Contents

Company’s Vision & Mission……………………………………… .................. 1

Chairman’s Letter……………………………………… ..................................... 2

CEO’s Message………………..……………………….. ....................................... 4

Directors’ Profile & Corporate Information……………. ................................... 6

Directors’ Report………………………………………… ................................. 9

Auditors’ Report ………………………………………… ................................. 19

Balance Sheet……………………………………………. ................................... 22

Profit & Loss Account…………………………………… .................................. 23

Cash Flow Statement……………………………............... ................................... 24

Schedules to the Accounts………………………………… .............................. 26

Balance Sheet Abstract & Co’s General Business Profile… ................................. 55

Statement Pursuant to Section 212………………………... ............................. 56

Subsidiary’s Accounts – Shyam Internet Services Ltd. …… ............................... 57

Notice of 14th Annual General Meeting……………………. .............................. 68

V ision
Booming and prosperous India driven by hundreds of millions success
stories

❖ MTS will be the driving force for bringing New India into the fold of
opportunities. This drive for progress arises from our deep urge–to explore,
to create, to achieve, to change, to improve.

Mission
Enable New India’s continuous renewal

❖ We believe the power of connectivity will provide New India with a new
sense of identity and opportunity. We will provide this connectivity in a
simple, effective and affordable manner.

A mbition
Outdo Yourself

❖ We will encourage the use of connectivity to rise above social, cultural,

occupational and economic challenges, thus becoming the undisputed
champion of those who have the courage to go against all odds.

1
 Chairman’s Letter
Dear Members,

It gives me immense pleasure and a sense of profound satisfaction in presenting the 14th Annual Report of your
Company.

India is exhibiting a new fortitude of buoyancy and endeavor across all areas of its economy, on the back of an
exceptional ‘economic awakening’. This revolution has been the result of an ongoing programme of liberalization
over the last decade, and a greater assimilation with the world economy. A blend of factors such as strong economic
fundamentals, availability of skilled and talented manpower and the outsourcing boom have interacted positively
with each other and transformed India into a globally competitive force. Presently when major economies around the
world are in grip of stern recession, India experienced a relative slowdown but remained a rare attractive place, with
a moderate but still a healthy growth rate. India’s economy not much impact adversely in the magnitude compared to
economies of other major countries. I am hopeful that India’s inherent vigor provides a strong base to face the
repercussion of the recession and India will overcome it as soon as the economies of other major countries show the
signs of recovery.

Indian telecom markets have registered startling growth since past several years. Wireless service is growing at close
to 13% quarter on quarter and it is astonishing that this growth comes when monthly India is adding at an average of
10 million mobile subscribers. Today, Indian telecom network is the second largest in the world. With the current
pace, the target to reach about 700 million connections by 2012 is likely to be well within reach of the country. The
growth of wireless services has been phenomenal. Today, the wireless subscribers are not only much more than the
wireline subscribers in the country but also increasing at a much faster pace.

India is one of the most attractive markets in the world, with accelerating productivity and consumption levels, as well
as rapidly developing infrastructure. We are a strategic investor and will initially focus on building out an integrated
national telecommunications network and providing our Indian customers with superior telecommunications services.
I am very elated to inform you that the Company obtained its Pan-India license for operations of mobile services in
March 2008 and at present has enough spectrum to provide mobile telephony services in 22 telecom-circles, covering
India’s 28 states and 7 union territories, with a population of 130 million.

Our foremost inclination in India is the roll-out of Pan-India mobile operations. I am also enchanted in reporting that
the network roll-out process is in full swing with the help of world renowned technology partners. The Company has
also entered into a strategic partnership with reputed companies for supply of customized handsets.

Despite our late entrance to the local telecom market, our growth rate succeeded our expectations. Your Company
meticulously is aligned to the fast paced stride towards accomplishment of Pan India roll out plan with yearning to
excel within scheduled time frame work.

The Joint Venture partners have always been making all their efforts to achieve optimum growth in the networth of the
Company. With the infusion of further funds to the tune of INR 20000 Million by SISTEMA JSFC and Indian Promoters
in the Company in the last financial year, the equity share capital of the Company increased to INR 24559.5 Million

2
enhancing the book value (NAV) per equity share to Rs. 5.06 as at March 31, 2009 and also defending the
Company to become a Company with negative networth. The said infusion of further equity also improved the
creditworthiness of your Company to swiftly implement the Pan India roll out and thus enhanced the value of investment
of all stakeholders including minority shareholders.

Progressive development of Sistema Shyam TeleServices business in India is closely linked to MTS brand as one of the
most popular International telecom brands reflecting high quality of communication and global nature of our services.

Your Company has so far revealed better performance as compared to the business plan. It is because of constant
efforts and determination of employees to surpass the rising expectations of all our stakeholders that we stand successful.
I strongly believe our management team has the leadership capability to take Sistema Shyam to the next level. I would
like to express my appreciation for their continuous commitment to our success. With our commitment to growth, we
had also committed to build an organization based on Transparency and Performance orientation where superlative
efforts of employees are well recognized and rewarded. With your support, we will soon undertake a time-bound
execution of some path breaking People - Centric initiatives which will be based on Employee Centricity and overall
Excellence. As we intensify our effort to expand nationally and emerge as market leaders amongst the telecom
service providers we look forward for continued commitment and high performance of employees. I am confident that
in nearest future we will achieve the next limits of our success.

I express my gratitude to our Indian Joint Venture Partners for their unstinted co-operation, support and trust bestowed
upon us and looking forward to their continued support.

To conclude, I would like to say that your trust and faith in the Company have been our great strength. I would also
like to take this opportunity to thank all stakeholders for trusting us. I have no doubt that their confidence and support
will be redeemed by the Company’s Management, in the years ahead.

Yours Sincerely,

Ron Sommer
CHAIRMAN

3
 CEO’s Message
Dear Shareholders,

This is my first communication to you and it is indeed a matter of colossal pleasure for me to inform you concerning the
development of the Company during the last one year.

It has been another incredible year in the history of Indian Telecom industry. India - one of the most vibrant and fastest
growing telecom markets in the world enjoys a sturdy growth rate of 10 million mobile users every month. The low
tariff rates make it affordable for majority of the population even in remote areas to avail the wireless telecom
services. Indian customers are embracing mobile technology in a big way. Subscribers growth in India will continue
driven by wide gap between rural and urban areas in terms of mobile penetration, an improved regulatory climate,
telecom policy that aims to encourage and liberalize private and foreign investment, permission to international
player to bring in funds in form of loans, rural expansion, entry of newer operators, cheaper handsets, quick service
delivery for mobile connections, affordable pricing plans in the form of pre-paid cards and increased purchasing
power among the 18 to 40 years age group as well as sizeable middle etc. The Mobile will emerge as a next
advertising and marketing medium - and be seen as capable of not just mass reach but also allow a high degree of
targeting.

A little less than a year ago, we embarked on a truly momentous journey of introducing telecom service of world
renowned MTS brand in India. In retrospect, we are delighted by our performance in terms of the launch of new
telecom circles, growth in customers and the overall financial performance of the Company. The journey was marked
with a lot of challenges and it is only because of our resolve to surpass the rising expectations of all our stakeholders
that we stand as one of the industry leaders among the new operators, cutting across the length and breadth of our
vast country. This also displays our commitment to our Vision, Corporate Values and emphasis on Creativity and
Innovation in the way we approach our Business.

I am very delighted to inform you that the period under review has been significant for your Company with regard to
number of key achievements and encouraging developments. Your Company has launched its CDMA services in five
new Circles viz. Tamil Nadu, Kerala, Kolkata, West Bengal and Bihar apart from Rajasthan of which expansion
program has been completed successfully and the Company is having second largest CDMA network by footprint in
the Rajasthan Circle. In order to reflect the Joint Venture between SISTEMA JSFC and SHYAM GROUP, the name of
your Company has been changed from Shyam Telelink Limited to Sistema Shyam TeleServices Limited. Keeping in
view the need for Pan India Brand name, your Company has launched globally applauded MTS Brand in India.
‘MTS’ ranked among BRANDZ™ Top 100 Most Powerful Brands. MTS India mobile sub base has increased the
threshold of almost two million. In the month of March-2009 incremental share in Rajasthan market reached the
record figure of 13%. More than 10,000 BTS to be set up in the first phase, execution of Agreement with the National
distributor UTL, tieing up with Samsung, ZTE and Huawei for superior handset range & quality have also taken place
during the year. The Corporate office of the Company has re-located from New Delhi to Gurgaon (Haryana) for
monitoring the Pan India operations smoothly and efficiently and we have also established required offices in newly
launched circles.

I am also enchanted in reporting that Roll out of Pan India operations for rest of the circles is also under swift progress.
The Company has also entered into a strategic partnership with reputed companies for supply of customized handsets.

4
Inter Connect Agreements for all India operations have been executed with most of the major operators. The Company
is primarily focusing to accomplish the task of launching of new circles within scheduled time.

We are now geared to rapidly expand our presence across the Country. Presently we are working on last mile
strategies for introducing our path breaking MTS services in Delhi NCR this would be followed close on the heel with
launches in Mumbai & Karnataka. The increased canvas of operations implies many more million customers enrolled
in our network and enjoying our superior services this year.

The growth in the domestic telecom industry has largely been concentrated in the Metros and Class A circles in the
past decade; however, coverage in the Class B and Class C cities is still low. India’s rural tele-density currently stands
at less than 15 percent. Your Company is endeavouring to explore the possibilities to add new customers from rural
areas though these markets are volume driven with low tariffs.

Your Company is surfacing and all set to defy the competition in existing Telecom Market with a propel to lead the
market by providing high quality product & services supported by state of the art technology, vigorous and efficient
processes backed by highly skilled and enthusiastic professionals. We are also putting our all efforts for establishing
the global MTS brand in India, the MTS Brand is internationally recognized and widely respected as a robust,
reliable and pioneering brand. Your Company is ongoing its efforts to provide world class quality connectivity with
Innovative & Customer friendly Tariff Schemes under the Global brand MTS. Our aspiration is to be an out performing
Pan-India Telecom player and to deliver high quality product to our valued customers. We will incorporate the MTS
values in the process of introducing world class services, creating a benchmark organization and above all being a
respected, honest, valued and admired corporate citizen. As we move forward, I take this opportunity to reiterate our
commitment to provide excellent services and value for money products to our valued customers.

It is matter of immense pleasure that your Company has been awarded with the “National Telecom Award” at the
National Telecom Award Ceremony for being the most successful new Telecom Operator in India. This award is
recognition of the MTS establishing itself as a strong challenged brand in India.

The excitement is unfolding and we would have enough opportunities to ‘Outdo Ourselves” to achieve record growth
rate and numbers; achievements that would become benchmark in the telecom history. True to our value of reciprocal
benefits the Company would ensure individual growth and development of all our valued team members.

The detailed information of Company’s progress in different operational areas has been appropriately portrayed in
the Directors’ Report.

Before concluding, I would like to take this opportunity to express my gratitude to thank every customer, partner,
employee and investor for support and trust bestowed upon us and looking forward to their continued support in the
year ahead in catalyzing our efforts towards building a great organization, which would create records in the
archives of the telecom industry.

Thanking you

Vsevolod Rozanov
PRESIDENT & CEO
5
 Board of Directors
Mr. Ron Sommer studied mathematics at the University of Vienna, where he earned his doctorate in
1971. He began his professional career with the Nixdorf Group in New York, Paderborn and Paris. In
1980 he was appointed Managing Director of the German subsidiary of the Sony Group. In 1986 he
became Chairman of the Management Board of Sony Deutschland, and was subsequently appointed
President and Chief Operating Officer of Sony Corporation of America in 1990. In 1993, Mr. Sommer
served at Sony Europe in the same function. From May 1995 to July 2002 he served as Chairman of the
Management Board of Deutsche Telekom AG. He has been serving as Chairman of the International
Advisory Council of Sistema JSFC since May 2003. Since May 2009 Mr. Sommer is serving as First
Vice-President of Sistema JSFC.
Mr. Sommer presently is the Director on the Board of several Companies in different countries like
Ron Sommer Motorola Inc., USA; Sistema JSFC, Russia;Tata Consultancy Services, India; Munich Reinsurance, Germany;
Chairman Weather Investment, Italy.

Mr. Sergey Cheremin graduated with honors in 1989 from the Moscow State Institute of International
Relations with a specialization in international journalism and completed his postgraduate course at
Moscow State University specializing in global economic issues. In 1992, he was an intern at the
New York Institute under the Investments and International Accounts Program and in 1993 joined a
course for banking specialists at Fairfield University (USA).
From 1991 to 1992 Mr. Cheremin was Deputy CEO at Printbank and from 1992 to 1998 worked as the
CEO of the Moscow Export-Import Bank. Between 1998 and 2000 he was Vice President of Ural Trust
Bank and from 2000 to 2003 was Adviser to the President of Severo-Vostochny Alliance Bank where he
subsequently became President. In 2004, he was appointed CEO of MBRD Bank and has acted as
the Chairman of the Board there till April 2005. Since then, he has served with Sistema JSFC as
Senior Vice President (Head of External Relations). Presently, he is a Director and Dy. Chairman of Sergey Cheremin
Board of Directors of Sistema JSFC. Dy. Chairman

Mr. Vsevolod Rozanov did his graduation from the Lomonosov Moscow State University with a degree
in Economics. He is having rich corporate experience of more than 15 years, mainly in the field of
Management, Economics and Finance. He has served many esteemed Multinational Companies in senior
capacity. Before joining the Company he was Vice President and CFO with Mobile TeleSystems (MTS),
Moscow, another Subsidiary Company of Sistema JSFC. He is a successful professional who made a
significant contribution to consolidating MTS’s position in the telecom market.

Vsevolod Rozanov
Whole Time Director
(President & CEO)

Corporate Information (Contd...)

CHIEF FINANCIAL OFFICER REGISTERED OFFICE

Sergey Savchenko B2-D, Shiv Marg, Bani Park,
Jaipur – 302016, Rajasthan, India
Tel. 0141-5100510
COMPANY SECRETARY
Rashid J Malik
INTERNAL AUDITORS
M/s Mehra Goel & Co.
AU D I TO R S
Chartered Accountants,
M/s S. R. Batliboi & Associates
505, Chiranjiv Towers,
Chartered Accountants,
43, Nehru Place,
Golf View, Corporate Tower B, Sector 42,
New Delhi -110019, India
Sector Road, Gurgaon (Haryana), India

6
Mr. Rajiv Mehrotra is a new generation technocrat, an electronics engineer by profession, a pioneer and
a visionary and has many firsts to his credit. He started his career by setting up the manufacturing
facilities for Cable TV and Satellite TVRO system. With his exemplary, innovative and global ideas he
diversified and expanded on several fronts including the services sector like cellular, basic telephony
and GMPCS.
Under his technical leadership and a highly motivated R&D team, Shyam Telecom developed a wide
range of cost effective Quality Telecom products, Multi Access Radios, Multiplexes,V-Sat system, SCADA,
Fibre Optic Terminal and DECT based Wireless in the Local Loop system. He is avidly involved in the
Association of Basic Telecom Operators, representing the case of Basic Operators with the Government
of India, Department of Telecommunications etc. He is also a Member of the FICCI Telecom Committee.
Rajiv Mehrotra
Director

Mr. Alok Tandon is a Chartered Accountant by profession. He looks after all the financial and commercial
activities of the Shyam Group. Mr. Tandon has experience of more than 17 years in this field. Under his
guidance Shyam Telecom successfully concluded the IPO in 1994, which was oversubscribed by 25 times.
He has been instrumental in efficiently managing funding and investments for various group Companies.
Mr. Tandon also handles group relationships with all leading Banks, Foreign and Indian Institutional
Investors. With his efforts Shyam Telecom has been able to smoothly manage its Equity & Debt funding
requirements at the lowest possible cost. He has been instrumental in closing the several important
deals of the Shyam Group which gave group the highest ever per customer valuation of any telecom
operation in the country.
Alok Tandon
Managing Director

Mr Ajay Khanna is a co-promoter of Shyam Group. He has been instrumental in setting up all India
Distribution Network for Cable TV, which catapulted Shyam Telecom Limited to become the leading
player in the Indian Cable TV equipment Industry. Complete commercial & operational network of
SSTL’s Cellular & Basic Business was set up under his guidance. He handles the Project implementation,
Commercial operations (Sales, Marketing, and Credit control) and HR activities of the Shyam Group.
He also does handle Public Relations and liaison with Local Authorities and Statutory / Regulatory
Bodies.

Ajay Khanna
Managing Director

Corporate Information (Contd...)

CORPORATE OFFICE REGISTRAR & TRANSFER AGENT

MTS India Towers, Plot No.334, Indus Portfolio Pvt. Ltd.
Udyog Vihar, Phase –IV, G-65, Bali Nagar,
Gurgaon, Haryana, India New Delhi -110015, India
Website: www.mtsindia.in E-Mail : ippl@indusinvest.com
Tel : 91-124-4812500 Tel: 91-11-25172115, 25422805, 25422801
Fax : 91-124-4812825 Fax: 91-11-25449863

AUDIT COMMITTEE BOARD EXECUTIVE COMMITTEE

Mr. Sergey Cheremin Mr. Ron Sommer
Mr. Ajay Khanna Mr. Sergey Cheremin
Mr. Suman Sehgal Mr. Alok Tandon
Mr. Vsevolod Rozanov

7
 Mr. Suman Sehgal is a graduate from St. Stephens College, Delhi. After graduation he did Practical
training in West Germany for 2 years and in 1968 joined the family factory in India producing paper
products as Managing Director, catering to markets all over India. He went to Russia in 1984 and
worked as consultant to Blue Chipped Companies like Indian Tobacco Companies, Harrison Malayalam,
Tata Tea, Mackniel and Magor. Presently he is Chairman & Managing Director of Spice Shipping and
Director on the Board of some other Companies of S.R.N. Group. He is also General Consultant to
S.R.N. Group.

Suman Sehgal
Director
Mr. Mikhail Shamolin graduated from the Russian Academy of Government Service under the President
of the Russian Federation in 1993. From 1996 to 1997, he studied at Wharton Business School, where
he completed a finance and management course for top-managers.
Mr. Shamolin is the President and CEO of Mobile TeleSystems Group (MTS), Moscow since May 2008.
Prior to his current role, Mr. Shamolin has also held the position of Vice President, Head of MTS Russia
from August 06 to May 08. In this capacity, Mr. Shamolin managed the largest MTS business unit, one
which contributes roughly 75% of value to MTS. Mr. Shamolin joined MTS in July 2005 as Vice President,
Sales and Customer Service and has been a member of the MTS Board of Directors since
October 2008. Prior to joining MTS, Mr. Shamolin worked at McKinsey & Co. from 1998 to 2004.
In 2004 and 2005 he worked at Interpipe Corp. (Ukraine) as Managing Director of the Ferroalloys Mikhail Shamolin
Division. Director

Mr. Madhukar holds a Master of Arts degree in Economics and a Bachelor’s degree in Law. He did
professional programs in Project Management and Human Resource Development etc. from IIM
Ahemdabad, IIM Kolkata, IMI New Delhi and he is a Certified Associate of Indian Institute of Bankers
(CAIIB).
Mr. Madhukar’s banking career spans over 37 years and covers every major dimension of banking
operations, both in India as well as overseas. From 1990 to 1996 he served as the Managing Director of
the State Bank International Limited, Mauritius. In 1997, he was appointed Senior General Manager at
SBI Capital Markets. From 1998 to 2000, he served as the Chief General Manager, New Delhi Circle at
SBI; and in 2000 to 2001, as Managing Director of State Bank of Bikaner & Jaipur. In 2003-2004, he was
appointed Chairman & Managing Director at the Industrial Investment Bank of India Ltd. (IIBI). He held
concurrent charge from 2001-2004 as Chairman & Managing Director at United Bank of India and was
responsible for the remarkable turnaround of the bank from being a loss-making bank to a
Madhukar
profit-making success, without any additional financial assistance from the Government of India. He has
Director
also served as Whole Time Member with the Securities and Exchange Board of India.

Corporate Information
DEPOSITORIES
National Securities Depository Ltd. Central Depository Services (India) Ltd.
4th Floor, Trade World, Kamla Mills Compound, Phiroze Jeejeebhoy Towers,1
Senapati Bapat Marg, Lower Parel, 7th Floor, Dalal Street,
Mumbai -400013, India Mumbai – 400 001, India
Tel: 91-22-24994200 Tel: 91-22-22723333-3224
Fax: 91-22-66608035/24976351 Fax: 91-22-22723199/22722072

BANKERS
ICICI Bank Bank of China ABN Amro Bank Yes Bank
Punjab National Bank Indian Bank VTB Bank Societe Generale

8
 D I R E C TO R S ’ R E P O RT

Dear Members,
Your Directors have pleasure in presenting the Fourteenth Annual Report on the business and operations of the Company
together with Audited Statement of Accounts for the financial year ended 31st March 2009.
FINANCIAL HIGHLIGHTS
(Rs. In Million)
S l . Particulars Current Year Previous Year
No. ended ended
31 st March, 2009 31 st March, 2008
1. Total Income 1276 1167

2. Total Expenditure 3098 1394

3. Operating Profit Before Amortizations, Finance Expenses and Depreciation (1822) (227)

4 Financial Expenses 1891 565

5 Cash Profit/(Loss) (3713) (792)

6. Depreciation 721 881

7 Amortization of Intangible Assets, Miscellaneous Expenditure, impairment

& Start up Expenses 1460 134

8. Loss for the year (5894) (1807)

9. Loss before Tax- Current & Deferred (5894) (1807)

10. Current Tax 13 4

11 Loss after Tax (5907) (1811)

12 Loss Brought forward from previous year 6216 4405

13 Deficit Carried to Balance Sheet (12123) (6216)

The financials of the current year are not comparable to previous
year since the Company was operating in a single circle in Wire
line and Fixed Wireless segments, whereas during the current
financial year the Company has started services in 5 more circles
till date of this report. Your Company has invested substantial
amount in Capital and Operating Expenditure on a Pan India
basis on setting up telecom network. The results of these long
term investments will be reflected in future financial statements
of the Company.
The total income of the Company recorded a modest increase
from Rs.1166.78 million in previous year to Rs.1275.87 million
during the current year. The increase in revenue was supported
by interest income on Fixed Deposits. Due to launch of
new circles, the total operating expenditure increased from
Rs.1394.33 million in previous year to Rs.3097.56 million
during the current year. Finance expenses also increased from
Rs.565.43 million in previous year to Rs.1891.09 million
during current year primarily due to increase of long term
debts to Rs.22583.93 million and exchange fluctuation of
Rs.299.47 million. Your Company has thus incurred operating
loss (EBITDA) of Rs.1821.68 million as against Rs.227.55 million
last year. The Company also incurred start up expenditure of
Rs.897.62 million during the year. On an overall basis your
Company recorded a negative NPAT of Rs.5907.48 Million as
against Rs.1811.74 million during the previous year.
FINANCIAL STABILITY
Your Company has comfortable liquidity to meet its short term
and long term plans. The Company meets its working capital
requirement by having suitable commercial arrangement with
its creditors and sufficient credit lines with Banks & Financial
Institutions and operates on a robust cash management system
to ensure timely availability of funds. The Company has
optimized finance cost so as to ensure funds are available for
expansion of the network in the remaining telecom circles in
India. The Company actively manages its short-term liquidity to
generate optimum returns. Your Company has full financial
support from its promoters for its strategic expansion plans in
India.
DIVIDEND
In view of the loss during the year under review, your Directors
regret their inability to recommend any dividend.
9
 CHANGE OF COMPANY’S NAME
During the period under review, the name of the Company was
changed from Shyam Telelink Limited to Sistema Shyam
TeleServices Limited with effect from 22 nd Jan. 2009. The
name was changed in order to reflect the Joint venture between
Sistema JSFC & Shyam Group. This is reiterated that
SISTEMA is one of the largest public diversified corporation
in Russia and the CIS, which manages fast growing companies
operating in the consumer services sector and SHYAM Group
is a premier telecommunications equipment design &
manufacturing organization in India with an eye on the
global markets, and also in order to make all concerned aware
of this JV.
BRAND TRANSITION
Your Company had nurtured and cherished the Rainbow Brand
in Rajasthan Circle and the same had wide appeal. However,
upon the new strategy of the Company of becoming a Pan India
Operator, a need was felt to bring Brand with Pan India appeal
and global flavor. Accordingly your Directors took a strategic
decision and are delighted to inform you that your Company
has launched the globally acclaimed MTS brand in India and also
concluded the rebranding of Rajasthan from Rainbow to MTS
without any noticeable disruption in sales and smooth handover
of Rainbow brand equity to MTS. The Directors are confident
that this global brand will be immensely successful in cutting a
niche in the Indian telecom market with its core instinctive
value for customer focus.
The strength of MTS brand has been consistent and has been
recognized internationally in both 2009 & 2008 in BRANDZ TM
as one of the top 100 most powerful brands, a ranking published
by the Financial Times and Milliward Brown, a leading global
market research and consulting firm. It has been ranked at the
71st position by BRANDZ. Global recognition of MTS brand
strength is a testimony to both the success of MTS and the
growing interest in markets of operation of the Company.
Your Directors are confident that in the coming times our mobile
telephony brand MTS will continue to strengthen and become
the one of the most loved Telecom Brands of India.
LICENCES & SPECTRUM
As reported earlier, your Company has obtained Unified Access
Service License (UASL) from the Department of
Telecommunication (DoT) for all the 22 circles, to become a
Pan–India Operator. The DoT has allotted Start up Spectrum to
the Company for CDMA based mobility for all the Circles. The
Company has also obtained in-principle approval to use GSM
technology under the existing UASL License of Rajasthan Circle.
LAUNCH OF NEW CIRCLES
Your Directors take pride in reporting that during the period
under review with active support, hard work and dedication of
employees at all spheres, the Company accomplished fast track
growth expanding its presence by launching its CDMA services
in five new circles viz. Tamil Nadu, Kerala, Kolkata, West Bengal
and Bihar apart from Rajasthan. It is a matter of immense pleasure
that these launches have been achieved on schedule and this all
success could be possible due to the untiring efforts that
10
our employees, vendors, business partners, associates have all
put in.
Tamil Nadu & Kerala
The Company has launched its services in Tamil Nadu & Kerala
Circles in the month of March 09. In Tamil Nadu Phase-I the
Company is covering nearly 31million people which is 50% of
total population with coverage of 561 towns of the State. In
Kerala, initially 6 Districts of the State were launched in
March 2009 and till July 2009 network installation has been
completed and business operations have been started in all the
14 Districts covering nearly 17 million people which is 50% of
total population with coverage of 425 towns of the State.
Kolkata & West Bengal
In April 09 the Company entered in the Kolkata circle. This
Circle is having a population of 18 million and Telecom District
total area of 2050 sq. km. In Phase-I the Company is covering
nearly 1886.31 sq.km of the telephony potential and reaching
out to a population of around 17.5 million of the circle.
In May 09 your Company has shown its presence in West
Bengal Circle by launching its services in the Circle which is
having population of 60 million. In Phase-I the Company
covered 450 Towns and 26.67 million population i.e. 45% of
total population of the Circle.
Bihar
In July 09 the Company has also taken entry into Bihar by
launching its services in the Circle which is having population
of 109.7 million. In Phase-I the Company covered 271 Towns
and 22.1 million population i.e. 20% of total population of the
Circle.
The Company is committed to launch more Circles in calendar
year 2009 with Delhi, Mumbai, and Karnataka scheduled to be
launched very soon. The Company is now operational in newly
launched circles and is the only Company to be launch-ready
and aggressive to expand its footprints in other States of the
Country.
The new circles launch has made role of the Company more
challenging; managing the launched circle operations as well as
driving project execution in the yet to be launched circles. These
challenges are rarely experienced and require operating with
parallel twin responsibilities; both equally exciting and enriching.
The increased canvas of operations implies many more million
customers enrolled in our network and enjoying our superior
services this year.
EXPANSION IN RAJASTHAN
Presently the Company is providing its services in 600 Towns
and 12000 villages of Rajasthan where there is a large potential
customer base and major intercity traffic. The Company plans
to be operational in over 900 Towns and 13000 villages by the
year end. The Company’s fiber optic network is around
6000 km. In FY 2008-09, the Company has deployed in excess of
800 Base Transreceiver Stations (BTS) in various parts of
Rajasthan and about 600 more BTS are in pipe line and will be
operational very soon. Aggressive expansion works are
underway to offer full mobility services on the CDMA platform
in Rajasthan Circle.
In Rajasthan, we will continue to offer a range of fixed and
wireless services, and are already providing cross product
offerings with the inclusion of calls made to both the fixed and
wireless networks being treated as on-net for all MTS
customers.
The Company is continuously expanding its distribution reach
in Rajasthan covering 15000 retail outlets and has plans to cover
25000 more retail outlets by end of this calendar year.
PAN INDIA ROLLOUT
Your Company is primarily focused to accomplish Pan-India roll
out plan within scheduled time frame work. The Company holds
UAS licenses for all 22 Telecom circles for Pan-India rollout
that would encompass around 600 district headquarters and
4 Metros. Your Company meticulously aligned to the fast paced
stride towards accomplishment of Pan India roll out plan with
yearning to excel.
The Company has made arrangements for Infrastructure sharing
of Optical Fiber Cables, Towers & Cell Sites etc. with other
telecom operators across the country which would drastically
reduce the Network rollout costs of the Company and help in
faster rollout of networks. The Company has made enormous
progress in establishing network in the telecom circles of Delhi,
Haryana & Karnataka where commercial launches are planned
very soon.
The Company has placed orders to leading International Telecom
Manufacturers for rollout of its network across circles, which
includes supply of core telecom equipments. Your Company is
swiftly appointing Distributors and retail outlets in various
circles. The Company has also awarded contract to various
Turnkey Service providers for Tower, shelter supply & erection.
The Company has also tied up with Tata Teleservices for
providing national roaming to its customers on Tata Teleservices
Network.
Your Company’s endeavor is to become one of the largest
integrated telecom operators in the highly competitive and
challenging private telecommunication market in India. The
Company is committed to provide state-of-the-art Wireless
Technology for communication services to its customers across
the country.
AWARD & RECOGNITION
Your Directors are very excited to inform that your Company
has been conferred the National Telecom Award at the National
Telecom Award Ceremony for being most successful
new Telecom Operator in India.This was indeed a proud moment
for the Company.The award is in recognition of MTS establishing
itself as a strong challenger brand in the Indian Market.
We are confident that it will be a major boost to the morale
of MTS team.
PRODUCT & SERVICES
Your Company is fully committed to provide globally acclaimed
products and services to its customers at a very competitive
tariff plans. The Company has launched its services in all new
circles with competitive and attractive tariff plans for local as
well as STD Calls, VAS etc. ranging from competitive special
tariff vouchers, to variable talk time and validity offerings along
with smart & lucrative handsets of various companies of repute
with unique and advanced features. Our tag line - Badlo Life
ka Plan – has been developed to tap into a new sense of pride
and can do attitude emerging from new India. Honesty, Simplicity
and True Value have been developed as cornerstones of our
marketing approach in all aspects of offer development to
respond to the suspicion in the consumer market. Our million
minutes free launch promotion is the most innovative
promotion ever in this market, creating a high engagement
message to support the launch of the MTS brand and an
immediate reason for purchase.
At launch we offered the market a major innovation, a lifetime
Special Tariff Voucher (STV). This product category has already
been expanded from the one million minute launch promotion
to a 30p/minute lifetime local calling STV. We have also launched
a 1, 2, FREE SMS product allowing customers to have free SMS
after the first two per day, eclipsing all other SMS innovations in
the market currently.
Our terminals range is now expanded to include top brands
such as Samsung and MTS branded USB modems for laptop/
desktop users. The open market handset strategy will see
phones being offered by Spice, Haier, Samsung, Fly and Huawei
before the end of the year, which will reduce our Subscriber
Acquisition Cost (SAC) and expand the segments we can target.
We will also offer Blackberry type products for power users of
email, again expanding our reach into new segments.
CUSTOMER CARE
The Customer Service is at the core of every activity undertaken
by the Company. The Company believes that “differentiated”
customer service practices will provide the competitive edge
within the market. A well defined two-pronged Service strategy
aims to optimize ‘First Contact Resolution’ for customer
queries and provide ‘Consistent Service’ to all business partners.
At MTS we ensure that we “own our customers” and whatever
we do for them will be done “first time right”. The focus is in
ensuring we create and give our customers high quality customer
service through systems, processes and more importantly
people who will create the - MTS way of Service to customers.
Whether it is ensuring the best in class 24X7 Customer Service
Contact Centers through a few quality strategic partnerships
which strives to provide complete end to end resolution, or
the dedicated Complaint Resolution and Customer Retention
Management Team - customer satisfaction will be core to our
customer care strategy. MTS Services will carry both the
personal touch and local flavor to ‘reach-out’ to customers
through various initiatives as well as capture their feedback and
suggestions.
In future, we plan to expand our presence in the market in the
direct retail space where customers can meet and interact with
us for all their telecom needs. This facility is currently available
to our customers in Rajasthan circle only. Having grown as a
telecom player in 5 circles across the country and more to
come, we are focusing on ensuring Standardized Customer
Service Experience with the right balance of customer focus
and compliance to government / regulatory norms.
11
 MARKET SCENARIO
India is one of the most dynamic and fastest growing telecom
markets in the world. Indian mobile market has registered
stupendous growth in the current fiscal year due to easy
availability of low cost devices, better network coverage,
affordable services etc. As demand boosters, progressive
regulatory regime, network expansion by operators, reduction
in tariffs and cost of handsets, which essentially make the service
affordable for the common users, have supplemented the growth
of the Indian telecom sector.
In the past decade, the growth in domestic telecom industry has
largely been concentrated in the Metros and Class A circles;
still the coverage in the Class B and Class C cities is low at
15-25%. It’s worth noting that 70% of the Indian population
lives in rural areas, and, equally importantly, 64% of the nation’s
expenditure and 56% of its income comes from these villages–
yet India’s rural tele-density currently stands at less than 15%.
As far as year 2009 is concerned, there is not going to be any
major slowdown in the telecom business, as telecommunications
tools will help reduce expenditures for enterprises and
individuals. The industry is having 415.25 million subscribers as
of May 2009 and likely to add between 90-100 million new
subscribers in residual part of 2009. The overall teledensity has
reached 38.88% at the end of May 2009.
As per report of E & Y the total revenue of India’s
telecommunications services industry is projected to reach
$54 billion in 2012. Total telecom subscriber base of India is
estimated to reach about 700 million by 2012, including about
650 million mobile phone users. This has been due to the impact
of economic reforms and pro-active policies of the Government.
The Indian Telecom sector has witnessed dramatic
transformation on almost all the fronts.
SECURITY CONTROLS
The Company has established an effective security system of
internal controls designed to provide reasonable assurance
regarding the achievement of the objectives in the following
areas:
1. Effectiveness, efficiency and continuity in operations;
2. Adequacy of safeguard for assets; and
3. Reliability of financial controls
The integrity and reliability of the security systems are
achieved through clear policies and procedures, process,
automations, careful selection, training and development of
employees, and an organization structure that segregates
responsibilities.
The Company has also taken the following major initiatives to
further improve security control viz. Development of Process
Regulation for Contractor Screening & Vendor Verification with
the process regulation, Development of Process Regulation for
Conducting Line of Duty Investigations, Development of
Standard Fraud Level indicator format, Analysis Of Current
Situation for Combating Fraud, Pre-employment Verification of
employees, Technical Surveillance Counter Measures(TSCM),
Installation of all required Security Equipments etc.
12
STATUS OF LISTING OF SHARES AS PER SCHEME
OF ARRANGEMENT
As reported in last Annual Report that Hon’ble High Court
of Rajasthan vide its order dated 07.08.2008 while disposing
of the Company’s Application in the matter of Scheme
of Arrangement between Shyam Telecom & others, ordered
that:
“the Company, SSTL, shall, within a maximum period of 18
months from the date of this order initiate the process of listing
the shares representing the Issued Capital of the company by
adopting such route as may be permissible in law and shall carry
out such compliances as may be required in law including that of
offering a specified percentage of the shares to the Public, for
subscribing thereto, through the book building process, in the
manner provided for under SEBI (DIP) Guidelines 2000, and
upon such steps being taken, BSE may issue such orders that
may be required in law and as may be necessary for securing the
said listing.”
After the pronouncement of the aforesaid order, the Board has
reviewed the matter in its meetings from time to time. Suitable
actions are being planned to follow the directions of the Hon’ble
High Court.
CAPITAL RESTRUCTURING & NETWORTH
PROGRESSION
Your Directors consistently aspire to achieve optimum
growth in the share capital of the Company. With the
infusion of further funds to the tune of INR 20000 Million
by SISTEMA JSFC and Indian Promoters in the Company
during the year under reporting, the equity share capital
of the Company increased from INR. 4559.5 Million
to INR. 24559.5 Million as on 31.03.2009. The loss of
Rs.5907 Million incurred during the year as envisaged initially,
increased accumulated loss upto Rs.12123 Million as on
31st March, 2009 resulting into negative net worth as on that
date without considering the fresh equity. But the infusion
of further capital has tremendously improved its networth
from a negative one to a positive one. Now the book
value (NAV) per equity share as on March 31, 2009 stands
at Rs.5.06.
Compliance of FDI Sectoral Policy
As on the date of this report, the Issued, Subscribed and Paid up
Capital of the Company is 2,455,957,500 equity shares of
Rs.10/-each out of which SISTEMA JSFC is holding 1,810,289,400
shares i.e. 73.71%.
The total paid up capital of the Company along with breakup of
the Foreign and Indian Holding is as under :-
Category No. of Shares % of Holding
Foreign Holding 1810904912 73.735
Indian Holding 645052588 26.265
TOTAL 2455957500 100.00
The present foreign holding in the Company is within sectoral
equity cap for foreign equity prescribed in FDI policy as in force
as on date.
CORPORATE SOCIAL RESPONSIBILITY
Your Company realizes the responsibility towards employees,
the environment and society, the vital factor to the success. The
Company understands the needs and aspirations of the people
living in the vicinity of our operations and appreciates issues
raised by Authorities. The Company is fully committed to talk
and listen to other concerned parties and create value for our
shareholders.
Our entrepreneurial spirit is underpinned by a strong set of
cultural core values including integrity, social and environmental
responsibility and nurturing of individuals & creativity.
The CSR policy stresses on importance of respecting
local cultural factors and emphasizes on contributing to
socio-economic development in regions where it undertakes
business activities.
Your Company continued to focus on the neglected segments
of the society, providing Mobile PCO (Chalta Phirta PCO) to
physically challenged individuals. Connect A- School, A- Hospital,
Coin Collection Boxes and information Kiosks at Airports &
Bus Stands are few of the efforts in this segment.
SUBSIDIARY COMPANY
Shyam Internet Services Limited (SISL), a wholly owned
subsidiary of your Company is having a Category B ISP license
to provide Internet Service in the State of Rajasthan. SISL is the
leading name in the state of Rajasthan for quality internet services.
The Company is running internet services in 131 cities with
brand name “Infinity”.
SISL has also applied for License for category-A ISP for providing
Internet Services on different technologies on All India basis.
On receipt of category A- ISP license, the SISL would be
spreading its service offering multi flavored Internet access to
PAN India Internet subscribers with its world class
infrastructure, dedicated optical fiber cable network, Digital
modems, and fully automated helpdesk.
As required under Section 212 of the Companies Act, 1956,
Balance Sheet, Profit & Loss Account, Directors’ Report and
Auditors’ Report of the subsidiary (SISL) have been attached
with the Balance Sheet of the Company.
CORPORATE GOVERNANCE
Your Company believes that Corporate Governance has
become most essential element of a mechanism required for
corporate survival and being successful in today’s most
competitive business market, and in current regime it is
considered equally important in a Company as the other
operations of Corporate Business.
Being the Company interested in implementing a good
Corporate Governance, your Directors are taking all necessary
steps to implement best International Corporate Practices in
the Company in phased manner to promote the value of all
stakeholders.
REGULATORY CHANGES
Major Amendment in TTO
On 1st September, 2008 TRAI prescribed time period for
recharging with minimum specified amount for such tariff plans
which have lifetime validity or unlimited validity, such time period
shall not in any case, be less than six months.
Directions related to National Security
On 06.10.2008 DoT issued direction in the interest of security
of the nation to make provision of Equipment Identity Register
(EIR) so that calls without International Mobile Equipment
Identity (IMEI) or calls with IMEI with all zeros are not processed
and rejected.
Amendement to UASL Agreement for Roll out
obligations
On 10.02.09 DoT made amendments to the UAS License
Agreement for roll out obligations for wireless network
only. It is also provided that the licencee shall ensure that
metro service area of Delhi Mumbai, Kolkata and Chennai are
covered within one year of the date of allocation of start up
spectrum. It was, however, clarified that while computing the
period of 1 year the average delay in SACFA clearance shall be
excluded.
Standards of Quality of Service of Basic and Cellular
Services
On 20th March, 2009 - TRAI released Regulations on the
standards of Quality of Service of Basic Telephone Service
(wireline) and Cellular Mobile Telephone Service including
revision of benchmark for the parameter call drop rate, replacing
the parameter on accumulated downtime for community
isolation with new parameter on network availability, prescribing
new parameter to assess the metering and billing credibility in
respect of charging of pre-paid customers, reducing the period
within which refund/credit is to be applied to customers in case
a billing complaint is upheld from four week to one week, the
benchmark for the parameter “Response time to the customer
for assistance” has been simplified and rationalized to provide
for accessibility of call centre and response time by the operator.
Directions for preventing unintentional subscription
to VAS
On 27.04.2009 TRAI with a view to enhance transparency with
regard to explicit consent and for preventing accidental or
unintentional subscription to value added services and to protect
the interest of consumers, issued directions to all access service
providers to ensure to taking explicit consent of consumers
and for preventing accidental subscription to value added
services.
HUMAN RESOURCES
Human Resource is one of the key constituent for achieving
business success in Service Industry. In telecom industry, due to
its knowledge driven nature and hyper competitive scenario it
is even more vital.
13
The Human Resources Team at Sistema Shyam TeleServices Ltd.
aims at partnering with business by developing ‘next’ in class
HR practices and creating a learning organization. We believe
that performance driven employees with high levels of
motivation and engagement at work is the key to enhancing
business capabilities and subsequently delivering business
results. Hence we continuously invest in their training, motivating
and development. Both Sistema and Shyam have a proven track
record of pursuing quality management systems in their endeavor
to achieve excellence. In this regards we at SSTL are ensuring
to meet up with the high standard of Excellence through our
Employees. Our processes have been benchmarked with global
best practices and standards.
BOARD OF DIRECTORS & CHAIRMAN
During the period under review, the following Directors
resigned from the Directorship of the Company:-
1. Mr. Igor Garshin resigned as Director w.e.f. 01.10.2008
2. Mr. Anurag Dayal resigned as Director w.e.f. 20.03.2009
3. Mr. Vitaly Saveliev resigned as Director w.e.f. 30.03.2009
4. Mr. Shamil Kurmashov resigned as Director w.e.f. 12.05.09
The Board places on record its deep sense of appreciation
for the valuable services rendered by Mr. Vitaly Saveliv,
Mr. Igor Garshin, Mr. Shamil Kurmashov and Mr. Anurag Dayal
during their tenure as Directors of the Company.
Mr. Vsevolod Rozanov was appointed as Whole Time Director
under designation of President & CEO w.e.f. 01.10.2008.
Mr. Madhukar was appointed as independent Additional Director
on the Board w.e.f. 27.03.2009, and he holds office only upto
the date of ensuing Annual General Meeting. Mr. Ron Sommer
and Mr. Mikhail Shamolin nominated by Sistema JSFC were
also appointed as Additional Directors of the Company
w.e.f. 21.05.2009, and they also hold office only up to the date of
ensuing Annual General Meeting of the Company. The Board
recommends their appointment as Directors in the ensuing
Annual General Meeting.
Consequent upon resignation of Mr. Vitaly Saveliev, the former
Chairman of the Company, the Board of Directors of your
Company elected Mr. Ron Sommer as the new Chairman
of the Company w.e.f. 21.05.2009. The Board also elected
Mr. Sergey Cheremin as Deputy Chairman of the Company
w.e.f. 21.05.2009.
In terms of clause 86 of Articles of Association of the Company
and as per the provisions of Section 255 of the Companies
Act, 1956, Mr. Rajiv Mehrotra and Mr. Sergey Cheremin are
liable to retire by rotation and being eligible, offer themselves
for re-appointment.
DIRECTORS’ CONFIRMATION
As required under the provisions of Section 217(2AA) of the
Companies Act, 1956, the Directors confirm that:
1. In the preparation of the annual accounts, the applicable
accounting standards have been followed.
14
2. Appropriate accounting policies have been selected and
applied consistently and judgment and estimates that are
reasonable and prudent have been made so as to give a true
and fair view of the state of affairs of the Company at the
end of the financial year ended March 31, 2009 and of the
Loss of the Company for the year ended on that date.
3. Proper and sufficient care for the maintenance of adequate
accounting records in accordance with the provisions of
the Companies Act, 1956 for safeguarding the assets of the
Company and for preventing and detecting fraud and other
irregularities have been taken.
4. The annual accounts have been prepared on a “going concern
basis”.
AUDIT COMMITTEE
During the period under review the Audit Committee of the
Directors was reconstituted. Presently, the constituent
members of the Audit Committee are Mr. Sergey Cheremin,
Mr. Ajay Khanna and Mr. Suman Sehgal.
AU D I TO R S
M/s S. R. Batliboi & Associates, Chartered Accountants, the
Statutory Auditors shall retire at the ensuing Annual General
Meeting and being eligible offer themselves for re-appointment.
The Audit Committee and the Board of Directors recommend
their re-appointment.
AUDITORS’ REPORT
The comments made by Auditors are self explanatory and
parawise management response to qualifications/observations
made in Auditors’ Report is stated as under:
As regards Para No.3 regarding payment of revenue share
fee in respect of consideration received during the year
2004-05.The Company has paid under protest Rs 319.86 million
to DoT towards AGR demand on gain from sale of its investment
in HIL. The Telecom Disputes Settlement and Appellate
Tribunal (TDSAT) has decided the matter in favour of the
Company. At present, the matter is pending with Honorable
Supreme Court for judgment. Based on legal Opinion received
and the TDSAT judgment, the Company is confident of a
favorable decision and is hopeful to receive back the amount
deposited under protest and hence no provision has been
made .
As Regards Para No.( i) (a) of the annexure to their report, the
process is already covered in agreement with National Service
Vendors and the Company is in the process of updating its
records based on acceptance testing and certification of supplied
capital goods installed by these vendors.
As regards para No (iv) of the annexure to their report,
the details of material receipt by national service vendors
on behalf of company have been completely reconciled with
vendors and acknowledgement of same is obtained. Further,
the company is in process of strengthening of recording of
receipt of material
As regards para No (ix) of the annexure to their report, there
have been minor delays in few instances during project phase.
Suitable mechanism to monitor timely payment has been put in
place to ensure timely deposit of statutory dues.
As regards para no(x) of the annexure to their report, it is
stated that the Company is Infrastructure Company operating
in Telecommunication business. As per industry practice, the
company is making cash losses in initial year of operation and it
expect to generate operational profit after the initial gestation
period.
FIXED DEPOSITS
The Company does not hold or accept any deposits and as such,
no amount of principal or interest on fixed deposits was
outstanding on the date of the Balance Sheet.
PARTICULARS OF EMPLOYEES
As required under Section 217(2A) of the Companies Act, 1956
read with Companies (Particulars of Employees) Rules, 1975, as
amended from time to time, a Statement of Particulars of
Employees is annexed hereto and forms part of this report.
PARTICULARS OF CONSERVATION OF ENERGY,
TECHNOLOGY ABSORPTION AND FOREIGN
EXCHANGE EARNINGS & OUTGO
Particulars with respect to Conservation of Energy, Technology
Absorption and Foreign Exchange Earnings and Outgo, as per
Section 217(1)(e) of the Companies Act, 1956 read with the
Companies (Disclosure of Particulars) Rules, 1988 are given
below :
a) Conservation of Energy
Your Company is a telecommunication service provider
requires minimal energy consumption and every effort has
been made to ensure the optimal use of energy, avoid waste
and conserve energy as far as possible.
b ) Technology Absorption, Adaptation and Innovation
The Company has not imported technical know-how. Your
Company has not yet established any separate R&D facilities.
c ) Foreign Exchange Earnings & Outgo
During the year under review, the Company has not earned
any foreign currency but has incurred expenditure of
Rs.2.39 Million (Previous year Rs.2.31 Million) on travelling
and Rs.8200.28 Million (Previous year Rs.33.27Million) on
purchase of equipments and services in foreign currency.
ACKNOWLEDGEMENT
Your Directors would like to express their sincere appreciation
for valuable co-operation and support received from
Government of India, State Governments, Department of
Telecommunication, TRAI, BSNL, ABTO, Local Authorities,
Financial Institutions, Bankers, Vendors, Customers,
Shareholders and other business constituents during the period
under review.
Your Directors sincerely appreciate the high degree of
professionalism, commitment and dedication, continuing
support and unstinting efforts displayed by employees at all
levels in ensuring an excellent all round operations performance,
they have performed magnificently on all fronts. Our steady
growth was made possible by their hard work, solidarity,
cooperation and support.
For and on behalf of the Board
Place : Gurgaon Ron Sommer
Date : July 16, 2009 CHAIRMAN
15
 ANNEXURE TO DIRECTORS’ REPORT
INFORMATION AS PER SECTION 217 (2A) OF THE COMPANIES ACT, 1956 READ WITH COMPANIES (PARTICULARS OF EMPLOYEES) RULES,
1975 AS AMENDED AND FORMING PART OF THE DIRECTORS’ REPORT FOR THE FINANCIAL YEAR ENDED MARCH 31, 2009
FOR THE FULL YEAR
S. NAME Gross Nature of Other terms Designation Qualification Date of Age To t a l Last Company’s Name
No. Earning E m p l o y m e n t & Condition Joining Exp.

1 YUDHBIR SINGH 3,452,096 Contractual As per service rules Circle Chief B.S.C 01-Apr-00 47 33 SHYAM TELECOM LTD.
of the Company Technical Officer (Electronics)

2 KALIKA PRASAD 2,072,911 Contractual As per service rules General Manager B.A./ M.A./ 01-Jun-00 40 24 HINDUSTAN COCA
of the Company P.G.D.H.R.M COLA BEV (P) LTD

3 SUNEEL VOHRA 3,453,661 Contractual As per service rules Advisor B.Com./ D.C.A. 01-Jun-01 47 18 SHYAM ACCESS
of the Company

4 SUDESH PANDIT 3,420,996 Contractual As per service rules Chief Operating C.A./ I.C.W.A.I/ 20-Oct-07 45 20 Emirates Integrated
of the Company Officer L.L.B. Telecommunications
Company, Dubai

5 RAJAT ARORA 3,783,253 Contractual As per service rules Chief Operating PGDBM 24-Oct-07 42 18 Bharti Airtel Limited
of the Company Officer

6 T NARASIMHAN 11,278,051 Contractual As per service rules Deputy Chief PGDMM 01-Jan-08 49 31 Vihaan Networks Limited
of the Company Executive Officer

FOR THE PART OF THE YEAR

7 MANMATH NIMAWAT 1,607,780 Contractual As per service rules of General Manager B. Com., Management 02-Jun-08 49 27 ACME TELEPOWER LTD
the Company Development Program

8 DMITRY KUPYSHEV 3,808,779 Contractual As per service rules of Exec. Assistant Bachelor of English 01-Jul-08 25 2 British Petrolium, Moscow
the Company & Law

9 JENS KIRCHNER 11,950,550 Contractual As per service rules of Chief Technical Master of Science 01-Jul-08 43 16 Siemens Ltd.
the Company Officer

10 KOZLOV VALERY 10,399,096 Contractual As per service rules of Chief Real Estate MBA, Moscow 01-Jul-08 53 30 MTS, Comstar
the Company Dev. Officer Electrotechnical
Institute of
Communication

11 SRINIVASA RAO SARIPALLI 3,140,819 Contractual As per service rules of Chief Operating P.G.D.B.M 02-Jul-08 42 22 Tata Teleservices Ltd
the Company Officer

12 KESHHAV TIWARY 2,203,382 Contractual As per service rules of Chief Operating B.Sc./ M.B.A. 10-Jul-08 43 12 RELIANCE
the Company Officer COMMUNICATION

13 NEERA SHARMA 1,617,645 Contractual As per service rules of General Manager L.L.B./ M.B.A. 16-Jul-08 37 13 DISHNET
the Company

14 VINAY MITTAL 1,401,864 Contractual As per service rules of General Manager C.A. 17-Jul-08 38 16 TATA TELESERVICES
the Company

15 KULJIT SINGH 2,411,370 Contractual As per service rules of Vice President M.B.A. 17-Jul-08 46 24 Bharti Airtel Limited
the Company

16 RAYMOND HERMAN 13,318,801 Contractual As per service rules of Deputy Chief Diploma, Moscow 01-Aug-08 47 23 Siemens Ltd.
FRANZ ARMES the Company Executive Officer Technical University
of Information &
Telecommunication

17 PRASUN KUMAR 1,371,493 Contractual As per service rules of General Manager M.B.A. 04-Aug-08 33 12 LEVI STRAUSS ( INDIA)
the Company

18 AMIT MATHUR 1,692,965 Contractual As per service rules of General Manager A.D.M. 12-Aug-08 41 19 Tata Autocomp Mobility
the Company Telematics Ltd

19 RAJIV KHOSLA 2,805,564 Contractual As per service rules of Vice President B.E 14-Aug-08 44 21 RELIANCE
the Company COMMUNICATION

20 SANIL G NAIR 1,297,251 Contractual As per service rules of General Manager M.B.A. 18-Aug-08 38 13 GLOBACOM LIMITED
the Company

21 NIKHIL SHRIVASTAVA 3,311,693 Contractual As per service rules of Vice President B.E (ELECT. 22-Aug-08 35 15 NOKIA SEIMENS
the Company &TELECOM) NETWORK PVT LTD

22 SANJAY JHA 1,412,011 Contractual As per service rules of General Manager B.E 01-Sep-08 38 12 Bharti Airtel Limited
the Company

23 SERGEY SAVCHENKO 16,865,795 Contractual As per service rules of Chief Finance PhD in 05-Sep-08 51 18 MTS, Moscow
the Company Officer Economics

24 SURENDRA NATH 2,729,464 Contractual As per service rules of General Manager M.B.A. 08-Sep-08 45 8 ACME TELEPOWER LTD
the Company

25 M SRINIVAS 1,133,607 Contractual As per service rules of General Manager B.Com. 11-Sep-08 45 24 TATA TELE SERVICES
the Company LTD.

26 VIKAS ARYA 2,988,295 Contractual As per service rules of Vice President B.E/ M.B.A 15-Sep-08 36 15 FUTUREWEI
the Company TECHOLOGIES

16
S. NAME Gross Nature of Other terms Designation Qualification Date of Age To t a l Last Company’s Name
No. Earning E m p l o y m e n t & Condition Joining Exp.
27 PRADEEP K. YADAV 2,425,620 Contractual As per service rules of Vice President MS-EE 30-Sep-08 47 19 VODAFONE ESSAR LTD.
the Company

28 VSEVOLOD ROZANOV 25,812,502 Contractual As per service rules of President and Degree in 01-Oct-08 38 8 MTS, Moscow
the Company CEO Economics

29 ZULFEQUAR MUJAHID 2,028,883 Contractual As per service rules of Chief Operating B.A.(Hons) 06-Oct-08 45 22 TATA TELE SERVICES
SIDDIQUI the Company Officer LTD.

30 SUNIL KUMAR SHARMA 1,028,174 Contractual As per service rules of Dy. General B.E 21-Oct-08 37 13 HUWAIE
the Company Manager TECHOLOGIES

31 ASHISH BHALLA 1,516,548 Contractual As per service rules of General Manager P.G.D.B.M 21-Oct-08 36 11 RELIANCE
the Company COMMUNICATION

32 PRITI SINGH 1,348,052 Contractual As per service rules of Vice President M.B.A. 27-Oct-08 46 14 RELIANCE
the Company COMMUNICATION

33 P S BAKSHI 1,456,011 Contractual As per service rules of Assistant Vice M.B.A. 01-Nov-08 53 29 LVY HOSPITAL&HEALTH
the Company President CARE LTD..

34 OLEG SUSHKOV 4,334,672 Contractual As per service rules of Head - Corporate Degree in 01-Nov-08 34 8 Aviva Life Insurance,
the Company Development Economics Russia

35 HARPREET SINGH BHATIA 1,207,588 Contractual As per service rules of General Manager M.B.A. 03-Nov-08 40 14 HFCL Infotel Limited
the Company

36 MANISH KHARBANDA 4,437,375 Contractual As per service rules of Chief Human P.G.Diploma in 10-Nov-08 39 13 RELIANCE
the Company Resource Officer Business COMMUNICATION
Administration

37 PANKAJ SHARMA 1,928,415 Contractual As per service rules of Vice President B.E 10-Nov-08 42 19 RELIANCE
the Company COMMUNICATION

38 PRANAY MISHRA 1,708,331 Contractual As per service rules of Circle Chief B.E 10-Nov-08 36 15 TATA TELESERVICES LTD
the Company Technical Officer

39 HARSH CHANDRA 1,025,464 Contractual As per service rules of Chief Operating P.G.D.M 01-Dec-08 41 17 TATA TELESERVICES LTD
the Company Officer

40 ANUP GOMES 739,562 Contractual As per service rules of General Manager P.G.Diploma 02-Dec-08 44 19 RELIANCE HARYANA
the Company in Business SEZ LTD.
Administration

41 ELENA PERETRUKHINA 1,394,377 Contractual As per service rules of General Manager MBA 10-Dec-08 32 1 MTS, Moscow
the Company

42 IGOR KONDARATSKOV 2,648,219 Contractual As per service rules of Advisor To Engineering in 10-Dec-08 48 24 LUKOM Agency
the Company President Radioelectronics

43 ATUL SHARMA 980,429 Contractual As per service rules of General Manager M.A. 11-Dec-08 40 22 RELIANCE
the Company COMMUNICATION

44 SANJEEV SHARAN 581,087 Contractual As per service rules of General Manager P.G.D.B.M (HR) 16-Dec-08 40 15 RELIANCE
the Company COMMUNICATION

45 AJAY KUMAR 676,752 Contractual As per service rules of Dy. General B.E/ P.G.Diploma 22-Dec-08 44 19 VODAFONE ESSAR
the Company Manager in Business LIMITED
Administration

46 RAJ KUMAR SHARMA 655,703 Contractual As per service rules of General Manager PGDBM 07-Jan-09 43 21 NOKIA SEIMENS
the Company NETWORK PVT LTD

47 SANJAY BANKA 991,386 Contractual As per service rules of Vice President F.C.A., F.C.S., 08-Jan-09 40 15 Bharti Airtel Limited
the Company L.I.I.I

48 S BALAGOPAL 965,369 Contractual As per service rules of Vice President PGDBM 09-Jan-09 50 26 INDIA TELECOM INFRA
the Company LTD

49 AJAY SHARMA 787,043 Contractual As per service rules of Assistant Vice A.M.I.E/ Diploma 10-Jan-09 48 21 HFCL Infotel Limited
the Company President in Electronics

50 LEONID MUSATOV 5,472,980 Contractual As per service rules of Chief Marketing Degree in 12-Jan-09 37 13 MTS RUSSIA
the Company Officer Economics &
Marketing

51 PANKAJ CHAUHAN 604,506 Contractual As per service rules of General Manager P.G.Diploma in 12-Jan-09 39 17 RELIANCE
the Company Industrial Relations COMMUNICATION

52 SERGEY KOROBOV 2,229,253 Contractual As per service rules of General Manager Degree in Mobile 13-Jan-09 35 9 MTS RUSSIA
the Company Communication &
Social Science

53 ANDREY CHEREPANOV 877,122 Contractual As per service rules of Project Manager Masters Degree in 14-Jan-09 42 6 MTS RUSSIA
the Company Finance

54 RENU KHANNA 602,844 Contractual As per service rules of Assistant Vice B.A (Hons) 15-Jan-09 42 19 GENPACT
the Company President economics

55 VLADISLAV POZDYSHEV 3,094,416 Contractual As per service rules of Chief Customer Degree in 20-Jan-09 39 15 MTS RUSSIA
the Company Service Delivery Economics
Officer

17
S. NAME Gross Nature of Other terms Designation Qualification Date of Age To t a l Last Company’s Name
No. Earning E m p l o y m e n t & Condition Joining Exp.
56 ELENA SIDORINA 1,145,379 Contractual As per service rules of Head - CEO MBA 27-Jan-09 38 11 MTS, Moscow
the Company Office

57 AMIT SANEJA 513,481 Contractual As per service rules of Assistant Vice PGDBM 28-Jan-09 36 11 ICICI PRUDENTIAL
the Company President

58 ATUL MATHUR 384,167 Contractual As per service rules of General Manager BE 30-Jan-09 37 15 TATA TELESERVICES
the Company

59 MAHENDRA PRATAP SINGH 607,894 Contractual As per service rules of Vice President L.L.B. 31-Jan-09 50 26 EMMAR MGF
the Company

60 DIVYA GUPTA 339,202 Contractual As per service rules of General Manager P.G.D.S 07-Feb-09 35 14 RELIANCE
the Company COMMUNICATION

61 ATUL JOSHI 1,382,557 Contractual As per service rules of Chief Sales M.B.A. 09-Feb-09 47 15 Subhiksha Ltd
the Company Officer

62 RAJESH OHRI 417,614 Contractual As per service rules of Assistant Vice M.B.A. 09-Feb-09 39 15 Bharti Airtel Limited
the Company President

63 S SURESH KUMAR 641,273 Contractual As per service rules of Chief Operating M.B.A. 09-Feb-09 41 15 Bharti Airtel Limited
the Company Officer

64 OM PRAKASH TRIPATHI 440,562 Contractual As per service rules of General Manager M.Tech. 11-Feb-09 54 35 Vodafone
the Company

65 RAJESH SHUKLA 378,785 Contractual As per service rules of Circle Chief B.E. 12-Feb-09 43 17 IMIL
the Company Technical Officer

66 SURYA PRAKASH SONI 249,153 Contractual As per service rules of General Manager M.B.A. 16-Feb-09 38 11 IDEA CELLULAR LTD
the Company

67 AVIJIT MUKHERJEE 273,138 Contractual As per service rules of General Manager Bachelor in 20-Feb-09 41 18 AIRCEL
the Company Technology

68 SHALINI VIG WADHWA 291,111 Contractual As per service rules of Corporate PGDBM 06-Mar-09 47 19 DLF
the Company Communication
Director

69 RAHUL KUSHWAHA 5,583,403 Contractual As per service rules of Finance Controler 29-Aug-08 46 20
the Company

70 BIJENDER SINGH YADAV 936,237 Contractual As per service rules of Head Planning Diploma in 30-Aug-08 38 16 Idea Celluler
the Company Electronics &
Communication
Engineering

71 K. GEORGE DAVIS 2,159,738 Contractual As per service rules of CTO - South B.Tech. - 31-Aug-08 42 19 PT Smart Telecom
the Company Electronics &
Telecommunication

72 SHUBHENDU KUMAR 1,649,423 Contractual As per service rules of General Manager MBA - Human 01-Sep-08 38 8 Spice Corporation
the Company Resource & General Limited
Management

73 M. BEJEES KUMAR 1,158,945 Contractual As per service rules of Head - Sales & MBA - Marketing 02-Sep-08 41 16 Self Employed
the Company Marketing

74 MOHIT KHETARPAL 122,377 Contractual As per service rules of Dy. General P.G.D.B.M 03-Sep-08 36 14 Tech Mahindra
the Company Manager

75 BIMAL SAMAL 494,848 Contractual As per service rules of Dy. General B.Com. 04-Sep-08 39 16 Aviva Life Insurance
the Company Manager

76 RAJEN KANJIBHAI VAGADIA 647,155 Contractual As per service rules of Director BE 05-Sep-08 42 17 Motorola India Pvt Ltd
the Company

77 AKSHAY MATHUR 356,604 Contractual As per service rules of Director B.A. 06-Sep-08 41 21 Reliance Communication
the Company Ltd

78 MARGARITA KOROTKOVA 13,669,849 Contractual As per service rules of Manager Higher School of 07-Sep-08 33 4 JSC “TNK - BP
the Company Economics - Management
Moscow State
University

79 WOLFGANG SCHAEDLICH 1,399,490 Contractual As per service rules of Chief Information Diploma from 08-Sep-08 38 13 Complus Ltd
the Company Officer Technical University

80 EVGENY NIKITIN 611,022 Contractual As per service rules of Project Manager Graduate 09-Sep-08 27 2 MTS RUSSIA
the Company

81 K V RAMACHANDRA 434,632 Contractual As per service rules of Sales Director MASTERS OF 06-Mar-09 52 25 SUBHIKSHA TRADING
the Company MANAGEMENT SERVICES
STUDIES

82 NATARAJAN M V 238,459 Contractual As per service rules of Sales Director PGDBM 13-Mar-09 44 17 RELIANCE RETAIL
the Company LIMITED

18
 A U D I TO R S ’ R E P O RT
To
The Members of SISTEMA SHYAM TELESERVICES
LIMITED (Formerly Shyam Telelink Limited),
1. We have audited the attached Balance Sheet of SISTEMA
SHYAM TELESERVICES LIMITED (formerly Shyam Telelink
Limited) (‘the Company’) as at March 31, 2009 and also the
Profit and Loss account and the Cash Flow statement for
the year ended on that date annexed thereto. These financial
statements are the responsibility of the 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 more fully discussed in Note 1(e), Schedule 19 to the
Financial Statements, on January 10, 2008, the Company has
paid Rs 319,860 thousand under protest to Department of
Telecommunication (‘DoT’) against the final assessment for
financial year ended March 31, 2005, towards revenue share
license fees, interest and penalty thereon, on the profit of
Rs 628,544 thousand from sale of its investments worth
Rs 1,751,852 thousand in Hexacom India Limited (‘HIL’) to
Bharti Televentures Limited. The Company, based on legal
opinion, believes that the profit on sale of its investments,
does not fall under the definition of Adjusted Gross Revenue
(AGR) generated and, accordingly, has made no provision in
its books of accounts for any such payment. Since revenue
share payable on the sale of investment is dependent upon
the outcome of the above uncertainty, the financial statements
for the year ended March 31, 2009 does not include any
adjustment in this regard. Our audit report on the financial
statements for the year ended March 31, 2008, was also
modified, accordingly.
4. Without qualifying our opinion, we draw attention to
Note 4, Schedule 20 to the financial statements, regarding
managerial remuneration paid in excess of the limits specified
under Schedule XIII to the Companies Act, 1956, pending
approval of the Central Government and accordingly no
adjustments have been made in this regard.
5. 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 (‘the Act’) we enclose in
the Annexure a statement on the matters specified in
paragraphs 4 and 5 of the said Order.
6. Further to our comments in the Annexure referred to above,
we report that:
i) We have obtained all the information and explanations,
which to the best of our knowledge and belief were
necessary for the purposes of our audit;
ii) In our opinion, proper books of account as required by
law have been kept by the Company so far as appears
from our examination of those books;
iii) The balance sheet, profit and loss account and cash
flow statement dealt with by this report are in agreement
with the books of account;
iv) In our opinion, the balance sheet, profit and loss account
and cash flow statement dealt with by this report
comply with the accounting standards referred to in
sub-section (3C) of section 211 of the Act;
v) On the basis of the written representations received
from the directors, as on March 31, 2009, and taken on
record by the Board of Directors, we report that none
of the directors is disqualified as on March 31, 2009
from being appointed as a director in terms of clause
(g) of sub-section (1) of section 274 of the Act;
vi) In our opinion and to the best of our information and
according to the explanations given to us, subject to
the effect of the adjustments that would have been
required had the outcome of uncertainty referred to in
Paragraph 3 above been known, the said accounts give
the information required by the Act, in the manner so
required and give a true and fair view in conformity
with the accounting principles generally accepted in
India;
a) in the case of the balance sheet, of the state of
affairs of the Company as at March 31, 2009;
b) in the case of the profit and loss account, of the
loss for the year ended on that date; and
c) in the case of cash flow statement, of the cash flows
for the year ended on that date.
For S. R. B ATLIBOI & ASSOCIATES
Char tered Accountants
per Prashant Singhal
Partner
Membership No: 93283
Place : Gurgaon
Date : July 16, 2009
19
ANNEXURE REFERRED TO IN PARAGRAPH [4] OF OUR REPORT OF EVEN DATE
Re: SISTEMA SHYAM TELESERVICES LIMITED (Formerly Shyam Telelink Limited)
(i) (a) The Company has maintained proper records showing
full particulars, including quantitative details and
situation of fixed assets. The Company is in process of
updating its records in respect of the locations of
capital inventories lying with third parties.
(b) The fixed assets are physically verified by the
management according to a regular programme
designed to cover all the items over a period of three
years. During the year, the management had also
designed a plan to physically verify capital work in
progress. Pursuant to the above, a portion of fixed
assets and capital work in progress (other than material
with third parties) has been physically verified by the
management during the year, which in our opinion is
reasonable having regard to the size of the Company
and nature of its assets. As informed, no material
discrepancies were noticed on such verification.
(c) There was no substantial disposal of fixed assets during
the year.
(ii) (a) The inventory has been physically verified by the
management during the year. In our opinion, the
frequency of verification is reasonable.
(b) The procedures of physical verification of inventory
followed by the management are reasonable and
adequate in relation to the size of the Company and
the nature of its business.
(c) The Company is maintaining proper records of
inventory and no material discrepancies were noticed
on physical verification.
(iii) During the year, the Company has neither granted nor
taken any loans, secured or unsecured, to / from the
companies, firms or other parties covered in the
register maintained under section 301 of the
Companies Act, 1956. Accordingly, clause (iii) of the
Order is not applicable to the Company for the current
year.
(iv) In our opinion and according to the information and
explanations given to us, there is an adequate internal
control system commensurate with the size of the
20
Company and the nature of its business, for the
purchase of inventory and for the sale of goods and
services. However, in respect of purchase of fixed
assets, the Company needs to strengthen internal
controls pertaining to recording of receipts of
material, and this is not a continuing failure. During the
course of our audit, no major weakness has been
noticed in the internal control system in respect of
these areas.
(v) (a) According to the information and explanations
provided by the management, the particulars of
contracts or arrangements referred to in section 301
of the Act that need to be entered into the register
maintained under section 301 have been so entered.
(b) According to the information and explanations given
to us, the transactions made in pursuance of such
contracts or arrangements exceeding value of Rupees
five lakhs have been entered into during the financial
year at prices which are reasonable having regard to
the prevailing market prices at the relevant time.
(vi) The Company has not accepted any deposits from the
public.
(vii) In our opinion, the Company has an internal audit
system commensurate with the size and nature of its
business.
(viii) We have broadly reviewed the books of account
maintained by Company pursuant to the rules made by
the Central Government for the maintenance of cost
records under section 209(1) (d) of the Companies
Act, 1956, and are of the opinion that prima facie, the
prescribed accounts and records have been made and
maintained. We have not, however, made a detailed
examination of records with a view to determine
whether they are accurate or complete.
(ix) (a) Undisputed statutory dues including provident fund,
employees’ state insurance, income-tax, sales-tax,
wealth-tax, service tax, custom duty and cess have
generally been regularly deposited with the appropriate
authorities though there has been delay in a few cases.
 The provisions relating to excise duty and investor
education fund are not applicable to the Company.
(b) According to the information and explanations given
to us, no undisputed amounts payable in respect of
provident fund, employees’ state insurance, income-
tax, wealth-tax, service tax, sales-tax, customs duty,
cess and other undisputed statutory dues were
outstanding, at the year end, for a period of more than
six months from the date they became payable.
(c) According to the information and explanations given
to us and based on the records of the Company, there
were no dues outstanding under any dispute with
respect to income tax, sales tax, service tax, wealth
tax, excise duty, custom duty and cess as at
March 31, 2009.
(x) The Company’s accumulated losses at the end of the
financial year are more than fifty percent of its net
worth. The Company has incurred cash loss during the
year. In the immediately preceding financial year, the
Company had incurred cash loss.
(xi) Based on our audit procedures and as per the
information and explanations given by the management,
we are of the opinion that the Company has not
defaulted in repayment of dues to a financial institution
and banks.The Company has not issued any debentures.
(xii) According to the information and explanations given
to us and based on the documents and records
produced to us, the Company has not granted loans
and advances on the basis of security by way of pledge
of shares, debentures and other securities.
(xiii) In our opinion, the Company is not a chit fund or a
nidhi / mutual benefit fund / society. Therefore, the
provisions of clause 4(xiii) of the Order are not
applicable to the Company.
(xiv) In our opinion, the Company is not dealing in or trading
in shares, securities, debentures and other investments.
Accordingly, the provisions of clause 4(xiv) of the Order
are not applicable to the Company.
(xv) According to the information and explanations given
to us, the Company has not given any guarantee for
loans taken by others from banks or financial
institutions.
(xvi) Based on information and explanations given to us by
the management, term loans were applied for the
purpose for which the loans are obtained.
(xvii) According to the information and explanations given
to us and on overall examination of the balance sheet
and cash flow statement of the Company, we report
that no funds raised on short-term basis have been
used for long-term investment.
(xviii) During the year, the Company has made preferential
allotment of shares to the parties or companies
covered in the register maintained under section 301
of the Act. In our opinion, the price at which shares
have been issued is not prejudicial to the interest of
the Company.
(xix) According to the information and explanations given
to us, the Company did not issue any debentures during
the year.
(xx) The Company has not raised any money by public
issue during the year.
(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.
For S. R. B ATLIBOI & ASSOCIATES
Char tered Accountants
per Prashant Singhal
Partner
Membership No: 93283
Place : Gurgaon
Date : July 16, 2009
21
BALANCE SHEET AS AT MARCH 31, 2009
Particulars As at As at
Schedule March 31, 2009 March 31, 2008
No. (Rupees ‘000) (Rupees ‘000)
——————— ——————— ———————
SOURCES OF FUNDS
SHARE HOLDERS’ FUNDS
Share Capital 1 24,559,575 4,559,575
Reserves and Surplus 2 6 6
——————— ———————
24,559,581 4,559,581
——————— ———————
LOAN FUNDS
Secured Loans 3 7,571,393 22,371,141
Unsecured Loans 4 15,012,542 -
——————— ———————
22,583,935 22,371,141
——————— ———————
Deferred Payment Liabilities 5,558,659 -
[Refer Note 11, Schedule 20]
——————— ———————
TOTAL 52,702,175 26,930,722
———————
——————— ———————
———————
APPLIC ATION OF FUNDS
FIXED ASSETS
Gross Block 5 10,642,047 6,474,304
Less: Accumulated Depreciation 2,538,127 3,065,618
——————— ———————
Net Block 8,103,920 3,408,686
Capital Work-in-progress [including capital advances of
Rs. 226,609 thousand (2008 - Rs. 6,094 thousand)] 3,991,645 31,622
——————— ———————
12,095,565 3,440,308
——————— ———————
INTANGIBLE ASSETS, NET 6 17,989,859 17,310,258
INVESTMENTS 7 7,526 7,526
CURRENT ASSETS, LOANS & ADVANCES
Sundry Debtors 8(a) 111,261 164,074
Inventory 8(b) 8,360 -
Cash and Bank Balances 8(c) 12,247,782 252,804
Loans and Advances 8(d) 2,238,406 674,570
Other Current Assets 8(e) 107,080 390
——————— ———————
14,712,889 1,091,838
——————— ———————
LESS: CURRENT LIABILITIES AND PROVISIONS 9
Current Liabilities 3,537,784 861,418
Provisions 689,126 478,421
——————— ———————
4,226,910 1,339,839
——————— ———————
NET CURRENT ASSETS / (LIABILITIES) 10,485,979 (248,001)
——————— ———————
MISCELLANEOUS EXPENDITURE 10 - 203,861
(to the extent not written off or adjusted)
PROFIT AND LOSS ACCOUNT 12,123,246 6,216,770
——————— ———————
TOTAL 52,702,175 26,930,722
———————
——————— ———————
———————
Significant Accounting Policies 19
Notes Forming Part of the Accounts 20
The Schedules referred to above 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
Char tered Accountants

per Prashant Singhal Vsevolod Rozanov Alok Tandon

Partner Whole Time Director - President & CEO Managing Director
Membership No: 93283

Place : Gurgaon Sergey Savchenko Rashid J Malik

Date : July 16, 2009 Chief Financial Officer Company Secretary
22
PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED MARCH 31, 2009
Particulars Schedule For the year For the year
ended ended
No. March 31, 2009 March 31, 2008
(Rupees ‘000) (Rupees ‘000)
——————— ——————— ———————
INCOME
Service Revenue 941,340 1,144,564
Sale of Goods 10,520 1,686
Other Income 11 324,019 20,537
——————— ———————
1,275,879 1,166,787
——————— ———————
EXPENDITURE
Network Operating Expenditure 12 1,005,179 609,692
Cost of Goods Sold 13 33,166 1,736
Personnel Expenditure 14 587,164 155,727
Sales and Marketing Expenditure 15 941,873 53,768
Administrative and Other Expenditure 16 530,181 573,414
——————— ———————
3,097,563 1,394,337
——————— ———————
OPERATING PROFIT / (LOSS) BEFORE AMORTISATION, (1,821,684) (227,550)
FINANCE EXPENSE AND DEPRECIATION
Amortisation of Intangible Assets 17 46,150 48,808
Finance Expenses 18 1,891,019 565,431
Depreciation 5 720,951 881,102
Provision for Obsolescence of Fixed Assets / CWIP 20, Note 12 515,994 44,137
Business Start up / Expansion Cost 20, Note 22 897,628 40,676
——————— ———————
4,071,742 1,580,154
——————— ———————
Profit / (Loss) before taxation (5,893,426) (1,807,704)
Provision for Tax
- Current Tax - -
- Deferred Tax 20, Note 16 - -
- Fringe Benefit Tax (13,050) (4,044)
——————— ———————
Profit / (Loss) After taxation (5,906,476) (1,811,748)
Profit/(Loss), Beginning of the year (6,216,770) (4,405,022)
——————— ———————
Loss, end of the year (12,123,246) (6,216,770)
———————
——————— ———————
———————
Loss per Share (equity shares, par value of Rs 10 each)
Basic & Diluted [Nominal value of Shares of Rs 10 (Previous Year: Rs 10)] (in Rs) (2.85) (3.97)
[Refer note 20, Schedule 20] ———————
——————— ———————
———————
Weighted Average number of shares in computing earnings per share
Basic & Diluted 2,072,395,856 455,957,500
———————
——————— ———————
———————
Significant Accounting Policies 19
Notes Forming Part of the Accounts 20
The Schedules referred to above form an integral part of the Profit & Loss Account
As per our report of even date
For S. R. Batliboi & Associates For and on behalf of the Board of Directors
Char tered Accountants

per Prashant Singhal Vsevolod Rozanov Alok Tandon

Partner Whole Time Director - President & CEO Managing Director
Membership No: 93283

Place : Gurgaon Sergey Savchenko Rashid J Malik

Date : July 16, 2009 Chief Financial Officer Company Secretary

23
CASH FLOW STATEMENT FOR THE YEAR ENDED MARCH 31, 2009
For the year For the year
ended ended
March 31, 2009 March 31, 2008
(Rupees ‘000) (Rupees ‘000)
——————— ———————
A . CASH FLOW FROM OPERATING ACTIVITIES
Net Profit/(Loss) before Tax (5,893,425) (1,807,705)
Adjustments for:
Depreciation 720,951 881,102
Amortisation of Intangible Assets 46,150 48,808
Provisions for Gratuity and Leave Encashment 15,730 6,088
Provision for Contingencies 38,029 321,226
Provision for Damaged/ Irrecoverable Assets - 9,600
Interest Expense and Other Finance Charges 1,891,019 565,431
Provision for Bad and Doubtful Debts / Advances (Net of Write Back) 24,142 20,310
Dividend on Current Investments - (273)
(Profit) / Loss on Sale of Fixed Assets 958 8,695
Provision for Lease Equalisation Reserve 70,941 68,484
Provision for Obsolescence of Fixed Assets / CWIP 515,994 44,137
Interest Income (321,703) (5,983)
——————— ———————
Operating Profit Before Working Capital Change (2,891,214) 159,920
——————— ———————
Adjustments for changes in Working Capital
(Increase)/Decrease in Sundry Debtors 29,368 (29,145)
(Increase)/Decrease in Loans and Advances (1,489,895) (581,817)
(Increase)/Decrease in Inventory (8,360) -
Increase/(Decrease) in Current Liabilities and Provisions 1,438,909 (148,714)
——————— ———————
Cash from / (used) in Operations (2,921,192) (599,756)
——————— ———————
Taxes (Paid) / Received (52,688) (13,588)
——————— ———————
Net Cash from / (used in) Operating Activities (2,973,880) (613,344)
——————— ———————
B CASH FLOW FROM INVESTING ACTIVITIES
Purchase of Fixed Assets (3,726,791) (147,966)
Payment for Intangible Assets (538,401) (17,099,172)
Proceeds from Sale of Investments - 575,275
Proceeds from Sale of Fixed Assets 980 392
Dividend on Current Investments - 273
Interest Received 215,013 6,093
Purchase of Fixed Deposits (With maturity more than three months) (4,144,121) (122,567)
Proceeds from Maturity of Fixed Deposits 246,267 -
(With maturity more than three months)
——————— ———————
Net Cash from / (used in) Investing Activities (7,947,053) (16,787,672)
——————— ———————

24
CASH FLOW STATEMENT FOR THE YEAR ENDED MARCH 31, 2009
For the year For the year
ended ended
March 31, 2009 March 31, 2008
(Rupees ‘000) (Rupees ‘000)
——————— ———————
C CASH FLOW FROM FINANCING ACTIVITIES
Proceeds from issuance of Share Capital 20,000,000 -
Secured Long Term Borrowing:
Proceeds 7,594,384 2,032
Repayments (864,833) (598,831)
Secured Short Term Borrowing:
Proceeds 2,888,000 27,026,634
Repayments (24,416,777) (7,644,500)
Unsecured Long Term Borrowing:
Proceeds 18,438,496 -
Repayments (3,713,329) -
Unsecured Short Term Borrowing:
Proceeds - 1,726,100
Repayments - (2,413,400)
Payment of Finance Setup cost - (199,718)
Discounting Charges of Commercial Papers (4,275) (156,788)
Interest Expense and Other Finance Charges (1,296,571) (333,279)
——————— ———————
Net Cash from / (used in) Financing Activities 18,625,095 17,408,250
——————— ———————
Net Increase/(Decrease) in Cash and Cash Equivalents (A+B+C) 8,097,124 7,234
Cash and Cash Equivalents at Beginning of the Year 130,238 123,003
——————— ———————
Cash and Cash Equivalents at the End of the Year 8,227,362 130,237
———————
——————— ———————
———————
NOTES TO C ASH FLOW STATEMENT:
1 Cash and Cash Equivalents Include:
Cash in Hand 881 3,715
Cheques in Hand 1,963 2,057
Balances with Scheduled Banks in Current Accounts 724,517 124,465
Balances with Scheduled Banks in Deposit Account: 11,520,421 122,567
——————— ———————
Cash and Bank Balances as per Schedule 8(c) 12,247,782 252,804
Less : Fixed deposits not considered as cash equivalents (4,020,420) (122,567)
——————— ———————
Cash and Cash Equivalents in Cash Flow Statements 8,227,362 130,237
———————
——————— ———————
———————
2 Previous year figures have been regrouped and reclassified wherever necessary to confirm to the current year classification.
3 Cash and Cash Equivalents as on March 31, 2009 include depostis of Rs 512,611 thousand (2008 - Rs 122,567 thousand) towards
margin money which is not available for use by the Company.

As per our report of even date

For S. R. Batliboi & Associates For and on behalf of the Board of Directors
Char tered Accountants

per Prashant Singhal Vsevolod Rozanov Alok Tandon

Partner Whole Time Director - President & CEO Managing Director
Membership No: 93283

Place : Gurgaon Sergey Savchenko Rashid J Malik

Date : July 16, 2009 Chief Financial Officer Company Secretary
25
SCHEDULES FORMING PART OF THE ACCOUNTS
As at As at
March 31, 2009 March 31, 2008
(Rupees ‘000) (Rupees ‘000)
——————— ———————
SCHEDULE - 1
SHARE C APITAL
[Refer Note 8, Schedule 20]
Authorised Capital
6,000,000,000 (2008 - 6,000,000,000) Equity Shares of Rs 10 each 60,000,000 60,000,000
———————
——————— ———————
———————
Issued Capital
2,455,957,500 Equity Shares of Rs 10 each 24,559,575 4,559,575
——————— ———————
[2008 - 455,957,500 Equity Shares of Rs 10 each]
Subscribed and Paid Up Capital
2,455,957,500 Equity Shares of Rs 10 each fully paid up 24,559,575 4,559,575
———————
——————— ———————
———————
[2008 - 455,957,500 Equity Shares of Rs 10 each]

SCHEDULE - 2
RESERVES AND SURPLUS
Capital Reserve 6 6
———————
——————— ———————
———————
SCHEDULE - 3
[Refer Note 9, Schedule 20]
SECURED LOANS
Long Term
From Banks
Term Loan 7,500,000 840,000
Vehicle Loan 16,205 1,842
From Others 55,188 -
Shor t Term
From Banks
Term Loans - 19,856,634
Commercial Papers - 1,605,000
Other Loans - 67,143
Interest Accrued and due on Loans from Bank - 522
——————— ———————
7,571,393 22,371,141
———————
——————— ———————
———————
SCHEDULE - 4
[Refer Note 10, Schedule 20]
UN-SECURED LOANS
Long Term Loans
From Holding Company
External Commercial Borrowing 11,665,600 -
From Banks
External Commercial Borrowing 947,771 -
Unsecured Loan 2,399,171 -
——————— ———————
15,012,542 -
———————
——————— ———————
———————
26
SCHEDULES FORMING PART OF THE ACCOUNTS
SCHEDULE - 5
FIXED ASSETS
[Refer Note 2.3, 2.4 & 2.5 Schedule 19 and Note 12, Schedule 20]
(Amount in Rupees ‘000)

GROSS BLOCK ACCUMULATED DEPRICIATION NET BLOCK

PARTICULARS As at Additions Deletions/ As At As at For the Adjustments As At As At As at

April 1, Adjustments March April Year March March March
2008 31, 2009 1, 2008 31, 2009 31, 2009 31, 2008

Freehold Land 1,823 - - 1,823 - - - - 1,823 1,823

Leasehold Land 2,523 - - 2,523 148 25 - 173 2,350 2,375
Leasehold Improvements 99,235 102,539 7,041 194,733 57,886 11,515 3,281 66,120 128,613 41,349
Building 5,687 - - 5,687 1,105 190 - 1,295 4,392 4,582
Plant & Machinery* 2,415,657 5,644,655 1,722,313 6,337,999 1,395,484 342,072 1,228,149 509,407 5,828,592 1,020,173
Optical Fibre and Copper 2,686,755 64,838 69,598 2,681,995 692,687 133,519 16,527 809,679 1,872,316 1,994,068
Network Interface Units 1,173,562 66,290 36,576 1,203,276 843,953 213,233 - 1,057,186 146,090 329,609
Computers 61,105 59,453 - 120,558 56,610 9,204 - 65,814 54,744 4,495
Furniture & Fixtures 5,804 15,492 - 21,296 4,981 3,526 - 8,507 12,789 823
Office Equipment 13,275 20,455 - 33,730 8,892 2,205 - 11,097 22,633 4,383
Vehicles 8,878 31,972 2,423 38,427 3,872 5,462 485 8,849 29,578 5,006
To t a l 6,474,304 6,005,694 1,837,951 10,642,047 3,065,618 720,951 1,248,442 2,538,127 8,103,920 3,408,686
Previous Year 6,551,946 109,985 187,627 6,474,304 2,363,055 881,102 178,539 3,065,618 3,408,686 4,188,891
Capital Work in Progress* 3,991,645 31,622

* Additions to Plant and Machinery include Rs. 369,630 thousand (2008 - Rs. Nil) and Capital Work in Progress include Rs. 23,333 thousand (2008 - Rs. Nil) on account of capitalisation of exchange
differences on long-term foreign currency monetary items during the year.

SCHEDULE - 6
INTANGIBLE ASSETS
[Refer Note 2.7 & 2.10, Schedule 19 & Note 12(e), Schedule 20] (Amount in Rupees ‘000)

GROSS BLOCK ACCUMULATED AMORTISATION NET BLOCK

PARTICULARS As at Additions Deletions/ As At As at Additions Deletions/ As At As At As at

April 1, Adjustments March April Adjustments March March March
2008 31, 2009 1, 2008 31, 2009 31, 2009 31, 2008

Software 467,070 - - 467,070 440,970 20,790 - 461,760 5,310 26,100

Licence Entry Fees 17,421,672 615,539 - 18,037,211 137,514 20,933 - 158,447 17,878,764 17,284,158
Indefeasible Right to Use - 110,212 - 110,212 - 4,427 - 4,427 105,785 -

To t a l 17,888,742 725,751 - 18,614,493 578,484 46,150 - 624,634 17,989,859 17,310,258

Prior Year 786,373 17,102,369 - 17,888,742 529,676 48,808 - 578,484 17,310,258 256,697

As at As at
March 31, 2009 March 31, 2008
(Rupees ‘000) (Rupees ‘000)
SCHEDULE - 7 ——————— ———————
INVESTMENTS
[Refer Note 2.9, Schedule 19 and Note 13, Schedule 20]
Long Term and Unquoted: In Subsidiary Company
7,50,000 Equity Shares of Rs. 10/- each,
fully paid up in Shyam Internet Services Limited 7,500 7,500
Current and unquoted investments in Mutual Funds
1,645 Units (2008 - 1,645 Units) of Prudential ICICI
Liquid Plan Growth Option 26 26
——————— ———————
7,526 7,526
———————
——————— ———————
———————
27
SCHEDULES FORMING PART OF THE ACCOUNTS
As at As at
March 31, 2009 March 31, 2008
SCHEDULE - 8(a) (Rupees ‘000) (Rupees ‘000)
——————— ———————
[Refer Note 2.14, Schedule 19 and Note 14, Schedule 20]
SUNDRY DEBTORS
Debts outstanding for a period exceeding six months:
Secured and Considered Good 56,144 45,870
Unsecured and Considered Doubtful 156,103 144,217
Debts outstanding for a period less than six months:
Secured and Considered Good 1,798 13,303
Unsecured and Considered Good 53,319 104,901
Unsecured and Considered Doubtful 6,573 8,448
——————— ———————
273,937 316,739
Less: Provision for Doubtful Debts (162,676) (152,665)
——————— ———————
111,261 164,074
———————
——————— ———————
———————
SCHEDULE - 8(b)
[Refer Note 2.8, Schedule 19 and Note 7, Schedule 20]
INVENTORY
Fixed Wireless Terminals 8,360 -
——————— ———————
8,360 -
———————
——————— ———————
———————
SCHEDULE - 8(c)
CASH AND B ANK BALANCES
Cash in Hand 881 3,715
Cheques in Hand 1,963 2,057
Balance with Scheduled Banks:
In Current Accounts 724,517 124,465
In Fixed Deposit Account* 11,520,421 122,567
——————— ———————
12,247,782 252,804
———————
——————— ———————
———————
*includes Rs. 512,611 thousand (2008 - Rs. 122,567 thousand)
pledged towards margin money.

SCHEDULE - 8(d)
LOANS AND ADVANCES (Unsecured)
Advances recoverable in cash or kind or for value to be received:
Considered good 2,051,996 628,649
Considered doubtful 14,211 13,514
Assets Held for Sale [Refer Note 12 (d), Schedule 20] 35,000 -
Loans to Employees 1,264 604
Security Deposits 87,923 22,732
Advance against equity in Shyam Internet Services Ltd. 1,466 1,466
Advance Income Tax 60,757 21,119
——————— ———————
2,252,617 688,084
Provision for Doubtful Advances (14,211) (13,514)
——————— ———————
2,238,406 674,570
———————
——————— ———————
———————
28
SCHEDULES FORMING PART OF THE ACCOUNTS
As at As at
SCHEDULE - 8(e) March 31, 2009 March 31, 2008
(Rupees ‘000) (Rupees ‘000)
OTHER CURRENT ASSETS ——————— ———————
Interest accrued on Fixed Deposits 107,080 390
——————— ———————
107,080 390
———————
——————— ———————
———————
Total Current Assets, Loans and Advances 14,712,889 1,091,838
———————
——————— ———————
———————

SCHEDULE - 9
CURRENT LIABILITIES AND PROVISIONS
[Refer Note 2.16, Schedule 19 and Note 15, Schedule 20]
Current liabilities
Sundry Creditors
- for Capital Goods 1,236,738 284,286
- for Expenses 1,417,543 126,157
- Amount due to Micro and Small Enterprises - -
Unaccrued Income 258,285 200,040
Advances & Deposits from Customers & Others 144,740 168,743
Interest Accrued but not due on Loans 292,991 16,618
Book Overdraft 8,548 17,072
Other Liabilities 178,939 48,502
——————— ———————
3,537,784 861,418
——————— ———————
Provisions
Provision for Contingencies 361,425 323,397
Wealth Tax / FBT 1,837 33
Leave Encashment 34,105 20,813
Gratuity 8,821 6,384
Others 282,938 127,794
——————— ———————
689,126 478,421
——————— ———————
Total Current Liabilities & Provisions 4,226,910 1,339,839
———————
——————— ———————
———————

SCHEDULE -10
MISCELLANEOUS EXPENDITURE [Refer Note 2.13, Schedule 19] (Amount in Rupees ‘000)
Gross Accumulated Amortisation Net Balance

PA RT I C U L A R S As at Additions/ Disposals/ As At As at Additions/ Disposals/ As At As At As at

April 1, Adjust- Adjust- March April Charge* Adjust- March March March
2008 ments ments 31, 2009 1, 2008 ments 31, 2009 31, 2009 31, 2008

Finance Setup Cost 930,902 - - 930,902 734,183 196,719 - 930,902 - 196,719

Discount on Issue of
Commercial Papers 257,296 4,275 - 261,571 250,154 11,417 - 261,571 - 7,142

Total 1,188,198 4,275 - 1,192,473 984,337 208,136 - 1,192,473 - 203,861

Prior Year 771,710 416,488 - 1,188,198 676,202 308,135 - 984,337 203,861 95,507

* Out of Rs. 208,136 thousand (2008- Rs. 308,135 thousand) charge for the year, Rs 187,350 thousand (2008- Rs. 59,982 thousand) has been capitalised under intangible assets and Rs 20,786 thousand
(2008- Rs. 248,153 thousand) has been charged off under Finance Expenses.

29
SCHEDULES FORMING PART OF THE ACCOUNTS
Year ended Year ended
SCHEDULE - 11 March 31, 2009 March 31, 2008
(Rupees ‘000) (Rupees ‘000)
——————— ———————
OTHER INCOME
Interest [Gross of Tax Deducted at Source - Rs 39,151 thousand
(2008 - Rs 1,248 thousand)] 321,703 5,983
Provision no longer required written back - 13,219
Dividend on Current Investments - 273
Miscelleneous Income 2,316 1,062
——————— ———————
324,019 20,537
———————
——————— ———————
———————

SCHEDULE - 12
NETWORK OPERATING EXPENDITURE
Interconnect Usage Charges 457,808 346,101
Port Charges and Other Network Related Costs 29,365 35,516
Royalty and license Fees to Wireless Planning Commission 12,502 9,889
Revenue Share License Fees 39,892 64,279
House Wiring Expenses 22,112 19,228
Site Expenses :
Electricity and Water 42,634 24,453
Rent 50,834 36,238
Equipment Hire Charges & DG Set Running Expenses 1,303 972
Insurance 2,602 2,648
Infrastructure Sharing Expenses 269,396 28,118
Lease Line Expenses 8,926 -
Testing Charges 3,063 116
Cost of Telephone Instruments Installed 3,404 7,486
Repair and Maintenance - Network 61,338 34,648
——————— ———————
1,005,179 609,692
———————
——————— ———————
———————
SCHEDULE - 13
COST OF GOODS SOLD
[Refer Note 7, Schedule 20]
Opening Balance - -
Add: Purchase of Instruments 41,526 1,736
Less: Closing Balance of Instruments 8,360 -
——————— ———————
Cost of Goods Sold 33,166 1,736
———————
——————— ———————
———————

SCHEDULE - 14
PERSONNEL EXPENDITURE
Salaries, Wages and Bonus 512,166 132,418
Contribution to Provident and Other Funds 23,112 11,958
Staff Welfare Expenses 20,557 9,067
Recruitment and Training expenses 31,329 2,284
——————— ———————
587,164 155,727
———————
——————— ———————
———————

30
SCHEDULES FORMING PART OF THE ACCOUNTS
Year ended Year ended
SCHEDULE - 15 March 31, 2009 March 31, 2008
(Rupees ‘000) (Rupees ‘000)
SALES & MARKETING EXPENSES ——————— ———————
Advertisement and Marketing expenses 334,885 34,745
Sales Commission & Incentives 79,385 4,775
Sales Promotion Expenses 58,706 14,037
SIM Card Utilisation 29,504 -
Other Subscriber Acquisition Cost 38,091 211
Handset Subsidy (Mobile) 401,302 -
——————— ———————
941,873 53,768
———————
——————— ———————
———————
SCHEDULE - 16
ADMINISTRATIVE AND OTHER EXPENDITURE
Rent 99,441 93,815
Electricity and Water Charges 13,588 10,573
Travelling & Conveyance Expenses 85,262 26,270
Printing and Stationery 10,323 8,506
Postage and Communication Expenses 15,189 8,795
Vehicle Hire Charges 11,749 7,224
Insurance 143 239
Repair and maintenance -Others 22,482 13,874
Repairs and maintenance -Building 2,610 -
Professional and Consultancy fees 149,459 15,412
Rates and Taxes 3,931 1,153
Auditors’ Remuneration 7,804 2,513
Membership and Subscription 2,777 269
Collection & Recovery Expenses 21,415 19,096
Provision for Doubtful Debts/Advances 24,142 20,310
Provision for Contingencies 38,029 321,226
Provision for damaged/Irrecoverable Assets - 9,600
Loss on Sale of Fixed Assets 958 8,695
Miscelleneous expenses 20,879 5,844
——————— ———————
530,181 573,414
———————
——————— ———————
———————
SCHEDULE - 17
LICENSE FEE AND OTHER AMORTISATIONS
Amortisation of License Fee 20,933 18,641
Amortisation of IRU 4,427 -
Amortisation of Software 20,790 30,167
——————— ———————
46,150 48,808
———————
——————— ———————
———————
SCHEDULE - 18
FINANCE EXPENSES
[Refer Note 2.12 (iii), Schedule 19]
Interest :
- Term Loans 1,030,545 267,145
- Other Loans 33,799 4,984
Bank charges and commission 506,417 45,150
Amortisation of Finance Setup Costs 20,786 248,152
Exchange Rate Fluctuation 299,472 -
——————— ———————
1,891,019 565,431
———————
——————— ———————
———————
31
SCHEDULES FORMING PART OF THE ACCOUNTS
SCHEDULE 19: BACKGROUND AND SIGNIFICANT ACCOUNTING POLICIES

1. Background
(a) Nature of business
Sistema Shyam TeleServices Limited (formerly Shyam Telelink Limited) (‘the Company’ or ‘SSTL’), was incorporated on
April 20, 1995, as a wholly owned subsidiary of Shyam Telecom Limited (`STL`). The Company was awarded Basic Telephony
Service Licence by Department of Telecommunications (‘the DoT’) on March 4, 1998 for the Rajasthan Circle under fixed
licence fee regime under National Telecom Policy (‘NTP’) 1994, valid for a period of 20 years from the effective date. Further
to the Telecom Regulatory Authority of India’s (‘TRAI’) recommendations of October 27, 2003 and the DoT guidelines on
Unified Access (Basic and Cellular) Services Licence (‘UASL’) dated November 11, 2003, the Company migrated to the UASL
with effect from November 14, 2003. Pursuant to the migration, the Company has signed UASL Agreement in August 2004.
The Company commenced commercial operations of Basic Telephone Services in Jaipur on June 30, 2000 under the ‘Rainbow’
brand name, in the state of Rajasthan.
The Company has obtained an in-principle approval to use GSM technology under the existing UASL licence of Rajasthan circle
on October 18, 2007 from the DoT. During January 2008, the Company has received UASL for 21 service areas, thus becoming
licencee to operate in all India basis on CDMA frequencies. During the year, the Company has relaunched its mobility services
under CDMA technology in Rajasthan Circle on September 30, 2008 and has also launched commercial operations in Tamilnadu
and Kerala on March 26, 2009 and on March 30, 2009, respectively. The Company is in the process of setting up the infrastructure
for launching the services on the alternate technology in Rajasthan Circle and on CDMA technology in other circles. Subsequent
to March 31, 2009, the Company has also launched its commercial operations in Kolkata, Rest of West Bengal (RoWB) and Bihar
circles on May 21, 2009, June 11, 2009 and July 2, 2009 respectively.
With effect from April 2009, the Company has rebranded its services from “Rainbow” brand to “MTS” brand.
(b) Shareholding structure
In accordance with the approval from FIPB Unit of the Department of Economic Affairs of Ministry of Finance dated
December 7, 2007, subject to the overall equity cap of 74%, SISTEMA Joint Stock Financial Corporation (‘SISTEMA’) of Russia
acquired the shares of the Company from then Promoters of the Company and further infusion of share capital on various
dates. As at March 31, 2009, SISTEMA is holding 73.71% of the total share capital of the Company and therefore, the Company
has become a subsidiary company of SISTEMA.
(c) Scheme of arrangement
On May 18, 2006, the Honourable High Court of Rajasthan had approved the Scheme of Arrangement filed on August 11, 2005
between STL, Shyam Telecom Manufacturing Limited (‘STML’), SSTL and Shyam Basic Infrastructure Projects Private Limited
(‘SBIPL’) (‘petitioner Companies’) (hereinafter referred to as ‘the Scheme’). The Scheme, inter-alia provided for STML, a
wholly owned subsidiary of STL, to be amalgamated with STL; STL to transfer its investment to the extent of Rs 2,000,000
thousand equity shares of STLL to SBIPL, together with certain liabilities; and the balance investment of Rs 2,560,000 thousand
equity shares to its existing shareholders, without any consideration, in proportion to their shareholding in STL as per the
scheme. The Scheme also envisaged SSTL to be listed in the Bombay Stock Exchange and National Stock Exchange (‘the stock
exchanges’).
On October 26, 2006, the Company had transferred the equity shares held in the Company by STL, as per the scheme of
arrangement approved by the Honourable High Court of Rajasthan. Pursuant to distribution of STLL’s shares, in accordance
with the scheme of arrangement, with effect from October 26, 2006, the Company ceased to be wholly owned subsidiary
company of STL.
The Hon’ble High courts of Rajasthan, vide its order dated August 7, 2008, ordered that the Company shall within a maximum
period of 18 months from the date of the order initiate the process of listing the shares representing the issued capital of the
Company by adopting such route as may be permissible in law and shall carry out such compliance as may be required in law
including that of offering a specified percentage of the shares to the Public, for subscribing thereto, through book building
process, in the manner provided for under SEBI (DIP) Guidelines,2000 and upon such steps being taken, BSE may issue such
order that may be required in law and as may be necessary for securing the said listing. In the event of STLL not being listed, the
shareholders shall continue to have an ‘Exit Option’.
In the meeting held on October 1, 2008, the Board of the Company has reviewed the above order and decided to prepare a
detailed proposal on the future course of action.

32
(d) Licence Entry Fees
The Licence Entry Fees for Rajasthan Circle was based on the total licence fees of Rs 292,890 thousand paid under the old
licence fee regime, wherein the annual licence fee dues from inception till July 31, 1999 were considered as the Licence Entry
Fees as part of the migration package to NTP ’99. In addition, the Company paid Rs 29,600 thousand on November 12, 2003 to
migrate to UASL. Further, on December 12, 2007, the Company has paid Rs 322,500 thousand as a one time charge for use of
GSM spectrum under the original terms of the UASL agreement.
On January 10, 2008, the Company has paid a combined fee of Rs 16,263,201 thousand and provided bank guarantee of
Rs 8,470,000 thousand to DoT towards the licence to provide UASL services in 21 telecom circles Andhra Pradesh, Assam,
Bihar, Delhi, Gujarat, Haryana, Himachal Pradesh, Jammu & Kashmir, Karnataka, Kerala, Kolkata, Madhya Pradesh, Maharashtra,
Mumbai, North East, Orissa, Punjab, Tamilnadu (including Chennai), Uttar Pradesh (East), Uttar Pradesh (West) & Rest of
West Bengal.
On March 3, 2008 through March 7, 2008, DoT has granted licence to the Company to provide UASL services in the above
mentioned 21 telecom circles.
As per the UASL entered into by the Company, it is required to pay revenue share fees as prescribed in the licence agreement.
Adjusted Gross Revenue (‘AGR‘), under the licence agreement is defined as Gross Revenue inclusive of installation charges,
late fees, sale proceeds of handsets, revenue on account of interest, dividend, value added services, interconnection charges,
roaming charges, revenue from permissible sharing of infrastructure and any miscellaneous revenue after deduction of access
charges paid to other operators and service tax paid to the Government.
In addition, spectrum charges are payable on the revenue earned through the CDMA and CorDect wireless technology as
prescribed in the licence agreement.
(e) Sale of investment in Hexacom India Limited (‘HIL’)
During the year ended March 31, 2005, the Company invested Rs 1,020,882 thousand for 27.5 percent stake in HIL. As per
Acquisition and Share Swap agreement dated April 5, 2004 as amended by the supplementary agreement dated April 12, 2004,
the Company sold its holding in HIL to Bharti Televentures Limited for a consideration of Rs 1,751,852 thousand in the form
of 17,519 Optionally Convertible Redeemable Debentures (‘OCRD’) at the rate of Rs 100 thousand per OCRD; these OCRDs
were repayable at the end of one year from May 14, 2004. However, before the transfer of OCRD in its name, the Company
transferred its beneficial interest, right and title in these OCRDs to Shyam Cellular Infrastructure Projects Limited (‘SCIPL’)
for a consideration of Rs 1,649,246 thousand, net of discounting charges of Rs 102,426 thousand. Accordingly during the year
ended March 31, 2005, the Company has recorded gain on sale of the transaction of Rs 628,544 thousand, net of discounting
charges of Rs 102,426 thousand.
Further, Department of Telecommunication (‘DoT’) vide its assessment order dated May 26, 2006 for Financial Year 2004-05,
had raised demand of Rs 147,694 thousand towards revenue share licence fees on above transaction, interest on short payment
(upto May 31, 2006) and penalty (including interest on penalty). On January 10, 2008, the Company has paid Rs 319,860 thousand
under protest to the DoT, based on an estimated licence fees demand for above transaction.
The Company filed a petition with TDSAT against the Department of Telecommunication, which is of this contention
that all revenue are part of AGR and related levies are eligible to be taken on the same. TDSAT, wide its order dated
August 30, 2007, concluded that sharing of revenue can be only out of the gross revenue derived from the transferred
privilege of establishing, maintaining and working of telecommunication which alone are the licenced activities. The Tribunal
has analysed the legal position particularly in the light of Section 4 of the Indian Telegraph Act and come to the conclusion
that AGR is only the revenue earned through licenced activity. On the basis of above judgement by TDSAT, AUSPI
(Association of Unified Telecom Service Providers of India) filed a civil petition in Supreme Court, which is under process
of hearing.
Based on above facts, the Company has strong opinion to get back the money paid under protest. In view of the legal opinion,
the Company is of the opinion that there is no financial liability towards revenue share against the gain from sale of above
investments, and has, accordingly, made no provisions in its books of account and has disclosed the amount paid under protest
to the DoT as Contingent Liability [Refer Note 2(a), Schedule 20].
2. Significant Accounting Policies
2.1 Basis of preparation of financial statements
The financial statements have been prepared to comply in all material respects with the notified accounting standard by the
Companies (Accounting Standards) Rules, 2006 (as amended) and the relevant provisions of the Companies Act, 1956 (‘the
Act’). The financial statements have been prepared under the historical cost convention, on the accrual basis of accounting. The
accounting policies have been consistently applied by the Company except for the changes in accounting policy discussed more
fully below, and are consistent with those used in the previous year.

33
2.2 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.
2.3 Changes in Accounting Policies
Upto March 31, 2008, the company was charging off exchange differences arising on foreign currency monetary assets and
liabilities to Profit and Loss Account. Pursuant to the Companies (Accounting Standards) Amendments Rules, 2009, dated March
31, 2009, the Company has exercised the option of deferring the charge to the Profit and Loss Account arising on exchange
differences, in respect of accounting periods commencing on or after December 7, 2006, on long-term foreign currency monetary
items (i.e. monetary assets or liabilities expressed in foreign currency and having a term of 12 months or more at the date of
origination). As a result, such exchange differences so far as they relate to the acquisition of a depreciable capital asset have been
adjusted with the cost of such assets and would be depreciated over the balance life of the asset and in other cases, have been
accumulated in Foreign Currency Monetary Item Translation Difference Account and would be amortised over the balance period
of such long term asset/liability but not beyond accounting period ending on or before March 31, 2011. There was no exchange
differences on long term foreign currency monetary items during the period commencing December 7, 2006 till March 31, 2008.
Had the Company continued to use the earlier basis of accounting for exchange differences arising on long-term foreign currency
monetary items, the loss after tax for the current year ended March 31, 2009 would have been higher by Rs 389,272 thousand and
the net block of fixed assets (including capital work in progress) would have been lower by Rs 389,272.
2.4 Fixed Assets
Fixed assets are stated at cost less accumulated depreciation and impairment loss, if any. Cost comprises the purchase price
including taxes and duties (net of cenvat credit) and any attributable cost of bringing the asset to its working condition for its
intended use. Capital spares/ standby equipment are capitalised as part of the respective main assets, to which they relate to.
Any expenditure on upgradation of existing assets resulting in increase in their capacity and the benefits expected therefrom
is capitalised. All expenditure, including advances given and capital inventory are shown as capital work-in-progress until the
assets are ready for commercial use. Capital work-in-progress is stated at cost.
Provision for slow moving and obsolescence related to capital work-in-progress is made based upon the ageing of the capital
assets and a periodic technical evaluation undertaken by the Company.
Site restoration cost obligations are capitalized when it is probable that an outflow of resources will be required to settle the
obligation and a reliable estimate of the amount can be made.
2.5 Depreciation/Amortisation
(i) Fixed assets are depreciated pro rata from the date on which the asset is ready for commercial use (except for Wireless
Telephone Sets which are depreciated from the beginning of the month, following the month of purchase), on a straight line
method, based on the following estimated useful economic lives of assets.
Useful Life (in years)
Leasehold Land Over the period of the lease
Leasehold Improvements Over the period of the lease or 10 years, whichever is lower
Building 30
Plant and Machinery:
Network Equipments 12
Towers, Air Conditioners, Generators 6
Electrical equipment 6
Tools and Testing Equipment 5
Optical Fibre and Copper Cable Network 20
Wireless Telephone Sets 5
Computers 3
Furniture and Fixtures 6
Office Equipment 6
Vehicles 5
(ii) Depreciation rates derived from the above are not less than the rates prescribed under Schedule XIV of the Act.
(iii) Depreciation on the amount capitalised on upgradation of existing assets is provided over the remaining useful lives of the
original assets.
(iv) The site restoration cost obligation capitalised is depreciated over the period of useful life of the related asset.
(v) Fixed assets individually costing less than Rs 5 thousand are fully depreciated in the year of acquisition.

34
2.6 Impairment
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 wherever the carrying amount of an asset exceeds its recoverable
amount. The recoverable amount is the greater of the assets 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. After impairment,
depreciation is provided on the revised carrying amount of the assets over its remaining useful life.
A previously recognized impairment loss is increased or reversed depending on changes in circumstances. However the
carrying value after reversal is not increased beyond the carrying value that would have prevailed by charging usual depreciation
if there was no impairment.
2.7 Intangible Assets
All expenditure on intangible items are expensed as incurred unless it qualifies as an intangible asset as defined in Accounting
Standard 26. The carrying value of intangible asset is assessed for recoverability by reference to the estimated future discounted
net cash flows that are expected to be generated by the asset. Where this assessment indicates a deficit, the assets are written
down to the market value or fair value as computed above.
Bandwidth capacity is amortised on straight line basis over the period of the agreement.
Software is capitalised on the date of installation and is amortised over a period of 5 years on straight line method.
For accounting policy related to Licence Entry Fees, see Note 2.10(i) of Schedule 19, below.
2.8 Inventory
Inventory is valued at the lower of cost and net realisable value. Cost is determined on weighted average basis. Net realisable
value is estimated selling price in the ordinary course of business, less estimated costs of completion and the estimated costs
necessary to make the sale.
The Company provides for obsolete and slow- moving inventory based on management estimates of the usability of inventory.
2.9 Investments
Investments that are readily realizable and intended to be held for not more than a year are classified as current investments;
all other investments are classified as long-term investments. Current investments are carried at lower of cost and fair market
value determined on an individual investment basis. Long-term investments are carried at cost, except the cost of investments
acquired or partly acquired by the issue of shares or other securities, which is the sum total of the fair value of the securities
issued and other acquisition costs. Provision for diminution in value of long-term investments is made to recognize only a
decline other than temporary in the value of the investments.
2.10 Licence Fees
(i) License Entry Fee
The License Entry Fee has been recognised as an intangible asset and is amortised over the remainder of the license period of
20 years from the date of commencement of commercial operations [Refer Note 1(d), Schedule 19]. Fees paid for migration
of the original licences to the UASL is amortised over the remainder of the licence period of 20 years from the date of
migration to UASL.
Licence fee paid for use of GSM spectrum under the existing UASL licence is amortized over the remainder of the original
licence from the date of commencement of commercial operations on straight line method. [Refer Note 1(c) of Schedule 19].
The borrowing cost directly attributable to the qualifying asset [‘Licences’] is capitalized and amortized over the remainder of
licence period of 20 year from the date of commencement of commercial operation.
(ii) Revenue Sharing Fee
Revenue Sharing Fee, as a percentage of Adjustable Gross Revenue (AGR) payable as per terms of the UASL [Refer Note 1(d)
of Schedule 19] is expensed in the Profit and Loss Account in the year in which the related income from providing Unified
Access Services is recognised.
An additional revenue share towards spectrum charges is payable as a percentage of AGR, as defined in the Licence Agreement
earned from the customers who are provided services through the CDMA and CorDect wireless technology. These costs are
expensed in the Profit and Loss Account in the year in which the related revenues are recognised.
2.11 Cash and Cash Equivalents
Cash and cash equivalents comprise Cash at Bank and Cash in Hand and short term investments with an original maturity of
three months or less.
35
2.12 Foreign Currency Transactions
(i) Initial Recognition
Foreign currency transactions are recorded in the reporting currency, by applying to the foreign currency amount the exchange
rate between the reporting currency and the foreign currency at the date of the transaction.
(ii) Conversion
Foreign currency monetary items are reported using the closing rate. 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; and non-
monetary items which are carried at fair value or other similar valuation denominated in a foreign currency are reported using
the exchange rates that existed when the values were determined.
(iii) Exchange Difference
Exchange differences, in respect of accounting periods commencing on or after 7th December, 2006, arising on reporting of long-
term foreign currency monetary items at rates different from those at which they were initially recorded during the period, or
reported in previous financial statements, in so far as they relate to the acquisition of a depreciable capital asset, are added to or
deducted from the cost of the asset and are depreciated over the balance life of the asset, and in other cases, are accumulated in
a “Foreign Currency Monetary Item Translation Difference Account” in the enterprise’s financial statements and amortized over
the balance period of such long-term asset/liability but not beyond accounting period ending on or before March 31, 2011.
Exchange differences arising on the settlement of monetary items not covered above, or on reporting such monetary items of the
Company at rates different from those at which they were initially recorded during the year, or reported in previous financial
statements, are recognized as income or as expenses in the year in which they arise.
2.13 Miscellaneous Expenditure
(i) Finance set up costs
Finance set-up cost, including financial fees and cost of arranging and restructuring long-term loans, is amortised over the
period of the loan or five years, whichever is lower, commencing from the date of the first draw-down of the related loan, on
a straight-line basis.
(ii) Discount on issue of Commercial Papers
Discount on issue of Commercial Papers represents the difference between the face value and issue price of Commercial
Papers. This cost is deferred and amortised on a straight-line basis over the redemption period of Commercial Papers
commencing from the date of issue of Commercial Papers.
2.14 Revenue Recognition and Receivable
(i) Service Revenue
Service Revenues are recognised as services are rendered and are net of discounts & waivers Unbilled revenues resulting from
Unified Access Services provided from the billing cycle date to the end of month is recorded based on billing system reports.
Revenues from Unified Access Services rendered through prepaid cards are recognised based on actual usage by the customers
Processing and activation revenue on activation and on recharge vouchers are recognized as revenue, as and when the same
gets activated.
Revenue from infrastructure services is recognised as services are rendered, in accordance with the terms of the related
contracts.
Indefeasible Right of use contracts are accounted for as operating lease and revenue is recognized over the term of lease.
Payments received from customers, before the relevant criteria for revenue recognition are satisfied, are included in income
received in advance.
(ii) Sale of Goods
Revenue, net of discounts and return, from sale of goods is recognised on transfer of all significant risks and rewards and there
is no significant uncertainty towards realization of consideration.
(iii) Provision for Doubtful Debts
The company provides for entire outstanding net of security deposit for active subscribers whose outstanding is more than 90
days, deactivated customers or in specific cases, where management is of the view, that the amount for certain customers are
not recoverable.

36
 For receivables due from other operators on account for lease line revenue and IUC, the company provides for amount
outstanding for more than 180 days from the date of billing net of any amounts, payable to the operators, or in specific cases,
where management is of the view that the amounts for these customers are not recoverable.
2.15 Interconnection Usage Charges
The TRAI issued Interconnection Usage Charges Regulation 2003 (as amended) (‘IUC regime’). Under the IUC regime, with
the objective of sharing of call revenues across different operators involved in origination, transit and termination of every call,
the Company pays interconnection charges for all outgoing calls originating in its network to other operators, depending on
the termination point of the call i.e. mobile, fixed line and distance i.e. local, national long distance and international long
distance. The Company also receives certain interconnection charges from other operators for all calls terminating in its
network.
Accordingly, interconnect cost is recognised as incurred on termination of calls originating from the Company’s network and
terminating on the network of other telecom operators Interconnect revenue are recognised as earned on calls originating
from another telecom operator network and terminating on the Company’s network. The interconnect revenue and costs are
recognised in the financial statement on gross basis and included in service revenue and network operating cost, respectively.
2.16 Retirement Benefits
Shor t Term Employee Benefits
Short term employee benefits are recognised in the year during which the services have been rendered.
Long Term Employee Benefits
(i) Defined Contribution Plan
Provident Fund and employees’ state insurance schemes
All employees of the Company are entitled to receive benefits under the Provident Fund, which is a defined contribution plan.
Both the employee and the employer make monthly contributions to the plan at a predetermined rate (presently 12%) of the
employees’ basic salary. These contributions are made to the fund administered and managed by the Government of India. In
addition, some employees of the Company are covered under the employees’ state insurance schemes, which are also defined
contribution schemes recognized and administered by the Government of India.
The Company’s contributions to both these schemes are expensed in the Profit and Loss Account. The Company has no further
obligations under these plans beyond its monthly contributions.
(ii) Defined Benefit Plan
Leave Encashment
The Company has provided for the liability at year end on account of unavailed earned leave as per the actuarial valuation as per
the Projected Unit Credit Method.
Gratuity
The Company provides for gratuity obligations through a defined benefit retirement plan (the ‘Gratuity Plan’) covering all
employees. The Gratuity Plan provides a lump sum payment to vested employees at retirement or termination of employment
based on the respective employee salary and years of employment with the Company. The Company provides for the Gratuity
Plan based on actuarial valuations in accordance with Accounting Standard 15 (revised), “Employee Benefits”. The Company
makes annual contributions to the Life Insurance Corporation of India (LIC) for the Gratuity Plan in respect of its employees.
(iii) Short term compensated absences are provided for based on estimates.
(iv) Actuarial gains and losses are recognized in the P & L account as and when incurred.
2.17 Borrowing Costs
Borrowing costs attributable to the acquisition or construction of those fixed asset which necessarily take substantial period
to get ready for their intended use, including interest attributable to the funding of license fees with respect to New Circles up
to the date of commencement of commercial operations, are capitalised as a part of the cost of that asset [Refer Note 10(e) of
Schedule 20]. The accounting treatment of finance set-up cost has been discussed in Note 2.13 (i) of Schedule 19 to the financial
statements. Other borrowing costs are recognised as an expense in the period in which they are incurred.
2.18 Income Taxes
Tax expense comprises of current, deferred and fringe benefit tax. Current income tax and fringe benefit tax is measured at the
amount expected to be paid to the tax authorities in accordance with the Income Tax Act, 1961. Deferred income taxes reflects

37
 the impact of current year timing differences between taxable income and accounting income for the year and reversal of timing
differences of earlier years.
Deferred tax is measured based on the tax rates and the tax laws enacted or substantively enacted at the balance sheet date.
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 the Company has carry forward of unabsorbed
depreciation and tax losses, deferred tax assets are recognised only if there is virtual certainty that such deferred tax assets can
be realised against future taxable profits. Unrecognised deferred tax assets of earlier years 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.
2.19 Loss per Share
Basic loss per share is calculated by dividing the net loss for the year attributable to equity shareholders by the weighted
average number of equity shares outstanding during the year.
The number of shares used in computing diluted loss per share comprises the weighted average shares considered for deriving
basic loss per share, and also the weighted average number of shares, if any which would have been used in the conversion of
all dilutive potential equity shares.
2.20 Leases
(i) Where the Company is the lessee
Leases under which all the risks and rewards of ownership are effectively retained by the lessor are classified as operating
leases. Lease payments under operating leases are recognized as an expense in the Profit and Loss account on a straight-line
basis over the lease term.
Assets acquired on ‘Finance Lease’ which transfer risk and rewards of ownership to the Company are capitalized as assets by
the Company at the lower of fair value of the leased property or the present value of the related lease payments or where
applicable, estimated fair value of such assets.
Amortization of capitalised leased assets is computed on the Straight Line method over the useful life of the assets. Lease
rental payable is apportioned between principal and finance charge using the internal rate of return method. The finance
charge is allocated over the lease term so as to produce a constant periodic rate of interest on the remaining balance of
liability.
(ii) Where the Company is the lessor
Assets subject to operating leases are included in fixed assets. Lease income is recognised in the Profit and Loss Account
on a straight-line basis over the lease term. Costs, including depreciation are recognised as an expense in the Profit
and Loss Account. Initial direct costs such as legal costs, brokerage costs, etc. are recognised immediately in the Profit
and Loss Account.
2.21 Segment Reporting
(i) Identification of segment
The Company’s operating businesses are organized and managed separately according to the nature of services provided, with
each segment representing a strategic business unit that offers different services to different markets. The analysis of geographical
segments is based on the areas in which the Company’s services are sold.
(ii) Allocation of common costs
Common allocable costs are allocated to each segment according to the relative contribution of each segment to the total
common costs.
(iii) Unallocated items
The Corporate and other segment include general corporate income and expense items, which are not allocated to any
business segment.
2.22 Provisions
A provision is recognised when an enterprise 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.

38
SCHEDULE 20: NOTES TO ACCOUNTS (Amount in Rupees ‘000)
1. Capital Commitments 2009 2008
Estimated value of contracts remaining to be executed on capital
account and not provided for (net of advances) 10,479,101 1,262,864
——————
—————— ——————
——————
2. Contingent Liabilities not provided for
Financial Bank Guarantees 6,062,830 6,050,000
Performance Bank Guarantees 2,702,830 2,599,290
Claims not acknowledged as debt(Refer note (a) & (b) below) 517,842 319,860
——————
—————— ——————
——————
9,283,502 8,969,150
——————
—————— ——————
——————

(a) As more fully discussed in Note 1(e) of Schedule 19, the Company has paid Rs 319,860 thousand to DoT under protest
towards AGR demand on gain from sale of investment in HIL. The TDSAT has decided the matter in favour of the Company.
At present, the matter is pending with Honorable Supreme Court for judgment. The Company based on legal opinion and
judgment of TDSAT is confident of securing decision in its favour and hopeful to receive back the amount deposited under
protest with DoT.

(b) During the year ended March 31, 2009, the Company has received demand letters dated November 11, 2008,
December 20, 2008 and on January 02, 2009 respectively from Bharat Sanchar Nigam Limited (BSNL) wherein BSNL
has raised demand of Rs 143,316 thousand, Rs 43,103 thousand and Rs 3,980 thousand respectively on account
of unilateral revision of access charges for the period from June 2001 to May 2003 in contravention of the Interconnect
Agreement and TRAI Regulations. The Company, Association of Unified Service Providers of India ‘AUSPI’
(erstwhile Association of Basic Telephone Operators ‘ABTO’) and other Basic Service Operators contested aforesaid
revision in the rates of access charges before Telecom Dispute Settlement Appellate Tribunal (‘TDSAT’). TDSAT vide its
reasoned and detailed judgement dated April 27, 2005 allowed the refund claims and struck down the unilateral revision
in the rates of access charges by BSNL and held that Telecom Regulatory Authority of India (‘TRAI’) is the final authority
for fixing of access charges and access charges would be payable as rates prescribed by the TRAI and as per the Interconnect
agreements. BSNL preferred an appeal in Hon’ble Supreme Court against the order of TDSAT and an interim stay was
granted on October 19, 2006. Therefore aggrieved by such unilateral action on the part of BSNL by raising aforesaid
demand and disturbing the status-quo, applications were moved by the Company, AUSPI and other operators in the
Hon’ble Supreme Court vide C.A No.5834-5836 of 2005 that was listed for hearing on February 9, 2009 and Hon’ble
Supreme Court passed an order clarifying its previous order of October 19, 2006 and stayed the refunds claim against the
BSNL there by upholding the TDSAT order dated April 27, 2005 where by BSNL is refrained from raising the access
charges demand.

Against the aforesaid demands, the Company has paid Rs 143,316 thousand under protest against the demand note dated
November 28, 2008 only.

Based on the legal opinion on the above, the Company believes that the amount paid under protest to BSNL is recoverable
and there would be no further financial liability against these demands and has accordingly not recorded any liability
towards access charges during the year ended March 31, 2009.

(c) The Company had executed certain contracts (‘the contracts’) with an equipment vendor (‘the vendor’) for the supply of
network equipment and services for the turnkey implementation of the basic telephone service project in Rajasthan.
Under the contracts, the vendor was obliged to ensure a total financing solution for the project, including credit enhancement
support from the vendor’s sponsors. As the vendor defaulted in its contractual obligations in providing a total financing
solution for the project, the vendor executed an agreement (‘the agreement’) with the Shyam Group of Companies to
subscribe to warrants of the Group Companies aggregating 50 per cent of the value of supplies of equipment and services
by the vendor to the Company. Disputes have arisen between the Company and vendor with respect to fulfillment of
obligations under the contracts and the agreement. As at March 31, 2009, Rs 246,573 thousand (2008 - Rs 246,573 thousand)
was due by the Company to the vendor. The Company and the vendor are in the process of resolving their differences.
The management of the Company believes that the default under the contracts and the agreement primarily lies on the
part of the vendor and thus the Company does not bear any liability under the same. However, the vendor has made a
counter claim for an interim award of Rs 288,000 thousand, which has been rejected by the Arbitral Tribunal. Since, the
matter is under process for resolution with the Arbitral Tribunal and based on legal opinion from the Company’s counsel,
no additional liability has been provided in these financial statements.

39
 (Amount in Rupees ‘000)
3. Expenditure in Foreign Currency (on accrual-basis) 2009 2008
—————— ——————
Travelling 2,390 2,308
Interest 265,324 -
Loan Processing Fees 3,315 -
Professional & Consultancy Fees 411,098 9
Project Management Consultancy 196,012 -
Maintenance Services 390 -
—————— ——————
878,529 2,317
——————
—————— ——————
——————

4. Managerial Remuneration 2009 2008

—————— ——————
Salary 5,000 10,800
Contribution to PF 600 1,296
Other Allowances 19,400 3,600
Company Leased Accommodation 870 -
—————— ——————
25,870 15,696
——————
—————— ——————
——————

The Company provides for Gratuity and leave encashment on an actuarial basis for the Company as a whole, the amount
pertaining to the Whole Time Director is not readily ascertainable and hence not included above. Further, the Whole Time
Director of the Company is entitled to Performance Linked Incentive of 100 percent of Annual Fixed Salary which has been
provided for in the books of accounts and will be payable based on approval from the Board.
During the year, the Company has appointed a Whole Time Director with effect from October 1, 2008 under section 269 of the
Act and has paid remuneration in excess of the limits specified under Schedule XIII to the Act and pursuant to the provision of the
said section, the Company has filed an application with the Central Government on December 29, 2008 for the approval of the
appointment and remuneration of the Whole Time Director. The Company is confident of receiving the approval from the Central
Government.
(Amount in Rupees ‘000)
5. Payment to Auditors (excluding service tax) 2009 2008
—————— ——————
Statutory Audit 3,800 1,750
Tax Audit 400 -
Other Services 2,050 400
Reimbursement of Out-of-Pocket Expenses 441 363
—————— ——————
6,691 2,513
——————
—————— ——————
——————
6. Value of impor ts calculated on CIF basis
Import of Capital Equipment and spares 7,324,140 33,267
——————
—————— ——————
——————

7. Quantitative particulars of equipments

a) Under the schemes offered by the Company to its customers other than those where the Fixed Wireless Terminal
(FWT) are sold, the ownership of the FWT sets are retained by the Company. Accordingly, these have been classified
as Fixed Asset.
b) The Company is issuing SIM cards to customers for using services being offered by the company. The SIM cards are not
sold to customers but are being given for use only. Since, cost of per SIM card is not of material amount and the
Company does not perceive any retrieval value of the same, once the same is issued to the customers, cost of the same
is expensed off at the purchase itself and company does not maintain quantitative records of the issued SIM cards.
c) Detail of Trading Goods (FWT)
Quantity (Units) Value (in Rs. ‘000)
2009 2008 2009 2008
———— ———— ———— ————
Opening Stock - - - -
Purchase 22,801 1,054 41,526 1,736
Sales 12,801 1,054 10,520 1,686
Closing Stock 10,000 - 8,360 -
———————————————————————

40
8. Share Capital

a) As more fully discussed in Note 1(b), Schedule 19, on September 26, 2007, SISTEMA had acquired ten percent stake into
the Company and on January 17, 2008 had increased its stake in the Company to fifty one percent by acquiring additional
forty one percent stake from existing promoters, hence, with effect from January 17, 2008, the Company became
subsidiary of SISTEMA. The shareholding of SISTEMA has further increased to 73.71 percent on June 10, 2008 on
account of fresh infusion of equity in the Company during the year and SISTEMA holds 1,810,289,400 equity shares as
at March 31, 2009.
b) Out of 2,455,957,500 shares, 63,925,000 shares were allotted as fully paid up Bonus Shares by capitalisation of Capital
Reserve on September 12, 2000.
9. Secured Loans

a) During the year, the Company has obtained following secured loans:
i) Term loan of Rs 7,500,000 thousand from a Bank, secured against assignment of all telecom licences allotted by
Department of Telecommunication (DoT) other than the licence pertaining to Rajasthan Circle and first charge over
present and future assets of Rajasthan Circle on pari passu basis with other lenders. Registration of charge over
Telecom Licences with Registrar of Companies is pending. Outstanding balance as at March 31, 2009 is Rs 7,500,000
thousand. The amount repayable within one year is Rs Nil (2008 – Rs Nil).
ii) Term loan of Rs 73,584 thousand. The loan is secured against first and exclusive charge of the assets financed by the
lender. Outstanding balance as at March 31, 2009 is Rs 55,188 thousand. The amount repayable within one year is
Rs 11,225 thousand (2008- Rs Nil).
iii) Vehicle loans of Rs 20,770 thousand. These are secured by way of exclusive hypothecation charge in favour of the
respective lenders. Outstanding balance of these loans as at March 31, 2009 is Rs 16,175 thousand (2008- Rs 1,842
thousand). The amount repayable within one year is Rs 5,303 thousand (2008- Rs 806 thousand).

b) During the year, the Company has made repayment of the following secured loans:
i) Term Loans of Rs 840,000 thousand, outstanding as at March 31, 2008, from a Bank repayable by September 2011 has
been fully repaid in April 2008.
ii) Short-term loan of Rs 17,500,000 thousand, outstanding as at March 31, 2008, from a Bank repayable by November
2008 has been fully repaid in June 2008.
iii) Commercial papers of Rs 1,605,000 thousand, outstanding as at March 31, 2008, has been fully repaid on various dates
during the year.

10. Unsecured Loans

a) During the year, the Company has obtained following unsecured loans:
i) Term Loan from a bank of Rs 4,800,000 thousand. The loan is fully secured against unconditional & irrevocable Stand By
Letter of Credit of ABN AMRO Bank, London. Outstanding balance as at March 31, 2009 is Rs 2,399,170 thousand. The
amount repayable within one year is Rs 1,200,000 thousand (2008- Rs Nil).
ii) Foreign Currency Term Loan from its holding company of USD 230,000 thousand (Rs 11,420,650 thousand). The entire
loan amount will be due for repayment in full by December 2014. Outstanding balance as at March 31, 2009 is
Rs 11,665,600 thousand. The amount repayable within one year is Rs Nil (2008- Rs Nil).
iii) Foreign Currency Term loan from a foreign bank of USD 18,686 thousand (Rs 927,870 thousand) against supply of
Network Equipments for Rajasthan Circle by ZTE Corporation, China, secured by Corporate Guarantee issued by the
holding company. Outstanding balance as at March 31, 2009 is Rs 947,771 thousand. The amount repayable within one
year is Rs Nil (2008- Rs Nil).

b) Short-term loan of Rs 2,320,000 thousand, outstanding as at March 31, 2008, from a bank has been fully repaid in
June 2008.

11. Deferred Payment Liabilities

During the year, the Company has entered into contracts with international vendors for supply of network equipments and
rendering of services on deferred payments terms. On transfer of title and risk of the supplies and rendering of services as per
the terms of the respective vendor under above contracts, the Company has recorded the liabilities payable over the deferred
payment period as Deferred Payment Liabilities. Of which, the amount payable within one year is Rs 230,035 thousands.

41
12. Fixed Assets and Capital Work in Progress
a) Plant and Machinery includes loose tools of Rs 38,564 thousand (2008 — Rs 22,960 thousand).
b) Optical fibre and copper cable network and capital work-in-progress include optical fibre and ducts of Rs 174 thousand
(2008 — Rs 2,770 thousand) lying with third parties for building of the backbone and feeders and plant and machinery
includes equipment of net book value of Rs 3,832,611 thousand (2008 – Rs 68,900 thousand) located at the infrastructure
providers’ sites.
c) As on March 31, 2009, Fixed Wireless Phone (FWP) sets included equipment aggregating to net book value of
Rs 121,645 thousand (2008 — Rs 170,970 thousand) located at customer premises.
d) During re-launch of CDMA mobile services in Rajasthan Circle in September 2008 [Refer Note 1(a) of Schedule 19], the
Company has replaced certain network equipments of old technology from new network equipments and does not
plan to use the old network equipments going forward. Accordingly, the Company has recorded Provision for
Obsolescence of Rs 515,994 thousand against total written down value of Rs 550,994 thousand as at
September 30, 2008.
e) The borrowing cost of Rs 615,539 thousand has been capitalized during the year (2008 – Rs 513,471 thousand)
pertaining to acquisition of Intangible Assets.
f) During the year, the Company incurred certain expenses to the tune of Rs. 229,027 thousand (2008 – Nil) on pre-launch
related activities in various circles, out of which Rs. 180,250 thousand (2008 – Nil) is capitalised pertaining to the circles
which has started commercial operations during the year and Rs. 48,777 thousand (2008 - Nil) is pending allocation related
to the circles which are yet to start commercial operations as at the year end.
13. Investments
The Company has invested Rs 8,966 thousand (including advance for share capital of Rs 1,466 thousand) in subsidiary company
Shyam Internet Services Private Limited, which has licence for internet services for the state of Rajasthan. The accumulated
losses of the subsidiary Company as at March 31, 2009 are Rs 18,596 thousand (2008 - Rs. 12,840 thousand). The subsidiary
company has been awarded ‘Letter of Intent’ on March 28, 2008 to operate Internet services for pan India. Based on the
business plan of the subsidiary company, the Company is of the view that the diminution in investment is temporary in nature
and hence, has not made any provision for diminution in the value of investment.
14. Debtors
a) Debtors include unbilled debtors of Rs 1,223 thousand (2008 - Rs 2,233 thousand).
b) Debtors include Rs 19,442 thousand (2008 - 10,318 thousand) due from Shyam Internet Services Limited, a company
under same management u/s 370 (1B) of the Companies Act, 1956. Maximum balance outstanding during the year was Rs
20,556 thousand (2008 - 10,318 thousand).
15. Current Liabilities and Provisions
a) Sundry Creditors include amount payable to Micro, Small and Medium Enterprises as at March 31, 2009 of Rs Nil
(2008 – Rs Nil) (based on the information, to the extent available with the Company).
b) Salary outstanding to the Directors as at March 31, 2009 was Rs 310 thousand (2008 - Rs 880 thousand).
c) Advance and deposits from customers and channel partners include amounts refundable to subscribers of
Rs 21,210 thousand (2008 - Rs 21,136 thousand), which represents security deposits received from permanently
deactivated subscribers pending final settlement.
Income Received in Advance include advance revenue received for dark fibre given to customers on IRU basis
of Rs 144,385 thousand (2008 - Rs 157,222 thousand) and unaccrued prepaid revenue of Rs 55,461 thousand
(2008 - Rs 17,538 thousand).
d) Provisions:
A. Employee Benefits :
i) During the year, the Company has recognized the following amounts in the Profit and Loss Account
Defined Contribution Plans (Amount in Rupees ‘000)
Particulars 2009 2008
Employer’s Contribution to Provident Fund # 19,797 8,094
Employer’s Contribution to ESI # 1,238 1,569

# Included in Contribution to Provident and Other Funds (Refer Schedule 14)

42
 Defined Benefit Plans
The employee’s gratuity fund scheme managed by Life Insurance Corporation of India is a defined benefit plan. The present value
of obligation is determined based on actuarial valuation using Project Unit Credit Method (PUC). Under PUC Method, a
projected accrued benefit is calculated at the beginning of the period and again at the end of the period for each benefit that will
accrue for all active members of the plan. The projected accrued benefit is based on the plan accrual formula and upon service
as of the beginning or end of the period, but using member final compensation, projected to the age at which the employee is
assumed to leave active service. The plan liability is the actuarial present value of the projected accrued benefits as of the
beginning and end of the period for active members the obligation for leave encashment is recognized in the same manner as
gratuity.
Net Cost towards Gratuity for the year ended March 31, 2009 is as follow:
(Amount in Rupees ‘000)
Particulars 2009 2008
Current service cost # 6,033 2,805
Interest cost 725 679
Expected Return on plan assets (278) (335)
Actuarial (gain) / loss (2,362) (446)
Past service cost - -
Benefit Paid - -
Curtailment and Settlement cost / (credit) - -
Net Cost 4,118 2,703
Actual Return on Plan Assets 427 297
Actual Rate of Return on Plan Asset 8.65% 9.15%
# Included in Salaries, Wages and Bonus (Refer Schedule 14)

Net Cost towards Leave Encashment for the year ended March 31, 2009 is as follow:
Particulars 2009 2008
Current service cost # 19,057 4,889
Interest cost 1,324 1,162
Expected Return on plan assets - -
Actuarial (gain) / loss (5,168) (1,258)
Past service cost - -
Benefit Paid - -
Curtailment and Settlement cost / (credit) - -
Provision for Provident Fund for the year 13,293 433
Net Cost 28,506 5,226
Actual Return on Plan Assets - -
Actual Rate of Return on Plan Asset - -
# Included in Salaries, Wages and Bonus (Refer Schedule 14)

ii) The major categories of plan assets as a percentage of the fair value of total plan assets are as follow:
Gratuity
2009 2008
Investments with LIC 100% 100%

iii) The assumptions used to determine the benefit obligations are as follows:
Gratuity
Particulars 2009 2008
Discount Rate 7.00% 8.00%
Expected Rate of Increase in Compensation levels 6.00% 8.00%
Expected Rate of Increase on Plan Assets 7.00% 9.50%
Retirement Age 58 years 58 years

43
 Leave Encashment
Particulars 2009 2008
Discount Rate 7.00% 8.00%
Expected Rate of Increase in Compensation levels 6.00% 8.00%
Expected Rate of Increase on Plan Assets 0% 0%
Retirement Age 58 years 58 years

The principal assumptions are discount rate & salary growth rate. The discount rate is generally based upon the market yields
available on Government bonds at the accounting date with a term that matches the liabilities and the salary growth rate takes
account of inflation, seniority, promotion and other relevant factors on long term basis.
iv) Reconciliation of opening and closing balances of benefit obligations and plan assets
Gratuity (Amount in Rupees ‘000)
Particulars 2009 2008
Change in Projected Benefit Obligation (PBO)
PBO at beginning of year 10,362 8,481
Current service cost 6,033 2,805
Interest cost 725 679
Benefits paid (656) (982)
Past service cost - -
Actuarial (gain) / loss (2,214) (622)
Projected benefit obligation at year end 14,250 10,361
Change in plan assets:
Fair value of plan assets at beginning of year 3,978 3,360
Expected return on plan assets 278 -
Actuarial gain / (loss) 149 -
Employer contribution 1,680 1,273
Claim paid from Fund (656) (990)
Interest credited by LIC for the year - 335
Settlement cost - -
Benefit paid - -
Fair value of plan assets at year end 5,429 3,978
Net funded Status of the plan 8,821 6,383
Net amount recognised as liability 8,821 6,383

Leave Encashment
Particulars 2009 2008
Change in Projected Benefit Obligation (PBO)
PBO at beginning of year 18,917 14,524
Current service cost 19,057 4,889
Interest cost 1,324 1,162
Benefits paid (25) (400)
Past service cost - -
Actuarial (gain) / loss (5,168) (1,258)
Projected benefit obligation at year end 34,105 18,917
Change in plan assets:
Fair value of plan assets at beginning of year - -
Expected return on plan assets - -
Actuarial gain / (loss) - -
Employer contribution - -
Claim paid from Fund - -
Interest credited by LIC for the year - -
Settlement cost - -
Benefit paid - -
Fair value of plan assets at year end
Net funded Status of the plan 34,105 18,917
Provident Fund (12% on Earned Leave) - -
Net amount recognized 34,105 20,813

44
v) Amounts for the current and previous four periods are as follows:

Gratuity (Amount in Rupees ‘000)

Particulars 2009 2008
Defined benefit obligation 14,250 10,361
Plan assets 5,429 3,978
Surplus / (deficit) (8,821) (6,383)
Experience adjustments on plan liabilities Not Available1 Not Available1
1
Experience adjustments on plan assets Not Available Not Available1
1
The management has relied on the overall actuarial valuation conducted by the actuary. However, experience adjustments on
plan liabilities and plan assets are not readily available and hence not disclosed.
vi) The Company made annual contributions to the LIC of an amount advised by the LIC. The Company was not informed by LIC
of the investments made by the LIC or the break-down of plan assets by investment type.
vii) Estimated contributions to be made in next financial year for gratuity is Rs 14,205 thousand and for leave encashment Rs 20,717
thousand.
viii) The expected rate of return on plan assets was based on the average long-term rate of return expected to prevail over the next
15 to 20 years on the investments made by the LIC. This was based on the historical returns suitably adjusted for movements
in long-term government bond interest rates. The discount rate is based on the average yield on government bonds of 20 years.

B. Provision for Contingencies and Other Provisions :-

The following table sets forth the movement in the provisions: (Amount in Rupees ‘000)
Sl. Description As at Additions Amount As at
No. April 1, 2008 during used March 31, 2009
(April 1, 2007) 2008-09 (March 31, 2008)
(2007-08)
1. Provision for 323,397 38,029 - 361,425
Contingencies (2,171) (321,226) (-) (323,397)
2. Provision for Damaged / 50,997 - 36,576 14,421
Irrecoverable Assets (41,397) (96,00) (-) (50,997)
3. Provision for Lease 68,484 70,941 - 139,424
Equalisation Reserve (-) (68,484) (-) (68,484)
4. Asset Retirement 8,313 120,780 - 129,093
Obligation (-) (8,313) (-) (8,313)

a) The Company makes contingency provision for any un-anticipated regulatory liabilities that may arise subsequent to the
year end.

b) The Company had branded its CDMA services and Cor DECT services as fixed wireless services. BSNL unilaterally
declared these as Limited Mobility service [‘WLL (M)’] as against it being treated as a ‘Fixed wireless services’ by the
Company and raised demand notes for differential Access Deficit Charges (‘ADC’) for the period November 14, 2004
to August 30, 2005. On September 7, 2006, the Company had filed a petition with TDSAT against the above demand.
TDSAT vide its order dated September 7, 2006 has restrained BSNL from disconnecting POIs of the Company and not
to take coercive action against the Company to recover the demands. During the year ended March 31, 2008, the
Company had received demands of Rs 77,489 thousand (March 31, 2008 – Rs 77,489 thousand) related to period
November 14, 2004 to August 30, 2005. The Company is still awaiting final decision of TDSAT but has provided for the
above demand as contingent liability in the financial statement.

c) The DoT has raised demand on December 25, 2007 and February 14, 2008 aggregating Rs 243,152 thousand including
interest and penalty towards use of additional spectrum for Rajasthan Circle for CDMA and CorDect technology. The
company has paid the said demand under protest. The company has made an application to DoT for cancellation of
demand and refund of amount paid under the demand. The Company is in discussion with DOT to settle the above
demand and provided for it as contingent liability in the 2008 financial statement.

45
 d) In accordance with its accounting policy (See Note 2.4, of Schedule 19), the Company makes provision for slow moving
and obsolescence related to capital work-in-progress, based on the ageing of the capital assets and a periodic technical
evaluation undertaken by the Company.

16. Income Taxes

Deferred tax

During the year ended March 31, 2009, the Company has incurred book loss of Rs 5,906,476 thousand (2008 - Rs 1,811,748
thousand), aggregating to accumulated losses of Rs 12,123,246 thousand (2008 - Rs 6,216,770 thousand) as on that date, resulting
into a tax loss carry forward situation. The Company is eligible for a tax holiday under section 80IA of the Income-tax Act, 1961,
beginning with the financial year in which the Company started providing telecommunication services. Though the management is
confident of generating profits in the future, there is currently no convincing evidence of virtual certainty that the Company would
reverse the tax loss carry forwards beyond the tax holiday period. Accordingly, the Company has not recognized any deferred tax
assets resulting from the carry forward tax losses. Further, no deferred tax liabilities on account of temporary timing differences
have been recognized since they are expected to reverse in the tax holiday period.

17. Segmental Reporting

The primary reporting of the Company has been performed on the basis of business segments. The Company has only one
business segment, which is providing unified access services. Accordingly, the amounts appearing in these financial statements
relate to this primary business segment. Further, the Company provides services only in India and, accordingly, no disclosures
are required under secondary segment reporting.

18. Related Party Disclosure

In accordance with the requirements of Accounting Standards (AS) -18 on Related Party Disclosures, the names of the related
parties where control exists and/or with whom transactions have taken place during the year and description of relationships,
as identified and certified by the management are:

Key Management Personnel:

Relation Name of the related party
Whole Time Director Vsevolod Rozanov
Other Related Parties
Relation Name of the related party
Holding Company JSFC Sistema, Russia
Subsidiary Company Shyam Internet Services Limited
List of Fellow Subsidiaries is as below :
- Intracom S.A Telecom Solutions, Russia - CJSC Invest proekt
- OJSC Intellect Telecom, Russia - CJSC Kuntsevo - Invest
- OJSC Sitronics - CJSC Sistema Hals Severo-Zapad
- LLC Mobile TeleSystem-T - CJSC Sistema Hals Severo-Zapad
- MTS Finance – SPV - CJSC City - Hals branch in Saint – Petersburg
- MTS-Capital – SPV - LLC City - Hals Kazan’
- Ukrainian Mobile Communications (UMC) - LLC City - Hals Povilzh’e
- OJSC Mobile communication systems - LLC City - Hals Sibir’
- LLC MTS Kostroma - LLC City - Hals Tambov
- OJSC Company Novitel - LLC City - Hals Ural
- CJSC Novitel Plus - LLC City - Hals Yug
- LLC Overseas production company Uzdunrobita - CJSC Mosdachtrest
- Barash Communication Technologies, Inc - CJSC City - Hals
- LLC Svit – Kom - LLC Yurlack
- MTS Bermuda, LIMITED - CJSC Sistema - Hals
- LLC Dagtelekom - Asesco Grupo Sistema, s.a.
- K – Telecom - SGI Management Zagreb
46
- LLC MTS - Financial Fleurus
- LLC TS Service - Kerguelen Systems
- PTT Telekom Kiev - Edificaciones Giordino
- CJSC Sibintertelekom (Chita) - Torgoviy Dom Detskiy Mir
- CJSC Primtelephone (Vladivostok) - Detskiy Mir
- CJSC Volgograd Mobile (Volgograd) - CJSC DM-Centre
- OJSC MTS - P (Moscow) - DM - Base
- LLC MTS - RK (Siktyvkar) - DM-Tambov
- International Cell Holding Limited - LLC Detskaya Galereya Yakimanka
- CJSC BashSel (Agidel’, republic of Bashkorstostan ) - Neuekoeln
- LLC Bastion (Moscow) - LLC DM Orel
- Cezanne B.V. (Amsterdam) - LLC S-Toys
- Tarino Limited (Republic of Seychelles) - LLC Sapojok
- CJSC RTK (Moscow) - DM Ukraine
- Dega Retail Holding Limited - OJSC VAO Intourist
- LLC Telephone.ru – since 10.02.09 - Intourist S. A. (Luxembourg)
- LLC Eldorado – since 31.03.09 - Intourist Overseas Limited (Cyprus)
- OJSC TS-Retail - Intourist Trading (Cyprus)
- OJSC Comstar - UTS - CJSC Inturist - Blagoveshhensk
- CJSC Comstar – Direct - CJSC Inturist - Vladivistok
- MGTS FINANCE S.A. - OJSC InturAvtoServis
- CJSC AMT - CJSC Inturist - Nahodka
- CJSC United Telesystems MGTS” - CJSC Inturist - Sankt-Peterburg
- CJSC Petrodvor - CJSC Nord Vest Bas E’kspress
- OJSC MGTS - CJSC Inturist - Samara
- OJSC MS-Tel - CJSC Inturist - Petrozavodsk
- Callnet - Intourist Limited
- Cornet-AM - Intours Corp
- Neophone LLC - OJSC Intourist Hotel Group
- CJSC Technology Systems - OJSC GK Kosmos
- LLC Degre - OJSC Gostinichno-Ofisniy complex “Pekin”
- LLC Comstar – Ukraine - Savoy Westend Hotel
- LLC TK Civrovye Global Telecommunications - LLC Stepan’kovo
- LLC Astelit - LLC Riviera Holding
- LLC Unitel - AZZURRO ITALIA H.M.G. S.R.L.
- CJSC Golden Line - Rivera Wings
- CJSC Port Telekom - Riviera Turism
- Comstar One Limited - Riviera Orange
- OJSC Tymenneftegazsvyaz - Lunisoft
- CJSC Conversia-svyaz - OJSC Intourist Magazin Puteshestvii
- LLC TK Overta - OJSC Orient
- LLC Sochitelekomservice - LLC Orient-Tour
- LLC CTS Yug - LLC Orient-Anapa
- OJSC Regional Technical Centre - LLC Orient-Piter
- LLC Komtel - LLC Orient-Sochi
- OJSC Pansionat Priazov’e - LLC Berau Puteshestvii Orient
- CJSC Intersvyaz – Servis - LLC Kaztur
- LLC Inter – TV Media - Intourist Polska
- CJSC Ural telephone company - OJSC NTK Intourist
47
 - LLC Strategiya - Intourist transportation services
- OJSC Intellect-Telekom - Intourist Hotel Islet
- CJSC Centre-Telko - OJSC Sistema Mass Media
- CJSC Metrotelekom - Newspaper Rossia
- CJSC Sistema-telekom - RA Maksima
- LLC Vast - Rosbalt
- LLC Investsviaz - OJSC MTS
- LLC United TeleSystems - Media Planning
- Joint-stock bank MBRR - Thema Production
- CJSC Sietema - K Invest - LLC Lingway
- CJSC Sistema – Finleasing - CJSC Òhema Production
- LLC MBRR – capital - OJSC Esta
- CJSC Invest Svyaz Holding - CJSC Regionalnaya Kabelnaya Set
- LLC MBRR – Finance - CJSC Esta Telekom
- LLC Leasing - Maximum - CJSC Esta TV
- LLC NOSTRO - CJSC Tversviazinform
- East-West United Bank - Maksima Kiev
- OJSC Dalkombinat - Euro Dawn Limited
- OJSC NIIME and Mikron - LLC Cifrovoe TV
- OJSC Elion - LLC Upravlenie and Leasing
- OJSC Elaks - JIR Broadcast, Inc.
- CJSC Koncel - JIR Broadcast Management
- OJSC NIITM - JIR, Inc.
- CJSC VZPP Mikron - JIR Management, Inc.
- CJSC Sitronics - LLC United cabel network
- CJSC Sitronics Telekom Solutions - CJSC Infotek
- CJSC Vostochniy Veter - CJSC Integralnaia Telecommunication Network
- OJSC Kvant - CJSC Integralnaia Telecommunication Network+
- LLC Sitronics-management - CJSC Channel - 7
- Intracom Telecom - LLC Channel - 7 plus
- OJSC NTP Intellect Telekom - CJSC Channel VT
- Sitronics Finance SA - CJSC Kaskad - TV
- SITRONICS Telecom Solutions Czech Republic - CJSC Trank
- OJSC Ladoga Telekom - CJSC Kabelnoe Televidenie Mark
- LLC InterTelSibir - CJSC MPK Channel - 7
- SITRONICS Telecom Solutions, Pakistan Co. - CJSC NPO Vidis
(Private.) Limited
- SITRONICS Telecom Solutions BH d.o.o. Sarajevo - CJSC TV Maidan
- SITRONICS IT B.V. - LLC Kuznetsktelemost
- Kvazar - Micro International Limited - LLC Seti TV
- Kvazar - Micro, s.r.o (Czech Republic) - OJSC OJSC Teleservice
- UAB Kvazar - Micro Baltic (Lithuania) - CJSC TCN
- LLC Kvazar - Micro.ru - CJSC Komtel - Kemerovo
- KM-HUB Handels GmbH - CJSC Perviy Permskiy Internet Centre
- Kvazar - Micro Hungary Ktf - CJSC Ruslan TV
- KM-Investments Ukraine - CJSC Simbirsk KTV
- AO3TKBA3AP - Micro - LLC Komtel - Vologda
- CJSC Kvazar-Micro Tech - LLC Komtel - Taganrog
- LLC SITRONICS Telecom Solutions Ukraine - CJSC Tagylteleseti

48
- LLC Sitronics Smart Technology - CJSC Astro - Tel
- SITRONICS Telecom Solutions Slovakia - CJSC Trankmedia
- Ice informatics systems (Slovenia) - LLC PKF Trank - service
- SIA Kvazar-Micro ACC - LLC Norilsk InterKom
- Sitronics Informational technology - LLC Dudinka Interkom
- Cosmos Wealth - CJSC Sendi Service
- Kvazar-Micro LLC (RF) - LLC inforservice
- LLC Amfitel - LLC Sendi info
- CJSC SITRONICS personal solutions - LLC Kabelnie Seti “Inter - TV
- SITRONICS Telecom Solutions Tashkent - LLC Ivanova Cable Network
- OJSC Sitronics – NanoTechnology - LLC Inter - Telekom
- OJSC Navigation – information system - LLC Inter - net
- LLC SITRONICS - microdezign - LLC Inter TV -Shuya
- LLC Aventa Realty - LLC Inter-TV
- CJSC “Real estate agency Sistema Hals” - CJSC Ivanova Cable Network
- CJSC Management company Active management - LLC Group of company Sallak
- CJSC “Business park Novaia Riga” - LLC Telecommunication company Elkom - service
- LLC Hals - Architecture - LLC Euro Tel
- LLC Hals - Garant - LLC Bioritm
- LLC Hals - Prof - LLC Skart
- CJSC Hals - Finance - LLC Elektronika
- LLC Geokom - LLC Telesat
- CJSC Glavmontagespetsstroy - CJSC Teleradiotechnika
- LLC “Detskiy Mir - Development” - CJSC Stream - TV
- Zhilstroyindustriya - CJSC Stream - Content
- LLC Zdravnitsa – Laif - TOO RA Maxima KZ
- LLC Investicirni Rezerv - CJSC PBC (Russian World Studios)
- LLC Corporate Investments” - CJSC Binofarm
- LLC Merkuriy - CJSC Medico - Technological holding
- LLC Michurenskiy 39 - CJSC MT - MTH
- LLC Proekt Aviatsionnaya - CJSC NPO Tovarishestvo Orgsintez - I
- SMM -TV - Pharmapek
- LLC Proekt Artekovskaia - Mapichem
- LLC Proekt Babaevskaya - LLC Fita Line
- LLC Proekt Vavilova - LLC Valeksfarm
- LLC Proekt Davydova - Bi – Prom
- LLC Proekt Dem’yana Bednogo - Concern “RTI Sistemi
- LLC Proekt Dubininskaya - RTI im Mintsa
- LLC Proekt Zhukova - RTI Radio
- LLC Proekt Zelenodolskaya - Saranskiy televizionnyiy zavod
- LLC Proekt Kastanaevskaya - Vyimpel - S
- LLC Proekt Klenoviy - OJSC MTU Saturn
- LLC Proekt Krasnosel’skiy - Yaroslavskiy radiozavod
- LLC Proekt Krasnostudencheskiy - NIIDAR
- LLC Proekt Leninskiy - OJSC Mednogorskiy elecrotechnical plant Uralelectro
- LLC Proekt Lomonosovskiy - CJSC Uralelektro - K
- LLC Proekt Luysinovskaya - OJSC DMZ - Kamov
- LLC Proekt Nagatinskaya 4g - LLC Uralinstrument
- LLC Proekt Nastas’inskiy - LLC Alianz KD
49
 - LLC Proekt Octyabr’skaya - CJSC Uralelektro - CTM
- LLC Proekt Sevastopol’skiy - LLC OKB - Planeta
- LLC Proekt Sel’skohozyayistvennaya - CJSC NPK High technology and strategy systems
- LLC Proekt Simferopol’skiy - CJSC MedSi
- LLC Proekt Snezhnaya - OJSC Medsi Holding
- LLC Proekt Usievicha - OJSC Medsi II
- LLC Proekt Fotievoy - CJSC Group of company Medsi
- LLC Proekt Sh’epkina - CJSC Company Medexpress
- LLC Proekt Yaroslavskoe - LLC Medical Centre ROSNO
- LLC Profalyance - CJSC Hospital Zapad
- LLC Terra - LLC Saxalin ekstrenno medical assistance
- CJSC Elestroy M - LLC American Hospital Group
- LLC Art-Gals - CJSC Corporation of family medicine
- CJSC “Bolshoy City - CJSC Medsi fitness
- LLC Vilina - OJSC Sistema Finance Investments
- LLC Hals - Invest - LLC Manej 13/1
- CJSC Hals - Tehnopark - Desantis
- OJSC Hotel Korona Intourist - Sheton Investing Corp.
- LLC Detskiy Mir Krasnoyarsk - Sistema Capital S.A.
- LLC Zemli Poselenii - Sistema Finance S.A.
- CJSC Invest Prof - OJSC NTR Region
- CJSC Sistema-Hals Invest - OJSC Reestr
- LLC Korona Invest - CJSC R-Brok
- LLC Sistema Gals management - Non-government pension fund Sistema
- OJSC Tamanskaya 2 - LLC Davidov place
- CJSC Triada Invest - OJSC Sistema Venture
- CJSC Yaht club proekt - OJSC Asset management Dubna-Sistema
- LLC Alianz Bud - LLC Notris
- CJSC Biznesstroymonolit - CJSC Lamineia
- LLC HalsOblStroy - CJSC DBD place
- CJSC Hals - Story Severo-Zapad - CJSC Promtorg centre
- LLC Gorky-8 - OJSC CTT Sistema Sarov
- LLC Istochnik - CJSC System project
- CJSC Hals - Story Yug - OJSC TC Retail (transferred in business line “Telecommunications)
- LLC Landshaft II - OJSC Systema Leasing
- CJSC Landshaft - CJSC Investitsionnaya Pensionnaya Company
- OJSC Noviy gorodskoy tsentr - OJSC Noel’
- CJSC Prestizh - CJSC Finconsultproekt
- CJSC Promresurs - CJSC Fintehresours - M
- CJSC RemStoyTrest - 701 - CJSC Fineskort - M
- LLC SIB - BROK - CJSC Sistema - Invenchur
- LLC Sistema Hals Ukraine - OJSC Sistema - Invest
- LLC Sistema Hals Privolzh’e - CJSC Cottagestroy
- OJSC Sistema - Temp - ECU GEST
- LLC City - Service - Mardenhead Limited
- OJSC TRK Kazan - Siviera
- CJSC Eksperimental’niy zavod napitkov v Khamovnikah - Lytton Management
- OJSC Yaltinskiy rybokombinat - Bengala Holdings Corp.
- Sapidus Holdings - Brentington Trading Limited
50
 - Deus Holdings Limited - Hurdsfield Corporation
- Galtiemo Trading Limited - Ober
- Bariety Holding Limited - Areva
- Celosita Holding Limited - Sistema Holding (Cyprus)
- OJSC Baidging-Invest - Zeta Telecom
- LLC Sistema – Hals TSENTR - CJSC Vedeofon MB
- CJSC Hals - Service - CJSC Olympic System
- CJSC Hals - Stroy - Partnership CJSC New sport company and company
- OJSC Investicii v razvitie tehnologiy

Related Par ty Transactions during the year (Amount in Rupees ‘000)

Name of Party Relationship Description April 1, 2008 to Balance as at April 1, 2007 to Balance as at
March 31, 2009 March 31, 2009 March 31, 2008 March 31, 2008
JSFC Sistema Holding Company Car Hire Charges 2,533 1,020
Sales of Car 980 -
Unsecured Loan Taken 11,420,650 -
Security Deposit Received 4,000 -
Issue of Equity 14,820,000
Interest on Loan 279,363 -

Balance as on March 31,

2009 : (Payable)/Receivable
Loan (11,665,600)
Security Deposit (4,000)
Car Hire Charges 292
Others (2) 151

Shyam Internet Services Wholly Owned Internet Charges 3,685 344

Limited Subsidiary Company Leaseline Revenue 14,779 15,197

Balance as on March 31,

2009 : (Payable)/Receivable 19,442 10,318

Intracom S.A Telecom Fellow Subsidiary Purchase of Equipments 230,107 -

Solutions Project Services received 66,352 -

Interest incurred 6,224 -

Balance as on March 31,

2009 : (Payable)/Receivable (315,957) -

OJSC Intellect Telecom Fellow Subsidiary Project Consultancy 261,940 -

Balance as on March 31,

2009 : (Payable)/Receivable - -

Sitronics Telecom Solutions Fellow Subsidiary Purchase of Equipments 236,849 -

Balance as on March 31,

2009 : (Payable)/Receivable (236,849) -

OJSC Mobile Telesystems Fellow Subsidiary Consultancy Charges 14,192 -

Balance as on March 31,

2009 : (Payable)/Receivable - -

Mr. Vsevolod Rozanov Key Managerial Personnel Managerial Remuneration 25,870 -

Balance as on March 31,

2009 : (Payable)/Receivable - -

51
19. Leases

a) Where the Company is a lessee

The Company has entered into various lease agreements for leased premises, which expire at various dates over the next
ten years. Lease rental expense for the year was Rs 167,654 thousand (2008 - Rs 139,262 thousand). Further, the
Company has entered into infrastructure sharing agreement with Telecom Operators for a period of ten years. Infrastructure
sharing expense for the year is Rs 494,616 thousand (2008 - Rs 28,118 thousand).

Future lease payments under operating leases are as follows:

(Amount in Rupees ‘000)

2009 2008

Payable not later than one year 1,118,746 65,604

Payable later than one year and not later than five years 4,356,216 353,162

Payable later than five years 4,138,294 147,740

——————
—————— ——————
——————

The escalation clause includes escalation at various periodic levels ranging from 0 to 15% includes option of renewal from
0 to 6 years and there are not restrictions imposed on lease arrangements.

b) Where the Company is a lessor

(i) Infeasible Right to Use (IRU)

During the year ended March 31, 2005, the Company has entered into Indefeasible Right of Use contract for use of optical
fibre with telecom operators for a period of 15 years The gross carrying amount and accumulated depreciation of the
optical fibre is Rs 237,594 thousand (2008 - 237,594 thousand) and Rs 70,502 thousand (2008 - 58,622 thousand). The
income and depreciation recognised in the Profit and Loss for the year is Rs 12,837 thousand (2008 -Rs 12,837 thousand)
and Rs 11,880 thousand (2008 - Rs 11,880 thousand) respectively.

Future minimum lease receipts under operating leases are as follows:

(Amount in Rupees ‘000)

2009 2008

Recoverable not later than one year 12,837 12,837

Recoverable later than one year and not later than five years 64,186 64,186

Recoverable later than five years 67,362 80,199

——————
—————— ——————
——————

(ii) The Company has also entered into an agreement to take optical fibre in exchange on IRU basis for a period of 15 years.
Due to the nature of the transaction, it is not possible to compute gross carrying amount, depreciation for the year and
accumulated depreciation of the asset given on operating lease as at March 31, 2008 and accordingly, disclosures required
by AS 19 is not provided.

(iii) Infra sharing

The Company has entered into infrastructure sharing agreement to lease its network infrastructure (Gross book value
Rs 61,036 thousand and net book value Rs 7,214 thousand) with telecom operators. Infrastructure sharing income for the
year is Rs 29,239 thousand (2008 - Rs 27,178 thousand).

52
 Future lease receipts under operating leases are as follows:
(Amount in Rupees ‘000)
2009 2008
Receivable not later than one year 29,239 10,441
Receivable later than one year and not later than five years 69,317 81,227
Receivable later than five years 173,293 173,293
——————
—————— ——————
——————

(iv) Car Hire Agreement

The Company entered into car hiring agreement to lease a car (Gross book value Rs 2,423 thousand and Opening Net
book value Rs 2,181 thousand) with a company for a period of three years. Another car hiring agreement was entered
during the year for a period of three years, which is having Gross book value of Rs 8,433 thousand and accumulated
depreciation of Rs 1,414 thousand. Car Hiring income for the year is Rs 2,416 thousand (2008 - Rs 970 thousand).

Future lease receipts under operating leases are as follows:

(Amount in Rupees ‘000)

2009 2008
Receivable not later than one year 3,360 1,944
Recoverable later than one year and not later than five years 5,600 -
Recoverable later than five years - -
——————
—————— ——————
——————

(v) Rental Agreement

The Company has entered into leasing agreement to lease two flats with a company for a period of two years Rental
income for the year is Rs 180 thousand (2008 - Rs 90 thousand).

Future lease receipts under operating leases are as follows:

(Amount in Rupees ‘000)

2009 2008
Receivable not later than one year 90 180
Recoverable later than one year and not later than five years - -
Recoverable later than five years - -
——————
—————— ——————
——————
20. Loss per Share
Particulars 2009 2008
Net loss as per profit and loss account (Rupees in thousand) 5,906,476 1,811,748
Net loss for calculation of diluted EPS (Rupees in thousand) 5,906,476 1,811,748
Weighted average number of equity shares in calculating basic EPS 2,072,395,856 455,957,500
Weighted average number of equity shares in calculating diluted EPS 2,072,395,856 455,957,500
Loss per Share (equity shares, par value of Rs 10 each)
Basic (in Rs) 2.85 3.97
Diluted (in Rs) 2.85 3.97
The share capital of the Company does not include any future dilutive equity shares, it only comprises of equity share capital
hence the basic and dilutive loss per share is same.

53
21. Particulars of Unhedged Foreign Currency Exposure as at March 31, 2009
Particulars Amount in Amount in
Rs ‘000 USD ‘000
Import Creditors 6,422,723 126,631
Loan 12,613,371 248,686
Interest 209,721 4,135
—————— —————
To t a l 19,245,815 379,452
Note: Closing exchange rate is Rs 50.72 per USD

22. Business Start up/Expansion Cost

During the year, the Company has incurred Rs 897,628 Thousand (2008 – Rs 40,676 thousand) on development of business plan
and expansion of its operations in new circles other than Rajasthan circle. Accordingly, Business start-up/expansion cost
includes the following and has been separately disclosed.
(Amount in Rupees ‘000)

Particulars 2009 2008

Salaries, Wages & Bonus 50,381 15,133
Contribution to provident & other fund 3,962 1,154
Advertisement & Publicity Expenses 35,517 1,200
Sales Promotion Expenses - 801
Rent 13,994 9,209
Travelling & Conveyance Expenses 10,526 3,842
Legal, Professional & Consultancy Fees 484,485 8,896
Network Operating Expenses 266,622 0
Others 32,141 441
————— —————
To t a l 897,628 40,676

23. Licenced Capacity, Installed Capacity and Actual Production

Due to the nature of its activities, the Company is not subject to industrial licensing and the clause related to licenced capacity,
installed capacity and actual production is not applicable.

24. The Company has appointed independent consultants for conducting Transfer Pricing study to determine whether the transactions
with associate enterprises were undertaken at “arms length prices”. Adjustments, if any arising from the transfer pricing study
shall be accounted for as and when study is completed. As per the management of the Company, all international transactions
with associate enterprises are undertaken at negotiated contracted prices on usual commercial terms.

25. Prior Year Comparatives

Prior year comparatives have been reclassified, where necessary, to conform with current year’s presentation.

As per our report of even date

For S. R. Batliboi & Associates For and on behalf of the Board of Directors
Char tered Accountants

per Prashant Singhal Vsevolod Rozanov Alok Tandon

Partner Whole Time Director - President & CEO Managing Director
Membership No: 93283

Place : Gurgaon Sergey Savchenko Rashid J Malik

Date : July 16, 2009 Chief Financial Officer Company Secretary

54
BALANCE SHEET ABSTRACT AND COMPANY’S GENERAL BUSINESS PROFILE

i REGISTRATION DETAILS

Registration No. 1 7 7 7 9 State Code 1 7

Balance Sheet Date 3 1 0 3 2 0 0 9

ii CAPITAL RAISED DURING THE YEAR (Amount in Rs. Thousand)

Public Issue Right Issue

N I L N I L
Bonus Issue Private Placement
N I L 2 0 0 0 0 0 0 0
iii POSITION OF MOBILISATION AND DEPLOYMENT OF FUNDS (Amount in Rs. Thousand)

Total Liabilities Total Assets

5 6 9 2 9 0 8 5 5 6 9 2 9 0 8 5
SOURCES OF FUNDS

Paid up capital Reserve & Surplus

2 4 5 5 9 5 7 5 6
Secured Loans Unsecured Loans

7 5 7 1 3 9 3 1 5 0 1 2 5 4 2

APPLICATION OF FUNDS

Net Fixed Assets (including capital work in progress) Net Intangible Assets

1 2 0 9 5 5 6 5 1 7 9 8 9 8 5 9
Investment Net Current Assets
7 5 2 6 1 0 4 8 5 9 7 9
Misc. Expenditure Accumulated Losses
N I L 1 2 1 2 3 2 4 6

iv PERFORMANCE OF COMPANY (Amount in Rs. Thousand)

Turnover (Including other income ) Total Expenditure

1 2 7 5 8 7 9 7 1 6 9 3 0 5
Loss Before Tax Loss After Tax

5 8 9 3 4 2 6 5 9 0 6 4 7 6
Earning Per Share in Rs. Dividend Rate
- 2 . 8 5 N I L

v GENERIC NAMES OF THREE PRINCIPAL PRODUCTS / SERVICES OF COMPANY

( As per monetary terms )

Product Description Item Code

Telephony Services Not applicable

55
 STATEMENT REGARDING SUBSIDIARY COMPANY PURSUANT TO
SECTION 212 OF THE COMPANIES ACT, 1956

1. Name of the Subsidiary Company Shyam Internet Services Limited

2. Financial Year of the Subsidiary Company ended on 31st March, 2009

3. Financial Year of Holding Company ended on 31st March, 2009

4. Holding Company’s Interest as on 31.03.09 100%

5. Net aggregate amount of profit / (loss) of the Subsidiary Holders of the entire issued, subscribed & paid up
Company so far as it concerns the members of Sistema Shyam Equity share capital of 750000 shares of Rs 10 each.
TeleServices Limited.

(a) Not dealt with the accounts of Sistema Shyam TeleServices

Limited.

(i) For the subsidiary’s financial year ended on 31.03.09 Rs (57,56,529)

(ii) For the previous subsidiary’s financial year of Rs (70,89,812)

subsidiary’s since it became Subsidiary of Sistema
Shyam TeleServices Limited.

(b) Dealt with the accounts of Sistema Shyam TeleServices Nil

Limited.

(i) For the subsidiary’s financial year ended on 31.03.2009 Nil

(ii) For the previous subsidiary’s financial year of

subsidiary’s since it became Subsidiary of Sistema
Shyam TeleServices Limited.

6. Material changes which have occurred between the Nil

end of financial year of the Subsidiary Company and the
end of the holding company’s financial year in respect of :

(a) Fixed Assets (including capital work in progress of the

subsidiary company)

(b) Investment of subsidiary company.

(c) Money lent by subsidiary company.

(d) Money borrowed by Subsidiary company for any purpose

other than that of meeting current liabilities.

56
 Shyam Internet Services Ltd.
D I R E C TO R S ’ R E P O RT
Dear Members,
Your Directors are pleased to present the 9th Annual Report
on the Business and the Operations of the Company together
with the Audited Annual Accounts for the Financial Year ended
31st March, 2009.
CORPORATE REVIEW
During the year under review, Company has registered a Revenue
of Rs.1.31 crores and Net Loss for the year is Rs.0.58 crores.
Your Company is Category “B” ISP and is running internet
services in 131 cities with brand name “Infinity” possessing
aggressive, hard core technical, loyal and dedicated team to satisfy
requirements of its customers and provide strong support.
Infinity is equipped with world class infrastructure, with
dedicated Optical Fiber Cables, Digital Modems, Fully Automated
Helpdesk, a Users-to-Lines Ratio conforming to global
standards and the promise of a Multi flavored Internet Access.
Your Company is having over 32,600 Internet customers.
The Company has applied to Department of Telecommunications
(DoT) for category ‘A’ ISP license for providing Internet Services
on all India basis. On receipt of category ‘A’ ISP license your
Company would be spreading its world-class services offering
multi flavoured Internet access to Pan India Internet subscribers.
DIVIDEND
In view of loss during the year under review, your Directors
regret their inability to recommend any dividend.
D I R E C TO R S
As per the provisions of the Companies Act, 1956,
Mr. Dharmender Dhingra, Director of the Company retires by
rotation at the ensuing Annual General Meeting and being eligible
offers himself for re-appointment.
FIXED DEPOSITS
Your Company has not accepted deposits from public under
Section 58A of the Companies act.
AUDITORS AND AUDITORS’ REPORT
M/s Mehra Goel & Co., Chartered Accountants, retiring
Auditors of the Company, expressed their willingness to
continue as Auditors, if reappointed at the ensuing Annual
General Meeting.
The Company has received from the Auditors a certificate to
this effect that their appointment, if made would be within the
prescribed limits under section 224(1B) of the Companies
Act, 1956.
The notes to the accounts referred to in the Auditors’ Report
are self-explanatory and therefore, does not call for any further
comment.
DIRECTORS’ RESPONSIBILITY STATEMENT
In terms of the provisions of Section 217(2AA) of the
Companies Act, 1956 your Directors confirm as under that:
i. In the preparation of the annual accounts, the applicable
accounting standards have been followed.
ii. Appropriate accounting policies have been selected and
applied consistently and judgment and estimates that are
reasonable and prudent have been made so as to give a true
and fair view of the state of affairs of the Company at the
end of the financial year ended March 31, 2009 and of the
Loss of the Company for the year ended on that date.
iii. Proper and sufficient care for the maintenance of adequate
accounting records in accordance with the provisions of
the Companies Act, 1956 for safeguarding the assets of the
Company and for preventing and detecting fraud and other
irregularities have been taken.
iv. The annual accounts have been prepared on a “going concern
basis”.
PARTICULARS OF EMPLOYEES
There was no employee as per the provisions of Section 217
(2A) of the Companies Act, 1956, getting a remuneration
aggregating Rs.24,00,000/- or more per annum if employed
throughout the year and Rs.2,00,000/- per month or more if
employed for a part of the year.
PARTICULARS OF CONSERVATION OF ENERGY,
TECHNOLOGY ABSORPTION AND FOREIGN
EXCHANGE EARNINGS & OUTGO
Particulars with respect to Conservation of Energy, Technology
Absorption and Foreign Exchange Earnings and Outgo, as per
Section 217(1)(e) of the Companies Act, 1956 read with the
Companies (Disclosure of Particulars) Rules, 1988 are given
below :
a ) Conservation of Energy
Your Company is an Internet service provider requires
minimal energy consumption and every effort has been
made to ensure the optimal use of energy, avoid waste and
conserve energy as far as possible.
b ) Technolog y Absorption, Adaptation and
Innovation
The Company has not imported technical know-how. Your
Company has not yet established any separate R&D
facilities.
c ) Foreign Exchange Earnings & Outgo
The Company has not earned any foreign currency but has
incurred expenditure in foreign currency of Rs. 1.15 Lacs
(Previous Year Rs.1.08 Lacs) during the financial year.
COMPLIANCE CERTIFIC ATE
The Company has obtained a Compliance Certificate from
Practicing Company Secretary, pursuant to provision of section
383A of the Companies Act, 1956.
ACKNOWLEDGEMENT
Your Directors acknowledge with gratitude the assistance, Co-
operation and support received by the Company from the
Department of Telecommunication, various State and Central
Government Authorities and the Banks.
For & on behalf of the Board of Directors
Place: New Delhi Dharmender Dhingra
Date: June 18, 2009 Chairman of the Meeting
57
 Shyam Internet Services Ltd.
A U D I TO R S ’ R E P O R T
TO
THE MEMBERS OF SHYAM INTERNET SERVICES
LIMITED
1 . We have audited the attached Balance Sheet of SHYAM
INTERNET SERVICES LIMITED as at 31st March, 2009,
and also the Profit & Loss Account and the cash flow
statement of the Company for the year 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 the 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 the 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), 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 paragraph 4 and 5 of
the said order.
4 . Further to our comments in the Annexure referred to in
paragraph 3 above, we report that:-
(a) We have obtained all the information and explanations,
which to the best of our knowledge and belief were
necessary for the purposes of our audit;
(b) In our opinion, proper books of account as required
by law have been kept by the company so far as appears
from our examination of those books;
(c) The Balance Sheet, Profit and Loss Account and Cash
Flow Statement dealt with by this report are in
agreement with the books of account;
(d) In our opinion, the Balance Sheet, Profit & Loss Account
and Cash Flow Statement dealt with by this report
comply with the Accounting Standards referred to in
sub-section (3C) of section 211 of the Companies Act,
1956;
(e) On the basis of written representations received from
the directors as on 31st March, 2009 and taken on
record by the Board of Directors, we report that none
of the directors is disqualified as on 31st March 2009
from being appointed as a director in terms of clause
58
(g) of sub-section (1) of section 274 of the Companies
Act, 1956;
(f) In our opinion, and to the best of our information and
according to explanations given to us, read with Notes
on Accounts (Schedule: 9), the said accounts give
the information required by the Companies Act, 1956,
in the manner so required and give a true and fair view
in conformity with the accounting principles generally
accepted in India:
i. In the case of the Balance Sheet, of the state of
affairs of the company as at 31st March, 2009;
ii. In the case of the Profit and Loss Account, of the
Loss for the year ended on that date.
iii. In the case of the Cash Flow Statement, of the
cash flows for the year ended on that date.
For Mehra Goel & Co.
Chartered Accountants
Place: New Delhi R.K.MEHRA
Date: June 18, 2009 Partner
M. No. 6102
ANNEXURE
(Referred To In Paragraph 3 of Our Report of Even
Date)
I. The Company has maintained proper records showing
full particulars, including quantitative details and situation
of fixed assets. The fixed assets covering significant value
have been physically verified by the management during
the year, which in our opinion is reasonable, having
regard to the size of the Company and the nature of its
assets. On the basis of the information and explanations
given by the management, no material discrepancies have
been noticed on such verification.
No substantial part of fixed assets has been disposed off
during the year, which has affected the going concern.
II. The company is in the business of providing internet
services. Accordingly clause 4 (ii) relating to physical
verification of inventory is not applicable on the company.
III. To the best of our knowledge and according to the
information and explanations given to us, the Company
has not taken/granted any loans, secured/unsecured from/
to companies, firms or other parties listed in the register
maintained under Section 301 of the Companies Act,
1956.
I V. In our opinion and according to the information and
explanations given to us, there are adequate internal
 Shyam Internet Services Ltd.
control procedures commensurate with the size of the
Company and the nature of its business for the purchase
of machinery, equipment and other assets and for the
provision of the services, inventory, fixed assets and
with regard to services rendered. During the course of
our audit, no major weakness has been noticed in the
internal controls.
V. In our opinion and according to the information and
explanations given to us, there are no transactions made
in pursuance of contracts or arrangements entered in
the register maintained under section 301 of the
companies act, 1956.
VI. To the best of our knowledge and according to
the information and explanations given to us, the
Company has not accepted any deposits covered under
Section 58 A and 58 AA of the Companies Act, 1956.
VII. To the best of our knowledge and as per the information
and explanations given to us, the Company has a
reasonable internal audit system commensurate with
its size and nature of its business. However the same
needs to be strengthened.
VIII. The central government has under clause (d) of sub
section (1) of section 209 of the Companies Act, 1956,
prescribed maintenance of cost records for the company.
We are of the opinion that prima facie the prescribed
accounts and records have been maintained and are being
made up. We have, however, not made nor we are
required to carried out any detailed examination of
records with the view to determine whether they are
accurate or complete.
IX. To the best of our knowledge and according to the
information and explanations given to us, the Company
is generally regular in depositing undisputed statutory
dues namely Investor Education and Protection fund,
Wealth Tax, Custom Duty, Service Tax, Excise Duty, Cess
and any other statutory dues, where applicable with the
appropriate authorities. There were no arrears of
outstanding statutory dues at the last day of financial
year for a period of more than six months from the date
they became payable.
Further according to the information and explanations
given by the management, there were no disputed dues
of sales tax, income tax, custom duty, wealth tax, excise
duty and cess as on the balance sheet date.
X. The company’s accumulated losses at the end of the
financial year are more than fifty percent of its net worth.
Further the company has not incurred cash losses during
the financial year. In the immediately preceding financial
year the company had incurred cash loss.
XI. In our opinion, the Company has not defaulted in
repayment of dues to Financial Institutions or banks or
debenture holders.
XII. On the basis of verification of accounts and records
maintained by the Company and to the best of our
knowledge & belief, the Company has not granted any
loans and advances on the basis of security by way of
pledge of shares, debentures and other securities.
X I I I . In our opinion, and to the best of our information and
according to the explanation by the management, we are
of the opinion that the company is neither a chit fund
nor a nidhi /mutual benefit fund/ society. Therefore the
provisions of the clause 4 (xiii) of the order are not
applicable to the company.
X I V. To the best of our knowledge and according to
information given to us, the Company is not dealing or
trading in shares, securities and other investments.
Accordingly the provisions of clause 4 (xiv) or the order
are not applicable to the company.
X V. To the best of our knowledge and according to the
information and explanation given to us, the Company
has not given any guarantee for loans taken by others
from Banks / Financial Institutions.
X V I . To the best of our knowledge and according to the
information and explanations given to us, Company had
not taken any term loan during the previous year.
X V I I . According to the Cash Flow Statement and other
records examined by us and information and
explanations given to us, on an overall basis, funds raised
on short term basis have, prima facie, not been used
during the year for long term investment.
X V I I I . According to the information & explanations given to
us, the Company has not made any preferential allotment
of shares during the year to parties and companies
covered in the Register maintained under Section 301
of the Companies Act, 1956.
X I X . According to the information & explanations given to
us, the Company has not issued any debentures during
the year.
XX. According to the information & explanations given to
us, the Company has not raised any money by Public
Issue during the year.
X X I . Based upon the audit procedure performed and
information and explanations given by the management,
we report that no fraud on or by the company has been
noticed or reported during the year.
For Mehra Goel & Co.
Chartered Accountants
Place: New Delhi R.K.MEHRA
Date: June 18, 2009 Partner
M. No. 6102
59
 Shyam Internet Services Ltd.

BALANCE SHEET AS AT 31 ST MARCH, 2009

SCHEDULE AS AT AS AT
N O. March 31, 2009 March 31, 2008
(Rupees) (Rupees)
I. SOURCES OF FUNDS —————— —————— ——————
SHARE HOLDER’S FUNDS
(a) Share Capital 1 7,500,000 7,500,000
(b) Advance Against Share Capital 1,466,020 1,466,020
Reserve and Surplus
Profit And Loss Account - -
—————— ——————
TOTAL 8,966,020 8,966,020
——————
—————— ——————
——————

I I . APPLIC ATION OF FUNDS

FIXED ASSETS 2
(a) Gross Block 14,741,098 14,741,098
(b) Depreciation 13,121,786 12,497,841
—————— ——————
(c) Net Block 1,619,312 2,243,257

INVESTMENT 3,000 3,000

CURRENT ASSETS ,LOANS AND ADVANCES

(a) Sundry Debtors 3 1,477,923 2,786,634
(b) Cash & Bank Balances 4 4,214,354 3,685,707
(b) Loans and Advances 5 6,287,734 2,757,812
—————— ——————
11,980,011 9,230,153
Less:
CURRENT LIABILITIES & PROVISIONS
(a) Current Liabilities 6 23,232,738 15,350,296
—————— ——————
23,232,738 15,350,296
NET CURRENT ASSETS (11,252,726) (6,120,143)

MISCELLANEOUS EXPENDITURE
(To the extent not written off or adjusted)
Profit and Loss account 18,596,435 12,839,906
—————— ——————
TOTAL 8,966,020 8,966,020
——————
—————— ——————
——————

SIGNIFICANT ACCOUNTING POLICIES 9

& NOTES TO ACCOUNTS

As per our report of even date attached

For MEHRA GOEL & CO. For and on behalf of the Board of Directors
Chartered Accountants

R K Mehra Suneel Vohra Dharmender Dhingra

Partner Director Director
M.No. 6102

Place: New Delhi

Date : June 18, 2009

60
 Shyam Internet Services Ltd.

PROFIT & LOSS ACCOUNT FOR THE PERIOD ENDED 31 ST MARCH, 2009

SCHEDULE For The Year For The Year

Ended Ended
N O. March 31, 2009 March 31, 2008
(Rupees) (Rupees)
—————— —————— ——————
INCOME
Services & Other Income 7 13,048,508 16,057,775
—————— ——————
13,048,508 16,057,775
——————
—————— ——————
——————

EXPENDITURE
Operating Expenditure 8 18,181,092 22,282,418
—————— ——————
18,181,092 22,282,418
——————
—————— ——————
——————

PROFIT BEFORE DEPRECIATION (5,132,584) (6,224,643)

Less : Depreciation 623,945 865,169

PROFIT/(LOSS) BEFORE TAX (5,756,529) (7,089,812)

PROVISION OF INCOME TAX
Current Tax - -
PROFIT/(LOSS) AFTER TAX (5,756,529) (7,089,812)
Profit/(Loss) Carried forward from Previous Year (12,839,906) (5,750,094)
PROFIT/(LOSS) CARRIED FORWARD TO BALANCE SHEET (18,596,435) (12,839,906)
Profit/ (Loss) for the Year (5,756,529) (7,089,812)
Weighted average number of ordinary equity shares 750,000 750,000
Advance received for equity shares 1,466,020 1,466,020
Dilutive Potential Equity Shares 146,602 146,602
Number of Equity shares used to compute diluted earning per share 896,602 896,602
Basic earning per share (7.68) (9.45)
Diluted earning per share (6.42) (7.91)
Nominal Value of equity share 10.00 10.00

SIGNIFICANT ACCOUNTING POLICIES 9

& NOTES TO ACCOUNTS

As per our report of even date attached

For MEHRA GOEL & CO. For and on behalf of the Board of Directors
Char tered Accountants

R K Mehra Suneel Vohra Dharmender Dhingra

Partner Director Director
M.No. 6102

Place: New Delhi

Date : June 18, 2009

61
 Shyam Internet Services Ltd.

CASH FLOW STATEMENT FOR THE YEAR ENDED AS ON 31ST MARCH, 2009
Current Year Previous Year
(Rupees) (Rupees)
——————— ———————
A. CASH FLOW FROM OPERATING ACTIVITIES
Net Profit before Tax and before prior period/ extra ordinary items (5,756,529) (7,089,812)
Adjustment for :
Depreciation 623,945 865,169
Expenses amortised - -
Interest Received (311,000) (272,000)
Operating profit before working capital change (5,444,584) (6,497,643)
Adjustment for :
(Increase)/ Decrease in Trade and Other Receivables (1,950,917) (3,405,000)
Increase /(Decrease) in Trade Payable 7,882,442 7,592,000
Sundry balances written off (2,665) 332,633

Cash Generated from operations 486,941 (2,310,643)

Sundry balances written off 2,665 (332,633)
Direct Taxes refund/(paid) (Inclusive of TDS) (249,408) (137,000)
Cash flow before prior period items 237,533 (2,447,643)
Net Cash (used in)From Operating Activities 237,533 (2,447,643)

B CASH FLOW FROM INVESTING ACTIVITIES

(Purchase)/Sale of Fixed Assets - 131,000
Purchase of Investment - -
Interest Received(Net of TDS) 290,114 240,000
Net cash (used in) / from investing activities 290,114 371,000

C CASH FLOW FROM FINANCING ACTIVITIES

Net cash (used in) / from Financing Activities - -
Net increase/(Decrease) in cash and cash equivalents (A+B+C) 527,647 (2,075,643)
Cash and cash equivalents at beginning of the Period 3,686,000 5,762,000
Cash and cash equivalents at the end of the Period 4,214,354 3,686,000

As per our report of even date attached

For MEHRA GOEL & CO. For and on behalf of the Board of Directors
Char tered Accountants

R K Mehra Suneel Vohra Dharmender Dhingra

Partner Director Director
M.No. 6102

Place: New Delhi

Date : June 18, 2009

62
 Shyam Internet Services Ltd.

SCHEDULES FORMING PART OF THE ACCOUNTS

AS AT AS AT
March 31, 2009 March 31, 2008
(Rs.) (Rs.)
——————— ———————
SCHEDULE - 1
SHARE C APITAL
Authorised Capital
7,50,000 Equity Shares of Rs.10/- each. 7,500,000 7,500,000

Issued, Subscribed and Paid up Capital

7,50,000 Equity Shares of Rs.10/-each fully paid 7,500,000 7,500,000
——————— ———————
7,500,000 7,500,000
———————
——————— ———————
———————
SCHEDULE - 2
FIXED ASSETS

GROSS BLOCK DEPRECIATION NET BLOCK

S. Asset As On Additions Sold during As At As On During Adjustment Upto As at As at

No. 01 Apr 08 during The Year 31 Mar 09 01 Apr 08 The Year 31 Mar 09 31 Mar 09 31 Mar 08
The Year

(Rs.) (Rs.) (Rs.) (Rs.) (Rs.) (Rs.) (Rs.) (Rs.) (Rs.) (Rs.)

1 Plant & Machinery 14,709,598 - - 14,709,598 12,468,342 623,519 - 13,091,861 1,617,737 2,241,256
2 Computer 31,500 - - 31,500 29,499 426 - 29,925 1,575 2,001
TOTAL 14,741,098 - - 14,741,098 12,497,841 623,945 - 13,121,786 1,619,312 2,243,257
Previous Year 14,888,498 - 147,400 14,741,098 11,649,524 865,169 16,852 12,497,841 2,243,257 3,238,974

AS AT AS AT
SCHEDULE - 3 March 31, 2009 March 31, 2008
(Rs.) (Rs.)
SUNDRY DEBTORS ——————— ———————
Debts Outstanding for a period exceeding six months :
Unsecured Considered Doubtful 276,350 276,350
Debts Outstanding for a period less than six months :
Unsecured Considered Good 1,477,923 2,786,634
——————— ———————
1,754,273 3,062,984
Provision for Doubtful Debts (276,350) (276,350)
——————— ———————
1,477,923 2,786,634
———————
——————— ———————
———————
SCHEDULE - 4
CASH & BANK BALANCES
Cash in hand 28,322 27,183
Balance With Scheduled Banks in:
-in Current Account 736,927 499,204
-in Term Deposits 3,341,202 3,159,320
Interest Accrued on FDR 107,903 -
——————— ———————
4,214,354 3,685,707
———————
——————— ———————
———————
SCHEDULE - 5
LOANS AND ADVANCES
(Unsecured considered Good)
Advances recoverable in cash or in Kind or for value to be received 5,243,050 1,983,422
Advance Tax (Net) 1,044,684 774,390
——————— ———————
6,287,734 2,757,812
———————
——————— ———————
———————
63
 Shyam Internet Services Ltd.

SCHEDULES FORMING PART OF THE ACCOUNTS

AS AT AS AT
March 31, 2009 March 31, 2008
SCHEDULE - 6 (Rs.) (Rs.)
——————— ———————
CURRENT LIABILITIES & PROVISIONS
Current Liabilities
Sundry Creditors 21,240,590 11,035,280
Unaccrued Revenue 945,861 2,124,595
Other Liabilities 1,046,287 2,190,421
——————— ———————
23,232,738 15,350,296
———————
——————— ———————
———————

SCHEDULES FORMING PART OF THE PROFIT & LOSS ACCOUNT FOR THE YEAR ENDED
31st MARCH, 2009
For The Year For The Year
Ended Ended
March 31, 2009 March 31, 2008
(Rs.) (Rs.)
——————— ———————
SCHEDULE - 7
SERVICES AND OTHER INCOME
Revenue from Internet Services* 12,737,837 15,786,026
Interest on deposits ** 310,671 271,749
——————— ———————
* TDS deducted Rs.239261 /-(Previous Year Rs.444812 /-) 13,048,508 16,057,775
———————
——————— ———————
———————
** TDS deducted Rs.20886 /-(Previous Year Rs.32244 /- )

SCHEDULE - 8
OPERATING AND OTHER EXPENDITURE
Bandwidth Charges 16,417,098 20,260,765
I.P. Annual Charges 115,372 107,899
Software Expenses 414,184 400,925
Insurance Expenses 15,337 16,517
Employee Cost 516,000 468,000
Auditors Remuneration:
- Audit fee 75,000 60,000
- Tax Audit fee 25,000 25,000
Bank Charges 8,766 4,022
Bank Gaurantee Charges - 45,408
Legal & Professional Charges 32,950 20,300
Printing & Stationery Expenses - 32,188
Repair & Maintenance Charges - 331,161
Equipment Hire Charges 443,500 60,600
Office Expenses 4,990 -
Office Rent 115,560 108,000
Sundry Balance W/o (2,665) 332,633
Rates And Taxes - 9,000
——————— ———————
18,181,092 22,282,418
———————
——————— ———————
———————
64
 Shyam Internet Services Ltd.

SCHEDULES FORMING PART OF THE ACCOUNTS

SCHEDULE - 9
I. SIGNIFICANT ACCOUNTING POLICIES
Background
The company has been granted the category ‘A’ license for operating Internet Services throughout the country on 16th November
2000 by the Department of Telecommunications. The company has converted the Licence to Category ‘B’ on 18th December 2003.
The License is granted initially for 15 years. The Company has started its services commercially from 1st November 2001 in state
of Rajasthan. On March 28,2008 the company has received Letter of Intent ( LOI) for award of Licence of providing Internet
services in All India service area.The Company is a wholly owned subsidiary of Sistema Shyam TeleServices Limited as at
31st March 2009.
1. BASIS FOR PREPARATION OF ACCOUNTS
Financial statements are prepared under historical cost convention on accrual basis of accounting and in accordance with
applicable accounting standards in India.
2. FIXED ASSETS
Fixed assets are stated at cost, net of CENVAT, wherever availed, less accumulated depreciation. All costs include borrowing
cost for bringing the assets to their working condition for their intended use.
3. REVENUE RECOGNITION
Revenue in respect of INTERNET access services is recognized over the period in which the related services are rendered.
4. DEPRECIATION
Depreciation on fixed assets is provided on written down value method at the rates and in the manner prescribed in
Schedule XIV to the Companies Act, 1956.
5. FOREIGN CURRENCY TRANSACTIONS
Transactions denominated in the foreign currencies are normally recorded at the exchange rate prevailing at the time of the
transaction. Monetary items denominated in foreign currencies outstanding at the year end are translated at the exchange rate
applicable as of that date. Non-Monetary items denominated in foreign currency are valued at the exchange rate prevailing on
the date of transaction. Any income or expenses on account of exchange difference, either on settlement or on translation,
is recognised in Profit & loss account.
Exchange difference on forward exchange contract is recognized in the statement of Profit & Loss account in the year in which
the exchange rate changes. Profit or loss arising on cancellation or renewal of forward exchange contracts are recognized as
income or expense for the year.
6. Intangible Assets
All expenditure on intangible items are expensed as incurred unless it qualifies as an intangible asset as defined in Accounting
Standard 26. The carrying value of intangible asset is assessed for recoverability by reference to the estimated future
discounted net cash flows that are expected to be generated by the asset. Where this assessment indicates a deficit, the assets
are written down to the market value or fair value as computed above.
7. Income Taxes
Tax expense comprises of current, deferred and fringe benefit tax. Current income tax and fringe benefit tax is measured at
the amount expected to be paid to the tax authorities in accordance with the Indian Income Tax Act. Deferred income taxes
reflects the impact of current year timing differences between taxable income and accounting income for the year and reversal
of timing differences of earlier years.
Deferred tax is measured based on the tax rates and the tax laws enacted or substantively enacted at the balance sheet date.
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 the company has carry forward of unabsorbed
depreciation and tax losses, deferred tax assets are recognised only if there is virtual certainty that such deferred tax assets
can be realised against future taxable profits. Unrecognised deferred tax assets of earlier years 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 realized.
8. Provision and Contingent Liabilities
Show Cause Notices issued by the various Government Authorities are not considered as obligation. Where the demand
notices are raised, the show cause notice, disputed by the company, are classified as possible obligation.

65
 Shyam Internet Services Ltd.

Provisions involving substantial degree of estimation in measurement are recognized when there is a present obligation as a
result of past event and it is probable that there will be an outflow of resources. Contingent liabilities are not recognized but
are disclosed in Notes.
II. NOTES TO ACCOUNTS
1 . The year’s operations have resulted into net loss. We are informed that the company’s revenues will increase on extending
internet service on all India basis. The parent company will infuse necessary funds required for all India operations. We have
therefore considered the company as going concern
2 . Contingent Liabilities (Rs. In Lacs)
Particulars 31.3.2009 31.3.2008

Financial Bank Guarantee 20.00 20.00

Performance Bank Guarantee Nil 4.45
To t a l 20.00 24.45

3. Expenditure in foreign currency

(Rs. In Lacs)
Particulars 31.3.2009 31.3.2008

Registration and Annual Fees 1. 15 1.08

4. Employee Benefits:
The company has not provided retirement benefits as the company has on its rolls less than 20 persons, the minimum for
applicability of P.F. and Gratuity. The provisions of AS-15 (Revised) 2006 issued by the Institute of Chartered Accountants of
India is not applicable. Hence the information & disclosures required under the said AS have not been furnished.
5. Deferred Taxes
The company is eligible for a tax holiday under section 80IA of the Indian Income Tax Act, 1961, beginning with the financial year
in which the Company started providing telecommunication services. No deferred tax liabilities on account of temporary
timing differences have been recognized since they are expected to reverse in the tax holiday period.
6. As certified by the company, in compliance with the Micro, Small and Medium Enterprises Development Act, 2006, the
company has called for the information from vendors. However, no response has been received till date. Hence, the desired
information has not been furnished.
7. Segmental Reporting
The primary reporting of the Company has been recognized on the basis of business segments. The Company has only one
business segment, which is providing internet services. Accordingly, the amounts appearing in these financial statements
relate of this primary business segment. Further, the Company provides services only in the state of Rajasthan and accordingly,
no disclosures are required under secondary segment reporting.
8. Related Party Disclosures (Rs. In Lacs)
Name of related Relations Nature of Tr a n s a c t i o n Outstanding Outstanding
party Tr a n s a c t i o n 31.03.2009 31.03.2008

Sistema Shyam Holding Revenue 23.37 194.42 103.18

Teleservices Ltd Company Payable Payable

Bandwidth 107.84
Charges
9. Previous Period figures have been regrouped and reclassified, wherever necessary, for comparative purpose.
10. Other information pursuant to paragraphs 3 & 4 of Part II of Schedule VI to the Companies Act, 1956 are NIL/ Not Applicable
to the company.
For MEHRA GOEL & CO. For and on behalf of the Board of Directors
Char tered Accountants

R K Mehra Suneel Vohra Dharmender Dhingra

Partner Director Director
M.No. 6102

Place: New Delhi

Date : June 18, 2009

66
 Shyam Internet Services Ltd.

BALANCE SHEET ABSTRACT AND COMPANY’S GENERAL BUSINESS PROFILE

i REGISTRATION DETAILS

Registration No. 1 0 5 6 2 5 State Code 5 5

Balance Sheet Date 3 1 0 3 2 0 0 9

ii CAPITAL RAISED DURING THE YEAR (Amount in Rs. Thousand)

Public Issue Right Issue

N I L N I L
Bonus Issue Private Placement

N I L N I L
iii POSITION OF MOBILISATION AND DEPLOYMENT OF FUNDS (Amount in Rs. Thousand)
Total Liabilities Total Assets

8 9 6 6 8 9 6 6
SOURCES OF FUNDS
Paid up capital (including advance for capital) Reserve & Surplus

8 9 6 6 N I L

Secured Loans Unsecured Loans

N I L N I L

APPLICATION OF FUNDS
Net Fixed Assets (including capital work in progress) Net Intangible Assets

1 6 1 9
Investment Net Current Assets
3 - 1 1 2 5 3

Misc. Expenditure
N I L

iv PERFORMANCE OF COMPANY (Amount in Rs. Thousand)

Turnover (Including other income ) Total Expenditure

1 3 0 4 9 1 8 8 0 5
Loss Before Tax Loss After Tax
5 7 5 7 5 7 5 7
Earning per Share in Rs. Dividend Rate
- 7 . 6 8 N I L

v GENERIC NAMES OF THREE PRINCIPAL PRODUCTS / SERVICES OF COMPANY ( As per monetary terms )

Product Description Item Code

Internet Services Not applicable
67
 NOTICE OF 14 th ANNUAL GENERAL MEETING
Notice is hereby given that the 14th Annual General Meeting of
the members of Sistema Shyam TeleServices Limited will be
held at Hotel Pink Pearl, 10th Mile, Mahapura, Ajmer Road,
Jaipur – 302026, Rajasthan, India, on Friday, the 25th September,
2009 at 11 A.M. to transact the following business:
ORDINARY BUSINESS
1. To receive, consider and adopt the Audited Balance Sheet
as at 31st March 2009 and the Profit and Loss Account for
the year ended on that date together with the Directors’
Report and the Auditors’ Report thereon.
2. To appoint a Director in place of Mr. Rajiv Mehrotra, who
retires by rotation and, being eligible, offers himself for
re-appointment.
3. To appoint a Director in place of Mr. Sergey Cheremin,
who retires by rotation and, being eligible, offers himself
for re-appointment.
4. To appoint Auditors to hold office from the conclusion of
this Annual General Meeting till the conclusion of the next
Annual General Meeting and authorize the Audit Committee
of the Board / Board of Directors to fix their remuneration.
M/s S. R. Batliboi & Associates, Chartered Accountants, the
retiring Auditors of the Company, being eligible, offer
themselves for re-appointment.
SPECIAL BUSINESS
5. To consider and if thought fit, to pass with or without
modification, the following resolution as an Ordinary
Resolution:
“RESOLVED THAT Mr. Ron Sommer, a German
National, whose term of office as an Additional Director
of the Company expires at this Annual General Meeting
and in respect of whom the Company has received
a notice under Section 257 of the Companies Act, 1956,
proposing the candidature of Mr. Ron Sommer for the office
of Director, be and is hereby appointed as a Director of the
Company whose period of office will be liable to
determination for retirement by rotation.”
6. To consider and if thought fit, to pass with or without
modification, the following resolution as an Ordinary
Resolution:
“RESOLVED THAT Mr. Mikhail Shamolin, a Russian
National, whose term of office as an Additional Director of
the Company expires at this Annual General Meeting and in
68
respect of whom the Company has received a notice under
Section 257 of the Companies Act, 1956, proposing the
candidature of Mr. Mikhail Shamolin for the office of
Director, be and is hereby appointed as a Director of the
Company whose period of office will be liable to
determination for retirement by rotation.”
7. To consider and if thought fit, to pass with or without
modification, the following resolution as an Ordinary
Resolution:
“RESOLVED THAT Mr. Madhukar, whose term of office
as an Additional Director of the Company expires at this
Annual General Meeting and in respect of whom the
Company has received a notice under Section 257 of the
Companies Act, 1956, proposing the candidature of
Mr. Madhukar for the office of Director, be and is hereby
appointed as a Director of the Company whose period of
office will be liable to determination for retirement by
rotation.”
By Order of the Board
For Sistema Shyam TeleSer vices Limited
Place: Gurgaon Rashid J Malik
Dated: July 16, 2009 Company Secretary
Registered Office:
B2-D, Shiv Marg, Bani Park,
Jaipur-302016, Rajasthan (India)
NOTES
1 . A MEMBER ENTITLED TO ATTEND AND VOTE AT
THE MEETING IS ENTITLED TO APPOINT A
PROXY TO ATTEND AND VOTE, ON A POLL,
INSTEAD OF HIMSELF/ HERSELF AND SUCH
PROXY NEED NOT BE A MEMBER OF THE
COMPANY.
The instrument appointing a proxy should be duly
completed, stamped & signed, and must be sent so as to
reach the Company’s Registered Office not less than
48 hours before the commencement of the Meeting.
2. Members/Proxies are requested to produce the enclosed
attendance slip duly signed as per the specimen signature
recorded with the Company for admission to the meeting
hall. Members, who hold shares in Dematerialized Form,
 are requested to bring their Client – ID & DP – ID numbers
for easier identification of attendance at the meeting.
3. Corporate Members are requested to send a duly certified
copy of the Board Resolution authorizing their
representative(s) to attend and vote at the Annual General
Meeting.
4. Members desirous of getting any information from the
Company are requested to send their queries to the
Company at its Registered Office well in advance so that
the same may reach at least 7 days before the date of the
Meeting to enable the management to keep the required
information, readily available at the Meeting.
5. As a measure of economy, copies of the Annual Report
shall not be distributed at the Meeting. Members are
requested to bring along their own copies to the meeting.
6. Members are requested to immediately intimate the
change of their address, if any, along with pin-code number
to the Registered Office of the Company quoting
their Folio Numbers, and members holding shares in
electronic form may inform the same to their Depository
Participants.
7. Explanatory Statement pursuant to Section 173 (2) of the
Companies Act, 1956 in respect of the Special Business
set out under item nos. from 5 to 7 is annexed hereto.
ANNEXURE TO NOTICE
Explanatory Statement pursuant to Section 173(2) of
the Companies Act, 1956
Item No. 5
Mr. Ron Sommer was appointed as an Additional Director of
the Company in the Board Meeting held on 21.05.2009. As per
provisions of Section 260 of the Companies Act, 1956, he holds
office only up to the date of the ensuing Annual General Meeting
of the Company.
Mr. Ron Sommer studied mathematics at the University of Vienna,
where he earned his doctorate in 1971. He has vast experience
of over 30 years. He began his professional career with the
Nixdorf Group in New York, Paderborn and Paris. In 1980 he
was appointed Managing Director of the German subsidiary of
the Sony Group. In 1986 he became Chairman of the
Management Board of Sony Deutschland, and was subsequently
appointed President and Chief Operating Officer of Sony
Corporation of America in 1990. In 1993 Mr. Sommer served at
Sony Europe in the same function. From May 1995 to July 2002
he served as Chairman of the Management Board of Deutsche
Telekom AG. He has been ser ving as Chairman of the
International Advisory Council of Sistema JSFC since May 2003
and as member of the Board of Directors since June 2005.
Since May 2009 Mr. Sommer is serving as First Vice-President of
Sistema JSFC.
The Company has received a notice in writing from a member
along with requisite deposit, proposing his candidature for the
office of Director of the Company under Section 257 of the
Companies Act, 1956.
The Board of Directors believes that Mr. Ron Sommer as a
Director on the Board will make immense contribution in the
development of the Company.
The Board recommends the resolution set forth under Item
No. 5 for the approval of the members.
None of the Directors, except appointee, are in any way
concerned or interested in the said resolution.
Item No. 6
Mr. Mikhail Shamolin was appointed as an Additional Director
of the Company in the Board Meeting held on 21.05.2009. As
per provisions of Section 260 of the Companies Act, 1956, he
holds office only up to the date of the ensuing Annual General
Meeting of the Company.
Mr. Mikhail Shamolin graduated from the Russian Academy of
Government Service under the President of the Russian
Federation in 1993. From 1996 to 1997, he studied at Wharton
Business School, where he completed a finance and management
course for top-managers.
Mr. Mikhail Shamolin has been the President and CEO of Mobile
TeleSystems Group (MTS), Moscow since May 2008. Prior to
his current role, Mr. Shamolin has also held the position of
Vice President, Head of MTS Russia from August 2006. In this
capacity, Mr. Shamolin managed the largest MTS business unit,
one which contributes roughly 75% of value to MTS.
Mr. Shamolin joined MTS in July 2005 as Vice President, Sales
and Customer Service and has been a member of the MTS Board
of Directors since October 2008. Prior to joining MTS,
Mr. Shamolin worked at McKinsey & Co. from 1998 to 2004. In
2004 and 2005 he worked at Interpipe Corp. (Ukraine) as
Managing Director of the Ferroalloys Division.
The Company has received a notice in writing from a member
along with requisite deposit, proposing his candidature for the
office of Director of the Company under Section 257 of the
Companies Act, 1956.
69
The Board of Directors believes that Mr. Mikhail Shamolin as a
Director on the Board will make immense contribution in the
development of the Company.
The Board recommends the resolution set forth under Item
No. 6 for the approval of the members.
None of the Directors, except appointee, are in any way
concerned or interested in the said resolution.
Item No. 7
Mr. Madhukar was appointed as an Additional Director of the
Company in the Board Meeting held on 27.03.2009. As per
provisions of Section 260 of the Companies Act, 1956, he holds
office only up to the date of the ensuing Annual General Meeting
of the Company.
Mr. Madhukar is M.A. in Economics and LL.B. He did professional
programs in Project Management and Human Resource
Development etc. from various IIMs and he is a Certified
Associate of Indian Institute of Bankers (CAIIB). He did his
International Banker Course from Midland Bank, London and
Investment Management from MOBAA, Mauritius. Mr. Madhukar’s
banking career spans over 37 years and covers every major
dimension of banking operations, both in India as well as
overseas. From 1990 to 1996 he served as the Managing Director
of the State Bank International Ltd., Mauritius. In 1997, he was
appointed Senior General Manager at SBI Capital Markets. From
1998 to 2000, he served as the Chief General Manager,
New Delhi Circle at SBI; and in 2000-2001, as Managing Director
of State Bank of Bikaner & Jaipur. In 2003-2004, he was appointed
70
Chairman & Managing Director at the Industrial Investment Bank
of India Ltd. (IIBI). He held concurrent charge from 2001-2004
as Chairman & Managing Director at United Bank of India and
was responsible for the remarkable turnaround of the bank
from being a loss-making bank to a profit-making success.
He has also served as Whole Time Member with the Securities
and Exchange Board of India.
The Company has received a notice in writing from a member
along with requisite deposit, proposing his candidature for the
office of Director of the Company under Section 257 of the
Companies Act, 1956.
The Board of Directors believes that Mr. Madhukar as a Director
on the Board will make immense contribution in the
development of the Company.
The Board recommends the resolution set forth under Item
No. 7 for the approval of the members.
None of the Directors of the Company, except appointee, are
in any way concerned or interested in the said resolution.
By Order of the Board
For Sistema Shyam TeleSer vices Limited
Place : Gurgaon Rashid J Malik
Date : July 16, 2009 Company Secretary
Registered Office:
B2-D, Shiv Marg, Bani Park,
Jaipur-302016, Rajasthan (India)
-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------


SISTEMA SHYAM TELESERVICES LIMITED

Registered Office: B-2D, Shiv Marg,
Bani Park, Jaipur-302016 Raj. (India)

ATTENDANCE SLIP
(Please complete this attendance slip and hand it over at the entrance of the meeting hall)

Name & Address Folio No. DP ID Client ID # No. of Shares Held

# Applicable for members holding shares in dematerialized form.

I / We hereby record my / our presence at the 14TH ANNUAL GENERAL MEETING of SISTEMA SHYAM
TELESERVICES LTD. to be held on Friday, the 25th day of September 2009, at Hotel Pink Pearl, 10th Mile,
Mahapura, Ajmer Road, Jaipur-302026, Rajasthan, India at 11:00 a.m.

SIGNATURE OF THE MEMBER OR THE PROXY ATTENDING THE MEETING

If Member, please sign here If Proxy, please sign here



Note: Members are requested to bring their copies of the ANNUAL REPORT and AGM Notice at the Meeting as the same will not be circulated at
the Meeting.

----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

SISTEMA SHYAM TELESERVICES LIMITED
Registered Office: B-2D, Shiv Marg,
Bani Park, Jaipur-302016 Raj. (India)

PROXY FORM
Folio No …………….....……… DP ID………………………Client ID. ……….…....…..…...................................
Shares Held………………..........

I/We,…………………………………………….of…………………………………being a Member / Members of

SISTEMA SHYAM TELESERVICES LIMITED, hereby appoint…………….....…of................................
or failing him/her……….................................................... of………………………................................ or failing
him/her…………………………............................... of………………………………………………………
as my /our Proxy to attend and vote for me / us on my / our behalf at the 14TH ANNUAL GENERAL MEETING
of the Company to be held on Friday, the 25th day of September, 2009, at Hotel Pink Pearl, 10th Mile, Mahapura,
Ajmer Road, Jaipur-302026, Rajasthan (India) at 11:00 a.m. and at any adjournment thereof.
Affix
Revenue


Signed this ..............................................day of September, 2009.

Stamp

Note: The Proxy form duly completed must be deposited at the Registered Office of the Company, not less than
FORTY EIGHT HOURS before the time of holding the meeting. The Proxy need not be a Member of the Company.