the period attributable to equity shareholders and the
weighted average number of shares outstanding during the period are adjusted for the effects of all dilutive potential equity shares, if any.
(q) Provisions
A provision is recognised when Cairn India Group has a present obligation as a result of past event and it is probable that an outflow of resources
will be required to settle the obligation, in respect of which a reliable estimate can be made. Provisions are not discounted to its present value and
are determined based on best estimate required to settle the obligation at the balance sheet date. These are reviewed at each balance sheet date
and adjusted to reflect the current best estimates.
(r) Cash and Cash equivalents
Cash and cash equivalents in the cash flow statement comprise cash at bank and in hand and short-term investments, with an original maturity of
90 days or less.
(s) Employee Benefits
Retirement and Gratuity benefits
Retirement benefits in the form of provident fund and superannuation scheme are defined contribution schemes and the contributions are
charged to the profit and loss account of the period when the contributions to the respective funds are due. There are no obligations other than
the contribution payable to the respective funds.
Gratuity liability is a defined benefit obligation and is provided for on the basis of an actuarial valuation on projected unit credit method made
at the end of each financial year. The scheme is maintained and administered by an insurer to which the trustees make periodic contributions.
Short term compensated absences are provided for based on estimates. Long term compensated absences are provided for based on
actuarial valuation made at the end of each financial year. The actuarial valuation is done as per projected unit credit method.
Actuarial gains / losses are immediately taken to profit and loss account and are not deferred.
Employee Stock Compensation Cost
Measurement and disclosure of the employee share-based payment plans is done in accordance with SEBI (Employee Stock Option Scheme and
Employee Stock Purchase Scheme) Guidelines, 1999 and the Guidance Note on Accounting for Employee Share-based Payments, issued by the
Institute of Chartered Accountants of India. Cairn India Group measures compensation cost relating to employee stock options using the intrinsic
value method. Compensation expense is amortized over the vesting period of the option on a straight line basis. The cost of awards to employees
under the Company's ultimate parent entity's Long Term Incentive Plans ("the LTIP") is recognised based on the amount cross charged by the
parent entity.
(t) Use of estimates
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent liabilities at the date of the financial statements
and the results of operations during the reporting period end. Although these estimates are based upon management's best knowledge of current
events and actions, actual results could differ from these estimates.
(u) Segment Reporting Policies
Identification of segments:
The Company's operating businesses are organized and managed separately according to the nature of products and services provided, with each
segment representing a strategic business unit that offers different products and serves different markets. The analysis of geographical segments
is based on the areas in which major operating divisions of the Company operate.
(v) Derivative Instruments
As per the ICAI Announcement, accounting for derivative contracts, other than those covered under AS-11, is done on marked to market on a
portfolio basis, and the net loss is charged to the income statement. Net gains are ignored.
4. SEGMENTAL REPORTING
Business segments
The primary reporting of Cairn India Group has been prepared on the basis of business segments. Cairn India Group 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 financial reporting systems. Accordingly, the figures appearing in
these financial statements relate to the Cairn India Group'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 Cairn India
Group are confined to the Indian sub-continent in terms of oil and gas blocks and customers. Accordingly, the figures appearing in these financial
statements relate to Cairn India Group's single geographical segment being operations in the Indian sub-continent.
6. As at 31st March 2009, the Company and its subsidiaries together have utilized INR 82,563,170 thousand for the purposes listed in the
prospectus issued for the Initial Public Offer. The details of utilization of funds is as follows-
Particulars Upto Upto
31st March 2009 31st December 2007
Acquisition of shares of Cairn India Holdings Limited from Cairn UK Holdings Limited 59,580,837 59,580,837
Exploration and Development expenses 21,152,714 10,411,239
General corporate purposes 230,000 90,440
Issue expenses 1,599,619 1,599,619
Total 82,563,170 71,682,135
The details of the unutilized monies out of the public issue proceeds is as follows-
Particulars 31st March 2009 31st December 2007
Mutual funds 718,277 7,337,856
Balances with banks 4,967,454 9,228,910
Total 5,685,731 16,566,766
111
Schedules to the Consolidated Financial Statements Continued
SCHEDULE 23 - NOTES TO ACCOUNTS
The details of exercise price for stock options outstanding as at March 31, 2009 are:
Scheme Range of No. of Weighted Weighted
exercise options average average
price (INR) outstanding remaining exercise
contractual price (INR)
life of options
(in years)
CISMP Plan 33.70 2,238,077 2.08 33.70
CIPOP Plan 10.00 3,200,096 1.51 10.00
CIESOP Plan 143-227 10,914,244 1.60 185.39
CIPOP Plan - Phantom options* 10.00 784,859 2.33 10.00
CIESOP Plan - Phantom options* 143-227 362,556 2.37 218.19
The details of exercise price for stock options outstanding as at December 31, 2007 are:
CISMP Plan 33.70 8,298,713 1.04 33.70
CIPOP Plan 10.00 4,755,244 2.49 10.00
CIESOP Plan 160-166.95 8,545,710 2.47 164.49
*Introduced during the current period
113
Schedules to the Consolidated Financial Statements Continued
SCHEDULE 23 - NOTES TO ACCOUNTS
8. During the current period, Cairn India Group decided to retrospectively account for stock options using the Intrinsic Value Method as against the
Fair Value Method (Black Scholes) followed till the financial year ended 31st December 2007. Accordingly, the excess stock option provision up to
31st December 2007 was reversed during the current period ended 31st March 2009, resulting in an exceptional gain of INR 155,723 thousand.
Further, the stock option charge for the current period is lower and the profit after tax is higher by INR 488,373 thousand (including exceptional
gain of INR 155,723 thousand) due to this change.
115
Schedules to the Consolidated Financial Statements Continued
SCHEDULE 23 - NOTES TO ACCOUNTS
commenced recovery from Cairn's buyers, of revenues from sale proceeds to set-off against the sums they claim are now due as a result of the
Malaysian judgement being in their favour. This recovery action is currently being contested by Cairn in the Indian courts.
In the event that the GoI's appeal ultimately succeeded in a manner which resulted in a ruling which Cairn India Group accepted as binding, then
Cairn India Group would be required to pay an additional USD 64 million (approximately INR 3,265,000 thousand). Cairn India Group would also
be potentially liable for interest on this sum currently estimated at approximately USD 30 million (INR 1,536,000 thousand) though the calculation
of interest would require further agreement.
Ravva Joint Venture Arbitration proceedings : Base Development Cost
In a separate and unrelated dispute related to the profit petroleum calculations under the Ravva PSC, the Ravva joint venture received a claim from
the Director General of Hydrocarbons (DGH) for the period from 2000-2005 for USD 166.4 million for an alleged underpayment of profit
petroleum to the Indian Government, out of which Cairn India Group's share will be USD 37.4 million (approximately INR 1,909,000 thousand)
plus potential interest at applicable rate (LIBOR plus 2% as per PSC).
This claim relates to the Indian Government's allegation that the Ravva JV has recovered costs in excess of the Base Development Costs ("BDC")
cap imposed in the PSC and that the Ravva JV has also allowed these excess costs in the calculation of the Post Tax Rate of Return (PTRR). Cairn
believes that such a claim is unsustainable under the terms of the PSC because, amongst other reasons, the BDC cap only applies to the initial
development of the Ravva field and not to subsequent development activities under the PSC. Additionally the Ravva JV has also contested the
basis of the calculation in the above claim from the DGH. Even if upheld, Cairn believes that the DGH has miscalculated the sums that would be
due to the Indian Government in such circumstances. Companies have initiated the arbitration proceedings with appointment of an arbitrator.
Government of India has also appointed its arbitrator. Presiding arbitrator is yet to be appointed.
Service tax
One of the subsidiary companies of the Cairn India Group has received three show cause notices from the tax authorities in India for non payment
of service tax as a recipient of services from foreign suppliers. These notices cover periods from 16th August 2002 to 31st March 2008. A writ
petition(s) challenging the liability to pay service tax as recipient of services in respect of first show cause notice (16th August 2002 to 31st March
2006) and challenging the scope of some services in respect of second show cause notice (1st April 2006 to 31st March 2007), has been filed
with the Chennai High Court. The reply for second and third show cause notice has also been filed before the authorities. Should the adjudication
go against Cairn India Group, it will be liable to pay the service tax of approximately INR 978,000 thousand plus potential interest of
approximately INR 395,000 thousand, although this could be recovered in part where it relates to services provided to Joint Venture of which
Cairn India is operator.
Tax holiday on gas production
Section 80-IB(9) of the Income Tax Act, 1961 allows the deduction of 100% of profits from the commercial production or refining of mineral oil.
The term 'mineral oil' is not defined but has always been understood to refer to both oil and gas, either separately and collectively.
The 2008 Finance Bill appeared to remove this deduction by stating [without amending section 80-IB(9)] that "for the purpose of section 80-IB(9),
the term 'mineral oil' does not include petroleum and natural gas, unlike in other sections of the Act". Subsequent announcements by the Finance
Minister and the Ministry of Petroleum and Natural Gas have confirmed that tax holiday would be available on production of crude oil but have
continued to exclude gas.
Cairn India Group filed a writ petition to the Gujarat High Court in December 2008 challenging the restriction of section 80-IB to the production of
oil. In the event this challenge is unsuccessful, the potential liability for tax and related interest on tax holiday claimed on gas production for all
periods to 31st March 2009 is approximately INR 2,370,000 thousand.
Based on the legal opinions received, the management is of the view that the liability in these cases is not probable and accordingly no provision
has been made in the financial statements.
13. Cairn India Group has a defined contribution gratuity plan. 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 scheme is funded with an insurance company in the form of a
qualifying insurance policy.
The following tables summarize the components of net benefit expense recognised in the profit and loss account and the funded status and amounts
recognised in the balance sheet for the gratuity plans.
Profit and Loss account
Net employee benefit expense (recognised in Employee Cost)
Particulars 31st March 2009 31st December 2007
Current service cost 23,529 10,846
Interest cost on benefit obligation 6,051 2,863
Expected return on plan assets (3,666) (1,798)
Net actuarial (gain) / loss recognised in the year 14,974 21,226
Past service cost Nil Nil
Net benefit expense 40,888 33,137
Actual return on plan assets 6,700 2,975
Balance sheet
Details of Provision for Gratuity
Particulars 31st March 2009 31st December 2007
Defined benefit obligation 108,425 66,142
Fair value of plan assets 68,854 29,163
Less: Unrecognized past service cost Nil Nil
Plan asset / (liability) (39,571) (36,979)
Changes in the present value of the defined benefit obligation are as follows:
Particulars 31st March 2009 31st December 2007
Opening defined benefit obligation 66,142 41,207
Current service cost 23,529 10,846
Interest cost 6,051 2,515
Benefits paid (5,306) (10,829)
Actuarial (gains) / losses on obligation 18,009 22,403
Closing defined benefit obligation 108,425 66,142
Changes in the fair value of plan assets are as follows:
Particulars 31st March 2009 31st December 2007
Opening fair value of plan assets 29,163 25,693
Expected return 3,666 1,798
Contributions by employer 38,296 11,324
Benefits paid (5,306) (10,829)
Actuarial gains / (losses) 3,035 1,177
Closing fair value of plan assets 68,854 29,163
Note: The Group's expected contribution to the fund in the next year is INR 34,725 thousand.
The major categories of plan assets as a percentage of the fair value of total plan assets are as follows:
Particulars 31st March 2009 31st December 2007
Investments with insurer 100% 100%
The overall expected rate of return on assets is determined based on the market prices prevailing on that date, applicable to the period over which
the obligation is to be settled.
117
Schedules to the Consolidated Financial Statements Continued
SCHEDULE 23 - NOTES TO ACCOUNTS
The principal assumptions used in determining gratuity liability for the Group's plans are shown below:
Particulars 31st March 2009 31st December 2007
Discount rate 7% 8%
Future salary increase 10% 10%
Expected rate of return on assets 9.35% 9.1%
Employee turnover 13.13% 13.13%
Mortality Rate LIC (1994-96) LIC (1994-96)
Ultimate Table Ultimate Table
Note: The estimates of future salary increases, considered in actuarial valuation, take account of inflation, seniority, promotion and other relevant
factors, such as supply and demand in the employment market.
Gratuity liabilities for the current and previous period are as follows:
Particulars 31st March 2009 31st December 2007
Defined benefit obligation 108,425 66,142
Plan assets 68,854 29,163
Surplus / (deficit) (39,571) (36,979)
Experience adjustments on plan assets (loss)/gain 3,132 2,970
Experience adjustments on plan liabilities (loss)/gain (11,964) (6,960)
Notes:
a) The Group has adopted AS 15 (Revised 2005) Employee Benefits for the first time during the previous year. Disclosures required by
paragraph 120 (n) of AS-15 (Revised 2005) are required to be furnished prospectively from the date of transition and hence have been
furnished for the current and the previous year only.
b) The Group is maintaining a fund with the Life Insurance Corporation of India (LIC) to meet its gratuity liability. The present value of the plan
assets represents the balance available with the LIC as at the end of the period. The total value of plan assets amounts to INR 68,854
thousand as certified by the LIC.
15. The share issue expenses of INR 208,410 thousand incurred on the preferential allotment of 113,000,000 equity shares have been charged to the
profit and loss account and not adjusted from the securities premium account on conservative basis.
16. Cairn India Group supplies gas from its Ravva and Cambay blocks to various customers. The price contracts with two customers are due for
revision with effect from December 2008 and currently the same are under negotiation. Pending finalization of the price contracts, revenue has
been recognised based on the last agreed prices on a conservative basis, as the management is expecting an upward price revision.
17. The goodwill of Cairn India Group amounting to INR 253,192,675 thousand has arisen on consolidation of financial statements of the Company
with its subsidiaries and represents the difference between the cost to the Company of its investment in Cairn India Holdings Limited (which
largely represent Cairn India Group's operations in India through its subsidiaries) and its proportionate share in the net book value of Cairn India
Holdings Limited on consolidated basis at the time of acquisition of shares in Cairn India Holdings Limited. The management has carried out the
tests for impairment of goodwill at the year-end as per requirements of AS 28 (Impairment of Assets) by computing the value in use of the assets
and comparing the same with the carrying amount of the net assets. Value in use is based on the discounted future net cash flows of the oil and
gas assets held by the Cairn India Group. For all blocks in the exploration stage, valuation has been carried out using risked NPV / boe. The result
of the impairment tests indicate that the value in use is higher than the carrying amounts and no impairment provision is required to be created at
the reporting date.
18. The management committee for the Rajasthan block has recently approved the declaration of commerciality and has granted an area of 822 square
kilometers for future development. This includes an additional area of 238 square kilometers where the approval of the Ministry of Petroleum and
Natural Gas is awaited.
19. Long term investment represents shares of Videocon Industries Limited held by Cairn Energy India Pty Limited (CEIPL) by virtue of its holdings in
erstwhile Videocon Petroleum Limited, which subsequently merged with Videocon Industries Limited. CEIPL is yet to receive the share certificates
of the merged entity and the matter is being pursued with the company.
20. The current tax and deferred tax provisions have been computed on the basis of the standalone financial statements of the Company's
subsidiaries, i.e. not based on the consolidated financial statements of Cairn India Limited and its subsidiaries. There was a reversal of deferred tax
liability amounting to INR 237,884 thousand during the current period due to changes in assumptions for computing the timing differences in
relation to certain assets of Rajasthan project during the tax holiday period.
21. Cairn India Holdings Limited (CIHL), a wholly owned subsidiary of the Company along with some of its subsidiaries has entered into a loan facility
agreement for USD 850 million with a consortium of banks. For the purposes of securing this facility, CIHL along with some of its subsidiaries has
created a negative pledge on its assets and those of its subsidiaries, whereby it has undertaken not to dispose any of the said assets or create any
charge on the same without the prior consent of the lenders. Further, the entire shares of Cairn Energy Hydrocarbons Limited a wholly owned
subsidiary of CIHL, has been pledged with the lenders.
22. Cairn India Group's estimate of hydrocarbon reserves and resources at the period/year end is as follows-
Particulars Gross proved and probable Gross proved and probable Net proved and probable
hydrocarbons initially in place reserves and resources reserves and resources
(mmboe) (mmboe) (mmboe)
Current Year Previous Year Current Year Previous Year Current Year Previous Year
Rajasthan MBA Fields 2,054 2,054 685 685 479 479
Rajasthan MBA EOR – – 308 308 216 216
Rajasthan Block Other Fields 1,708 1,697 86 84 61 60
Ravva Fields 625 584 72 82 16 18
CBOS/2 Fields 156 116 20 25 8 10
KG-DWN-98/2 650 650 353 353 35 35
Total 5,193 5,101 1,524 1,537 815 818
Cairn India Group's net working interest in proved and probable reserves is as follows-
Particulars Proved and Proved and probable
probable Reserves reserves (developed)
Oil (mmstb) Gas (bscf) Oil (mmstb) Gas (bscf)
Reserves as at 1st January 2007* 207.15 53.19 18.10 53.19
Additions / revision during the year 44.47 4.21 3.63 4.21
Production during the year 4.59 13.40 4.59 13.40
Reserves as at 31st December 2007** 247.03 44.00 17.14 44.00
Additions / revision during the fifteen months period 98.35 (1.66) 2.64 (1.66)
Production during the fifteen months period 5.58 13.74 5.58 13.74
Reserves as at 31st March 2009*** 339.80 28.60 14.20 28.60
119
Schedules to the Consolidated Financial Statements Continued
SCHEDULE 23 - NOTES TO ACCOUNTS
* Includes probable oil reserves of 35.81 mmstb (of which 3.24 mmstb is developed) and probable gas reserves of 16.73 bscf (of which 16.73
bscf is developed)
** Includes probable oil reserves of 41.78 mmstb (of which 4.17 mmstb is developed) and probable gas reserves of 16.57 bscf (of which 16.57
bscf is developed)
*** Includes probable oil reserves of 57.70 mmstb (of which 5.7 mmstb is developed) and probable gas reserves of 12.80 bscf (of which 12.80 bscf
is developed)
mmboe = million barrels of oil equivalent
mmstb = million stock tank barrels
bscf = billion standard cubic feet
1 million metric tonnes = 7.4 mmstb
1 standard cubic meter = 35.315 standard cubic feet
MBA = Mangala, Bhagyam & Aishwarya
EOR = Enhanced Oil Recovery
For S. R. Batliboi & Associates For and on behalf of the Board of Directors
Chartered Accountants Rahul Dhir Managing Director and Chief Executive Officer
per Raj Agrawal Aman Mehta Director
Partner Indrajit Banerjee Executive Director and Chief Financial Officer
Membership No.: 82028 Neerja Sharma Company Secretary
Place : Gurgaon
Date : 27th May, 2009
121
Statement Pursuant to Section 212 of the Companies Act, 1956
(All amounts are in thousand Indian Rupees, unless otherwise stated)
Profits/(Losses) so far it Profits/(Losses) so far it
concerns the members of concerns the members
the Holding Company of the Holding Company
and not dealt with in the and dealt with in the
books of Account of the books of Account of the
Holding Company Holding Company
S. Name of the Subsidiary Company Name of the Holding Company Number of equity shares held Extent of Financial For the For the For the For the
No. Holding year of the Financial Previous Financial Previous
subsidiary Year of the Financial Year of the Financial
ended on Subsidiary Year(s) Subsidiary Year(s)
since it since it
became a became a
Subsidiary Subsidiary
1 Cairn India Holdings Limited Cairn India Limited 292,929,752 shares of £ 1 each 100% 12/31/2008 6,456,890 (1,592,111) – –
2 Cairn Energy Gujarat Block 1 Limited Cairn India Holdings Limited 551 ordinary shares of £ 1 each 100% 12/31/2008 94,633 (8,458) – –
3 Cairn Exploration (No.7) Limited Cairn India Holdings Limited 1 ordinary share of £ 1 each 100% 12/31/2008 129,766 (136,016) – –
4 Cairn Exploration (No.6) Limited Cairn India Holdings Limited 1 ordinary share of £ 1 each 100% 12/31/2008 7,469 (6,276) – –
123
Notes
95 Consolidated Profit
bopd 75,000 bopd, designed to
accommodate production from
Naresh Chandra
Rahul Dhir
and Loss Account (barrels of oil per day) Bhagyam and Aishwariya and
further expansion. Will be
96 Consolidated Statement At peak production which is commissioned by 2011
of Cash Flows estimated to account for more
than 20% of India’s crude oil
97 Schedules to Consolidated production
Financial Statements
123 Glossary
Cairn India Limited Annual Report and Financial Statements 2008–09
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