1 MTNL Tw Tw Tw Tw Twenty Second enty Second enty Second enty Second enty Second Annual Report Annual Report Annual Report Annual Report Annual Report 2007-08 2007-08 2007-08 2007-08 2007-08 MAHANAGAR TELEPHONE NIGAM LIMITED (A Nav Ratna Company)
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MTNL
TwTwTwTwTwenty Secondenty Secondenty Secondenty Secondenty SecondAnnual ReportAnnual ReportAnnual ReportAnnual ReportAnnual Report
2007-082007-082007-082007-082007-08
MAHANAGAR TELEPHONE NIGAM LIMITED(A Nav Ratna Company)
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MTNL
MISSION OF MAHANAGAR TELEPHONE NIGAM LIMITED
"To provide in its area of operation, in a leading way, world class
telecom services which are demanded, keeping always the
customer's delight as its aim, so that it continues to be the
premier Indian Telecom Company".
________________
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MTNL
CONTENTS
Page No.
1. Board of Directors 4
2. Statutory Auditors, etc. 5
3. Performance Highlights 6
4. Notice 7-10
5. Directors' Report 11-21
6. Corporate Governance Report 22-34
7. Management Discussion & Analysis 35-37
8. Auditors' Report 39-53
9. Annual Accounts (Balance Sheet, Profit & Loss Account,Consolidated Balance Sheet, Profit & Loss Account & Cash Flow Statement) 54-99
10. Annexure to Directors’ Report-Addendum to Directors' Report-2007-08Comments of Statutory Auditors & Management replies thereto 100-105
11. Annexure to Directors' Report - Comments of C&AG 106-107
12. Replies of Management to the Comments of C&AG 108-109
13. Statements Pursuant to Section 212 of the Companies Act, 1956Relating to subsidiary companies 110-111
14. Millennium Telecom Limited - Directors' Report, Auditors' Report,Balance Sheet, Cash Flow Statement & Comments of C&AG 112-133
15. Mahanagar Telecom Mauritius LimitedAuditors' Report, Balance Sheet 134-148
16. ECS Mandate Form 149
17. Proxy & Admission Forms 151
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MTNL
BOARD OF DIRECTORS(AS ON 30.08.08)
Shri R.S.P. Sinha Chairman & Managing Director
Shri Kuldip Singh Director (Technical)
Smt. Anita Soni Director (Finance)
Sh. S.P. Pachauri Director (HR)
Dr.S.Balasubramanian Director
Shri J.S. Deepak Director
Smt. Usha Sahajpal Director
Smt. Anuradha Joshi Durgapal Director
BOARD COMMITTEES
Audit Committee
Dr.S.Balasubramanian Chairman
Smt. Usha Sahajpal Member
Smt. Anuradha Joshi Durgapal Member
Smt. Anita Soni, Director (Finance) Permanent Invitee
Sh. S.R. Sayal, Company Secretary Secretary
Investors/Shareholders Grievances CommitteeDr.S.Balasubramanian Chairman
Smt. Usha Sahajpal Member
Smt. Anita Soni, Director (Finance) Member
Sh. S.R. Sayal, Company Secretary Secretary
COMPANY SECRETARYShri S.R. SAYAL
REGISTERED AND CORPORATE OFFICEJeevan Bharti Building,
Tower I, 12th floor,124 Connaught Circus,
New Delhi - 110 001Tel: 91 11 23742212Fax: 91 11 23314243
Website : www.mtnl.net.in / www.bol.net.in
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MTNLSTATUTORY AUDITORS
M/s Dhawan & Co.Wegmans House
21, Veer Savarkar BlockVikas Marg,ShakarpurNEW DELHI - 110 092
BRANCH AUDITORSDelhi MumbaiM/s Gandhi Minocha & Co. C.V.K. & AssociatesChartered Accountants Chartered Accountants82, Shakti Apartments No.2, Samarath ApartmentsAshok Vihar, Delhi-110 017 D.S. Baprekar Road,
Dadar (W), Mumbai-400 028
BANKERSState Bank of India, New Delhi/Mumbai
Indian Overseas Bank, New Delhi/MumbaiPunjab National Bank, Mumbai
Oriental Bank of Commerce, New DelhiCentral Bank of India, Mumbai
Dena Bank,Union Bank of India, MumbaiUnited Bank of India, New Delhi
Syndicate Bank, Mumbai,Vijaya Bank, New Delhi/Mumbai
Indian Bank, New Delhi,ICICI Bank, MumbaiUTI Bank, Mumbai
REGISTRARS AND TRANSFER AGENTS
M/s. Beetal Financial & Computer Services (P) Ltd.3rd Floor, Beetal House
99,Madangir, Behind Local Shopping CentreNear Dada Harsukhdas Mandir, New Delhi - 110 062.
Ph: 011-29961281-82, Fax : 011-29961284E-mail : [email protected]
Investor HelpdeskPh : 011-23765269, Fax : 011-23716655
E-mail : [email protected]
22nd Annual General Meeting on Friday, September 26, 2008 at 3.00 p.m.at FICCI Golden Jubilee Auditorium, Tansen Marg, New Delhi-110001
The Annual Report can be accessed at www.mtnl.net.in
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MTNL
PERFORMANCE HIGHLIGHTS(2007-08)
Particulars (Rs. In Million)
Total Income 53299.33
Total Expenditure 46982.84
Revenue Sharing 8042.41
License Fees 4215.11
Profit before tax and Prior Period 6316.49Adjustment
Dividend 2520.00
Earnings Per Share (EPS) Rs. 9.32
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MTNLN O T I C E
Notice is hereby given that the twenty second Annual General Meeting of the members of MahanagarTelephone Nigam Limited will be held on Friday, the 26th September 2008 at 3.00 P.M. at FICCI GoldenJubilee Auditorium, Tansen Marg, New Delhi-110 001 to transact the following business:-
I. ORDINARY BUSINESS:
1. To receive, consider and adopt the audited Balance Sheet of the company as at 31st March, 2008 andthe Profit and Loss Account for the year ended on that date together with the reports of the Auditorsand Directors and the comments of the Comptroller and Auditor General of India thereon u/s 619(4) ofthe Companies Act, 1956.
2. To confirm interim dividend and declare final dividend on equity shares.
3. To appoint directors in place of those retiring by rotation:• To appoint a director in place of Dr. S. Balasubramanian, who retires by rotation and being
eligible, offers himself for reappointment.• To appoint a director in place of Sh J. S. Deepak, who retires by rotation and being eligible, offers
himself for reappointment
4. To fix the remuneration of the Statutory and Branch Auditors appointed by the Comptroller & AuditorGeneral of India for the Financial Year 2008-09.
II. SPECIAL BUSINESS :
To pass, with or without modifications, the following Resolution as Ordinary Resolution:-
"RESOLVED THAT Smt. Usha Sahajpal who was appointed as non-official part-time director of thecompany by the Govt. of India, D.o.T, vide their letter dated 30th April 2008 for a period of 3 years andwhose appointment was ratified by the Board in terms of Article of Association of the company asAdditional Director of the company from 30th April 2008 till the next AGM, be and is hereby appointedas Director of the Company from the date of AGM i.e. 26th September 2008 in terms of D.O.T.'saforesaid letter dt. 30th April 2008 subject to retirement by rotation, as per provisions of CompaniesAct."
Explanatory statement pursuant to Section 173 of the Companies Act, 1956 is enclosed.
By order of the BoardFor MAHANAGAR TELEPHONE NIGAM LIMITED
(S.R.SAYAL)Company Secretary
Place : New DelhiDate : 2-9-2008
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MTNLExplanatory statement pursuant to Section 173 of the Companies Act, 1956 for the Special Businessto be conducted at the AGM.
1. Smt. Usha Sahajpal was appointed as non-official part-time director of the company by the Govt. ofIndia, D.o.T, dt 30th April 2008 for a period of 3 years. In terms of Article of Association of thecompany Smt. Usha Sahajpal was appointed as Additional Director of the company from 30th April2008 till the next AGM, subject to the provisions of the Companies Act. Accordingly, Smt. UshaSahajpal ceases to hold office of Director at this AGM, and may be appointed as Director of theCompany from the date of AGM i.e. 26th September 2008 in pursuance to D.O.T.'s aforesaid letter dt.30th April 2008 subject to retirement by rotation as per the provisions of Companies Act.
Mrs. Usha Sahajpal is having Master of Arts (Political Science) degree from Delhi University. She hadjoined Indian Audit and Accounts Service from 1966 to 1976 and Indian Civil Accounts Service from1976 to 2003 (till retirement). During her tenure, she has held various positions in the Indian Audit andAccounts Department as Controller of Accounts in various ministries of the Govt. of India, FinanceAdvisor to the Employees Provident Fund Organization, Ministry of Labour, Chief Controller of Accounts,Ministry of Industry, Jt. Secretary and Finance Advisor, Ministry of Agriculture, Principal Chief Controllerof Accounts, Central Board of Excise and Customs, Department of Revenue, Ministry of Finance andController General of Accounts, Ministry of Finance. She has retired from service on 31st March2003 as Controller General of Accounts, Ministry of Finance, Govt. of India. She is presently non-official, part-time Director on the Board of South Eastern Coal Fields Ltd. (a subsidiary of Coal IndiaLtd.), Member, Finance Committee, Jawahar Lal Nehru University, Delhi and Member of other institutes/societies, NGOs, etc.
In terms of D.o.T.'s letter dated 30th April 2008 the tenure of appointment of Smt. Usha Sahajpal is 3years. Therefore the appointment of Smt. Usha Sahajpal is recommended for approval.
Smt. Usha Sahajpal is interested in the resolution. None of the other directors except Smt. UshaSahajpal are personally interested in the resolution.
By order of the BoardFor MAHANAGAR TELEPHONE NIGAM LIMITED
(S.R.SAYAL)Company Secretary
Place : New DelhiDate : 2-9-2008
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MTNLNOTES
1. A MEMBER ENTITLED TO ATTEND AND VOTE IS ENTITLED TO APPOINT A PROXY TO ATTENDAND VOTE INSTEAD OF HIMSELF AND THE PROXY NEED NOT BE A MEMBER OF THE COMPANY.PROXIES IN ORDER TO BE VALID MUST BE LODGED AT THE REGISTERED OFFICE OF THECOMPANY AT 12TH FLOOR, TOWER-1, JEEVAN BHARTI BUILDING, 124, CONNAUGHT CIRCUS,NEW DELHI-110001, NOT LESS THAN 48 HOURS BEFORE COMMENCEMENT OF THE MEETING.PROXY FORM IS ANNEXED.
2. The Register of members and Share Transfer Books will remain closed from 24th September to26th September 2008. (both days inclusive).
3. (i) Final Dividend, if any, approved at the 22nd Annual General Meeting of the Company will be paidto those shareholders whose names appear:
(a) As beneficial owners as at the end of the business hours on 23rd September 2008 as per thelist to be furnished by the Depository in respect of the shares held in electronic form, and
(b) As members in the register of members of the company after giving effect to all valid sharetransfers in physical form lodged with the company on or before 23rd September 2008.
(ii) Members are advised to avail ECS facility for the credit of dividend directly to their bank accounts.This facilitates quick credit of the dividend amount and eliminates any delay or loss of the dividendwarrants in the transit and also ensures safety against fraudulent encashment.
(iii) While opening a depository account with the participants of NSDL/CDSL you may have given yourbank account details, which will be used by your company for printing of dividend warrants. Thisensures that the dividend warrants, even if stolen or lost, cannot be used for any purpose otherthan for depositing the money in the account specified on the dividend warrant. This ensuressafety for investors. However, you may want to receive dividend in an account other than the onespecified, while opening the depository account. You may change/correct bank account detailswith your depository participant accordingly. We also request you to kindly give MICR code ofyour bank to your depository participant.
4. The Members are requested to notify change of address, if any, to:-
(i) The company's Registrar & Transfer Agent, M/s. Beetal financial & Computer Services (P) Ltd.3rd Floor, Beetal House 99,Madangir, Behind Local Shopping Centre Near Dada HarsukhdasMandir, New Delhi - 110 062 in case the shares are held in physical form and
(ii) to the respective Depository Participant (DP) with whom the members are having their DematAccounts, in case the shares are held in electronic form.
5. It will be appreciated that queries, if any, on the accounts and operations of the company are sent tothe company 10 days in advance of the meeting so that the answers could be made readily available.
6. As a measure of economy, copies of Annual Report will not be distributed at the Annual GeneralMeeting. Members are therefore, requested to bring their copies of the Annual Report to the meeting.
7. Members are requested to fill up their name, folio No./ID No. and to affix their signature at the spaceprovided on the attendance sheet (given at the end of the Annual Report) and hand over the same atthe entrance of the place of the meeting.
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MTNL8. Members, who are holding shares in identical order of names in more than one folio, are requested to
write to the Registrar & Transfer Agents of the company, enclosing their share certificates to enablethe company to consolidate their holding in one folio. The share certificates will be returned to themembers after making necessary endorsement in due course.
9. In terms of Section 109A of the Companies Act, 1956, nomination facility is available to individualshareholders. Members holding shares in physical form may nominate a person in respect of all theshares held by them whether singly or jointly. Members who hold shares singly are advised to avail ofthe nomination facility by filing up the prescribed form.
10. All the shareholders who have not yet got their shares demated, are requested to get their sharesdemated in their own interest as it will be easier for them to trade as well as maintain the security.
11. The Board had recommended a final Dividend of 10% as its meeting held on 31st July, 2008. Thedividend, if approved by the Member at the said Annual General Meeting, will be posted by 25thOctober, 2008 to those Members, whose names appear on the Register of Members of the Companyas on 23rd September, 2008. However, in respect of shares held in electronic form, the dividend willbe payable to those persons whose names appear as beneficial owners as at the closure of thebusiness hours on 23rd September, 2008 as per details thereof to be furnished by the depositories.
12. Pursuant to Section 205A(5) and 205C of the Companies Act, 1956, the Company has transferred theunpaid/unclaimed amount of dividends paid up to 1999-2000, to the General Revenue Account/InvestorEducation and Protection Fund of the Central Government. The unpaid / unclaimed amount of Dividenddeclared on 28th September, 2001 for the financial year 2000-01 will be transferred to the InvestorEducation and Protection Fund (IEPF) of the Central Government by 27th September, 2008. Memberswho have not encased their dividend warrants pertaining to the said year may approach the Companyor its Registrar & Share Transfer Agent for obtaining payment thereof.
Please note that no gifts of any sort would be distributed at the AGM
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MTNLDIRECTORS' REPORT
To
The Shareholders of
of Mahanagar Telephone Nigam Limited
Dear Shareholders,
Your Directors have pleasure in presenting the 22nd Annual Report of your Company together with the
Statement of Accounts and Auditors' Report as well as comments of Comptroller and Auditor General on
the Accounts for the financial year ended on March 31, 2008.
HIGHLIGHTS
India has set on to join a handful elite of nations offering third-generation (3G) mobile telephony services
as the Govt. announced the auction of slices of spectrum to offer the high-value services which give the
Telecom Industry a chance to earn higher revenue per user and your company is ready to launch the 3G
services soon.
The company is well equipped to keep pace with the competition in the growing economy of the country.
During the year there is a tremendous increase in the cellular subscriber base. The company has continued
to provide a sustained push to mobile services through an expanding network and a large range of services.
The Company strives for enhancement of the shareholders value.
We strengthened our leadership in GSM mobile services by improving on market shares in both the
metros. The net profit during this year has gone down by Rs 948.45. million as compared to previous
year which is mainly due to revision of tariff.
The reduction in tariff is costing your company dearly. But inspite of all the facts, due to the hard work
of our officials, we have almost maintained our profit in the last three years at the similar level.
There is a decline in income from services as compared to previous year. This is partly attributed to the
decline in tariffs due to heavy competition. The downward trend of the Fixed line subscribers is still an
area of concern for the company.
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MTNLFINANCIAL RESULTS
Sources and application of funds for the year under review are given below:-
(Rs. in Million)
2007-08 2006-07
Income from Services 47225.17 49093.18
Expenditure (excluding` 46955.02 47881.54
Interest & prior period Adjustments)
Operating Profit 270.15 1211.64
Other Income 6074.16 6735.30
Interest 27.82 20.11
Profit before tax 6316.49 7926.83
Tax provision for the year 2248.31 3266.50
Prior Period Adjustments (1800.73) (2157.03)
Net Profit for the year 5868.91 6817.36
Profit available for 5868.91 6817.36
Appropriation
Interim/Proposed final dividend 2520.00 2520.00
Dividend Tax 428.27 372.14
Transfer to:
a) Contingency Reserve -- --
b) Reserve for R&D -- --
c) General Reserve 2920.64 3925.22
SOURCES AND USES OF FUNDS
Authorised Capital 8000.00 8000.00
Issued, Subscribed & paid-up Capital 6300.00 6300.00
Reserves & Surpl 112913.58 109992.96
Secured and unsecured loan
Deferred Tax Liability (Net) 4865.16 6204.79
REPRESENTED BY
Fixed Assets* (Net Block) 63197.96 64036.68
Investment 5573.92 4414.03
Net Current Assets 44065.31 44186.71
Deferred Revenue Expenditure 1591.70 2216.51
Capital Work-in-Progress 9649.85 7643.82
Note : Previous year's figures have been re-grouped/re-cast wherever considered necessary.
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MTNLDIVIDEND
The Company has paid an interim dividend @ 30 % for the year 2007-08 and the Board is pleased torecommend payment of final dividend @ 10% i.e. total 40% on the paid up equity capital of Rs. 6300million. The dividend will absorb a sum of Rs. 2520 million excluding dividend tax.
SUBSIDIARY COMPANIES
Your Company has two subsidiaries viz. Millennium Telecom Ltd. (MTL) at Mumbai and Mahanagar TelephoneMauritius Ltd. (MTML) at Mauritius. The reports and accounts of subsidiary companies pursuant to section212 of the Companies Act, 1956 are annexed.
(i) Millennium Telecom Ltd. (MTL)
MTL is handling the project for laying submarine cable from India to south East Asia and Middle East withultimate intent to extend eventually to the USA and Europe. By investing in this project, MTNL & BSNL(would be joint venture partner with 50% equity participation in capital of MTL) can get InternationalBandwidth to support its own network demand as well as to lease it to others at very competitive rates.Thus, MTNL & BSNL would not be dependent on other operators for international bandwidth.
(ii) Mahanagar Telephone Mauritius Ltd. (MTML)
The company was incorporated as private domestic company at Mauritius on 14.11.2003 with an authorizedcapital of MUR 600M and the paid up capital as on 31.3.2008 stands as MUR 436.5 Million. The companyis having License from the telecom regulatory ICTA for Fixed Telephone Services, Mobile Services,International Long Distance Services and Internet Services.
It has Installed 100K state of art technology CDMA IX & IX EVDO switch with a radio network of 51 Basestations. The system is equipped to provide value added services viz., SMS, DATA, Multi-media service
* The following Telecom Services are being provided by MTML as of today:
- Fixed Wireless Telephone
- Mobile
- International Long Distance Calls.
Internet through Fixed Wireless Phones and Data cards
The Company is second operator in Fixed Line and third operator in Mobile and one among the seven ILDoperators.The company is equipped with call centre (10 positions) and 11 Customer Care centres all overthe island and started its operations in the year 2005-2006 partially. The full operations of the companystarted from March 2007.
• The company is having the following customer base as of 31.3.2008.
- Fixed Wireless Phones 26,710
- Mobile 8,901
- International Long Distance (through CAC) 5,708
- Internet Customers 2,993
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MTNLREVENUE
• The company earned a gross revenue of MUR 188.8M from services during the year 2007-08 andjust broke even during the year 2007-08.
• The Fixed assets of the company as of 31.3.2008 MUR 445.27 M.
JOINT VENTURES
Your company has two joint ventures viz. UNITED TELECOMMUNICATIONS LTD. (UTL) & MTNLSTPIIT SERVICES Ltd.
(i) UNITED TELECOMMUNICATIONS LTD. (UTL)
UTL is a Public Limited Company registered in Nepal and has been promoted by three telecom majorsviz. MTNL, TCIL & VSNL (TATA) and Vishal Group of Nepal. Initially, UTL deployed state of art 3G CDMA2000 1xWLL equipments for providing Basic Telephone Service based on WLL technology in Kathmanduvalley consisting of five municipalities namely Kathmandu city, Lalitpur, Bkaktapur, Thimi and Kitipur.For serving customers in the valley, UTL has established a modern customer service centre called WaveGallery in Pitlisadak for providing registration and other commercial services to its customers. Subsequentlyfive more Customer Service Centres in Hattisar, Chhabhil, Balaju, Patan, Ghataghar and Kakhtapur wereestablilshed in valley.
UTL has set up first call centre for telecom in Nepal with IVRS system for customers support serviceslike FRS (Fault Repair Service), DQ (Directory Enquiry), PRS (Payment Reminder System) etc. UTLinstalled international Gateway Switch from M/s. Alcatel (France/India) and Satellite Earth Station fromM/s. GSI (USA) for provision of international customers through its own international gateway (consistingof satellite earth station and international gateway switch) in April 2004. As on date, UTL has expandedits services in Hetuda, Birganj, Butwal, Bhairawah, Pokhara, Banepa, Bharatpur/Narayanagarh, BiratNagarm Itahari and Dharan. In another couple of months, UTL services will be available in Simra andDamak.
UTL was adjudged as one of the highest payer of taxes towards Customs Duty, VAT, TSC, TDS etc andUTL by this way has remitted more than NRs 20 crore to the Government treasury. As on date, Customerbase is about 115,000. The number of PCOs are about 1200.
UTL is planning to deploy Value Added Services (VAS) viz PDSN(high speed internet of 144 KBPS), SMS,etc and also the expansion, upgradation of existing network including IN platform. Also provision of pre-paid services is on anvil. The network covers adjourning villages to the cities wherever its services are inoperation, 283 villages have been covered having customer base of 16,559.
(ii) MTNLSTPI IT SERVICES Ltd.
MTNL has joined hands with Software Technology Parks of India (STPI), a society under the Ministry ofInformation Technology as 50:50 partners. The main objective of the company is to undertake all suchactivities that are required to make domain "India.in" popular. The joint venture was incorporated on 31-03-2006 under the Companies Act 1956, with authorized capital of Rs. 50 Crores and at present the paidup capital is Rs. 5 Lacs.
The project under this joint venture is under way. MTNL-STPI JV project of data centre at Chennai willprovide services like messaging, web-hosting, application hosting, Web-farming application etc. Thecompany is in the process of recruiting its own staff and will be recruiting the best professionals fromsoftware industry.
The Company has obtained 'Certificate of Commencement of Business' from ROC on 14-12-2007.
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MTNLSYSTEM STATUS OF MTNL AS ON 31st MARCH 2008.
S. NO. PARTICULARS DELHI MUMBAI TOTAL
1 Number of Exchanges 342 210 552
2 Equipped Capacity* 5135129 4734081 9869210
Digital Lines 5135129 4734081 9869210
DLC Capacity 160152 117734 277886
Digitalization % lines 100% 100% 100%
3 DELs (Including WLL Fixed and GSM) 3181463 4028385 7209848
4 DELs
a) Wired Lines. 1574417 2101452 3675869
b) WLL-Fixed 27640 103572 131212
c) Garuda (FWT)
d) WLL-Mobile 100966 59950 160916
e) Cellular Mobile (GSM) 1478440 1763411 3241851
5 DLC (Nos) 425 509 934
6 Leased Circuits 15273 35900 51173
7 PCOs
Local 57340 134794 192134
STD 25352 21849 47201
Total 82692 156643 239335
8 Tax capacity 150000 155200 305200
9 Tandem 370500 386060 756560
10 ISDN 8945 16748 25693
11 Internet connection
a) Pre paid 19892 7407 27299
b) Post paid 593825 735182 1329007
c) Broadband (including ADSL) 232169 338422 570591
12 Waiting List Nil Nil Nil
13 OFC (in Route Kms) 7172.383 5866.132 13038.515
14 OFC (in Fibre Kms) 201349.534 138992.902 340342.436
15 IPTV 3481 3499 6980
16 VOIP 1523 1302 2825
*(including WLL fixed ,WLL mobile & GSM)
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MTNLCUSTOMER CARE AND AFTER SALE SERVICES
MTNL pays utmost attention to customer care and after sales services. The customer care help lines forall its services have been strengthened and more trained staff has been posted on these help lines as wellas in Sanchar Haats to provide on the spot solutions to all the requirements of the customers. With a viewto provide world class customer care services, the company has recently increased the seats in all itscall centers by deploying qualified professionals.
HUMAN RESOURCE DEVELOPMENT
The Telecom industry in India is undergoing through a volatile phase and fate of the organizations is beingwritten and re-written everyday. In the recent past, we have identified Human Resources as one of thestrategic partners for rapid business strides leading to success in all strata of our operations. During lastfiscal also we continued our endeavors towards world standards HR policies.
We have always considered our Manpower as one of our greatest assets and this is what differentiatesMTNL from its competitors. We have a strong manpower base of 47422 Nos. with wide array of Technicaland Managerial aptitudes and also talented supporting staff having exposure to state of the art technologiesprevailing in Telecom Industry in the world. As a step towards restructuring of our manpower we haveadopted dual pronged strategy, viz., at one end we have recruited young and talented professionals inareas like Telecom, Finance, HR, Marketing, Law and on the other hand we have taken steps towardsrightsizing of the organization by offering VRS.
Thus fine-tuning our existing manpower mix in terms of age, qualification, and aptitude to meet the demandsposed by the changing Business Environment and to take advantage of the opportunities presented toserve ever-increasing customer base.
TRAINING PERFORMANCE
Our Company has been conducting various Training & Development activities, which apart fromminimizing the skill gap and technical obsolescence, are also focusing towards attaining the biggerorganizational purpose of building a competent workforce to take the challenge in the currently existingTelecom sector.
CENTRE FOR EXCELLENCE IN TELECOM TECHNOLOGY AND MANAGEMENT(CETTM)
Our dream for having a world-class in house Training Centre furthered one step when CETTM (Centre forExcellence in Telecom Training & Management) was awarded ISO 9001:2000 certification. CETTM isslowly taking the lead role and becoming the nodal center for HRD. Induction Training programme for newlyrecruited executive Trainees in the field of Telecom, Finance, Marketing, HR, Legal have been conductedat CETTM.
CETTM has started generating revenues by leasing out infrastructure and providing training to otherorganizations of repute.
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MTNLINDUSTRIAL RELATIONS
Industrial peace and Industrial harmony based on healthy Employee Relations, like the previous year
prevailed throughout the year. The Grievances/Issues raised by the employees/Union/Associations was
given due attention and regard. The cases/issues brought up by them were settled through regular meetings
ad interactions between Management and Unions/Associations and action as mutually agreed was taken
to settle them.
A further step towards Worker's Participation in critical issues concerning business endeavors, a special
Joint Negotiation Committee meeting was convened to share the views of recognized Unions on the
various aspects of our business endeavors and to obtain opinion from them in further improving the same.
EMPLOYEES' WELFARE
Employees Welfare Schemes like subsidized Canteen, Crèches, Housing, Medical facilities, Scholarships
for the wards of employees, Group Insurance, dormitories for females working in night shift etc. continued
and maintained by the Company for its employees. Sports and Cultural activities were also given priority
during the year.
IMPLEMENTATION OF OFFICIAL LANGUAGE POLICY
The company continued its efforts to comply with statutory requirements in promoting the use of Hindi
and has been able to achieve most of the annual targets set by the Government for implementation and
promotion of Hindi as Official Language in the Company.
IMPLEMENTATION OF RESERVATION POLICY FOR SC/ST/OBC AND PH COMMUNITY
Your Company has endeavored to fulfill all the statutory requirements with regard to implementation of
reservation policy for candidates belonging to SC/ST/OBC communities and as well as Physically Challenged
candidates.
WORKING CONDITIONS OF WOMAN EMPLOYEES
We are continuously striving towards gender sensitization amongst our employees. Special care has
been taken in case of woman employees working in night shifts. Also to redress the issues of Sexual
Harassment at workplace Special Cells have been constituted.
The Parliamentary Committee on empowerment of Women had studied the working conditions of women
in MTNL during the year. Special grants have been sanctioned to Women Welfare Committee at Delhi/
Mumbai.
CORPORATE SOCIAL RESPONSIBILITY
Fulfilling the Social Responsibility was always high on our agenda and in last fiscal year also your company
supported a lot of Organizations fighting for the bigger social cause. In many instances we also took the
same responsibility on our shoulders.
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MTNLMANPOWER STATUS
As on 31st March 2008 your Company had a strength of employees as per details given below:-
MTNL Employees working strength as on 31.3.2008
Group Working SC ST
A 1257 230 57
B 5342 807 115
C 28214 4892 533
D 12538 2912 922
Total 47351 8841 1627
DRMs 71 0 1
Grand Total 47422 8841 1628
VIGILANCE
Vigilance cell in MTNL is headed by Sh. Kabal Singh, IRSSE who has joined as CVO in corporate office on24.3.2005. CVO is responsible for complete vigilance administration of MTNL. In 2007-08, emphasis hasbeen laid on incorporating practices to increase transparency and making systemic improvements to preventthe possibility of manipulation. Under the guidance and instructions of Central Vigilance commission stepshas been initiated for ensuring efficient vigilance administration by leveraging of technology and throughincreasing transparency by way of making effective use of information technology in the functioning ofcompany. In its commitment to ensure total transparency MTNL achieved a milestone by way of signing aMOU with Transparency International - India (TII) for implementation of Integrity Pact in all its majorprocurements. Integrity Pact is a tool developed by a NGO named Transparency International, whichensures that all activities and transactions between a Company or Government Departments and theirSuppliers are handled in a Fair, Transparent and Corruption Free manner.
Training programmes, seminars and workshops had been conducted from time to time to enhance theknowledge and skills of executives and staff so as to improve their efficacy and strengthen their role inoverall development of the organization. The Vigilance Awareness Week was celebrated from 12.11.2007to 17.11.2007 and various activities were observed during this week. Customer's feedback and suggestionvia a questioner was collected through various Sanchar Haats/CSCs for improvement in the services andcomplaint handling policy of MTNL was released. The telecom frauds and system failures causing revenueleakage were detected with the help of Fraud Management and Control Centre (FMCC). FMCC is proving avital instrument in timely detection of various revenue realization related issues such as delay in disconnectionof service due to non-payment bills or non-issue of bills etc. The cases of high calling customers and bulkusers were regularly monitored and checked so as to prevent any potential financial loss to company.
Monthly Vigilance meetings were regularly conducted to monitor the progress of pending vigilance complaintsand disciplinary cases. In these meetings, remedial measures and actions were suggested and initiated toredress the problems and remove the hurdles in timely settlement of such cases. Vigilance branch received321 complaints during the year. These complaints were expeditiously examined and necessary actions
19
MTNLwere taken. Total 107 disciplinary cases were finalized during the year. Regular inspections were also carriedout by vigilance officials at sensitive areas and corrective action were initiated and suggested whereverrequired. Major/minor penalty, disciplinary proceedings have been initiated against 105 employees of thecompany for the irregularities and misconducts detected during vigilance investigations.
CONSERVATION OF ENERGY AND TECHNOLOGY ABSORPTION
Being a service providing organization, the relevant rules in this regard are not applicable to your
Company.
FOREIGN EXCHANGE EARNINGS
a) Activities relating to Export and total Foreign Exchange earned and used:-
Earned : Rs. (Million) 66.70
Expenditure in Foreign Currency Rs. (Million) 34.09
CORPORATE GOVERNANCE
Your company follows the principles of effective corporate governance practices. The Company has taken
steps to comply with the requirements of revised Clause 49 of the Listing Agreement with the Stock
Exchanges. A Report on Corporate Governance has been appended under separate section titled ' Corporate
Governance Report ' and forms a part of the Annual Report.
COMPLIANCE CERTIFICATE
A certificate from the Practicing Company Secretary regarding compliance of conditions of Corporate
Governance as stipulated under revised Clause 49 of the Listing Agreement is attached to this report.
DIRECTORS' RESPONSIBILITY STATEMENT
Pursuant to the provisions of Sec 217(2AA) of the Companies Act, 1956, the Directors to the best of their
knowledge and belief confirm that:
(i) in the preparation of the annual accounts, the applicable accounting standards have been followed
along with proper explanation relating to material departures;
(ii) they have selected such accounting policies and applied them consistently and made judgments
and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs
of the company as at the end of the financial year and of the profit or loss of the company for that
period;
(iii) they have taken proper and sufficient care for the maintenance of adequate accounting records in
accordance with the provisions of the Companies Act 1956 and for safeguarding the assets of the
company and for preventing and detecting fraud and other irregularities;
(iv) they have prepared the annual accounts on a going concern basis.
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MTNLPARTICULARS OF EMPLOYEES
During the year under report, there was no employee who was in receipt of remuneration in excess of
limits prescribed under the provisions of Section 217(2A) of the Companies Act, 1956 read with the
Companies (Particulars of Employees), Rules, 1975.
COMMENTS OF C & AG ON THE ACCOUNTS
Comments of C&AG and management replies thereto are given as an Annexure to the Directors'
Report.
DIRECTORS
During the year under report, the Board of Directors of your Company met frequently. At these meetings, the
Board held intensive discussions on the budget, important financial transactions and various steps to face the
impending competition from private operators both in Basic Telephone Service and Cellular Mobile Telephony
and other value added services.
Sh.R.S.P.Sinha continued to be the Chairman and Managing Director of your company and Sh. Kuldip Singh,
and Smt. Anita Soni continued to be the Director(Technical ) and Director(Finance) respectively of your Company.
During the period under report, the following changes took place in the ̀ Directorship of the Company:-
1 . Sh. Satya Prakash Pachauri was appointed as Director (HR) w.e.f. 06.12.2007 in place of Sh. V.
Shivakumar who had retired from the services of the company after completion of his tenure on
03.04.07.
2. Sh. J. S. Deepak Joint Secretary (T) , Department of Telecommunication was appointed as director
in place of Sh. M. Sahu w.e.f. 30.04.2008
3. Smt. Usha Sahajpal was appointed as non-official Part-Time Director (Independent Director) w.e.f.
30.04.2008.
4. Smt. Anuradha Joshi Durgapal, DDG (FEB.), DOT was appointed as Govt. director w.e.f 31.7.2008
in place of Sh. A.S. Bhola.
The Board places on record its deep appreciation for the excellent services rendered by Sh M. Sahu and
Sh. A.S. Bhola during their tenure as Directors on the Board of MTNL.
AUDITORS
M/s. Bansal Sinha & Co. Chartered Accountants, were appointed as Statutory Auditors of your Company
by the Comptroller and Auditor General of India. In addition, M/s. Gandhi Minocha & Co. and
M/s C.V.K. & Associates, Chartered Accountants were appointed as Branch Auditors for Delhi and Mumbai
units respectively for the year 2008-09.
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MTNLACKNOWLEDGEMENT
Your Directors take this opportunity to gratefully acknowledge the help, guidance and support receivedfrom Deptt. of Telecom (DOT) and various Ministries of the Government of India. Your Directors are especiallygrateful to its Bankers, all stakeholders and investors including ADR holders, for their continued patronageand confidence reposed in the company.
The Directors would like to express their thanks for the sincere hard work and dedication of every employeeleading to impressive results of your company. The Board is confident that with the employees' continuedenthusiasm, initiative and dedicated efforts, your company could face the new challenges and opportunitiesarising out of the resultant competition from private operators in the Cellular Mobile, Basic Telephone,Internet services and other Value Added services.
For and on behalf of the Board of Directors
(R.S.P. SINHA)CHAIRMAN AND MANAGING DIRECTOR
PLACE : NEW DELHIDATE : 29th August 2008
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CORPORATE GOVERNANCE REPORT
A detailed report on Corporate Governance for the financial year 2007-08 is given below:-
1. COMPANY'S PHILOSOPHY ON CODE OF GOVERNANCE
The company's philosophy on corporate governance encompasses achieving the balance betweenshareholders interest and corporate goals through the efficient conduct of its business and meeting itsstakeholders obligation in a manner that is guided by transparency, accountability and integrity.
2. BOARD OF DIRECTORS
The Company currently has eight Directors including the Chairman and Managing Director and threeFunctional Directors as per the following details.
Name Category Directorship in Membership in otherOther Companies. Committees
Sh. R.S.P. Sinha Chairman and Chairman of MTML, MTL, --Managing Director UTL and MTNLSTPI IT
Services Ltd.
Sh. Kuldip Singh Director (Technical) Director, MTNLSTPI IT --Services Ltd. and MTL
Smt. Anita Soni Director (Finance) Director, MTNLSTPI IT Audit Committee &Services Ltd. and MTL Shareholders'/Investors'
Grievances Committee
Sh. Satya Director (HR) -- --Prakash Pachauri
Sh. J.S. Deepak Govt. Director Director, BSNL & MTL --
Smt. Anuradha Govt. Director -- Audit CommitteeJoshi Durgapal
Dr. S. Part-time Director -- Audit Committee &Balasubramanian Shareholders'/Investors'
Grievances Committee
Smt. Usha Part-time Director, South Eastern Audit Committee &Sahajpal Director Coalfield Ltd. Shareholders'/Investors'
Grievances Committee
2.1 Attendance of Directors at the Board Meeting and the last Annual General Meeting.
The Company holds regular Board Meetings. The detailed agenda along with the explanatory notes iscirculated in advance. The Directors can suggest inclusion of any item(s) in the agenda at the Boardmeeting. During the year 2007-08, Ten meetings were held.
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Name of the Director No. of Board Perce- Attendance at the Remarksmeetings ntage last AGM held onAttended (%) 28th September, 2007
Sh. R.S.P. Sinha 10 out of 10 100 Yes
Sh. Kuldip Singh 10 out of 10 100 Yes
Smt. Anita Soni 10 out of 10 100 Yes
Sh. Satya Prakash 2 out of 2 100 No Assumed officePachauri w.e.f. 6.12.2007
Sh. A.S. Bhola 5 out of 10 50 No ceased to be Directorw.e.f. 31.07.08
Sh. M. Sahu 4 out of 9 44 No ceased to be Directorw.e.f. 27.02.08
DETAIL OF BOARD MEETINGS HELD DURING 2007-08
Sl. Meeting No. Date Place No. of Directors present
1. 224 24th April 2007 New Delhi 4
2. 225 4th June 2007 New Delhi 5
3. 226 17th July 2007 New Delhi 5
4. 227 27th July 2007 New Delhi 5
5. 228 30th August 2007 New Delhi 6
6. 229 28th September 2007 New Delhi 6
7. 230 31st October 2007 New Delhi 4
8. 231 30th November 2007 New Delhi 6
9. 232 30th January 2008 New Delhi 4
10. 233 27th February 2008 New Delhi 5
2.2 DETAILS OF MEMBERSHIP OF BOARD COMMITTEES
None of the Directors of the Company hold memberships of more than ten Committees nor is any Director/Chairman of more than five Committees of Boards of all the companies where he holds Directorships. Forthis purpose committees comprise Audit Committee and Shareholders'/Investors' Grievance Committee.
2.3 CODE OF CONDUCT FOR DIRECTORS AND SR. MANAGEMENT PERSONNEL
MTNL has adopted the Code of Conduct for Directors and Senior Management Personnel as per therequirement of clause 49 of the Listing Agreement dealing with Corporate Governance. The Code iscomprehensive Code applicable to all Directors and Senior Management Personnel Viz. ExecutiveDirectors, General Managers and all functional heads of the company. The Code lays down in detail thestandard of business conduct, ethics governance and centers around the following theme:
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"Integrity and transparency are the core value in all our business dealings. We shall act in compliancewith applicable laws and regulations, in a manner that excludes considerations of personal advantageand will not compromise in our commitment to honesty and integrity in any aspect of our business. Weare committed to excellence, in all our endeavours".
3. AUDIT COMMITTEE
The scope of the Audit Committee has been defined by the Board of Directors in accordance with theprovisions of the Companies Act read with clause 49 of the listing agreement, which among others, includes:-
Reviewing the Company's financial reporting processes and systems
Recommending the appointment and removal of statutory auditors, taking decisions regarding auditfee and related expenses
Reviewing the Company's financial and risk management policies
Reviewing with management the quarterly and annual financial statements, before submission tothe Board, focusing primarily on:
changes in accounting policies and practices;
major accounting entries, qualifications and accounting issues based on the managementsdiscretion and judgement;
compliance with the accounting standards
compliance with the stock exchange and legal requirements, concerning financial statements;
any related party transactions; and
internal audit processes and systems
The Audit Committee specifically reviews the un-audited quarterly financial results before these are submittedto the Board for approval. Minutes of each Audit Committee meeting are placed before the Board for information.
Presently, the Audit Committee consists of the following directors:-
1. Dr.S.Balasubramanian Chairman
2. Smt. Usha Sahajpal Member
3. Smt. Anuradha Joshi Durgapal Member
4. Smt. Anita Soni, Director (Finance) Permanent Invitee
5. Sh. S.R. Sayal, Company Secretary Secretary
3.1 Meetings and attendance
The Audit Committee held 10 meetings during the year 2007-08.
The members' attendance at the Committee Meetings was as under:-
S. No. Name of Director No. of meetings attended
1. Dr.S.Balasubramanian Chairman 10 9
2. Sh. A.S. Bhola, Member 10 5
3. Sh. M. Sahu, Member (part of the year) 7 2
4. Smt. Annie Moraes (part of the year) 1 0
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4. SHAREHOLDERS'/INVESTORS'GRIEVANCES COMMITTEE
Pursuant to claue 49 of the Listing Agreement, a Shareholders/Investors' Grievances Committeeexists in MTNL to look into the investors' complaints, if any, and to redress the same expeditiously.The Committee oversees the reviews all matters connected with the Securities' transfers. The Committeelooks into redressing of shareholders complaints like non-receipt of Balance Sheet, non receipt ofdividends, etc. The Committee also oversees the performance of the Registrar and Transfer Agents,and recommends measures for overall improvement in the quality of investors services.
Presently the Committee consists of the following directors:-
1. Dr.S.Balasubramanian Chairman2. Smt. Usha Sahajpal Member3. Smt. Anita Soni, Director (Finance) Member4. Sh. S.R. Sayal, Company Secretary Secretary
The Investors' Grievances Committee held 4 meetings during the year 2007-08 and the attendance ofthe members is given as under:-
Sl. No. Attendance No. of meetings attended1. Dr.S.Balasubramanian 4 42. Sh. A.S. Bhola (part of the year) 3 13. Smt. Anita Soni, Director (Finance) Member 4 4
To redress the investors' complaints expeditiously and to comply with clause 47 of the listingagreement with the stock exchanges, we have created an e-mail address exclusively for investorsgrievances/complaints i.e. [email protected]. The investors can file their complaints online to this address directly. The same has been posted on company's website also.
5. SHARE TRANSFER COMMITTEEPursuant to clause 47A of the Listing Agreement the Board has delegated the powers to approvetransfer of securities, issue of duplicate shares, request for issue of new certificates on split/consolidation etc., to a committee of officers consisting of Sh. T.R. Gandhi, General Manager (BB &IA) and Company Secretary. The Committee held regular meetings during the year and approved thetransfer of shares, transmission of shares, Dematerialization of shares, rematerialization of sharesand issue of duplicate shares. No share transfer request case is pending as on the date of thepreparation of this report.
Details Of Shareholders/Investors' Complaints Are Given Here Under:-
No. of Share holders' No. of Shareholders No. of Shareholderscomplaints Received complaints Solved complaints as on 31.03.08*
37 34 03*
* These complaints have since been resolved.
6. COMPANY SECRETARYName of the Company Secretary Sh. S.R. SAYALAddress Jeevan Bharti Building, 13th floor, Tower - I,
124 Connaught Circus, New Delhi - 1.Contact Telephone 011- 23324587Fax 011- 23716655
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7. COMPLIANCE OFFICERName of the Compliance officer Sh. S.R. SAYALAddress Jeevan Bharti Building, 13th floor, Tower I,
124 Connaught Circus, New Delhi - 1.Contact Telephone 011-23324587Fax 011-23716655
8. REMUNERATION COMMITTEEThe whole time Directors of the company including the Chairman and Managing Director are appointedby the Government of India and are being paid remuneration as per the terms of their appointment TheCompany, therefore, has not constituted a Remuneration Committee. The non-official part-time Directorsare paid Rs.10,000/- by way of sitting fees for every meeting of the Board/Committee of the Boardattended by them. No other remuneration is paid to the non-official part-time Directors.
9. DISCLOSUREa. All the relevant information in respect of materially significant related party transactions, i.e.
transactions of the Company of material nature with its Promoters, Directors or Management, ortheir relatives or subsidiaries of the Company, etc. having potential conflict with the interest ofthe Company at large has been given in the Annual Accounts.
b. The Company has complied with statutory compliances and no penalty or stricture has beenimposed on the Company by the Stock Exchanges or SEBI or any other statutory authority onany matter relating to the capital markets during the last three years.
10. MEANS OF COMMUNICATIONa. The quarterly and half yearly results were published in English and Hindi Newspapers.
b. The Company's Audited & Un-audited periodic financial results and Press Releases are postedon the Company's website.
c. Detailed Management Discussion and Analysis Reports have been included in this Annual Report.
d. The Company has also posted information relating to Corporate Governance etc. through CorpFiling as required by the Stock Exchanges.
11. GENERAL BODY MEETINGSLOCATION AND TIME FOR LAST THREE ANNUAL GENERAL MEETINGS WERE:
Nature of meeting Date and Time Venue
21st Annual General Meeting 28th September 2007 FICCI Golden Jubilee Auditorium,3.00 P.M. Tansen Marg New Delhi-110 001
20th Annual General Meeting 26th September 2006 FICCI Golden Jubilee Auditorium,11.00 A.M. Tansen Marg New Delhi-110 001
19th Annual General Meeting 28th September, 2005 FICCI Golden Jubilee Auditorium,3.00 P.M. Tansen Marg New Delhi-110 001
••••• Whether special resolutions were put through postal ballot last year?No special resolution was passed last year, so there was no requirement of postal ballot.
Person who conducted the Postal Ballot exercise.Not applicable.
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••••• Whether special resolutions are proposed to be conducted through postal ballot?
If any Special resolution on matters notified vide Companies (Passing of the resolution by postal
ballot) Rules, 2001 read with section 192A of the Companies Act, 1956 is required to be passed, the
same will be passed through Postal ballot.
••••• Procedure for Postal Ballot.
The procedure shall be as per the provisions of the Companies Act, 1956 read with Companies
(Passing of the resolution by postal ballot) Rules, 2001.
12. GENERAL SHAREHOLDER'S INFORMATION:
(i) Annual General Meeting
Date and Time - 26th September 2008, 03.00 P.M.
Venue - FICCI Golden Jubilee Auditorium,
Tansen Marg New Delhi-110 001
(ii) Dates of Book Closure - 24th September to 26th September, 2008
(iii) Dividend Payment - Within 30 days from the date of AGM
(iv) Financial Calendar
Board meeting for considering Audited Annual Accounts for the year 31st July 2008
ended on 31.3.2008 and recommendation of dividend
Submission of Audited Accounts to C&AG of India 31st July 2008
Board Meeting for Unaudited Quarterly Financial Results for the
quarter ended on 30th June 2008 31st July 2008
Board Meeting for Unaudited Quarterly Financial Results for the End of October 2008
quarter ended on 30th September 2008
Board Meeting for Unaudited Quarterly Financial Results for the End of January 2009
quarter ended on 31st December 2008
Board Meeting for Unaudited Quarterly Financial Results for the End of April 2009
quarter ended on 31st March 2009
(v) Registered Office - Mahanagar Telephone Nigam Limited.
Jeevan Bharti Building,
Tower-I, 12th Floor,
124, Connaught Circus,
New Delhi-110001.
Tel: 911123742212
Fax: 911123716655
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(vi) Listing Details - The Equity Shares of the Company are listed on the followingStock Exchanges:
(i) The Delhi Stock Exchange Association LimitedDSE House,3/1, Asaf Ali Road, New Delhi-110002.Tel: 011-23292039/40, Fax: 011-23292181
(ii) Bombay Stock Exchange Limited, Mumbai
Rotunda Building, Phiroze Jeejeebhoy Towers,Dalal Street, Mumbai-400001.Tel: 022-22655614/21/22, Fax: 022-22721072
(iii) The Calcutta Stock Exchange Association Limited7, Lyons Range, Kolkata-700001.Tel: 033-22201488, Fax: 033-22102210
(iv) Madras Stock Exchange Limited11, Second Lines Beach, Chennai-600001.Tel: 044-25224382/83/93, Fax: 044-25244897.
(v) The National Stock Exchange of India LimitedExchange Plaza, 5th floor, Plot No. C/1, G Block,Bandra-Kurla Complex, Bandra(E), Mumbai-400051.Tel: 022-26598100/8235/8236Fax: 022-26598237/8238.
(vi) New York Stock Exchange11, Wall Street, New York. (For ADRs)The Listing Fee for the Financial Year 2008-09 has beenpaid to all stock exchanges.Tel. : 0012126565791, Fax : 0012126565071
(vii) Name and Designation of - Shri S.R.SAYALCompliance Officer - Company Secretary
Jeevan Bharti Building Tower-I, 13th Floor,124, Connaught Circus, New Delhi-110001Tel : 91-11-23324587, Fax : 91-11-23716655Email : [email protected].
(viii) (a) Stock CodeBombay Stock Exchange - 'MAHANGR TELE 108'Delhi Stock Exchange - '13069'Madras Stock Exchange - 'MTP'National Stock Exchange - 'MTNL EQ'Calcutta Stock Exchange - '23036'New York Stock Exchange - 'MTE'
(b) Demat ISIN Numbers in - INE 153A01019NSDL & CDSL. The annual custodian fees for theFinancial Year 2008-09 have been paid to NSDL and CDSL.
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(c) Corporate Identity - Our CIN, allotted by the Ministry of Corporate Affairs,Number (CIN) Government of India is L 3210DL1986GOI023501 and
out company is registered within the jurisdiction ofRegistrar of Companies NCT of Delhi & Haryana.
(ix) Registrar and Transfer Agents - M/s. Beetal Financial & Computer Services (P) Ltd.3rd Floor, Beetal House, 99,Madangir,Behind Local Shopping Centre,Near Dada Harsukhdas Mandir, New Delhi - 110 062.Ph: 011 29961281-82, Fax No.: 011- 29961284E-mail : [email protected]
(x) Stock Market Data - The monthly high, low, closing prices & volume for themonth at each of the Stock Exchanges where theCompany's shares are listed are given in the following table:-
BOMBAY STOCK EXCHANGE (BSE)
MONTH HIGH LOW CLOSE QUANTITYApril 2007 168.00 141.90 148.15 15950119May 2007 159.00 145.55 153.15 11661918June 2007 169.40 148.60 160.55 14733267July 2007 171.00 147.60 150.45 11273564August 2007 149.65 129.00 141.05 8020192September 2007 173.70 141.10 159.90 11632473October 2007 199.80 144.00 179.55 36916480November 2007 191.90 153.35 171.45 20911403December 2007 199.30 171.50 192.30 25252114January 2008 219.45 112.60 119.55 35168594February 2008 133.80 115.75 118.40 12633753March 2008 118.90 92.75 96.55 15945672
NATIONAL STOCK EXCHANGE (NSE)
MONTH HIGH LOW CLOSE QUANTITYApr-07 170 138.9 148.3 43581798May-07 159 144.4 152.95 34316582Jun-07 169.4 148.55 160.65 37964455Jul-07 171 147.55 150.45 26703887Aug-07 150 128.8 141.4 18719737Sep-07 173.75 141.05 160.65 28138159Oct-07 199.7 142.1 179.45 79308741Nov-07 191.8 152.05 171.85 48863184Dec-07 199 171.2 192.4 55931845Jan-08 217.8 112.1 118.95 76376945Feb-08 133.9 115.8 119.1 34546416Mar-08 118.95 92.7 96.6 31033305
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(xi) Share Transfer System - As per the directives of Securities & Exchange Board of India, theEquity Shares of your Company have been mandated for trading indematerialized form by all categories of investors since 1997. Sharetransfers in physical form are registered, if documents are complete inall respects, and returned within 15 days from the date of receipt inmost cases and in any case within 30 days from the date of receipt.
(xii) Distribution of Shareholding (As on 31.3.2008)( NOMINAL VALUE OF EACH SHARE/UNIT RS. 10 )
Share Number of % to No of Shares Amount in Rs. % to
Holding of Shareholders Total Total
Nominal
Value of Rs.
UP TO 5000 1,25,128 92.67 1,43,92,345 14,39,23,450.00 2.2845
5001 TO 10000 5,352 3.96 44,09,191 4,40,91,910.00 0.6999
10001 TO 20000 2,329 1.72 35,78,571 3,57,85,710.00 0.5680
20001 TO 30000 696 0.52 17,86,103 1,78,61,030.00 0.2835
30001 TO 40000 332 0.25 11,76,256 1,17,62,560.00 0.1867
40001 TO 50000 298 0.22 14,13,472 1,41,34,720.00 0.2244
50001 TO 100000 398 0.29 29,57,430 2,95,74,300.00 0.4694
100001 AND
ABOVE 494 0.37 60,02,86,632 6,00,28,66,320.00 95.2836
TOTAL 1,35,027 100.00 63,00,00,000 6,30,00,00,000.00 100.0000
a) Dematerialization of Shares - As on 31st March 2008, almost all shares of the Company'sequity share capital available in the market is in dematerializedform. The Company has entered into agreements with both thedepositories viz. National Securities Depository Ltd. (NSDL) andCentral Depository Services Ltd. (CDSL), whereby shareholdershave an option to dematerialize their shares with any of them.
b) Liquidity - MTNL shares are actively traded in the Indian Stock Exchangesand NYSE. MTNL shares consistently rank among the top fewtraded shares, both in terms of Volume and value. The Shares ofthe Company are traded in the "A" Group at the Bombay StockExchange and are included in the NIFTY index on the NSE.
(xiv) Status of unclaimed and unpaid dividend for different years.
The Unclaimed Dividends have been transferred to the Govt. of India/IEPF as and when becamedue (upto 1999-00). Information in respect of unclaimed and unpaid dividend declared for 2000-01 and thereafter is given below and the shareholders who have not received the same, mayclaim it from the Company before the dates mention herein.
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Financial Year ended Date of declaration of Last date for claiming unpaidDividend dividend.
31.03.2001 28th September 2001 27th September 200831.03.2002 30th September 2002 29th September 200931.03.2003 20th September 2003 19th September 201031.03.2004 29th September 2004 28th September 201131.03.2005 22nd February 2005 21st February 201231.03.2005 28th September 2005 27th September 201231.03.2006 21st February 2006 20th February 201331.03.2006 26th September 2006 25th September 201331.03.2007 20th February, 2007 19th February 201431.03.2007 28th September 2007 27th September 2014
31.03.2008 22nd February 2008 21st February 2014
(xv) Procedure to get changes in address registered in the Company's records.Shareholders holding shares in physical form, may send a request letter duly signed by all the holdersgiving the new address along with Pin Code. Shareholders are also requested to quote their folio numberand furnish proof such as attested copies of Ration Card/ PAN card/ Passport/ Latest electricity ortelephone bill/Lease Agreement, etc. If shares are held in dematerialised form, information about changein address needs to be sent to the DP concerned.
(xvi) Procedure for registering change of name of shareholders.Shareholders may request the Company's R&TA for effecting change of name in the share certificate(s)and records of the Company. Original share certificate(s) alongwith the supporting documents like marriagecertificate, court order etc. should be enclosed. The Company's R&TA, after verification, will effect thechange of name and send the share certificate(s) in the new name of the shareholders. Shareholdersholding share in demat form, may request the concerned DP in the format prescribed by DP.
(xvii) BRIEF RESUME OF THE DIRECTORS APPOINTED DURING THE YEAR/PROPOSED TO BEAPPOINTED/REAPPOINTED AT THE ANNUAL GENERAL MEETING:
(i) Sh. Jagdish Saksena Deepak - Govt. DirectorSh. J.S. Deepak, Joint Secretary (Telecom), Govt. of India has been nominated Govt. director onthe Board of MTNL by the DOT, Govt. of India on 30th April, 2008. Mr. Deepak is having M.Sc.degree in Electronics from Bangalore University and MBA from prestigious institute IIM, Ahmedabadin Marketing and Finance. Mr. Deepak belongs to 1982 batch of Indian Administrative Services(IAS) and has over 25 years of experience. He has worked in the Govt. of UP in different departments/organizations such as Principal Secretary, Industrial Development. Export Commissioner UP,Managing Director, UP Export Corporation Limited, Deputy Managing Director, State IndustrialDevelopment Corporation, UP,. Principal Secretary, Elementary Education, Health, Family Welfarein Government of UP and Commissioner, Faizabad and Commissioner Meerut.
ii) Dr. S. Balasubramanian - Independent DirectorDr.S. Balasubramanian has been a member of MTNL Board since 25.11.05 as Non-official part-timeDirector. He holds M.A.(Economics) degree, M.Phil (Economics) degree, Ph.D (Eco) and DSS fromUniversity of Madras. He served as Professor of Economics in Madras University for 28 years aswell as served as Head of Deptt. Of Economics for 15 years in Presidency College, Chennai. Hehas published several publications on Socio-Economic thoughts etc. He has also served as aMember of Tamilnadu Public Service Commission.
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iii) Smt. Usha Sahajpal - Independent Director
Smt. Usha Sahajpal is having Master of Arts (Political Science) degree from Delhi University.She had joined Indian Audit and Accounts Service from 1966 to 1976 and Indian Civil AccountsService from 1976 to 2003 (till retirement). During her tenure, she has held various positionsin the Indian Audit and Accounts Department as Controller of Accounts in various ministries ofthe Govt. of India, Finance Advisor to the Employees Provident Fund Organization, Ministry ofLabour, Chief Controller of Accounts, Ministry of Industry, Jt. Secretary and Finance Advisor,Ministry of Agriculture, Principal Chief Controller of Accounts, Central Board of Excise andCustoms, Department of Revenue, Ministry of Finance and Controller General of Accounts,Ministry of Finance. She has retired from service on 31st March 2003 as Controller General ofAccounts, Ministry of Finance, Govt. of India. She is presently non-official, part-time Directoron the Board of South Eastern Coal Fields Ltd. (a subsidiary of Coal India Ltd.), Member,Finance Committee, Jawahar Lal Nehru University, Delhi and Member of other institutes/societies, NGOs, etc.
iv) Smt. Anuradha Joshi Durgapal - Govt. Director
Smt. Anuradha Joshi Durgapal was appointed Govt. Director on MTNL Board on 31.7.08. Shehad joined Indian Post and Telecommunication Accounts & Finance service through civilservices examination in 1987. She holds a Post Graduate Degree in M.Sc.(Chemistry) fromIIT Delhi. She also holds Masters Degree in Public Policy from Australian National University,Canberra. Presently she is holding the charge of DDG (FEB) in DOT since May 2008. Prior tothis she has worked in MTNL, Delhi and DOT at various middle and senior level managementposts and looked after Telecom revenues, Banking, Finance, Establishment, Accounts, Audit,Training and Project Finance. She has also worked in Cabinet Secretariat on deputation basisfor five years. She has been a member of the Study Group 3 relating to the tariff andeconomic issues in the International Telecommunication Union (ITU) during 2007-08. She hasattended various seminars and workshops relating to Telecom Revenue, Access to ICT towomen in Asia, Human Resource Management and Career Progression in Japan, South Koreaand Sweden.
Any queries relating to the financial statements of the Company can be addressed to:-
Mrs. Anita SoniDirector (Finance)Jeevan Bharti Building, Tower - I, 12th floor124 Connaught Circus, New Delhi - 110 001.Tel: 23321095/ 23710460 Fax : 23738361
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V.K. SHARMA & CO.Company Secretaries422, Ocean Plaza, Sector-18, NoidaTel. : 0120-4221470, Mobile : 9811009592E-mail : [email protected]
CERTIFICATE OF COMPLIANCE AS STIPULATED UNDER CLAUSE 49OF THE LISTING AGREEMENT OF THE STOCK EXCHANGES OF INDIA
To,The shareholders
We have examined the compliance of conditions of Corporate Governance by Mahanagar Telephone NigamLimited for the year ended 31st March 2008, as stipulated in clause 49 of the Listing Agreement of thesaid Company with stock exchanges in India. The compliance of conditions of Corporate Governance isthe responsibility of the management. Our examination was limited to procedures and implementationthereof, adopted by the company for ensuring the compliance of the conditions of Corporate Governance.It is neither an audit nor an expression on the financial statements of the company.
In our opinion and to the best of our information and according to the explanations given to us, we certifythat the company has complied with the conditions of Corporate Governance as stipulated in the abovementioned Listing Agreement except that:
1. The composition of the Board of Directors is not as per the stipulation regarding number of nonexecutive directors and independent directors required by the Clause as there are less than 50%independent directors.
2. The composition of the Audit Committee is not as per the stipulation regarding number independentdirectors required by the Clause as there are less than two third independent directors.
For V.K.SHARMA & CO.Company Secretaries
Sd/-
(V.K.Sharma)
FCS 3440
Place : New DelhiDate : 12th August, 2008
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34
CEO and CFO Certificate pursuant to Clause 49(V) of the Listing Agreement
This is to certify that :
a). We have reviewed financial statements and the cash flow statement for the year and that to the best
of their knowledge and belief :
(i) these statements do not contain any materially untrue statement or omit any material fact or
contain statements that might be misleading;
(ii) these statements together present a true and fair view of the company's affairs and are in
compliance with existing accounting standards, applicable laws and regulations.
b) There are, to the best of our knowledge and belief, no transactions entered into by the company
during the year which are fraudulent, illegal or violative of the company's code of conduct.
c). We accept responsibility for establishing and maintaining internal controls and that We have evaluated
the effectiveness of the internal control systems of the company and We have disclosed to the
auditors and the Audit Committee, deficiencies in the design or operation of internal controls, if any,
of which we are aware and the steps we have taken or propose to take to rectify these deficiencies.
d) We have indicated to the auditors and the Audit committee
(i) significant changes in internal control during the year;
(ii) significant changes in accounting policies during the year and that the same have been disclosed
in the notes to the financial statements; and
(iii) instances of significant fraud of which we have become aware and the involvement therein, if
any, of the management or an employee having a significant role in the company's internal
control system appointed in terms of the Companies Act.
(R.S.P. Sinha) (Anita Soni)
Chairman & Managing Director (CEO) Director (Finance) (CFO)
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MANAGEMENT DISCUSSIONS & ANALYSIS
This discussion contains forward looking statements, the performance of the company for the year 2007-08 and an outlook for the future. The report conveys expectations on future performance based on anassessment of current business environment. These could vary based on future developments.
INDUSTRY STRUCTURE & DEVELOPMENTS
Telecom Infrastructure development has a key role to play in both economic growth and public convenience.Investors, policymakers and citizens alike acutely feel the constraint of physical infrastructure on economicgrowth. Introduction of 3G services by Government of India is a major stride towards contributing economicgrowth of the nation. The policy guidelines signal big business for global players and a revenue opportunityfor the government, which is expected to net Rs.30,000 crores to 40,000 crores from the 20 year licenses.
In 2007-08, the biggest improvement in telephony was in voice services. Prices dropped dramatically to thepoint where India is now as competitive as developed markets. The steep cut in mobile STD rates and theavailability of cheap mobile handsets can be expected to lead to further growth in coming months. Servicequality, a major problem in the past, has improved significantly, but there is ground left to cover as India stilllags behind many other countries in this regard, even within the developing world.
OPPORTUNITIES & THREATS
MTNL is being the first company in both Metros to have been offered 3G license by GOVT. OF INDIA andwe will get a head start in offering the services which is expected next year to bring high-speed Internet topalmtop. As we are the market leader in providing affordable services, the 3G services will also beaffordable in a price-conscious market. The market and consumers enthusiasm indicates a major increasein our revenues through 3G services in coming years. Broadband and IPTV will also be a contributing asignificant revenues in our kitty.
Department of Telecom has asked the Telecom Regulatory Authority of India to review mobile call terminationcharges on priority basis. A revision can bring about a reduction in call tariffs for users.
Given the central aim of telecom policy to provide services at affordable rates, it may be beneficial thata review of the mobile termination charges based on present and projected cost and traffic is undertakenby TRAI on a priority in a time bound manner.
Termination charges is one of the major components of tariff and is paid by an operator from whosenetwork call originates, to a service provider on whose network the call is terminated. Currently, thecharges have been fixed at Rs.0.30 a minute. The charges were fixed in 2003. While the cost of networkand services have comes down by more than 50 per cent since then, termination charges have remainedunaffected as they are independent of market flux.
The cost-based termination charges would be less than Rs.0.10 a minute. If implemented, the existingoperators would have to forego a substantial portion of their revenues, while new cellular operators wouldfind it easy to establish themselves.
The reduction in termination charges will lead to reduction in pay-outs of the operators thus making thetariffs more viable and sustainable in the competitive environment..
Following major categories of risk are faced by MTNL in the current competitive telecom scenario:-
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MARKET RISKS
The telecommunications market in the cities of Delhi and Mumbai are among the most competitive markets.MTNL faces intense competition from the other mobile operators and the basic service operators. Thishas led to an increased pressure on margins due to reducing tariffs and also on the customer retention andacquisition. The Average revenue per user is also going down. With new operators coming in Delhi andMumbai, such competitive pressures are likely to increase further, putting a further strain on the margins.Recently DOT has issued LOIs to a number of new players which will lead to increased competition tomarket share. MTNL is confirmed only in two cities i.e. Delhi and Mumbai, therefore MTNL is not able toexpand its telecom services beyond its area of jurisdiction.
POLICY AND REGULATORY RISKS
The telecommunications sector in India is one of the highest taxed sector. The high level of license feeis a big strain on the finances of the company. This is paid over and above all other taxes and dutieswhich are levied on all other businesses. Regulatory policies cannot be foretold and may at time, be suchas to affect the financials of the company.
MANPOWER RISKS
There is a huge workforce and approximately 32% of revenue is spent on staff. In comparison of the staffcosts of other operators, it is about 7% of the revenues. This is a major risk which the company faces, asit has little flexibility in the matter and may have to continue to carry the cost. It may in fact become evenhigher as wage negotiations are now due as per the earlier wage agreement which was for 10 years.
Considering the tremendous growth of private sector and opportunities that have become available andavailability of employment in telecom & IT sectors, retention of suitable manpower is a big challenge.
There is 20% attrition rate among the young executives recruited for specialized jobs.
OUTSTANDING DUES
Over the years, the amount owned to MTNL by its customers had been increasing and accumulatedsignificantly. Realisation of dues from customers has become even more difficult in the increasinglycompetitive telecom market as the customers can close the connection and take services of other operators.Efforts are being made to reduce the outstanding and some success has been achieved in bringing downtotal outstanding in a multi operator environment, this risk remains.
HUMAN RESOURCE DEVELOPMENT
The Company attachés the highest priority to the quality of intellectual capital at its disposal and believesthat knowledge and skill level of its employees are the key to achievements of its corporate mission.MTNL has a sound recruitment policy and comprehensive training system.
During the past one year, your Company has laid greater emphasis on Human Resources Development.We have been devoting substantial resources on building a skilled workforce that has an innate capabilityto counter threats posed by ever changing business environment and to take advantages of opportunitiespresented to serve ever increasing customer base.
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37
The Company has been conducting various training and development activities which apart from reorientingthe employees towards the greater organizational purpose, are also focusing on eliminating any skill gapand technical obsolescence. The management's view on training is one of development of employees'overall personality and enabling them in becoming a vital productive resource.
INTERNAL CONTROL SYSTEM & THEIR ADEQUACY
The company has internal control system commensurate with its size and nature of business and meetingwith following objectives:-
(i) Efficient use and safeguarding of resources
(ii) Compliance with statutes, policies and procedures
(iii) Transactions being accurately recorded and promptly reported
The Internal Control System provides well-documented policies, guidelines authorizations and approvalprocedures. The internal Audit Department conducts periodic audits across all locations and all functionsthroughout the year. The observations raised out of the audit are subject to periodic review and compliancemonitoring. The Audit Committee of the Board on a regular basis reviews the internal audit Reports alongwith the report of the status of implementation of recommendations contained therein.
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Annual AccountsAnnual AccountsAnnual AccountsAnnual AccountsAnnual Accounts(2007-08)(2007-08)(2007-08)(2007-08)(2007-08)
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DHAWAN & CO.Chartered Accountants
312, Wegmans House, 21, Veer Savarkar Block,
Shakarpur, Vikas Marg, Delhi-110092
Ph. : 011-22017651, Fax : 011-22025360
AUDITORS’ REPORT
To,
The Members of
Mahanagar Telephone Nigam Limited
New Delhi
1. We have audited the attached Balance Sheet of Mahanagar Telephone Nigam Limited as at March 31,
2008, the Profit and Loss Account and the Cash Flow Statement of the Company for the year ended on
that date, annexed thereto, in which, the accounts of 3 units namely Delhi unit, Mumbai unit and MS unit
(Delhi & Mumbai both) are incorporated, which are audited by the branch auditors appointed by the
Comptroller & Auditor General of India. 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. These
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 by the Companies (Auditor's
Report) Order, 2004 (together the 'Order'), issued by the Central Government of India in terms of Section
227 (4A) of the Companies Act, 1956, and on the basis of such checks as we considered appropriate and
according to the information and explanation given to us, we give in the Annexure, a statement on the
matters specified in paragraphs 4 and 5 of the said Order, to the extent applicable to the company.
4. Further to our comments in the Annexure referred to in paragraph 3 above and subject to:
i) Non-Provision of a sum of Rs. 32.29 Millions, payable in terms of directions of Hon'ble
Supreme Court of India to various Companies. The Profit of the company as well as Current
Assets of the company are overstated by the above amount. [Refer Note No. 7(C)].
ii) Booking of Income of Rs. 545.86 Millions, during the year under review, on account of
charges for usage of MTNL Trunk Automatic Exchange (TAX) by BSNL, which has been
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40
rebutted by BSNL. The Profit of the company, for the year, therefore, is overstated by Rs.
545.86 Millions and Current Assets of the company are overstated by an equivalent amount.
[Refer Note No. 10(d)].
iii) Non-Provision of Post Medical Retirement Benefits in the Books of Accounts as per the
requirements of Accounting Standard AS - 15 (Revised), which may have significant impact
on the profitability of the company. Amount not ascertainable. Further, as regards provisions
and disclosures made for Gratuity, Pension and Leave encashment, we have relied on the
report of Actuarial Valuation carried out by the Actuary and provided to us by the management.
[Refer Note No. 30, 31 & 32].
iv) During the year, the company has entered into project agreement with a private company for
development of core knowledge park at Noida and has given the right to develop the project
on land belonging to MTNL for the period of 50 years. The company has received Rs. 481.25
Millions as consideration towards granting right to develop the project and maintain the
same for 50 years. This amount has been treated as Income of this year whereas the same
should be deferred and should be spread over the life of the agreement. This has resulted in
overstatement of profit by Rs. 471.62 Millions and understatement of Deferred Revenue
Income. [Refer Note No. 22].
v) The company has not provided for Rs. 19.55 Millions on account of old EMIs of handsets
billed but not paid for closed connections and Rs. 100.84 Millions billed at the year end out
of unbilled EMI of closed connections of handsets for CDMA connections. This has resulted
into overstatement of profit by Rs. 120.39 Millions and consequent overstatement of current
assets.
vi) In respect of some equipments in Old WLL exchange, which have been recommended by
the committee for de-capitalisation, the same have not been de-capitalised and as such
have not been valued at lower of Net Book Value or Net Realisable Value, as such the financial
impact of the same is Rs. 484.40 Millions have not been charged to Profit & Loss Account.
The Profit of the company, therefore, is overstated by Rs. 484.40 Millions and Fixed Assets
are overstated by an equivalent amount.
vii) The company has not made provision in the accounts for the balance of Rs. 9.92 Millions
outstanding for more than 3 years in respect of dues from International operators. Thus, the
profit of the company is overstated by Rs. 9.92 Millions and debtors have been overstated
by the same amount.
viii) Short-provision of Rs. 1149.81 Millions on account of merger of 50% of Dearness Allowance
(DA) with basic pay to the employees on IDA scales in terms of Department of Public
Enterprises OM No. 2(7)/2005-DPE (WC)-GL-III dated 26.02.2008. The profit of the company,
therefore, is overstated by Rs. 1149.81 Millions and current liabilities are understated by the
same amount. [Refer Note No. 21]. Further, there will be liability on account of impact of the
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same on retirement benefits too. Impact of the same on retirement benefits is not
ascertainable.
ix) During the year, the company has raised bills of ADC to two private operators for the period
from November 2004 to January 2005 of Rs. 22.56 Millions. The bills are arbitrarily raised
without exact basis as such there is reasonable uncertainty at the time of raising of claim.
The same is not as per AS - 9 issued by the Institute of Chartered Accountants of India. The
profit of the company, therefore, is overstated by Rs. 22.56 Millions and Current Assets are
overstated by equivalent amount. [Refer Note No. 10(e)].
x) There is a difference of Rs. 36.54 Millions as per financial books and as per report generated
from billing system. The impact of the same, on provisioning for Bad-debts and profitability
is un-ascertainable.
xi) The system of issuance of completion certificate by engineering department needs to be
strengthened. The impact, if any, due to delay of issuance of completion certificate by
concerned engineering department on the capitalization of assets, WIP and consequently
on depreciation, if any, is un-ascertainable.
xii) In MS Delhi unit, during the year, no reconciliation of roaming receivables have been carried
out. The impact of non-reconciliation of roaming debtors on profitability, if any, is
unascertainable.
xiii) No provision has been made for the following expenses / claims made by BSNL:
a) Signalling charges amounting to Rs. 219.30 Millions;
b) Transit Tariff claims amounting to Rs. 251.90 Millions;
c) M. P. Bills claims upto 31.03.2005 amounting to Rs. 60.10 Millions;
d) Claims for service connections amounting to Rs. 401.48 Millions;
e) IUC claims of MTNL rebutted by BSNL amounting to Rs. 101.40 Millions;
f) IUC claims raised by BSNL, Gujarat circle amounting to Rs. 11.14 Millions;
The profit of the company, in view of para (xiii) above, is overstated by Rs. 1045.32 Millions
and Current Assets are overstated by similar amount.
xiv) The Bank Reconciliation Statements as at 31st March 2008 include the unmatched / unlinked
credits and debits aggregating Rs. 56 Millions and Rs. 42.75 Millions, respectively, which
have not been properly accounted for, in the absence of adequate particulars. The impact of
such entries on the accounts is not ascertainable. (Refer Note No. 13).
xv) The value of the properties where the conveyance / lease deeds remain to be executed,
stamp duty payable, if any, for execution of above said properties has not been provided for.
The outstanding liabilities, if any, towards Ground Rent payable on properties transferred
from DOT also remains unascertained. [Refer Note No. 8].
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xvi) The balance in Subscriber's Deposit Accounts Rs. 8481.73 Millions, Interest Accrued & Due
thereon Rs. 29.48 Millions and Unlinked Receipt from Subscribers Rs. 312.44 Millions are
subject to reconciliation. Reconciliation of metered and chargeable calls generating revenue
in Service unit at Mumbai has been made in case of a few exchanges. Reconciliation of
remaining exchanges at Mumbai needs to be completed. In respect of Delhi and MS unit,
thorough reconciliation of activation charges, ratable calls, customers deposits and sundry
debtors from the output generated from the billing system and the books of accounts has
not been conducted. The final impact of above on the accounts is presently not ascertainable
and the same may have an impact on the Profitability of the company. [Refer Note No. 15(b)].
xvii) a) Amount recoverable on current account from DOT Rs. 30,856.38 Millions. and amount
payable on current account to DOT Rs. 454.99 Millions i.e. Net Recoverable Rs. 30,401.39
Millions (Previous Year Rs. 29,443.42 Millions) are subject to reconciliation, confirmation
and consequent adjustments. [Refer Note No. 17(a)].
(b) Amount recoverable on current account from BSNL Rs. 6,036.32 Millions (Previous Year
Rs. 8,677.31 Millions) is subject to reconciliation, confirmation and consequent
adjustments. [Refer Note No. 17(b)].
The final impact of the above on the accounts is, presently, not ascertainable. The same
may, however, have an impact on reconciliation / settlement.
xviii) The Mumbai unit of the Company has computed and accounted for the IUC charges of
BSNL for the Current Year on the basis of actual CDR's recorded in MTNL's Mumbai Exchange
and in respect of Intra Circle Calls, as per Leased Lines. Any adjustment after settlement of
dispute with BSNL may have an impact on the Profits of the company. Amount not
ascertainable. [Refer Note No. 10(C)].
xix) The company has not made following disclosures required under schedule - VI of the
Companies Act, 1956 as per references given after each item:
a) Consumption of stores and spares (Para No. 3 (x)(a) of part II.
b) Consumption of imported and indigenous stores & spares and percentage to the total
consumption. (Para No. 4 D (C) of part II)
c) The classification of sundry debtors as unsecured without considering the security deposit
that the unit has received from subscribers.
d) Non-Furnishing of Agewise details of Loans & Advances contravenes the requirements
of Part - I of Schedule - VI to the Companies Act, 1956.
e) The Company is not in possession of requisite information and details for the identification
of Micro, Small and Medium enterprises. Hence, we are unable to comment upon the
compliance of section 15 and 22 of Micro, Small and Medium Enterprises Development
Act, 2006.
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xx) The following mentioned practices and procedures followed by the Company in respect of
Fixed Assets and Depreciation Accounting, in our opinion, are not in accordance with the
Accounting Standard - 10 on 'Accounting for Fixed Assets'; Accounting Standard - 6 on
'Depreciation Accounting' and Accounting Standard - 28 on "Impairment of Assets" issued
by the Institute of Chartered Accountants of India : -
(a) During the year, the company has changed the policy regarding allocation of overhead
expenses to fixed assets, from percentage of capital expenditure as prescribed by DOT
to directly allocable expenses and a sum of Rs. 2754.28 Millions have been allocated to
Capital Work in Progress out of Employees Remuneration & Benefits and Administrative,
Operating & Other Expenses [Refer Schedule P & Q of the Annual Accounts]. Branch
Auditor has further reported that method of capturing of data for allocation of overhead
expenses to capital expenditure requires more scientific and prudent methodology. This
change in policy has resulted in increase of Profit by Rs. 2098.68 Millions. [Refer Note
No. 3(b)].
(b) Expenditure on replacement of assets, equipments, instruments and rehabilitation work
is capitalised if it results in enhancement of revenue earning capacity as stated in
Significant Accounting Policy 2(iii). This being a technical matter, we have placed reliance
on the opinion of the management.
(c) In respect of Mumbai unit, various Fixed Assets (including WLL handsets but not including
exchange equipments), replacement cost have been capitalised and / or the assets are
sold, without any adjustments of the relevant costs and written down value of such
assets from the Fixed Assets block.
xxi) Non - confirmation and reconciliation of balances recoverable and payable. Impact on Profits
not ascertainable.
xxii) The company has adopted the basis of valuation of inventories (except for WLL handsets)
as stated in Significant Accounting Policies of the company, which is in accordance with
the Accounting Standard - 2 on "Valuation of Inventories" issued by the Institute of Chartered
Accountants of India which prescribes for valuation of the same at the lower of the cost and
net realizable value. This is a change in the Accounting Policy which has resulted in
understatement of inventories by Rs. 1.11 Millions and profits by Rs. 1.11 Millions.
xxiii) The accounting policy for revenue and phonogram has been changed from cash basis to
accrual basis. This has resulted in the Income being more by Rs. 0.14 Millions and the
debtors more by the same amount. However, the impact of above change in policy in respect
of Delhi unit is negligible. Thus, the Net Profit of the company is overstated by Rs. 0.14
Millions and Current Assets are correspondingly shown higher by the same amount.
xxiv) As per the change in Accounting Policy in respect of Intangible Assets which include
Application Software, the depreciation is charged assuming there will be no residual value
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44
at the end of the life of the assets. This has resulted in increase in Depreciation amounting
to Rs. 2.62 Millions. Thus the profit is understated by Rs. 2.62 Millions and Fixed Assets are
also understated by equivalent amount. [Refer Note No. 3(d)].
xxv) During the year, the company has changed the policy with regard to reciprocal services and
stated there is no reciprocal arrangement with BSNL / DOT. Since in the previous year also,
no revenue was booked, as such impact of change of policy on the account is not
ascertainable. It has further been reported by the branch auditors that they are unable to
comment whether all the reciprocal arrangements with DOT have been accounted for.
(The overall impact of the above qualifications on the Profit and Assets / Liabilities of thecompany is placed in Annexure - II, which is annexed hereto and is forming part of thereport.)
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 except that the following items referred to in paragraph
l (i) of Significant Accounting Policies are consistently accounted on cash basis, instead of on
accrual basis as required under section 209 of the Companies Act, 1956 :
a) Interest Income / Liquidated Damages, when realisability is uncertain.
b) Annual recurring charges of amount up to Rs.0.10 Millions each for overlapping period.
iii) The Balance Sheet, Profit and Loss Account and the 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 the 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 except AS - 2 regarding Valuation of Inventories (Refer Significant Accounting Policy No.
3); AS - 4 regarding Contingencies and Events Occurring after the date of Balance Sheet; AS - 5
regarding Net Profit or Loss for the Period, Prior Period Items and Changes in Accounting Policies
[Refer Significant Accounting Policy No. 1(b)]; AS - 6 regarding Depreciation Accounting [Refer
Significant Accounting Policy No. 2(v)]; AS - 9 regarding Revenue Recognition [Refer Accounting
Policy No. 1 (ii)], AS - 10 regarding Accounting of Fixed Assets (Refer Significant Accounting Policy
No. 2); AS - 11 regarding The Effects of Changes in Foreign Exchange (Accounting Policy No. 4); AS
- 15 regarding Accounting for Retirement Benefits in the Financial Statements of Employers (Refer
Note No. 30, 31 & 32); AS -28 regarding Impairment of Assets (Refer Significant Accounting Policies
No. 2 and Note No. 37) and AS - 29 on Provisions, Contingent Liabilities and Contingent Assets.
v) Since the company is a Government company, clause (g) of sub-section (1) of section 274 of the Companies
Act, 1956 regarding obtaining written representations from the directors of the company, is not applicable
to the Company in terms of Notification No.GSR-829 (E) dated 21.10.2003);
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45
vi) Attention is further invited to the following : -
a) Non compliance of Accounting Standard - 28 on Impairment of Assets, which, in view of the
recent technological changes, may have significant impact on the carrying cost of the Fixed
Assets of the company and may have significant impact on the profitability of the company.
b) Non - Redemption of Ist, IInd, IIIrd and IVth installment of 8.75% Cumulative Redeemable
Preference Shares amounting to Rs. 800 Millions by ITI Limited, due in the year 2005, 2006,
2007 and 2008. Consequently, the funds of the company have been blocked to the tune of Rs.
800 Millions. (Refer Note - 12).
c) The Income Tax Assessment of the company is pending at various stages from the assessment
year 1994-95 to 2005-06. The Income Tax Department has partially allowed claims of the
company u/s 80 IA & some other claims against which the company has filed appeals. To
meet the contingency of Income Tax demands, which may arise due to rejection of its appeals,
the company had specifically created a CONTINGENCY RESERVE in the previous years.
During the year also, an amount of Rs. 5111.50 Millions has been transferred from General
Reserve to the Contingency Reserve. [Refer Note No. 5].
d) In spite of the directions issued by the Department of Telecommunications (DOT), in the
month of January 2006, the company is not reconciling its accounts with BSNL on monthly
basis.
e) Settlement of claim with DOT, in respect of Pension, Gratuity, GPF and Leave encashment
liability of absorbed employees is long pending.
f) Non - Provisioning of Fringe Benefit Tax (FBT) on the Service connections provided to the
employees of the company, Free of cost / at concessional rate.
g) As per suspense list, certain CDRs are lying unmatched in the computer billing system and
are pending reconciliation.
h) Provision has been made in the accounts for one time permission charges payable to MCD
/ NDMC relating to BTS sites acquired on ad-hoc basis in the absence of detailed information.
Reconciliation of site taken as per field record and as per account is not available.
i) Non - compliance of various clauses of Clauses - 49 of the Listing Agreement relating to
Corporate Governance, as per detail given hereunder:
1. The Board of Directors should have an optimum combination of executive and non -
executive directors with not less than 50% of the board of directors comprising of non
executive directors. The company has 4 executive directors including Managing Director
and has only 1 non executive director.
2. The Audit Committee constituted by the company is defective to the extent that it has
only one independent director in place of two, as required by law.
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46
j) Debtors Balance as per subsidiary records are short by Rs. 74.21 Millions as compared to
General Ledger balances and are under reconciliation. Impact on the accounts not
ascertainable. [Refer Note No. 16].
k) A review of the balances with Non-Scheduled Banks reveal that the company is having
accounts with some non-scheduled banks, where the accounts are closed and still the balances
are lying in the account. [Refer Note No. 26].
vii) In our opinion, and to the best of our information and according to the explanations given to us, the said
accounts read with the significant Accounting Policies and together with the notes thereon, give the
information required by the Companies Act, 1956, in the manner so required and also give, subject to
our observations in paragraph 4 foregoing, a true and fair view in conformity with the accounting
principles generally accepted in India.
(a) in the case of Balance Sheet, of the State of Affairs of the Company as at 31st March, 2008;
(b) in the case of the Profit & Loss Account, of the Profit of the Company for the year ended on that
date; and
(c) in the case of the Cash Flow Statement, of the cash flows of the Company for the year ended on
that date.
For & on behalf of
Dhawan & Co.Chartered Accountants
Place : New Delhi Sunil Gogia
Dated : July 31, 2008 (Partner)
M.No. - 73740
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ANNEXURE - I TO THE AUDITORS' REPORT(Referred To In Paragraph - 3 Of Our Report Of Even Date To The Members of
Mahanagar Telephone Nigam Limited On The Accounts For The Year Ended 31st March 2008)
As required by the Companies (Auditor's Report) Order, 2003, issued by the Central Government of Indiain terms of section 227(4A) of the Companies Act, 1956 and as per the information and explanations givento us, the books and records examined by us in the normal course of audit, the reports received from theBranch Auditors and to the best of our knowledge and belief, we further report that:
1. (a) Delhi unit has maintained records of fixed assets. However, full particulars of the assets& locations as required are not maintained in most of the cases. In respect of assetsacquired from DOT on 1st April 1986, particulars of location are not available. In caseof Mumbai Unit and MS unit Mumbai, fixed assets registers maintained w.e.f. 01.04.2002are adequate in so far as these give full particulars of quantitative details andidentification of situation of fixed assets is in progress. In MS unit - Delhi, records offixed assets have been maintained. However, full particulars of assets and location asrequired are not maintained in many cases. Corporate Office has maintained fixed assetsregister showing full particulars including quantitative details. The situation / location offixed assets have, however, not been mentioned in most of the cases.
(b) As per the Accounting Policy of the company, Fixed Assets are required to be physicallyverified by the Management on rotation basis, once in three years.
In respect of Mumbai unit, the work of physical verification of fixed assets namelyUnderground Cables is being conducted in accordance with accounting policy No. 2(ii). Thefixed assets have been physically verified during the year covering one third of the fixedassets every year. In respect of Delhi and Mobile Service (MS) units (both Delhi & Mumbai),physical verification has been conducted on rotation basis once in three years. As certifiedby the management, the office machinery and equipment, electrical appliances, Furniture &Fixtures and line and wires were physically verified in accordance with programme ofverification by the management in this year and relied on by us. In our opinion, the area ofphysical verification needs to be strengthened and discrepancies need to becategorically reported. In respect of Corporate office, no physical verification hasbeen conducted by the Management.
(c) The company has not disposed off any substantial part of its fixed assets during the yearand as such there is no effect on the going concern.
2. (a) In our opinion, physical verification of inventory has been conducted by the managementat reasonable intervals.
(b) In our opinion, the procedure of physical verification of the inventory followed by themanagement needs to be strengthened and frequency needs to be increased. Accordingto the information and explanations given to us, the physical verification of all the itemsof stores was carried out during the year by Delhi and Mumbai units. However, at MS unit,Delhi, physical verification was conducted only for SIM cards. Detailed physical verificationreports for all the above units except Mumbai, were not made available for the verificationof auditors. We, in view of the same, are unable to offer our comments on the same.
MTNL
48
(c) The Company is maintaining proper records of inventory. As per the information provide tous, discrepancies noticed on physical verification of inventory were not material and havebeen properly dealt with in the books of accounts.
3. According to the information and explanations given to us, the Company has neither granted nortaken any loans, secured or unsecured, to or from companies, firms or other parties covered inthe register maintained u/s 301 of the Companies Act, 1956. Consequently, clauses (iii)(b), (iii)(c),(iii)(d), (iii)(e), (iii)(f) and (iii)(g) of paragraph 4 of the order are not applicable.
4. In our opinion and according to the information and explanations given to us, there are adequateinternal control procedures commensurate with the size of the Company and the nature of itsbusiness for the purchase of inventory and fixed assets and for the sale of goods / services.However, in case of Delhi unit, Auditors have shown their inability to comment on theprocedures with respect to the purchases under tenders floated and evaluated by corporateoffice. Further, reconciliation & confirmation of deposits to various departments,reconciliation between the exchange generated calls & billed calls, reconciliation of thebalance in subscriber deposit account with subsidiary records needs to be strengthened.Further, in respect of Mumbai Unit, the overall internal control on revenue billing andrecords of use and return FWP instruments, ADSL Modems and CDMA handsets needs tobe strengthened. In case of MS units, the overall internal control system on revenue billingneeds to be strengthened as the sundry debtors, deposits and service tax generated bysystem is not in agreement with the financial books. Further, in MS unit Delhi, the systemof reconciliation of IUC payable needs to be strengthened, as the amount generated as perthe system for the payable, in certain cases, has to be reconciled with certain operators. Inaddition to above, there is continuing failure to correct the above weakness in the InternalControl System. In our opinion, there should be a system of cross checking of IUC billingto operators.
5. The Company has not made purchase of material from companies, firms or other parties listed inthe register required to be maintained under section 301 of Companies Act 1956, aggregatingduring the year to Rs. 5,00,000/- or more in value in respect of each party. The company has,however, obtained and provided the services from / to the companies, firms or other partieslisted in the register required to be maintained under section 301 of the Companies Act,1956. The above transactions, though required to be entered in the register required to bemaintained under section 301 of the Companies Act, 1956, have not been entered.
6. As informed to us, the Company has not accepted any deposits from the public during the yearwithin the meaning of section 58 A of the Companies Act, 1956 and the rules framed there under.Therefore, the directives issued by the Reserve Bank of India are not applicable.
7. In our opinion, the Internal Audit System of the company commensurate with the size of theCompany and the nature of its business. However, the extent of coverage of the areas ofoperations, frequency / quality of reporting / timeliness of the reporting and the follow upof internal audit observations need to be strengthened.
8. The Central Government has prescribed the maintenance of cost records under clause (d) of subsection (1) of section 209 of Companies Act, 1956 w.e.f. 01.04.2003. The company has notmade available Cost Records for the year under review and in the absence of the same, weare unable to express our opinion.
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49
9. (a) There were no undisputed amounts payable in respect of Statutory Dues including ContributoryProvident Fund, Investor Education and Protection Fund, Income Tax, Sales Tax, Wealth Tax,Custom Duty, Excise Duty, Cess and any Other Statutory Dues outstanding as at 31.03.2008,for a period of more than six months from the date they become payable except service taxpayable on amount lying in unlinked credits accounts in units (amount not ascertainable).As informed to us, the provisions of Employees State Insurance Act are not applicable to thecompany. There has generally been no delay in depositing CPF contribution to the trust. GPFcontribution, in respect of employees on deemed deputation, are generally remitted regularly toDOT cell. GPF contribution, in respect of absorbed DOT employees, has been deposited withthe GPF Trust after registration of the trust with Income Tax Department.
(b) According to the information and explanation given to us, there are no dues in respect ofCustom Duty, Excise Duty and Cess that have not been deposited with the appropriateauthorities on account of any dispute. However, the Company has not deposited SalesTax / VAT Dues, Service Tax and Income Tax Dues on account of disputes as under:
(i) Local Sales Tax and Central Sales Tax / VAT:
Name of the Amount (Rs) Amount (Rs) Period Authority whereStatute L.S.T C.S.T pending
Delhi Sales Tax Act 268131 92302769 1988 - 89 Addl. Comm.Sales Tax
Delhi Sales Tax Act 162120 20517000 1989 - 90 Addl. Comm.Sales Tax
Delhi Sales Tax Act 1006001 15337192 1990 - 91 Addl. Comm.Sales Tax
Delhi Sales Tax Act 11660806 63932673 1991 - 92 Addl. Comm.Sales Tax
Delhi Sales Tax Act 1437418 144392134 1992 - 93 Addl. Comm.Sales Tax
Delhi Sales Tax Act 1699669 176491 1993 - 94 Addl. Comm.Sales Tax
Delhi Sales Tax Act 1032760 201103762 1994 - 95 Addl. Comm.Sales Tax
Delhi Sales Tax Act 827253 88446906 1995 - 96 Addl. Comm.Sales Tax
Delhi Sales Tax Act 71319 0 1996 - 97 Addl. Comm.Sales Tax
Delhi Sales Tax Act 0 348774 1997 - 98 Addl. Comm.Sales Tax
Delhi Sales Tax Act 0 102613 1998 - 99 High court
Delhi Sales Tax Act 1461 545178 1999 - 00 High court
Delhi Sales Tax Act 88527 5000 2000 - 01 High court
Delhi Sales Tax Act 2036407 15200 2001 - 02 Addl. Comm.Sales Tax
Delhi Sales Tax Act 371932 0 2002 - 03 Addl. Comm.Sales Tax
Delhi Sales Tax Act 1255424 0 2003 - 04 Addl. Comm.Sales Tax
Delhi Sales Tax Act 0 180544146 1987 - 88 Addl. Comm.Sales Taxto1993 - 94
Delhi Sales Tax Act 72041344 4234 2004 - 05 Addl. Comm.Sales Tax
Delhi Unit has already deposited Rs. 15,45,11,466.90, out of the total disputed liability as above.
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(ii) Service Tax
Name of the Statute Amount (Rs.) Period Authority where pending
Service Tax 220600000 2007 - 08 Excise Commissioner
(iii) Bombay Sales Tax
Name of the Nature of Dues Amount under Year to which Forum whereStatute dispute not amount the dispute is
deposited relates pending
BST Act Assessed Amount 54829094.00 2000 - 01 MSTT
BST Act Assessed Amount 40201675.00 1999 - 00 MSTT
BST Act Assessed Amount 59424662.00 1998 - 99 MSTT
BST Act Assessed Amount 53193370.00 1996 - 97 DC
BST Act Assessed Amount 3552968.00 1993 - 94 MSTT
BST Act Assessed Amount 553070.00 1988 - 89 MSTT
Finance Act, Service Tax cause Notice 5600000.00 2003 - 04 Appeal filed withService Tax CESTAT.
Lease Act Assessed Dues 1943994661.00 1998 - 99 to Joint Comm. of(Now under 2002 -03 Sales Tax-(Apps.)MVAT)
(iv) CESTAT
Sl. No. Nature of Dues Amount Forum where thedispute is pending
1 Installation of BTS Sites 3963453 CESTAT
2 Installation of BTS Sites 35665083 CESTAT
3 Installation of BTS Sites 7489891 (Penalty) CESTAT
4 Installation of BTS Sites 2248797 CESTAT
5 Installation of BTS Sites 2617816 CCE
6 Service Tax Demand 2003-04 2080000 Appeal is being filedwith Joint Commissioner
(Appeals)
7 Installation of BTS Sites 3210353 CCE
8 Installation of BTS Sites 15167288 CCE
9 Installation of BTS Sites 12190290 CCE
10. The company has not incurred any losses in the current year and in the financial year immediatelypreceding such financial year.
11. The Company has neither taken any loans from a financial institution / bank nor issued any debentures.Accordingly, clause 4 (xi) of the order is not applicable.
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12. The Company has not granted loans and advances on the basis of security by way of pledge ofshares, debentures and other securities. Accordingly, clause 4 (xii) of the order is not applicable.
13. The Company is not a Chit Fund or a Nidhi Mutual Benefit Fund / Society. Accordingly, clause 4(xiii)of the order is not applicable.
14. The Company is not dealing in or trading in shares, securities, debentures and other investments.Accordingly, clause 4(xiv) of the Order is not applicable.
15. According to the information and explanation given to us, the Company has not given any guaranteesfor loans taken by others from banks or financial institutions. Accordingly, clause 4(xv) of the Orderis not applicable.
16. The Company has not obtained any Term Loans. Accordingly, clause 4(xvi) of the Order is not applicable.
17. The Company has not raised any Long Term or Short Term Loan. Accordingly, Clause 4(xvii) of theOrder is not applicable.
18. The Company has not made any preferential allotment of shares to parties and companies covered inthe register maintained under section 301 of the Act.
19. The Company has not issued any debentures. Accordingly, clause 4(xix) of the Order is not applicable.
20. The Company has not raised any money by public issues during the year. Accordingly, clause 4(xx)of the Order is not applicable.
21. According to the information and explanations given to us, no major fraud on or by the company hasbeen noticed or reported during the year. The figures of subscribers fraud is yet to be ascertained andprovided in case of Delhi unit.
For Dhawan & Co.Chartered Accountants
Sunil Gogia(Partner)
M. No. 73740Place : New DelhiDated : July 31, 2008
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ANNEXURE - II TO THE AUDITORS REPORTImpact of Audit Observations given in our report dated 31st July 2008, on the
Profit, Assets & Liabilities of M/s Mahanagar Telephone Nigam Limited as at 31st March 2008
Particular Rupees in MillionAmount Amount
A) Overstatement of Profit 3960.80B) Understatement of Profit 0.00
- Net Impact on Profit & Cumulative Profit 3960.80- Accumulated Profit would have been 108952.78
(112913.58)C) Overstatement of Current Assets 1744.05D) Understatement of Current Assets 0.00
- Net Impact on Current Assets 1744.05- Current Assets would have been 139872.48
(141616.53)E) Overstatement of Current Liabilities 0.00F) Understatement of Current Liabilities 1260.73
- Net Impact on Current Liabilities 1260.73- Current Liabilities would have been 44569.90
(43309.18)G) Overstatement of Fixed Assets 484.40H) Understatement of Fixed Assets 0.00
- Net Impact of Fixed Assets 484.40- Fixed Assets would have been 62713.56
(63197.96)I) Overstatement of Deferred Revenue Income 471.62J) Understatement of Deferred Revenue Income 0.00
- Net Impact on Deferred Revenue Income 471.62- Deferred Revenue Income would have been 471.62
Impact of other Audit Observations not ascertainable, hence not ascertained.
Note : Figures shown in bracket represent figures reported in the balance sheet.
For & On behalf ofFor Dhawan & Co.
Chartered Accountants
Sunil Gogia(Partner)
M. No. 73740Place : New DelhiDated : July 31, 2008
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53
Par
awis
e Im
pac
t of A
ud
it O
bse
rvat
ion
s g
iven
in o
ur
rep
ort
dat
ed 3
1st J
uly
200
8, o
n th
e P
rofi
t, A
sset
s &
Lia
bil
itie
s o
fM
/s. M
ahan
agar
Tel
eph
on
e N
igam
Lim
ited
as
at 3
1st M
arch
200
8
Par
a N
o.P
arti
cula
rsP
rofi
tC
urre
nt A
sset
sC
urre
nt L
iabi
liies
Def
erre
dFi
xed
Ass
ets
R
even
ue E
xpen
ses
Ove
r-U
nder
-O
ver-
Und
er-
Ove
r-U
nder
-O
ver-
Und
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r-U
nder
-st
ated
stat
edst
ated
stat
edst
ated
stat
edst
ated
stat
edst
ated
stat
ed
4(i)
Rel
atin
g to
Non
-Pro
visi
on o
f C
ontin
gent
Lia
bilit
ies
32.2
932
.29
4(ii)
Rel
atin
g to
Boo
king
of
Inco
me
of M
TNL
TAX
545.
8654
5.86
4(iv
)B
ooki
ng o
f O
ne T
ime
Inco
me
471.
6247
1.62
4(v)
Non
-Pro
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MI
hand
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sed
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120.
39
4(vi
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ecap
italis
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Equ
ipm
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in o
ld W
LL e
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484.
4048
4.40
4(vi
i)N
on-P
rovi
sion
ing
for
Inte
rnat
iona
l op
erat
ors
9.92
9.92
4(vi
ii)N
on-P
rovi
sion
of
50%
DA
mer
ge w
ith B
asic
Pay
1149
.81
1149
.81
4(ix
)N
on-P
rovi
sion
ing
of A
DC
cla
ims
22.5
622
.56
4(xi
ii) a
-fB
SN
L B
ills/
Pro
visi
ons
1045
.32
1045
.32
3882
.17
0.00
1744
.05
0.00
0.00
1182
.10
0.00
471.
6248
4.40
0.00
Not
e :
Impa
ct o
f ot
her
Aud
it O
bser
vatio
ns n
ot a
scer
tain
able
, he
nce
not
asce
rtai
ned.
Par
awis
e Im
pac
t on
Pro
fit d
ue
to c
han
ge
in A
cco
un
tin
g P
oli
cies
, as
giv
en in
ou
r re
po
rt d
ated
31s
t Ju
ly 2
008,
on
the
Pro
fit,
Ass
ets
& L
iab
ilit
ies
of M
/s M
ahan
agar
Tel
eph
on
e N
igam
Lim
ited
as
at 3
1st M
arch
200
8
Par
a N
o.P
arti
cula
rsP
rofi
tN
et I
mpa
ct
Ove
r-U
nder
-O
ver-
Und
er-
stat
edst
ated
stat
edst
ated
4(xx
)(a)
Cha
nge
in A
ccou
ntin
g P
olic
y fo
r al
loca
tion
of o
verh
eads
2098
.68
-
4(xx
ii)C
hang
e in
Acc
ount
ing
Pol
icy
for
valu
catio
n of
inv
ento
ry-
1.11
4(xx
iii)
Acc
ount
ing
Pol
icy
for
Rev
enue
& P
hono
gram
0.14
-
4(xx
iv)
Cha
nge
in A
ccou
ntin
g P
olic
y fo
r In
tang
ible
Ass
ets
-2.
62
2098
.82
3.73
2095
.09
The
over
all
impa
ct o
f qu
antif
iabl
e qu
alifi
catio
ns a
s pe
r I
abov
e is
Inc
reas
e in
Pro
fit b
y R
s. 3
882.
17 M
illio
ns,
Incr
ease
in
Cur
rent
Ass
ets
by R
s. 1
744.
05 M
illio
ns,
decr
ease
in
Cur
rent
Liab
ilitie
s by
Rs.
118
2.10
Mill
ions
. D
ecre
ase
in D
efer
red
Rev
enue
Inc
ome
By
Rs.
471
.62
Mill
ions
and
Inc
reas
e in
Fix
ed A
sset
s by
Rs.
484
.40
Mill
ions
.
The
over
all
impa
ct d
ue t
o ch
ange
in
Acc
ount
ing
Pol
icie
s is
ove
rsta
tem
ent
of P
rofit
by
Rs.
209
5.09
Mill
ions
.
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54
MAHANAGAR TELEPHONE NIGAM LIMITEDBalance Sheet as at 31st March, 2008
As at 31.3.2008 As at 31.3.2007 (Rs.in Million) (Rs.in Million)
SOURCES OF FUNDSShareholders' FundsShare Capital A 6,300.00 6,300.00Reserves & Surplus B 112,913.58 109,992.96Deferred Tax Liability (Net) C 4,865.16 6,204.79Total 124,078.74 122,497.75APPLICATION OF FUNDSFixed Assets DGross Block 158,425.77 152,913.45Less : Depreciation 95,227.81 88,876.77Net Block 63,197.96 64,036.68Capital Work-in-Progress E 9,649.85 7,643.82Investments F 5,573.92 4,414.03Current Assets, Loans & AdvancesInventories G 1,607.05 2,212.78Sundry Debtors H 9,417.97 9,652.02Cash & Bank Balances I 33,693.60 18,687.02Other Current Assets J 2,385.17 1,100.90Loans & Advances K 94,512.74 110,304.62
141,616.53 141,957.34Less : Current Liabilities and ProvisionsCurrent Liabilities L 43,093.00 43,309.18Provisions M 54,458.22 54,461.45Net Current Assets 44,065.31 44,186.71Deferred Revenue Expenditure 1,591.70 2,216.51Total 124,078.74 122,497.75Accounting Policies & Notes to Accounts TThe Schedules referred to above form an integral part of the Balance Sheet.
( S.R.Sayal) ( R.C.Sen) (Anita Soni) (R.S.P. Sinha)Company Secretary Dy. General Manager Director (Finance) Chairman &
(Accounts) Managing DirectorIn terms of our report of even dateFor Dhawan & Co.Chartered Accountants
Sunil Gogia(Partner)
M.No:73740Place : New DelhiDate : 31st July, 2008
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MAHANAGAR TELEPHONE NIGAM LIMITEDProfit & Loss Account for the year ended 31st March, 2008
For the year For the year ended 31.3.2008 ended 31.3.2007
(Rs.in Million) (Rs. in Million)
INCOMEIncome from Services N 47,225.17 49,093.18Other Income O 6,074.16 6,735.30
53,299.33 55,828.48EXPENDITUREEmployees' Remuneration and Benefits P 16,434.71 18,132.03Revenue Sharing 8,042.41 8,807.42Licence Fee 4,215.11 4,647.39Administrative,Operating & Other Expenses Q 11,222.19 9,462.86Depreciation D 7,040.60 6,831.84Interest R 27.82 20.11
46,982.84 47,901.65Profit Before Tax 6,316.49 7,926.83Provision for Taxation 3,587.94 3,177.98Provision for Deferred Taxation (1,339.63) 88.52Profit After Tax 4,068.18 4,660.33Prior Period Adjustments S (1,800.73) (2,157.03)Profit For the Year 5,868.91 6,817.36Profit Available for Appropriation 5,868.91 6,817.36Appropriations :Interim/Final Dividend 2,520.00 2,520.00Tax on Dividend 428.27 372.14Transfer To Contingency Reserve - -Transfer to General Reserves 2,920.64 3,925.22
5,868.91 6,817.36Earning Per ShareBasic/Diluted earnings per share (in Rs.) 9.32 10.82(Refer note 35)Accounting Policies & Notes to Accounts TThe Schedules referred to above form an integral part of the Profit & Loss Account.
(S.R.Sayal) (R.C.Sen) (Anita Soni) (R.S.P. Sinha)Company Secretary Dy. General Manager Director (Finance) Chairman &
(Accounts) Managing DirectorIn terms of our report of even dateFor Dhawan & Co.Chartered Accountants
Sunil Gogia(Partner)
M.No:73740Place : New DelhiDate : 31st July, 2008
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SCHEDULES FORMING PART OF BALANCE SHEETSCHEDULE-AShare Capital
As at 31.3.2008 As at 31.3.2007 (Rs.in Million) (Rs.in Million)
AUTHORISED CAPITAL 80,00,00,000 Equity Shares of Rs.10/- each 8,000.00 8,000.00ISSUED SUBSCRIBED AND PAID UP CAPITAL63,00,00,000 Fully paidEquity Shares of Rs. 10/- each 6,300.00 6,300.00Out of the above shares(i) 59,99,98,400 Equity Shares are allotted as fully paid up pursuant to a contract without payment being received in cash out of which 35,43,72,740 Shares are held by the Government of India
(ii) 3,00,00,000 Equity Shares areallotted as fully paid up represented byGlobal Depository Receipts (GDRs) throughan International Offering in US Dollars.OneGDR represented two equity shares.In Nov,2001 the GDRs were exchanged in AmericanDepository Shares (ADSs) on a one-for one basis.One ADS also represents two of our equity shares.
6,300.00 6,300.00
SCHEDULE-BReserves & Surplus
As at Addition Deduction As at 1.4.2007 during the year during the year 31.3.2008
(Rs in Millions) (Rs in Millions) (Rs in Millions) (Rs in Millions)
Bonds Redemption Reserve - - - -
Bonds Redemption Reserve(Prev.Yr) (0) (0) (0) -
Share Premium 6,650.05 6,650.05
Share Premium(Prev.Yr) (6,650.05) (0) (0) (6,650.05)
General Reserve 93,905.57 2,920.64 5,111.50 91,714.71
General Reserve(Prev.Yr) (84,906.04) (8,999.53) (93,905.57)
Reserve For Contingencies 9,129.34 5,111.50 - 14,240.84
Reserve For Contingencies(Prev.Yr) (14,203.65) - (5,074.31) (9,129.34)
Reserve For Research & Development 308.00 308.00
Reserve For Research & Development(Prev.Yr) (308.00) - (0) (308.00)
TOTAL 109,992.96 8,032.14 5,111.50 112,913.58
(106,067.74) (8,999.53) (5,074.31) (109,992.96)
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SCHEDULE CDeferred Tax Liability (Net) (Rs. in million)
Deferred Tax Current Year Deferred Tax
Liability(Asset) Charge/(Credit) Liability(Asset)
As at 1.04.2007 As at 31.03.2008
(Rs. in million) (Rs. in million) (Rs. in million)
Deferred Tax Liabilities
Difference between Book,
Tax Depreciation & others 13,523.89 (356.92) 13,166.97
Difference between Book,
Tax Depreciation & others(Prev.Yr) (12,643.18) (880.71) (13,523.89)
Total - A 13,523.89 (356.92) 13,166.97
(12,643.18) (880.71) (13,523.89)
Deferred Tax Assets
Provision for Doubtful Debts,
Advances and Bank Balances (3,491.86) (421.43) (3,913.29)
Provision for Doubtful Debts,
Advances and Bank Balances(Prev.Yr) (-3111.15) (-380.71) (-3491.86)
Provision for Obsolete Stock (231.58) (43.58) (275.16)
Provision for Obsolete Stock(Prev.Yr) (-230.24) (-1.34) (-231.58)
Others (3,595.66) (517.70) (4,113.36)
Others(Prev.Yr) (-3185.52) (-410.14) (-3595.66)
Total - B (7,319.10) (982.71) (8,301.81)
(-6526.91) (-792.19) (-7319.10)
Deferred Tax Liability (A – B) 6,204.79 (1,339.63) 4,865.16
(6,116.27) (88.52) (6,204.79)
MTNL
58
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MTNL
59
SCHEDULE-ECapital Work-In-Progress
As at As at31.3.2008 31.3.2007
(Rs. in Million) (Rs. in Million) Buildings 362.86 496.93 Apparatus & Plants 7,567.63 5,503.61 Lines & Wires 12.42 13.81 Cables 1,461.47 1,416.79 Subscribers' Installations 139.38 124.24 Air Conditioning Plants 124.28 106.84 Less Provision For Abandoned Works (18.19) (18.40)
9,649.85 7,643.82
SCHEDULE-FInvestments
As at As at31.3.2008 31.3.2007
(Rs. in Million) (Rs. in Million)
Long Term-Non Trade (At Cost)
Investment in 10000000 8.75%Un Quoted preferenceshare of Rs. 100/- each fully paid up with M/s. ITI Ltd.(Refer Note No.12) 1,000.00 1,000.00
Investment in subsidiary company-MillenniumTelecom Ltd. ( Un Quoted 2875880Equity shares of Rs. 10 each fully paid up) 28.76 28.76Mahanagar Telephone Mauritius Ltd.(Un Quoted 49418754 Equity Share ofMUR 10 (INR 14.9251) each fully paid up) 737.58 595.12
Investment in Joint Ventureswith United Telecom Ltd. (Un-Quoted 2901450 Equity Shareof Rs.100 each, fully paid up) 290.15 290.15with MTNLSTPI IT Services Ltd.(Un Quoted 25000Equity share @Rs.10 each) 0.25 -
Others
Investment in LIC (MF) 508.83 -Investment in UTI (MF) 508.35 -Investment in Un Quoted 11.5% Bonds fully paid up ofMaharashtra Krishna Valley Development Corporation Ltd. 2,500.00 2,500.00(Redemption in the Year 2012) 5,573.92 4,414.03
MTNL
60
SCHEDULE - GInventories (At Cost)
As at As at31.3.2008 31.3.2007
(Rs.in Million) (Rs.in Million)Stores and Spares :Building Material 0.62 0.62Lines & Wires 87.73 108.16Cables 1,046.64 857.69Exchange Equipments 396.75 552.24WLL Equipments 7.86 16.00Telephone & Telex instruments 147.10 493.54WLL Instruments 203.44 459.35Telephones & Telex Spares 2.79 2.79Installation Test Equipments 0.42 1.64Store - in -Transit 0.10 0.04Mobile Handsets & Sim Cards 17.54 16.47
1,910.99 2,508.54Less: Provision for obsolete stores 303.94 295.76
1,607.05 2,212.78
SCHEDULE - HSundry Debtors (Unsecured)*
As at As at31.3.2008 31.3.2007
(Rs.in Million) (Rs.in Million)Outstanding for a Period Exceeding Six MonthsConsidered Good 3,189.42 3,042.01Considered Doubtful 4,202.14 2,902.11Other Debts#Considered Good 6,154.47 6,558.00Considered Doubtful 39.48 37.53Income Accrued from services - -
13,585.51 12,539.65Less: Provision for doubtful debts 4,151.20 2,873.28Less: Provision for wrong billing 16.34 14.35
9,417.97 9,652.02
# Include Rs3450.56 Millions (Rs.4290.65 millions) on account of income accrued from services* Except to the extent covered by Security Deposits from subscribers.For the current year, debtors exceeding Six months, considered good & doubtful includes service tax ofRs. 135.51millions (Rs301.51Millions) & Rs.329.86 millions (Rs.252.34 Millions) respectively.Other debtorsconsidered good & doubtful include service tax of Rs.232.47 millions(Rs.836.42Millions) & Rs.221.63millions(Rs.4.09 Millions) respectively.
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61
SCHEDULE - ICash & Bank Balances
As at As at31.3.2008 31.3.2007
(Rs.in Million) (Rs.in Million)
Cash in hand, Including cheques in handRs.40.87 millions (Rs96.44 Millions) 65.41 123.40
Balance with Scheduled BanksIn Current Accounts 1,237.75 1,493.64
In Fixed Deposit Accounts 32,390.50 17,070.04
Balance with Non-Scheduled BanksIn Current Account (Refer Note -26) 5.66 5.66
33,699.32 18,692.74
Less: Provision for Doubtful Bank Balances 5.72 5.72
33,693.60 18,687.02
SCHEDULE - JOther Current AssetsUnsecured Considered Good
As at As at31.3.2008 31.3.2007
(Rs.in Million) (Rs.in Million)Interest Accrued on Deposits with Banks, 1,336.13 111.12
Interest Accrued on Bonds 192.19 192.19
Income Accrued From other Deposits & Loans & Advances 852.64 796.56
Cheque in transit with other Bank 4.21 1.03
Less :- Provision for doubtful Income - -
2,385.17 1,100.90
MTNL
62
SCHEDULE - KLoans & AdvancesUnsecured Considered Good*
As at As at31.3.2008 31.3.2007
(Rs.in Million) (Rs.in Million)
Loans & AdvancesSecured LoansHousing Loan To Employees 1,808.00 1,995.91Un Secured Loans(Considered good, unless otherwise stated)*(1) To Subsidiary Company - -(2) To DOT - -(3) To BSNL - -(4) To Other Corporates 908.09 741.85(5) To Employees i) Vehicles 38.58 34.58 ii) Others 122.07 119.51Amount Recoverable from DOT 30,856.38 29,995.46Amount Recoverable from BSNL 6,036.89 12,437.81Amount Recoverable from VSNL 3.42 2.17Advances Recoverable in Cash or in Kindor for value to be received.# 17,137.54 15,647.15Advance to JV Co (MTNLSTPI IT Services Ltd) 4.60 3.71Advance Tax 32,057.44 48,059.34Deposits with Govt. Deptt. 476.86 354.35Capital Advance 167.12 149.09Amount Recoverable from GPF Trust 886.65 714.72Others 4,571.03 600.54
95,074.67 110,856.19Less: Provision for Doubtful Advances 561.93 551.57
94,512.74 110,304.62
* Except to the extent of doubtful advances recoverable in cash or in kind or for value to be received for whichprovision has been made.# Including Rs.442.28 Millions (Rs. 65.10 millions) receivable from Gratuity Trust
MTNL
63
SCHEDULE - LCurrent Liabilities
As at As at31.3.2008 31.3.2007
(Rs.in Million) (Rs.in Million)Sundry Creditors
(i) For Goods and Services 6,377.64 5,228.28
(ii) For Work done 4,243.58 3,937.99
(iii) For Others 1,440.47 2,347.73
Advances Received from Customers & -
Others 405.50 306.22
Deposits from : -
(i) Contractors 367.49 342.08
(ii) Customers & Others 9,886.30 10,792.93
Unclaimed Bonds 0.06 0.06
Other Liabilities -
(i) For Salaries and Other Benefits 992.79 409.59
(ii) Bonus/ Ex-Gratia 390.00 405.98
(iii) GPF of MTNL optee 10,094.87 9,293.02
(iv) Others 6,293.91 4,138.84
Interest Accrued and due on GPF - -
Income Received in advance against -
Services - 1,274.72
Amount Payable: 1,476.85
(i) To DOT 455.00 552.04
(ii) To BSNL 0.57 3,760.49
(iii) To VSNL 18.72 13.08
(iv) To Subsidiary 6.37 8.03
(v) To Others 640.16 494.66
Deffered Tax Liabilities - -
Interest Accrued but not due : -
(i) On Bonds - -
(ii) On Deposits 2.72 3.44
43,093.00 43,309.18
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64
SCHEDULE - MProvisions
As at 31.3.2008 As at 31.3.2007 (Rs.in Million) (Rs.in Million)
Pension(i) Company Employees 31,451.29 28,716.45(ii) Others 122.99 116.50Leave Encashment(i) Company Employees 3,196.70 2,679.58(ii) Others 12.56 8.86Gratuity 2,609.66 2,623.24Proposed Final Dividend 630.00 630.00Tax on Dividend 107.07 107.07Income Tax 16,128.27 19,399.81Fringe Benefit tax 189.85 128.49Wealth Tax 9.83 51.45
54,458.22 54,461.45
Schedules Forming Part of Profit and Loss Account for the year ended 31-03-2008SCHEDULE - NIncome from Services
For the year For the year ended 31.3.2008 ended 31.3.2007 (Rs. in Million) (Rs. in Million)
Telephone(a) Rentals 10,999.55 11,383.63(b) Calls & Other Charges 12,636.84 14,979.15(c ) Franchises Services 3,991.54 6,165.44(d) Rent & Junction Charges 1,133.02 1,223.55(e) Access Calls & Other Charges 3,657.92 2,547.79VCC 355.75 456.35Internet 129.26 127.60Telex 0.19 0.01Circuits 480.73 758.48WLL Rent 435.07 482.94WLL Call Charges 445.82 352.41Mobile(a)Rentals, calls& IUC revenue 2,395.51 2,460.58(b)Income from Roaming 1,513.54 1,259.58(c)Pre paid Trump 4,420.11 3,780.94(d)Activation Charges 34.53 118.24Broadband 3,358.73 1,958.38Value added and Other Services(a) Indonet 1.22 1.91(b) Voice Mail 74.40 71.28(c ) Free Phone 193.28 150.21(d) Premium Rate 0.66 0.55(e) ISDN - Rental 352.44 245.66(f) ISDN - Call Charges 572.81 496.64Others 42.25 71.86
47,225.17 49,093.18
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65
SCHEDULE - OOther Income
For the year For the yearended 31.3.2008 ended 31.3.2007
(Rs. in Million) (Rs. in Million)Interest(i) From Banks (Tax deducted at sourceRs.602.89 Millions (Rs. 417.36 Millions) 2,618.28 1,584.35(ii) Interest on Advances to Employees 108.82 206.60(iii) Interest on Deposits, Advances and Others 310.21 324.06(iv) Interest from Income Tax Department 1,100.18 3,221.36Dividend from Mutual Fund 17.19 -Sale of Directories,Publications, Forms etc. 22.52 14.55Profit on Sale of Assets 26.11 9.82Liquidated Damages 316.68 230.01Foreign Currency Fluctuation - 0.08Bad Debts Recovered 62.07 96.36Credit Balances Written Back 320.43 838.83Rent on Quarters, Inspection Quarters, Hostelsand other services provided 62.19 55.36Others 1,109.48 153.92
6,074.16 6,735.30
SCHEDULE - PEmployees' Remuneration and Benefits
For the year For the yearended 31.3.2008 ended 31.3.2007
(Rs. in Million) (Rs. in Million)Salaries,Wages,Allowances and other Benefits 12,042.44 11,232.97Bonus/ Ex-Gratia 474.16 415.08Medical Expenses/Allowances 926.84 822.28Leave Encashment(i) Company Employees 631.26 522.49(ii) Others 7.30 9.12Pension Contribution(i) Company Employees 4,032.86 3,872.87(ii) Others 12.36 170.22Contribution to Provident Fund 265.22 237.39Gratuity (165.17) 733.98Compensation under VRS Scheme 625.19 622.09Staff Welfare Expenses 126.47 242.84
18,978.93 18,881.33Less :Allocation to Capital Work-In-Progress 2,544.22 749.30
16,434.71 18,132.03
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66
SCHEDULE - QAdministrative, Operating and Other Expenses
For the year For the yearended 31.3.2008 ended 31.3.2007
(Rs. in Million) (Rs. in Million) Power & Fuel 1,883.37 1,607.88 Rent 618.98 608.84 Repairs & Maintenance: - Buildings 153.91 166.92 - Plant & Machinery 936.20 759.54 - Others 486.89 395.16 Insurance 37.14 36.61 Rates & Taxes 360.34 325.37 Travelling Expenses 43.31 51.52 Postage & Courier 172.64 206.16 Printing & Stationery 150.21 146.98 Vehicle Expenses: (i) Maintenance 14.05 15.31 (ii) Running 32.52 36.13 (iii) Hiring 93.10 97.72 Commission paid on Franchised Services 1,895.38 2,248.94 Comm. Paid to Pre Paid services 7.23 11.02 Advertising/Business Promotion Expenses 331.61 446.92 Provision for Doubtful Debts including Disputed Bills 1,238.59 1,119.68 Provision for Wrong Billing 1.28 0.39 Bad Debts Written Off 59.77 22.74 Provision for Obsolete Stores 128.22 3.95 Professional & Consultancy Charges 106.68 84.26 Seminar and Training Expenses 12.64 10.65 Miscellaneous Expenses 817.98 613.07 Loss on Sale of Assets 443.51 50.12 Internet charges 609.29 168.30 PSTN Charges - - Spectrum Charges (WLL) 17.62 20.92 Spectrum Charges (MS) 338.81 204.94 Loss of Assets 440.98 2.82
11,432.25 9,462.86 Less : Allocation to Capital work in progess 210.06 -
11,222.19 9,462.86
MTNL
67
SCHEDULE - RInterest :
For the year For the yearended 31.3.2008 ended 31.3.2007
(Rs. in Million) (Rs. in Million)
Interest on :
Customers' Deposits 15.82 19.74GPF 0.02 0.19Other 11.98 0.18
27.82 20.11
SCHEDULE - SPrior Period Adjustments
For the year For the yearended 31.3.2008 ended 31.3.2007
(Rs. in Million) (Rs. in Million)
DebitsSalary,Wages,Allowances & Staff Expenses - 18.21
Power & Fuel 0.01 1.81
Rent - 1.00
Rates & Taxes 13.02 0.16
Repairs to Plant & Machinery 2.00 16.63
Depreciation/Amotisation 51.04 85.94
Others (includes Tax Rs. 671.37 Millions) 748.87 18.75
814.94 142.50CreditsRate & Taxes written back - -
Excess provision written back (Income Tax) 2,526.53 2,283.17
Others 89.14 16.36
2,615.67 2,299.53Net Adjustment (1,800.73) (2,157.03)
MTNL
68
SCHEDULE FORMING PART OF THE ACCOUNTSFOR THE YEAR ENDED 31ST MARCH 2008.
SCHEDULE - T
SIGNIFICANT ACCOUNTING POLICIES AND NOTES ON ACCOUNTS
A. SIGNIFICANT ACCOUNTING POLICIES
1. Basis of preparation of financial statements
i. The accounts are prepared under the historical cost convention adopting the accrual method ofaccounting except the following items, which are accounted for on cash basis:
(a) Interest income/liquidated damages, where realisability is uncertain.
(b) Annual recurring charges of amount up to Rs. 0.10 Millions each for overlapping period.
ii. Revenue Recognition
(a) Revenue is recognised on accrual basis, including income from subscribers whose disputesare pending resolution, and closure of the subscribers' line. Revenue in respect of serviceconnection is recognised when recoverability is established.
(b) Provision is made for wrong billing, disputed claims from subscribers excluding operators,cases involving suspension of revenue realisation due to proceedings in Court and debtorsoutstanding for more than 3 years. In case of Mobile Services (GSM), the provision is madefor dues, which are more than 180 days.
(c) Activation charges recovered from the subscribers at the time of new telephone connection isrecognised as income in the year of connection.
(d) Activation charges in case of Mobile Services (GSM) is recognised as revenue on connection.
(e) Income from services includes income from leasing of infrastructure to other service providers.
iii. The cost of stores and materials is charged to project or revenue job at the time of issue. However,spill over items at the end of the year lying at various stores are valued at weighted averagemethod.
iv. The sale proceeds of scrap arising from maintenance & project works are taken into miscellaneousincome in the year of sale.
v. Bonus / Ex - Gratia is paid based on the productivity - linked parameters and it is providedaccordingly.
vi. Income from services pertaining to prior years is not disclosed as prior period item. In respect ofother income/expenditure, only cases involving sums exceeding Rs. 0.10 Millions are disclosedas prior period items.
1.1 Employee Retirement Benefits
a) In respect of officials who are on deemed deputation from DOT and other Govt. Departments, theprovision for pension contribution is provided at the rates specified in Appendix 2(A) to FR 116and 117 of FR. & SR. and provision for leave encashment is made @ 11% of pay as specified inappendix 2(B) of F.R.116 and 117 of F.R. & S.R. Provision of gratuity, in respect of these officers,is not required to be made.
b) In respect of others, provision is made as per Actuarial Valuation.
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69
2. Fixed Assets
i. Fixed Assets are carried at cost less accumulated depreciation. Cost includes directly relatedestablishment expenses including employee remuneration and benefits and other administrativeexpenses. Establishment overheads and expenses incurred in units where project work is alsoundertaken are allocated to capital and revenue based either on time allocated or other attributablebasis. Assets are capitalised, as per the practices described below, to the extent completioncertificates have been issued, wherever applicable.
(a) Land is capitalised when possession of the land is taken. Value of Leasehold Land is amortisedover the period of lease.
(b) Building is capitalised to the extent it is ready for use.
(c) Apparatus & Plants principally consisting of Telephone Exchange Equipments and Air ConditioningPlants are capitalised on commissioning of the exchange. Subscribers Installations are capitalisedas and when the exchange is commissioned and put to use either in full or in part.
(d) Lines & Wires are capitalised as and when laid or erected to the extent completion certificateshave been issued.
(e) Cables are capitalised as and when ready for connection with the main system.
(f) Vehicles and Other Assets are capitalised as and when purchased
(g) Intangible assets include application software are capitalised when ready for use.
ii. The fixed assets of the company are being verified by the management at reasonable intervals i.e.once in every three years by rotation. The physical verification of underground cables is done on thebasis of working of network and based on records available together with a certificate from the technicalofficers.
iii. Expenditure on replacement of assets, equipments, instruments and rehabilitation work is capitalisedif it results in enhancement of revenue earning capacity.
iv. Upon scrapping / decommissioning of assets, these are classified in fixed assets at the lower of NetBook Value and Net Realisable Value and the estimated loss, if any, is charged to Profit and Loss A/c.
V. Depreciation
(a) Depreciation is provided on Straight Line Method at the rates prescribed in Schedule XIV to theCompanies Act, 1956 except in respect of Apparatus & Plant (including Air Conditioning Systemattached to exchanges), which is depreciated at the rates based on technical evaluation of usefullife of these assets i.e. 9.5%, which is higher than the rates prescribed in Schedule XIV to theCompanies Act, 1956.
(b) 100 % depreciation is charged on assets of small value in the year of purchase, other than thoseforming part of project, the cost of which is below Rs.0.01 Millions in case of Apparatus & Plants,Training Equipment & Testing Equipment and Rs.0.20 Millions for partitions.
(c) In case of intangible assets, the useful life of the assets is considered as 10 years and amortizationis charged on depreciable amount accordingly. There will be no residual value at the end of the lifeof the assets.
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70
3. Inventories
Inventories being stores and spares are valued at cost or net realizable value, whichever is lower. However,inventories held for capital consumption are valued at cost.
4. Foreign Currency Transactions
Transactions in foreign currency are stated at the exchange rate prevailing on the transaction date. Year-end balances of current assets and liabilities are restated at the closing exchange rates and the differenceadjusted to Profit & Loss Account.
5. Deferred Revenue ExpenditureCompensation paid to employees retired under Voluntary Retirement Scheme (VRS) is treated as deferredrevenue expenditure to be written off over a period of five years.
6. InvestmentsCurrent investments are carried at the lower of cost & fair market value. Long term Investments are statedat cost. Provision for diminution in the value of long-term investments is made only if such a decline isother than temporary in the opinion of the management.
B. NOTES TO ACCOUNTS2007-2008 2006-2007
(Rs. in Million) (Rs. in Million)1. Contingent Liabilities
(a) Income TaxDemands disputed and under appeal 17233.13 26359.64
(b) Sales Tax, Service Tax, Excise duty, MunicipalTax Demands Disputed and under Appeal 1423.07 1151.48
(c) Disputed Demand under Lease Act* 1943.99 1943.99(d) i Interest to DDA on delayed Amount Amount
payments/Pending Court Cases Indeterminate Indeterminateii Pending Court Cases/Tax cases Amount Amount
Indeterminate Indeterminateiii Stamp duty payable on land and Amount Amount
buildings acquired by the Company Presently PresentlyUnascertainable Unascertainable
(e) Claims against the Company notacknowledged as Debts. 3013.49 2461.33
(f) Bank guarantee & Letter of Credit 913.60 1123.30(g) Directory dispute 2852.50 2852.50(h) Interest on cancellation of 54.12 54.12
6th series of Bonds (Canfina)(i) Interest demanded by DOT and disputed
by company on account of delay in paymentof Leave Salary and Pension Contribution 1738.10 1738.10
(j) Pending court cases against land acquisition Indeterminate Indeterminate
A demand from service Tax Department for Rs.5.60 Millions being short payment of Service Tax in 2003-04 (Claiming that MTNL should get refund of any excess payment during the previous half- year andshould not adjust) was contested by MTNL, Mumbai in CESTAT. While admitting our petition CESTAT has
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directed MTNL to deposit Rs.1.5 Millions. Accordingly an amount of Rs.1.5 Millions has been depositedon 15.01.2008. The case is pending for hearing.
* Consequent to the judgment by Hon'able Supreme Court in the matter of U.P. State Government vs.Union of India (DOT), the authorities have raised fresh demand for the period from 1998 - 99 to 2002- 03 for Rs. 1943.99 Millions.
2. Estimated amount of contracts remaining to be executed on Capital Account and not provided for (Netof Advances) in relation to execution of works and purchase of equipments is Rs. 5492.87 Millions(Rs. 6165.64 Millions). In respect of contracts where expenditure already incurred has exceeded thecontract value and the contract remains incomplete, additional expenditure required to complete thesame cannot be quantified.
3. Changes in the Accounting Policies during the financial year 2007-08
a) Revenue from Phonogram is accounted for on accrual basis. Last year, revenue from phonogramwas accounted for on cash basis. Due to change in the policy from cash to accrual basis, theimpact on profitability is negligible.
b) Due to change in accounting policy the overheads charged to capital expenditure is calculated ondirect allocation basis, as per the parameter recommended by the consultant and duly recommendby the Technical committee, instead of the fixed percentage as prescribed by the DOT in earlierperiods. Consequently due to the impact on change in accounting policy, the profit has gone upby Rs.2098.68 Millions.
c) Due to change in accounting policy for valuation of inventory, the Delhi and MS unit has negligibleimpact on accounts while in respect of Mumbai unit, the inventory has been gone down by Rs1.11 Millions and Profit has gone down by Rs 1.11 Millions.
d) Hitherto the company did not have any specified Policy as regards intangible assets of thecompany. The Profit has gone down by Rs 2.62 Millions due to new policy of intangible assets.
4. Other liabilities include credits on account of receipts including service tax from subscribers amountingto Rs.312.45 Millions (Rs.259.84 Millions), which could not be matched with corresponding debtors oridentified as liability, as the case may be. Appropriate adjustments/ payments shall be made inclusiveof service tax, when these credits are matched or reconciled.
5. a) The company had claimed benefit under section 80 - IA of the Income Tax Act, 1961 for thefinancial year from 1996-97 to 2005-06 @100% for the first 5 years and @ 30% for the subsequentfive years. The benefit is claimed on operational profit earned by the Company. In case of financialyears 1997-98 to 1999-2000 and 2001-2002, the benefits under section 80IA of the Income TaxAct were partially allowed by the IT department.
b) The balance, in the Contingency Reserve Accounts specifically created for contingency arisingout of disallowances of claims of benefits under section 80IA of Income Tax Act ,stood at Rs9129.34 Millions .The company has further provided an additional amount of Rs 5111.50 Millionsby debiting to General Reserve Account thus increasing the balance in the contingency Reserveto Rs 14240.84 Millions.
c) During the years ,on the basis of Assessment Orders received by the company for the financialyears from 1993-1994 to 2004-2005 allowing certain partial benefits to the company, the companyhas written back provision on account of Income Tax provided in the earlier years amounting toRs 2364.42 Millions
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6. Provision for taxation for the current year comprises of Income Tax of Rs. 3523.95 Millions, DeferredTax Asset of Rs.1339.63 Millions, Wealth Tax of Rs 2.64 Millions and Rs.61.35 Millions for FringeBenefit Tax.
7. (a) The supplemental agreement entered into between United India Periodicals Pvt. Ltd. / UnitedData Base (India) Pvt. Ltd/ Sterling Computers Ltd and the company for printing of telephonedirectories was struck down by the Hon'ble High Court of Delhi on 30.9.92 and the said decisionwas upheld by the Hon'ble Supreme Court of India on 12.1.93. A claim against the Company hasbeen raised by Sterling Computers Ltd. for Rs. 258.2 Millions which being under dispute, has notbeen provided for. The company has filed its counter claims of Rs. 228.7 Millions before theHon'ble High Court against Sterling/UDI/UIP and has also filed arbitration claims of Rs. 561.8Millions against these parties under the original agreement. Pending finalisation of this dispute,the company has raised and recorded as 'Claims Recoverable', a claim for Rs. 154.91 Millions(Rs. 154.91 Millions) on account of royalty, interest and billing charges and on payments madethrough Letter of Credit; Rs.130.47 Millions (Rs.130.47 Millions) recovered there against by thecompany from subscribers for the issue of directories, is carried under 'Current Liabilities'. Furtherclaims of the Nigam for interest and service charges aggregating Rs.143.67 Millions (previousyear Rs.143.67 Millions) have not been accounted for. Financial implication of the claim raisedagainst the company, adjustment of the sums received against outstanding claims, any non-realisation of claim and further claims recoverable shall be effected upon determination based onthe outcome of the proceedings in the court of law.
MTNL has moved an application under section 446 of the Companies Act, 1956 praying to showarbitral proceedings to be continued between parties pending before Hon'ble Mr. Justice K.S.Tiwana(Retd.) Sole Arbitrator and grant permission to continue with OMP No. 135/94.The company courtvide its order dated 01.04.2008 has allowed the application seeking the leave of the court tocontinue with the proceedings in OMP No. 135/1994 the Delhi high court fixed next date on30.09.2008.
(b) MTNL entered into contracts with M/s M & N Publications Limited for printing, publishing andsupply of telephone directories for Delhi and Mumbai units for a period of 5 years starting from1993. In view of the breaches of the terms and conditions of the contracts committed by thecontractor in publishing first issue of the directories of both units and their failure to execute theremaining part of the contracts, both the contracts were terminated by MTNL on 22.07.1996.Income from royalty and other applicable recoveries, for first issue published by contractor, Rs.181.2 Millions have been accounted for and received. Sole Arbitrator has been appointed by boththe parties. The effect of claims under the contract for remaining issues published by contractorwill be accounted for in the year of issuing of award by the Sole Arbitrator.
(c) Hon'ble TDSAT, in MTNL Vs C.G.Faxmail & Others, vide its order had directed MTNL to refund thedouble rent charged by it to e-mail service providers. MTNL filed a Special Leave Petition againstthe aforesaid order before Hon'ble Supreme Court. The Hon'ble Supreme Court, while admittingthe petition, directed the company to pay a sum of Rs.59.36 Millions to the C.G.Faxmail & Others.
8. Certain Lands and Buildings capitalised in the books, are pending registration/legal vesting in thename of the company and the landed properties acquired from DOT have not been transferred in thename of the company and in the case of leasehold lands, the documentation is still pending. In caseof Mumbai unit legal vesting of land and building of the value of Rs.14.60 Millions (Rs.15.61 Millions)acquired after 1st April, 1986 is under process.
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9. The Mumbai Unit had applied for amnesty under the Maharashtra Kar Nivaran Yojana, 1999 in respectof the Sales Tax demands of Rs 8.10 Millions (Rs. 8.10 Millions). The application for amnesty towardsdemands aggregating Rs.2.09 Millions (Rs.2.09 Millions) has been accepted. The balance applicationsrelating to demands of Rs.6.02 Millions (Rs.6.02 Millions) are under process and are not includedunder Contingent Liabilities.
10. a) BSNL has been carrying all NLD traffic (Both Incoming as well as Outgoing) of MTNL through theTAXs in Delhi and Mumbai owned and operated by MTNL since its inception and significantlyexpanded by MTNL over the years. In terms of IUC regulations of TRAI, a claim for TAX for anamount of Rs. 1277.26 Millions (Rs. 1251.49 Millions) has been billed to BSNL towards usage ofMTNL TAX. The same has been recognised as Revenue.
b) During the year, the Company has claimed from BSNL charges for leasing infrastructure of Rs.514.53 Millions (Rs.477.54 Millions) as per the tariff in force. The same has been recognised asrevenue in the current year, in accordance with the accounting policy of the company.
c) The Mumbai unit has computed and accounted for IUC charges of BSNL for the Current year onthe basis of actual CDR's recorded in MTNL's Mumbai exchanges. In respect of intra circle calls,carriage charges are computed with reference to Leased Lines and accounted. Entries have beenpassed accordingly for amount payable of Rs. 1676.95 Millions (Rs. 1765.02 Millions) and amountreceivables of Rs. 1202.33 Millions (Rs. 1210.84 Millions).
d) The tax usage on the incoming traffic and outgoing traffic from and to BSNL is calculated at aprescribed rate of Rs. 0.19 per minute. As per latest BSNL office letter no. 352-1/2008-Regln.Dated 06/05/2008, BSNL is also charging Rs.0.19 per minute as transit charges as prescribed inIUC Regulation of TRAI from cellular operators. These charges are levied by MTNL also on similarlines and are as per TRAI instructions.
e) ADC receivable from M/s Tata Com. and M/s Reliance has been calculated on the least applicablerate of the period of billing i.e. Rs.0.30 per minute. There were slabs of rates of Rs.0.30, Rs.0.50and Rs.0.80 during the billing period. The charge has been made taking into the 50% of totalarrived at i.e. Rs.450.00lacs. as a conservative measure and accordingly bill to the tune ofRs.225.00lacs only has been raised against M/s Tata Com. and M/s Reliance.
11. As per directions of the court, one UASL operator had deposited Rs. 3412.74 Millions against theclaim of the same amount. The company had recognised revenue of Rs 2367.90 Millions in the year2004 - 05 and Rs. 1044.84 Millions in the year 2005 - 06. The petition filed by UASL operator beforeHon'ble High Court, Delhi is dismissed as withdrawn with a liberty to the UASL operator to take stepsin accordance with law. The matter is presently pending before the Hon'ble Court.
12. The company had subscribed to 8.75% Cumulative Preference Shares of M/s. ITI Limited, amountingto Rs.1000 Millions during the year 2001-02. As per the terms of allotment, the above PreferenceShares were proposed to be redeemed in 5 equal installments in the 3rd, 4th, 5th, 6th and 7th year.Accordingly, Four installments amounting to Rs. 200 Millions each, aggregating to Rs. 800 Millionshave become redeemable, which have not been redeemed by ITI Limited. Moreover, no dividendincome has been booked in the accounts for the same, as ITI Limited has not declared any dividend.
13. In respect of Mumbai Unit the bank reconciliation statements as at 31st March, 2008 include unmatched/unlinked credits/ debits given by the banks amounting to Rs. 56.00 Millions (Rs. 12.91 Million) and Rs.42.75 Millions (Rs.7.66 Millions) respectively, which could not be properly accounted for, in the absenceof adequate particulars.
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14. In respect of Mumbai unit , an amount of Rs 4.59 Millions being the amount of commission chargesdebited by PNB in respect of East-2 area has not been accounted as it is under dispute. Hence theamount is kept as a reconciliation item without reducing the bank balance. The commission chargeshave been considered as a contingent liability.
15. a) Deposits from applicants and subscribers as on 31st March 1986 were Rs.1503.59 Millions asintimated provisionally by DOT. Corresponding assets shown under claims recoverable are beingreduced by the amount of recovery of rebate on rental and by the amount of recovery of applicationdeposit for which connections have been released to subscribers with effect from 1.4.1986. Balancestill recoverable from DOT on this account is Rs. 558.45 Millions (Rs. 558.38 Millions).
b) The balance in the Subscribers' Deposit Accounts of Rs. 8481.73 Millions (Rs. 10254.63 Millions)and Interest Accrued and Due thereon of Rs. 29.48 Millions (Rs. 34.07 Millions) is subject toreconciliation with the relevant subsidiary records.
16. The aggregate balance of sundry debtors as per the subsidiary records is short by Rs. 74.21 Millions(Previous Year high by Rs. 6.01 Millions) as compared to the balance in General Ledger and is underreconciliation. The resultant impact of the above on the account is not ascertainable.
17. a) Amount recoverable on current account from DOT is Rs. 30856.38 Millions (Rs. 29995.46 Millions)and amount payable is Rs. 454.99 Millions (Rs. 552.04 Millions). The net recoverable of Rs.30401.39 Millions (Rs. 29443.42 Millions) is subject to reconciliation and confirmation.
b) The amount recoverable from BSNL is Rs.6036.32 Millions (Rs.8677.32 Millions) after netting offRs. 6042.33 Millions is subject to reconciliation and confirmation.
18. a) Out of total provision of Gratuity of Rs. 6335.22 Millions up to 31.3.2008 (Rs. 6434.32 Millions),an amount of Rs. 1943.72 Millions and Rs. 665.41 Millions is recoverable from DOT, in respect ofGroup C & D and Group B employees respectively, for the period prior to their absorption. As on31.03.2008 Rs. 3725.55 Millions is available with the Gratuity Trust.
b) The total provision of Leave Encashment is Rs. 3196.69 Millions up to 31.3.2008 (Rs. 2679.58Millions). Out of this, an amount of Rs. 433.74 Millions and Rs. 653.68 Millions is recoverable,from DOT in respect of Group B and Group C & D employees respectively for the period prior totheir absorption in MTNL.
c) An amount of Rs. 10554.52 Millions (Rs. 9293.02 Millions) towards GPF contribution is recoverablefrom DOT as on 31.3.2008. The amount pertains to Group C& D and Group B employees absorbedin MTNL w.e.f. 01.11.98 and 01.10.2000, respectively.
d) The total provision of Pension is Rs. 31451.29 Millions (Rs.28716.45 Millions) upto 31.3.2008.Out of this an amount of Rs. 7582.23 Millions and Rs. 2198.24 Millions is recoverable from DOTin respect of Group C&D and Group B employees for the period prior to their absorption.
19. The amount of receivables and payables (including NLD / ILD Roaming operators) is subject toconfirmation and reconciliation. Pending such confirmation/ reconciliation, the impact on the accountis not ascertainable at this stage.
20. In respect of Delhi unit ,the management has not yet taken any decision to close the old CDMAexchange commissioned in the year 2003 and the passive infrastructure of old CDMA network is stillbeing used. The liability outstanding in this regard to the extent of Rs.470.10 Millions is not payable tovendor against this network due to the deficiencies and there is no arbitration and court case againstthe liability which otherwise is outstanding beyond three years liable to be written back. The write
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back of liability as well as the decommissioning of the system fully is yet to be decided and due to thefact that liability is not payable as certified by the CDMA unit, which is almost equivalent to thedepreciated cost of the system, there is no impact in this regard.
21. During the year in terms of office memorandum of department of Public Enterprises OM No 2(7)/2005-DPE(WC)-GL-III dated 26.02.2008 an amount of Rs.520 Millions towards merger of DA along withbasic pay has been provided on adhoc basis.
22. During the year under report, the company has entered into an agreement for development of a coreknowledge park on its land at Noida and accorded the responsibilities of development; at theconsideration of one time non-refundable Development Compensation Charges. No claim of refund oradjustment of the Development Compensation Charges is ever to be made. In addition to this M.T.N.L.shall recover throughout the life of the concession a regular annual license fee. Besides this, thedelivery of built up area of 25.2% of total built up area is to be handed over to MTNL by a projectdevelopment company selected in the RFP process. Accordingly revenue of Rs.481.30 Millions under'Other Income', on the payment becoming due and receivable by 4.11.2007 as per the agreementtowards the non- refundable Development Compensation Charges(DCC) has been recognized.
23. In respect of accounting for billing of subscribers for Mobile Services and collections made thereon,computerised billing system has been implemented and the financial entries for booking of incomeand debtors accounting have been incorporated in the books of accounts based on the output generatedthrough computer system.
24. Pending final settlement, the following have not been accounted for
2007-08 2006-07
(Rs. in Millions)
a) Customs Duty Refund Claims 53.21 53.21
b) Insurance Claims for damages due to floods 228.82 461.07
c) Insurance Claims for damages due to fire 16.51 -
d) Service Charges for 1992 issue of Directory. 0.59 0.59
e) Interest on advances for 1992 Directory 979.19 979.19
25. The other information under Para 4B and 4C of part II of schedule VI of the companies Act, 1956 is asunder
a) Remuneration paid/payable to the Chairman & Managing Director(s) and Other Directors for theyear ended 31st March 2008:-
For the Year For the yearended 31.03.2008 ended 31.03.2007
i) Remuneration 5.08 Millions 4.07 Millionsii) Perquisites 0.22 Millions 0.24 Millions
b) Remuneration to Auditors:Statutory Auditors Branch Auditors
(Rs.in Million) (Rs.in Million)(i) As Audit Fee 0.56(0.55) 1.90(1.55)(ii) Limited Review 0.22(0.33) 0.79(0.92)(iii) Auditors Expenses 0.12(0.06) 0.18(0.22)
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c) Value ofi. Imports on CIF basis NIL NILii. Others NIL NIL
d) Expenditure in Foreign Currencies 34.09 34.08e) Earnings in Foreign Exchange 66.70 54.80f) Gross Income from Services 47225.19 49093.18
26. The Balances with Non Scheduled Banks comprise of :-
(Rs. in Millions)Name of the Bank Balance as Maximum Balance
on 31.3.2008 during the yearPatan Cooperative Bank Ltd. Mumbai 0.03 0.03(Account closed, considered doubtful) (0.03) (0.03)
Indira Sahakari Bank Ltd., Mumbai 5.59 5.59(Considered doubtful) (5.59) (5.59)
The Mogaveera Co-op. Bank Ltd, Mumbai 0.04 0.04(Account closed, considered doubtful) (0.04) (0.04)
The maximum balance outstanding during the year have been taken as per the bank statements ofthe individual branches in respect of the operative accounts, since the unit maintains its accounts foreach bank as a whole without accounting for the balances with individual bank branches.
27. There is no reported Micro, Small and Medium enterprise as defined in the Micro, Small and Mediumenterprise development Act, 2006, to whom the company owes dues.
28. Information required under Paragraphs 3(x)(a) and 4D(c) of Part II of Schedule VI to the CompaniesAct 1956 is not ascertainable, since (i) consumption of stores is included under the normal heads ofCapital Expenditure and/or Repairs & Maintenance, and (ii) the issue of imported and indigenousitems are not separately priced/ identified.
29. There is no agreement between the Company and DOT for interest recoverable / payable on currentaccount. Accordingly, no provision has been made for interest payable / receivable on balance duringthe year.
30. During the year company has discontinued its medical benefit scheme for retired employees w.e.f31.08.2007. Thereafter, an adhoc arrangement was made w.e.f 1.9.2007. According to this adhocarrangement the respective units were allowed to settle such claims on case to case basis. Thisscheme was also discontinued w.e.f 20.03.2008; however the employees who are under treatment willcontinue to get the benefits till discharge from the hospital.
31. Contingencies and Events Occuring after Balance Sheet Date-AS-4
MTNL vide its office order no. MTNL/CO/Pers/8(1-176)2006 dt. April 17,2008 has introduced medicalplan till finalization of new alternative arrangement for Indoor Treatment of Retired MTNL employees,under this plan the emergent cases requiring hospitalization may be decided by the Executive Directorsof the respective units on a case-to-case basis.
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32. Employee Benefits -AS-15(R)
I. During the year, the Company has recognized the following amounts in the Profit and loss Account.
a) Defined Contribution Plans (Rs. In Millions)
Particulars AmountsEmployer Contribution to Provident Fund* 265.22Leave Encashment Contribution for DOT employees** 7.30Pension Contribution for DOT employees*** 12.21* Mentioned as Contribution to CPF**Mentioned as Leave Encashment-Others***Mentioned as Pension contribution-Others
(Rs. In Millions)Particulars Gratuity* Pension**Current Service Cost 250.30 924.00Interest Cost 540.00 2390.00Expected Return on Plan Assets (489.90) -Actuarial(gain)/loss (465.60) 718.80Past Service Cost -Curtailment and Settlement Cost/(Credit) - -Net Cost (165.20) 4032.80*Mentioned as Gratuity.**Mentioned as Pension Contribution-Company employees.
II. The assumptions used to determine the Defined Benefit Obligations are as follows:
Particulars Gratuity Pension
Discount Rate 8.25% 8.25%
Salary Escalation Current 5.00% 5.00%
Expected rate of Return on Plan Assets 8.00% -
III. Reconciliation of opending and closing balances of benefit obligations and plan assets.
a) Benefit obligations. (Rs. In Millions)
Particulars Gratuity Pension
Projected benefit obligation at beginning of the year 6434.30 28716.40
Interest Cost 540.00 2390.00
Current Service Cost 250.30 924.00
Past Service Cost - -
Benefit Paid (290.60) (1298.00)
Actuarial (Gain)/loss on obligations (598.80) 718.80
Projected benefit obligation at end of the year 6335.20 31451.30
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b) Plan Assets (Rs. In Millions)
Particulars Gratuity
Fair Value of plan assets at beginning of year 6434.30
Expected Return on Plan Assets 489.90
Contributions (165.20)
Benefit Paid (290.60)
Actuarial gain/(loss) on Plan Assets (133.20)
Fair Value of Plan Assets at the end of the year 6335.20
IV. Category of Investment in Gratuity trust as on 31.03.2008.
(Rs. In Millions)
Particulars Amounts
Government of India Assets 1755.70
Corporate Bonds 1600.80
State Govt 645.00
Others 2333.70
Total 6335.20
V. The discount rate of 8.25% which have taken for calculation of present value of obligation is basedon the bench mark rate available on Govt. Securities for the tenure of payment.
VI. Gratuity is payable to the employees on death or resignation or on retirement at the attainment ofsuperannuation age. To provide for these eventualities we have use Mortality:1994-96 LIC Ult tablefor mortality in service and LIC (1996-98) table for mortality in retirement.
VII. Mortality in service is assumed on the basis of LIC (1994-96) Ult and mortality in retirement isbased on LIC(1996-98) table.
VIII.Bonus is a short term benefit and during the year company has charged Rs.474.16 Millions as expensesand balance outstanding as on 31.03.08 is Rs.390.00 Millions.
33. Information regarding Primary Business Segments: - AS - 17
Rs. in Millions
S.No. Particulars Year Ended 31.3.2008 Year Ended 31.3.2007(Audited) (Audited)
1. Income from ServicesBasic & Other Services 39,959.21 42,035.18Cellular 8,821.91 7,741.46Unallocable - -Total 48,781.12 49,776.64Less: Inter Unit Income 1555.93 683.46Net Income From Services 47,225.19 49,093.18
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2. Segment result before interest and taxBasic & Other Services 2581.86 1472.97Cellular 2327.10 2873.49Unallocable 1435.35 3600.46Total 6344.31 7,946.94Less: Interest 27.82 20.11Less: Prior period Items (1,800.74) (2,157.03)Profit before tax 8117.23 10,083.86Less: Provision for Tax 2,248.31 3,266.50Profit after tax 5,868.92 6,817.36
3. Capital Employed(Segment Assets - Segment Liabilities)Basic & Other Services 41,716.47 46,857.35Cellular 5,832.09 4.772.47Unallocable 70,810.39 62.446.61Total 118,358.95 114,076.43
Notes: -1. The company has disclosed Business Segment as the Primary Segment. Segments have been
identified taking into account the nature of the services, the deferring risks and returns, theorganisational structure and internal reporting system
2. The company caters mainly to the needs of the two metro cities viz. Delhi and Mumbai. As such thereare no reportable geographical segments.
3. Segment Revenue, Segment Result, Segment Asset and Segment Liabilities include the respectiveamount identifiable to each of the segments. The expenses, which are not directly relatable to thebusiness segment, are shown as unallocable corporate assets and liabilities respectively.
34. Related Party Disclosures - AS - 18a) List of Related Parties and Relationships
Party Relation
Department of Telecommunication Holding 56.25% shares of the Company
Millennium Telecom Limited Wholly owned Subsidiary
Mahanagar Telecom Mauritius Ltd. Wholly owned Subsidiary
United Telecom Limited Joint Venture
MTNL STPI IT Services Ltd. Joint Venture
Key Management Personnel
Mr. R. S. P. Sinha Chairman & Managing Director
Mr. Kuldip Singh Director (Technical)
Mrs. Anita Soni Director (Finance)
Mr. S.P Pachauri (Part of the year) Director (HR)
Mr. K. C. Gupta Executive Director (Operation)
Mr. A. K. Arora Executive Director, Delhi
Mr. J. Gopal Executive Director, Mumbai
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(Rs. In Millions)
b) Related Party Transactions
(Except DOT)
Transactions Joint Venture Key Management Personnel
Guarantees - - -
Unsecured Loan - NIL NIL
Remuneration Paid - - 3.81
Loans & Advances - 1.14 -
Others 142.47 - -
35. Earning Per Share - AS - 20
1) Profit after Tax Rs. 5868.91 Millions
2) Number of Shares 630 Millions
3) Nominal value of shares Rs. 10/-
4) Basic/ diluted EPS Rs. 9.32
36. Consolidated Financial Statements - AS - 21 & AS - 27
The financial statements of Millennium Telecom Limited & Mahanagar Telephone Mauritius Limited(wholly owned subsidiaries of the Company) and United Telecom Limited & MTNL STPI IT ServiceLimited (Joint Ventures) have been consolidated in accordance with the Accounting Standard - 21 andAccounting Standard - 27, respectively.
37. No provision has been made for any loss on account of impairment of assets under AccountingStandard 28 as there is no indication of any impairment of assets of the Company.
38. Balance Sheet Abstract and Company's General Business Profile - PART IV
(i) Registration DetailsRegistration No. 23501 State Code 55Balance Sheet Date Date Month Year
31 03 2008
(ii) Capital raised during the year ( Rs. in Millions)Public Issue(GDR) Nil Rights Issue NilBonds Issue Nil
(iii) Position of Mobilisation and Deployment of Funds (Rs. in Millions)
Total Liabilities 124079 Total Assets 124079
Sources of Funds:
Paid up Capital 6300 Reserves & Surplus 112914
Secured Loans NIL Unsecured Loans NIL
Deferred Tax Liability 4865
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Application of Funds:
Net fixed assets + Capital WIP 72848 Investment 5574
Net Current Assets 44065 Misc. Expenditure 1592
Accumulated Losses NIL
iv) Performance of Company (Rs. in Millions)
Turnover 53299 Total Expenditure 46983
Profit before Tax 6316 Profit After Tax 5869
Earning per share in Rs. 9.32 Dividend Rate 40%
v) Generic names of three Principal Product/services of Company (as per monetary terms)
Item Code No. NOT AVAILABLE(ITC Code)Product Description TELEPHONE SERVICE
Item Code No. NOT AVAILABLE(ITC Code)Product Description TELEX
Item Code No. NOT AVAILABLE(ITC Code)
Product Description CIRCUITS
39. Previous year figures have been regrouped / recast to confirm to current year's presentation. Amountsin brackets represent the previous year's figures.
40. Schedules "A" to "T" form an integral part of the Balance Sheet and the Profit and Loss Account.
(S.R.Sayal) (R.C.Sen) (Anita Soni) (R.S.P. Sinha)Company Secretary Dy. General Manager Director (Finance) Chairman &
(Accounts) Managing Director
For Dhawan & Co.Chartered Accountants
Sunil Gogia(Partner)
M. No:73740Place : New DelhiDate : 31st July, 2008
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Annexure-I
MAHANAGAR TELEPHONE NIGAM LIMITEDCash Flow Statement for th year ended 31st March 2008
[Pursuant to Clause 32 of Listing Agreement(s) as (amended)]
2007-08 2006-07(Rs. in Million) (Rs. in Million)
A. Cash Flow from Operating ActivitiesNet profit before Tax and extra ordinary items 6316.49 7926.79
Adjustment for:
Prior period adjustment (net) 1851.20 2242.97
Profit on sale of fixed assets -26.11 -9.82
Loss on sale of fixed assets 443.51 50.12
Depreciation 7040.60 6831.84
Compensation charged under VRS Scheme 625.19 622.09
Compensation paid under VRS Scheme -0.38 -1696.12
Interest Cost 27.82 20.11
Interest Income -4137.50 -5336.37
Interest paid -28.55 -22.43
Operating cash profit before working capital changes 12112.27 10629.19
Adjustment for:
Trade and other receivables -79.91 -6139.69
Inventries 605.74 -834.64
Trade and other payables 3033.09 5591.22
Cash generated from operations 15671.19 9246.08
Direct Taxes paid 9206.86 -5669.69
Net Cash Flow from Operating Activities 24878.05 3576.39
B. Cash Flow from Investing ActivitiesPurchase of fixed assets -8748.94 -7751.96
(inclulding capital W.I.P.)
Sale of Fixed Assets 73.16 55.83
Interest received 2912.49 5325.52
Investment -1159.90 -226.78
Net Cash Flow from Investing Activities -6923.20 -2597.39
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C. Cash Flow from Financing ActivitiesRepayment of Loans 0.00 -1.50
Dividend paid (including tax) -2948.27 -2873.43
Net Cash Flow from Financing Activities -2948.27 -2874.93
D. Net Increase/Decrease in Cash and Cash Equivalents 15006.58 -1895.93
Cash and Cash equivalent as at the beginning of the year 18687.02 20583.98
Cash and cash equivalient as at the end of the year 33693.60 18688.05
Note:-
1. Previous year figures have been regrouped wherever necessary
(S.R.Sayal) ( R.C.Sen) (Anita Soni) (R.S.P. Sinha)Company Secretary Dy. General Manager Director (Finance) Chairman &
(Accounts) Managing Director
For Dhawan & Co.Chartered Accountants
Sunil Gogia(Partner) M.No: 73740
Place : New DelhiDate : 31st July, 2008
MTNL
84
Consolidated Balance Sheet of Mahanagar Telephone Nigam Ltd.as at 31st March, 2008
As at 31.3.2008 As at 31.3.2007(Rs. in Million) (Rs. in Million)
SOURCES OF FUNDSShareholders' FundsShare Capital 1 6,300.00 6,300.00Reserves & Surplus 2 112,698.61 109,726.53
Loan FundsSecured Loans 3 106.17 139.85Deferred Tax Liability (Net) 4 4,849.96 6,181.74Total 123,954.74 122,348.12
APPLICATION OF FUNDSGross Block 159,386.79 153,773.42Less : Depreciation 95,451.92 89,005.36Net Block 63,934.87 64,768.06
Capital Work-in-Progress 6 9,694.15 7,649.44Investments 7 4,516.68 3,500.00
Current Assets, Loans & AdvancesInventories 8 1,629.27 2,230.06Sundry Debtors 9 9,670.91 9,848.28Cash & Bank Balances 10 33,823.34 18,848.14Other Current Assets 11 2,385.94 1,104.00Loans & Advances 12 94,563.16 110,384.47
142,072.62 142,414.95Less : Current Liabilities and ProvisionsCurrent Liabilities 13 43,403.84 43,742.69Provisions 14 54,493.11 54,489.91Net Current Assets 44,175.67 44,182.36Miscellaneous Expenditure 1,633.37 2,248.26(to the extent not written off)Total 123,954.74 122,348.12
The Schedules referred to above form an integral part of the Balance Sheet.
(S.R.Sayal) ( R.C.Sen) (Anita Soni) (R.S.P. Sinha)Company Secretary Dy. General Manager Director (Finance) Chairman &
(Accounts) Managing DirectorIn terms of our report of even dateFor Dhawan & Co.Chartered Accountants
Sunil Gogia(Partner)
M.No: 73740Place : New DelhiDate : 31st July, 2008
MTNL
85
Consolidated Profit & Loss of Mahanagar Telephone Nigam Ltd.for the year ended 31st March, 2008
As at 31.3.2008 As at 31.3.2007(Rs. in Million) (Rs. in Million)
INCOMEIncome from Services 15 47,672.36 49,401.43Other Income 16 6,083.31 6,739.68
53,755.67 56,141.11EXPENDITUREEmployees' Remuneration and Benefits 17 16,447.00 18,140.11Revenue Sharing 8,127.70 8,895.44Licence Fee 4,245.98 4,676.76Administrative,Operating & Other Expenses 18 11,635.03 9,638.19Depreciation 5 7,132.30 6,892.09Interest 19 44.15 43.49
47,632.16 48,286.08Profit Before Tax 6,123.51 7,855.03Provision for Taxation 3,599.86 3,178.00Provision for Deffered taxation (1,339.63) 88.61Profit After Tax 3,863.28 4,588.42Prior period adjustments 20 (1,800.74) (2,232.35)Profit For the Year 5,664.02 6,820.77Profit Available for Appropriation 5,664.02 6,820.77Appropriation :Interim/Final dividend 2,520.00 2,520.00Tax on Dividend 428.27 372.14Transfer To Contingency Reserve - -Reserve for R&D - -General Reserve 2,715.75 3,928.63
5,664.02 6,820.77Earning Per ShareBasic/Diluted earnings per share (in Rs.) 8.99 10.83
Accounting Policies & Notes to Accounts 21The Schedules referred to above form an integral part of the Profit & Loss Account.
(S.R.Sayal) ( R.C.Sen) (Anita Soni) (R.S.P. Sinha)Company Secretary Dy. General Manager Director (Finance) Chairman &
(Accounts) Managing DirectorIn terms of our report of even dateFor Dhawan & Co.Chartered Accountants
Sunil Gogia(Partner)
M.No: 73740Place : New DelhiDate : 31st July, 2008
MTNL
86
SCHEDULES FORMING PART OF CONSOLIDATED BALANCE SHEET AS AT 31ST MARCH 2008SCHEDULE-1
Share Capital
As at As at31.3.2008 31.3.2007
(Rs.in Million) (Rs.in Million)
AUTHORISED CAPITAL80,00,00,000 Equity Shares of Rs.10/- each 8,000.00 8,000.00
ISSUED SUBSCRIBED AND PAID UP CAPITAL63,00,00,000 Fully paidEquity Shares of Rs. 10/- each 6,300.00 6,300.00
Out of the above shares(i) 59,99,98,400 Equity Shares are allotted as fully paid up pursuant
to a contract without payment being received in cash out of which35,43,72,740 Shares are held by the Government of India
(ii) 3,00,00,000 Equity Shares are allotted as fully paid uprepresented by Global Depository Receipts (GDRs)through an International Offering in US Dollars.OneGDR represented two equity shares. In Nov, 2001 theGDRs were exchanged in American Depository Shares(ADSs) on a one -for-one basis. One ADS also representstwo of our equity shares. 6,300.00 6,300.00
SCHEDULE-2Reserves & Surplus
As at Addition Deduction As at 1.4.2007 during the year during the year 31.3.2008
(Rs in Million) (Rs in Million) (Rs. in Million) (Rs in Million)
Bonds Redemption Reserve - - - -
Bonds Redemption Reserve(Prev.Yr) (0) (0) (0) -
Share Premium 6,650.05 6,650.05
Share Premium(Prev.Yr) (6,650.05) (0) (0) (6,650.05)
General Reserve 93,639.14 2,715.75 4,855.17 91,499.72
General Reserve(Prev.Yr) (84,669.87) (9,002.94) (33.67) (93,639.14)
Reserve For Contingencies 9,129.34 5,111.50 - 14,240.84
Reserve For Contingencies(Prev.Yr) (14,203.65) - (5,074.31) (9,129.34)
Reserve For Research & Development 308.00 - - 308.00
Reserve For Research & Development(Prev.Yr) (308.00) - (0) (308.00)
TOTAL 109,726.53 7,827.25 4,855.17 112,698.61
(105,831.57) (9,002.94) (5,107.98) (109,726.53)
MTNL
87
SCHEDULE-3Secured Loans
As at As at
31.3.2008 31.3.2007(Rs.in Million) (Rs.in Million)
Term Loan (PNB - EBL) 106.17 139.85
106.17 139.85
SCHEDULE-4Deferred Tax Liability (Net)
Deferred Tax Current Year Deferred Tax
Liability (Asset) Charge/(Credit) Liability (Asset)
As at 1.04.2007 (Rs. in Million) As at 31.03.2008(Rs. in Million) (Rs. in Millions)
Deferred Tax Liabilities
Difference between Book,
Tax Depreciation & others 13,502.00 (350.24) 13,151.76
Difference between Book,
Tax Depreciation & others(Prev.Yr) (12,619.20) (882.80) (13,502.00)
Total - A 13,502.00 (350.24) 13,151.76
(12,619.20) (882.80) (13,502.00)
Deferred Tax Assets
Provision for Doubtful Debts,
Advances and Bank Balances -3491.86 -421.43 3913.29
Provision for Doubtful Debts,
Advances and Bank Balances(Prev.Yr) (-3111.15) (-380.71) (-3491.86)
Provision for Obsolete Stock -231.58 -43.58 (275.16)
Provision for Obsolete Stock(Prev.Yr) (-230.24) (-1.34) (-231.58)
Others -3596.82 -517.69 4113.35
Others (Prev.Yr) (-3186.68) (-410.14) (-3596.82)
Total - B 7320.26 (982.70) 8301.80
(-6528.07) (-792.19) (-7320.26)
Deferred Tax Liability (A – B) 6,181.74 (1,332.94) 4,849.96
(6,091.13) (90.61) (6,181.74)
MTNL
88
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MTNL
89
SCHEDULE-6
Capital Work-In-Progress
As at As at31.3.2008 31.3.2007
(Rs.in Million) (Rs.in Million)
Buildings 407.16 502.55
Apparatus & Plants 7,567.63 5,503.61
Lines & Wires 12.42 13.81
Cables 1,461.47 1,416.79
Subscribers' Installations 139.38 124.24
Air Conditioning Plants 124.28 106.84
Less:- Provision For Abandoned Works (18.19) (18.40)
9,694.15 7,649.44
SCHEDULE-7
InvestmentsAs at As at
31.3.2008 31.3.2007(Rs.in Million) (Rs.in Million)
Long Term-Non Trade (At Cost)Investment in 10000000 8.75%Un Quotedpreference share of Rs. 100/- each fully paidup with M/s. ITI Ltd. (Refer Note No.12) 1,000.00 1,000.00
Investment in Subsidiary Companies
MillenniumTelecom Ltd. (Un Quoted 2875880Equity shares of Rs. 10 each fully paid up) - -
Mahanagar Telephone Mauritius Ltd.(Un Quoted 49418754 Equity Share ofMUR 10 (INR 14.9251) each fully paid up) - -
Investment in Joint Ventures - -
With United Telecom Ltd. (Un-Quoted 2901450Equity Share of Rs.100 each, fully paid up) - -
With MTNLSTPI IT Services Ltd.(Un Quated 25000 Equity share @Rs.10 each) - -
Others
Investment in LIC (MF) 508.58 -
Investment in UTI (MF) 508.10 -
Investment in Un Quoted 11.5% Bonds fullypaid up of Maharashtra Krishna ValleyDevelopment Corporation Ltd. 2,500.00 2,500.00
(Redemption in the Year 2012) 4,516.68 3,500.00
MTNL
90
SCHEDULE-8
Inventories (At Cost)
As at As at31.3.2008 31.3.2007
(Rs.in Million) (Rs.in Million)
Stores and Spares:Building Material 0.62 0.62Lines & Wires 87.73 108.16Cables 1,046.64 857.69Exchange Equipments 396.75 552.24WLL Equipments 7.86 16.00Telephone & Telex instruments 169.32 510.82WLL Instruments 203.44 459.35Telephones & Telex Spares 2.79 2.79Installation Test Equipments 0.42 1.64Store - in -Transit 0.10 0.04Mobile Handsets & Sim Cards 17.54 16.47
1,933.21 2,525.82Less: Provision for obsolete stores 303.94 295.76
1,629.27 2,230.06
SCHEDULE-9Sundry Debtors (Unsecured)*
As at As at31.3.2008 31.3.2007
(Rs.in Million) (Rs.in Million)
Outstanding for a Period Exceeding Six Months
Considered Good 3,442.26 3,238.17
Considered Doubtful 4,202.36 2,902.33
Other Debts
#Considered Good 6,154.47 6,558.00
Considered Doubtful 39.48 37.53
13,838.57 12,736.03
Less: Provision for doubtful debts 4,151.32 2,873.40
Less: Provision for wrong billing 16.34 14.35
9,670.91 9,848.28
# Include Rs3450.56 Millions (Rs.4290.65 Millions) on account of income accrued from services
* Except to the extent covered by Security Deposits from subscribers.
For the current year, debtors exceeding Six months, considered good & doubtful includes service tax ofRs.135.51Millions (Rs301.51Millions) & Rs.329.86 Millions (Rs.252.34Millions) respectively.Other debtorsconsidered good & doubtful include service tax of Rs.232.47 Millions (Rs.836.42 Millions) & Rs.221.63Millions (Rs.4.09Millions) respectively.
MTNL
91
SCHEDULE-10
Cash & Bank BalancesAs at As at
31.3.2008 31.3.2007(Rs.in Million) (Rs.in Million)
Cash in hand,Including cheques in handRs.40.87 Millions (Rs 96.44 Millions) 65.41 123.40Balance with scheduled BanksIn Current Accounts 1,308.35 1,617.76In Fixed Deposit Accounts 32,449.94 17,107.04
Balance with Non-Scheduled BanksIn Current Account (Refer Note -26) 5.66 5.66
33,829.06 18,853.86Less: Provision for Doubtful Bank Balances 5.72 5.72
33,823.34 18,848.14
SCHEDULE-11Other Current AssetsUnsecured Considered Good
As at As at31.3.2008 31.3.2007
(Rs.in Million) (Rs.in Million)
Interest Accrued on Deposits with Banks, 1,340.93 114.03
Interest Accrued on Bonds 192.19 192.19
Income Accrued From other Deposits & Loans & Advances 852.83 796.75
Cheque in transit with other bank 4.21 1.03
Less:- Provision for doubtful Income - -
2,385.94 1,104.00
MTNL
92
SCHEDULE-12Loans & AdvancesUnsecured Considered Good*
As at As at31.3.2008 31.3.2007
(Rs.in Million) (Rs.in Million)
Loans & Advances
Secured Loans
Housing Loan To Employees 1,808.00 1,995.91
Un Secured Loans
(Considered good, unless otherwise stated)
(1) To Subsidiary Company - (0.23)
(2) To DOT - -
(3) To BSNL - -
(4) To Other Corporates 908.09 741.85
(5) To Employees
i) Vehicles 38.58 34.58
ii) Others 122.07 119.51
Amount Recoverable from DOT 30,856.38 29,995.46
Amount Recoverable from BSNL 6,036.89 12,437.81
Amount Recoverable from VSNL 3.42 2.17
Advances Recoverable in Cash or in Kind
or for value to be received.# 17,137.54 15,647.15
Advance to JV Co (MTNLSTPI IT Services Ltd) - 3.71
Advance Tax 32,059.42 48,060.91
Deposits with Govt. Deptt. 476.86 354.35
Capital Advance 167.12 149.09
Amount Recoverable from GPF Trust 886.65 714.72
Others 4,624.07 679.07
95,125.09 110,936.06
Less: Provision for Doubtful Advances 561.93 551.57
94,563.16 110,384.49
* Except to the extent of doubtful advances recoverable in cash or in kind or for value to be received forwhich provision has been made.
# Including Rs 442.28 Millions (Rs. 65.10 Millions) receivable from Gratuity Trust
MTNL
93
SCHEDULE-13Current Liabilities
As at 31.3.2008 As at 31.3.2007(Rs.in Million) (Rs.in Million)
Sundry Creditors -(i) For Goods and Services 6,485.44 5,474.07(ii) For Work done 4,243.58 3,937.99(iii) For Others 1,440.47 2,347.73Advances Received from Customers &Others 405.50 306.22Deposits from :(i) Contractors 367.49 342.08(ii) Customers & Others 9,914.12 10,817.68Unclaimed Bonds 0.06 0.06Other Liabilities(i) For Salaries and Other Benefits 992.79 409.59(ii)Bonus/ Ex-Gratia 390.00 405.98(iii) GPF of MTNL optee 10,094.87 9,293.02(iv) Others 6,464.79 4,293.47Income Received in advance against services 1,476.85 1,274.72Amount Payable:(i) To DOT 455.00 552.04(ii) To BSNL 0.57 3,760.49(iii) To VSNL 18.72 13.08(iv) To Subsidiary 6.37 8.03(v) To Others 644.50 503.00Interest Accrued but not due :(i) On Bonds - -(ii) On Deposits 2.72 3.44
43,403.84 43,742.69
SCHEDULE-14Provisions
As at 31.3.2008 As at 31.3.2007(Rs.in Million) (Rs.in Million)
Pension(i) Company Employees 31,451.29 28,716.45(ii) Others 122.99 116.50Leave Encashment(i) Company Employees 3,196.70 2,679.58(ii) Others 12.56 8.86Gratuity 2,609.66 2,623.24Proposed Final Dividend 630.00 630.00Tax on Dividend 107.07 107.07Income Tax 16,129.71 19,400.46Fringe Benefit tax 189.85 128.49Wealth Tax 9.83 51.45Others 33.46 27.81
54,493.11 54,489.91
MTNL
94
SCHEDULES FORMING PART OF CONSOLIDATED PROFIT AND LOSS ACCOUNT FORTHE YEAR ENDED 31-03-2008
SCHEDULE-15Income from Services
As at As at31.3.2008 31.3.2007
(Rs.in Million) (Rs. in Million)
Telephone (a) Rentals 10,999.55 11,383.63
(b) Calls & Other Charges 12,710.58 15,050.52
(c ) Franchises Services 3,991.54 6,165.44
(d) Rent & Junction Charges 1,133.02 1,223.55
(i) Mobile Operators - -
(ii) Basic Service Operators - - (iii) Dolphin - -
(e) Access Calls & Other Charges 3,657.92 2,547.79
(i) Mobile Operators - -
(ii) Basic Service Operators - -
(iii) Dolphin - -
VCC 355.75 456.35 Internet 139.39 127.60
Telex 0.19 0.01
Circuits 480.73 758.48
WLL Rent 571.31 565.64
WLL Call Charges 445.82 352.41
Mobile (a) Rentals, calls& IUC revenue 2,411.55 2,464.22
(b) Income from Roaming 1,513.54 1,259.58
(c) PSTN Charges - -
(d) Pre paid Trump 4,420.11 3,780.94
(e) Activation Charges 34.53 118.24
Broadband 3,358.73 1,958.38 Value added and Other Services
(a) Indonet 1.22 1.91
(b) Voice Mail 193.73 191.87
(c ) Free Phone 193.28 150.21
(d) Premium Rate 0.66 0.55
(e) ISDN - Rental 352.44 245.66 (f) ISDN - Call Charges 572.81 496.64
Others 133.97 101.81
47,672.36 49,401.43
MTNL
95
SCHEDULE-16
Other Income
As at As at31.3.2008 31.3.2007
(Rs.in Million) (Rs. in Million)
Interest(i) From Banks (Tax deducted at source
Rs. 602.89 Millions (Rs. 417.36 Millions) 2,620.51 1,585.00(ii) Interest on Advances to Employees 108.82 206.60(iii) Interest on Deposits, Advances and Others 313.51 326.69(iv) Interest from Income Tax Department 1,100.18 3,221.36Dividend from Mutual Fund 17.19 -Sale of Directories,Publications, Forms etc. 22.54 14.55Profit on Sale of Assets 26.11 9.82Liquidated Damages 316.68 230.01Foreign Currency Fluctuation - 0.08Bad Debts Recovered 62.07 96.36Credit Balances Written Back 320.43 838.83and other services provided 62.19 55.36Others 1,113.09 155.02Waste paper etc (added with others) - -
6,083.31 6,739.68
SCHEDULE-17Employees' Remuneration and Benefits
As at As at 31.3.2008 31.3.2007
(Rs.in Million) (Rs. in Million)
Salaries,Wages,Allowances and -other Benefits 12,054.73 11,241.05Bonus/ Ex-Gratia 474.16 415.08Medical Expenses/Allowances 926.84 822.28Leave Encashment(i) Company Employees 631.26 522.49(ii) Others 7.30 9.12Pension Contribution(i) Company Employees 4,032.86 3,872.87(ii) Others 12.36 170.22Contribution to Provident Fund 265.22 237.39Gratuity (165.17) 733.98Compensation under VRS Scheme 625.19 622.09Staff Welfare Expenses 126.47 242.84
18,991.22 18,889.41Less :Allocation to Capital Work-In-Progress 2,544.22 749.30
16,447.00 18,140.11
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SCHEDULE - 18Administrative, Operating and Other Expenses
As at As at31.3.2008 31.3.2007
(Rs.in Million) (Rs. in Million)
Power & Fuel 1,898.12 1,616.34
Rent 618.98 608.84
Repairs & Maintenance:
- Buildings 153.91 166.92
- Plant & Machinery 936.20 759.54
- Others 486.89 395.34
Insurance 37.30 36.98
Rates & Taxes 362.96 325.74
Travelling Expenses 43.41 52.17
Postage & Courier 172.64 206.16
Printing & Stationery 152.05 147.70
Vehicle Expenses:
(i) Maintenance 14.05 15.31
(ii) Running 35.12 38.23
(iii) Hiring 93.10 97.72
Commission paid on Franchised Services 1,895.38 2,248.94
Comm. Paid to pre paid services 7.23 11.02
Advertising/Business Promotion Expenses 359.34 467.91
Provision for Doubtful Debts including 11.10 -
Disputed Bills 1,238.59 1,119.68
Provision for Wrong Billing 1.28 0.39
Bad Debts Written Off 59.77 22.74
Provision for Obsolete Stores 128.22 3.95
Professional & Consultancy Charges 107.35 84.35
Seminar and Training Expenses 12.64 10.65
Miscellaneous Expenses * 959.19 754.45
Loss on Sale of Assets 443.51 50.12
Internet charges 609.29 168.30
Spectrum Charges(WLL) 17.62 20.92
Spectrum Charges(MS) 338.81 204.94
Loss of Assets 440.98 2.82
11,635.03 9,638.19
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SCHEDULE - 19Interest :
As at As at31.3.2008 31.3.2007
(Rs.in Million) (Rs. in Million)
Interest on :
Customers' deposits 15.82 19.74GPF 0.02 0.19Other Loans 28.31 23.56
44.15 43.49
Less : Allocation to the DOT for interest on Bonds and Loans - -
44.15 43.49
SCHEDULE - 20Prior Period Adjustments
As at As at31.3.2008 31.3.2007
(Rs.in Million) (Rs. in Million)
ExpensesSalary,Wages,Allowances & Staff Expenses - 18.21Power & Fuel 0.01 1.81Rent - 1.00Rates & Taxes 13.02 0.16Repairs to Plant & Machinery 2.00 16.63Depreciation 51.04 85.94Others (includes Tax Rs. 671.37 Millions) 748.87 18.91
814.94 142.66IncomeExcess provision written back(Income Tax) 2,526.53 2,283.17Others 89.15 91.84
2,615.68 2,375.01Net Adjustment (1,800.74) (2,232.35)
Note:1. For the current year Consolidated Figures includes Unaudited Provisional figures of United Telecom
Ltd as their financial year ends on 16thJuly.2. For others the figures for current year is on provisional basis
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Annexure-I
MAHANAGAR TELEPHONE NIGAM LIMITEDConsolidated Cash Flow Statement for the year ended 31st March 2008
[Pursuant to Clause 32 of Listing Agreement(s) as (amended)]
2007-08 2006-07(Rs. in Million) (Rs. in Million)
A. Cash Flow from Operating Activities
Net profit before Tax and extra ordinary items 6,333.61 7,855.04
Adjustment for: - -
Prior period adjustment (net) 1,851.20 2,242.97
Profit on sale of fixed assets (26.11) (9.82)
Loss on sale of fixed assets 443.51 50.12
Depreciation 7,132.30 6,892.09
Compensation charged under VRS Scheme 625.19 622.09
Compensation paid under VRS Scheme (0.38) (1,696.12)
Interest Cost 27.82 20.11
Interest Income (4,137.50) (5,336.37)
Interest paid (28.55) (22.43)
Operating cash profit before working capital changes 12,224.55 10,606.57
Adjustment for:
Trade and other receivables (113.62) (6,247.68)
Inventries 600.80 (798.84)
Trade and other payables 2,929.30 5,930.29
Cash generated from operations 15,641.02 9,490.34
Direct Taxes paid 9,225.84 (5,669.69)
Net Cash Flow from Operating Activities 24,866.86 3,820.66
B. Cash Flow from Investing Activities
Purchase of fixed assets (8,884.85) (8,104.87)
(inclulding capital W.I.P.) - -
Sale of Fixed Assets 73.16 55.83
Interest received 2,912.49 5,325.52
Investment (1,162.45) (226.78)
Net Cash Flow from Investing Activities (7,061.66) (2,950.30)
C. Cash Flow from Financing Activitgies
Repayment of Loans (33.91) (28.40)
Dividend paid (including tax) (2,948.27) (2,873.43)
Loan/Share Capital 205.53 187.08
Net Cash Flow from Financing Activities (2,776.65) (2,714.75)
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D. Net Increase/Decrease in Cash and Cash Equivalents 15,028.55 (1,844.40)
Cash and Cash equivalent as at the beginning of the year 18,796.61 20,693.57
Cash and cash equivalient as at the end of the year 33,823.34 18,849.17
Note:-
1. Previous year figures have been regrouped wherever necessary
( S.R.Sayal) ( R.C.Sen) (Anita Soni) (R.S.P. Sinha)Company Secretary Dy. General Manager Director (Finance) Chairman &
(Accounts) Managing DirectorFor Dhawan & Co.Chartered Accountants
Sunil Gogia(Partner)
M.No: 73740Place : New DelhiDate : 31st July, 2008
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ANNEXURE TO DIRECTORS' REPORTAddendum to Director's Report 2007-08
Replies of Management to Auditors Report with regard to qualifications for the year 2007-08
i) Non - Provision of a sum of Rs. 33.29 Millions, payable interms of directions of Hon'ble Supreme Court of India tovarious Companies. [Refer Note No. 7(C)].
ii) Booking of Income of Rs. 545.86 Millions, during the yearunder review, on account of charges for usage of MTNLTrunk Automatic Exchange (TAX) by BSNL, which has beenrebutted by BSNL. The Profit of the company, for the year,therefore, is overstated by Rs. 545.86 Millions and CurrentAssets of the company are overstated by an equivalentamount. [Refer Note No. 10 (d)].
iii) Non provision of post medical retirement benefits in thebooks of accounts as per the requirements of AccountingStandard AS-15 (Revised), which may have ̀ impact on theprofitability of the company. Amount not ascertainable.Further, as regards provisions and disclosures made forGratuity, pension and leave encashment, we have reliedon the report of Actuarial valuation carried out by theActuary and provided to us by the management.
iv) During the year, the company has entered into projectagreement with a private company for development of coreknowledge park at Noida and has given the right to developthe project on land belonging to MTNL for the period of 50years. The company has received Rs.481.25 Millions asconsideration towards granting right to develop the projectand maintain the same for 50 years. This amount has beentreated as Income of this year whereas the same shouldbe deferred and should be spread over the life of theagreement. This has resulted in overstatement of profit byRs.471.62 Millions and understatement of DeferredRevenue Income. (refer Note No. 22).
v) The company has not provided for Rs.19.55 Millions onaccount of old EMIs of handsets billed but not paid for closedconnections and Rs.100.84 Millions billed at the year endout of unbilled EMI of closed connections of handsets forCDMA connections. This has resulted into overstatementof profit by Rs.120.39 Mil l ions and consequentoverstatement of current assets.
vi) In respect of some equipments in Old WLL exchange, whichhave been recommended by the committee for de-capitalisation, the same have not been de-capitalised andas such have not been valued at lower of Net Book Value orNet Realisable value, as such the financial impact of thesame is Rs. 484.40 Millions have not been charged to Profit& Loss Account. The Profit of the company, therefore, isoverstated by Rs 484.40 millions and Fixed Assets areoverstated by an equivalent amount.
vii) The company has not made provision in the accounts forthe balance of Rs.9.92 Millions outstanding for more than 3
i) Necessary adjustment will be made inthe year 2008-09 after review of the actualprovisions.
ii) The income has been booked as peraccrual method of accounting in terms of IUCRegulations of TRAI and pertains to actualusage of Tax by BSNL for passing its traffic.
iii) There is no defined contributory medicalbenefit scheme in existence. Hence noprovision on actuarial basis is required tobe made as per AS-15.
iv) The income has been booked inaccordance with AS-9. The paymentreceived is the upfront payment which isnon-refundable at any stage. It has nolinkage to the maintenance of the project atall and the revenue is booked on its accrualas per the account ing pr inciples andtherefore can not be deferred.
v) This is being reviewed by themanagement
vi) This wi l l be reviewed by themanagement in the year 2008-09 as therecommendations of the committee aregetting examined comprehensively.
vii) As per accounting policy of the company,the provision is made only for subscribers
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years in respect of dues from International operators. Thus,the profit of the company is overstated by Rs.9.92 Millionsand debtors have been overstated by the same amount.
viii) Short-provision of Rs. 1149.81 Millions on account ofmerger of 50% Dearness Allowance(DA) with basic pay tothe employees on IDA scales in terms of Department ofPublic Enterprises OM No. 2(7) 2005-DPE(WC)-GL-III dated26.2.2008. The profit of the company, therefore, isoverstated by Rs. 1149.81 Millions and current liabilitiesare understated by the same amount. (refer Note No. 21).Further, there will be liability on account of impact of thesame on retirement benefits too. Impact of the same onretirement benefits is not ascertainable.
ix) During the year, the company has raised bills of ADC totwo private operators for the period from November 2004to January 2005 of Rs. 22.56 Millions. The bills arearbitrarily raised without exact basis as such there isreasonable uncertainty at the time of raising of claim. Thesame is not as per AS-9 issued by the Institute of CharteredAccountants of India. The profit of the company, therefore,is overstated by Rs.22.56 Millions and Current Assets areoverstated by equivalent amount. (Refer Note No. 10(e).
x) There is difference of Rs 36.54 millions as per financialbooks and as per report generated from billing system.The impact of the same, on provisioning for Bad debts andprofitability is unascertainable.
xi) The system of issuance of completion certificate byengineering department needs to be strengthened. Theimpact, if any due to delay of issuance of completioncertificate by concerned engineering department on thecapitalization of assets, WIP and consequently ondepreciation, if any, is unascertainable.
xii) In MS Delhi unit, during the year, no reconciliation of roamingreceivables have been carried out. The impact of non-reconciliation of roaming debtors on profitability, if any, isunascertainable.
xiii) No provision has been made for the following expenses /claims made by BSNL:
a) Signalling charges amounting to Rs. 219.30 Millions;
b) Transit Tariff claims amounting to Rs. 251.90 Millions;
c) M. P. Bills claims upto 31.03.2005 amounting to Rs.60.10 Millions;
d) Claims for service connections amounting to Rs.401.48 Millions;
e) IUC claims of MTNL rebutted by BSNL amounting toRs. 101.40 Millions;
f) IUC claims raised by BSNL, Gujarat circle amountingto Rs. 11.14 Millions;
dues, which are more than 3 years old. Noprovision is made for dues from operatorsas the recoveries can be adjusted fromamounts payable as per the inter connectagreements and the debts therefore are notconsidered bad.
viii) Pending decision of the Board andapproval of the Administrative Ministry, anadhoc provision of Rs.520 millions has beenmade in the accounts for DA merger /wagerevision as the case may be.
ix) These bills have been raised for minimumamount on average basis in absence ofdetailed data. As the amount is realizableon the basis of Hon'ble Supreme Court'sapplicable judgment relating to ADC due tobe paid by other operators, it is consideredrealizable.
x) The same is under reconciliation andnecessary adjustment shall be made aftercompletion of reconciliation.
xi) This will be reviewed in the year 2008-09.
xi i ) The reconci l iat ion is underprocess.Necessary entries if any, shall bepassed after completion of the reconciliationprocess.
xiii) The reconciliation of claims made byBSNL and similar claim of MTNL is inprogress. As per MTNL's assessment, anamount of Rs 6036.32 millions is owed toMTNL by BSNL upto 31/03/2008. Necessaryadjustments, if required, will be made afterfinalization of reconciliation.
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The profit of the company, in view of para (xiii) above,is overstated by Rs. 1045.32 Millions and CurrentAssets are overstated by similar amount.
xiv) The Bank Reconciliation Statements as at 31st March, 2008include the unmatched / unlinked credits and debitsaggregating Rs. 56 Millions and Rs. 42.75 Millions,respectively, which have not been properly accounted for,in the absence of adequate particulars. The impact of suchentries on the accounts is not ascertainable. (Refer NoteNo. 13).
xv) The value of the properties where the conveyance / leasedeeds remain to be executed, stamp duty payable, if any,for execution of above said properties has not beenprovided for. The outstanding liabilities, if any, towardsGround Rent payable on properties transferred from DOTalso remains unascertained. [Refer Note No. 8].
xvi) The balance in Subscriber's Deposit Accounts Rs. 8481.73Millions, Interest Accrued & Due thereon Rs. 29.48 Millions,Unlinked Receipt from Subscribers Rs. 312.44 Millions aresubject to reconciliation. The reconciliation of metered andchargeable calls generating revenue in Service unit at Mumbaihas been made in case of a few exchanges. Reconciliation ofremaining exchanges at Mumbai needs to be completed. Inrespect of Delhi and MS unit, thorough reconciliation ofactivation charges, ratable calls, Customer deposits andsundry debtors from the output generated from the billingsystem and the books of accounts has not been conducted.The final impact of above on the accounts is presently notascertainable and the same may have an impact on theProfitability of the company. [Refer Note No. 15 (b)].
xvii)a) Amount recoverable on current account from DOT Rs30856.38 Millions. and amount payable on currentaccount to DOT Rs. 454.99 Millions i.e. Net RecoverableRs. 30401.39 Millions (Previous Year Rs. 29443.42Millions) are subject to reconciliation, confirmation andconsequent adjustments. [Refer Note No. 17(a)].
(b) Amount recoverable on current account from BSNLRs. 6036.32 Millions (Previous year Rs 8677.31millions) is subject to reconciliation, confirmation andconsequent adjustments. [Refer Note No. 17 (b)].
xviii)The Mumbai unit of the Company has computed and accountedfor the IUC charges of BSNL for the Current Year on the basisof actual CDR's recorded in MTNL's Mumbai Exchange and inrespect of Intra Circle Calls, as per Leased Lines. Anyadjustment after settlement of dispute with BSNL may havean impact on the Profits of the company. Amount notascertainable. [Refer Note No. 10(C)].
xix) The company has not made following disclosures requiredunder schedule - VI of the Companies Act, 1956 as perreferences given after each item:
a) Consumption of stores and spares (Para No. 3 (x)(a)of part II.
xiv) The reconcil iation of unmatched /unlinked credits is in the process. Necessaryadjustments, if any, shall be made in theaccounts af ter complet ion of thereconciliation process.
xv) As per Sale Deed executed betweenMTNL and DOT, stamp duty is not payableon the properties acquired by/vested in thename of company by the DOT.
xvi) The reconci l iat ion is in progress.Necessary entries, if any, shall be passedafter complet ion of the reconci l iat ionprocess.
xvi i ) (a) This is being pursued by theManagement
(b) Management is in the process ofreconci l ing the balance. Necessaryadjustment entry, if any, arising out of thisreconci l iat ion would be passed afterconfirmation/acceptance.
xviii) The entire Maharastra traffic has beentreated as intra circle calls on leased linesbasis vide DOT order no: 342-503/2004-VASdated 20th May 2005. In view of the above,there would not be any additional liability,which will have impact on the profit of thecompany.
a) Not applicable
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b) Consumption of imported and indigenous stores &spares and percentage to the total consumption. (ParaNo. 4 D (C) of part II)
c) The classification of sundry debtors as unsecuredwithout considering the security deposit that the unithas received from subscribers
d) Non-Furnishing of Age wise details of Loans &Advances contravenes the requirements of Part - I ofSchedule - VI to the Companies Act, 1956.
e) The Company is not in possession of requisite informationand details for the identification of Micro, Small andMedium enterprises. Hence, we are unable to commentupon the compliance of section 15 and 22 of Micro, Smalland Medium Enterprises Development Act, 2006.
xx) The following mentioned practices and procedures followedby the Company in respect of Fixed Assets and DepreciationAccounting, in our opinion, are not in accordance with theAccounting Standard - 10 on 'Accounting for Fixed Assets';Accounting Standard - 6 on 'Depreciation Accounting' andAccounting Standard - 28 on "Impairment of Assets" issuedby the Institute of Chartered Accountants of India : -
(a) During the year, the company has changed the policyregarding allocation of overhead expenses to fixedassets, from percentage of capital expenditure asprescribed by DOT to directly allocable expenses anda sum of Rs. 2754.28 Millions have been allocated toCapital Work in Progress out of EmployeesRemuneration & Benefits and Administrative,Operating & Other Expenses [Refer Schedule P & Q ofthe Annual Accounts]. Branch Auditor has furtherreported that method of capturing of data for allocationof overhead expenses to capital expenditure requiresmore scientific and prudent methodology. This changein policy has resulted in increase of Profit by Rs.2098.68 Millions. [Refer Note No. 3(b)].
(b) Expenditure on replacement of assets, equipments,instruments and rehabilitation work is capitalized if itresults in enhancement of revenue earning capacityas stated in Significant Accounting Policy 2(iii). Thisbeing a technical matter, we have placed reliance onthe opinion of the management.
(c) In respect of Mumbai unit, various Fixed Assets(including WLL handsets but not including exchangeequipments), replacement cost have been capitalizedand / or the assets are sold, without any adjustmentsof the relevant costs and written down value of suchassets from the Fixed Assets block.
xxi) Non - confirmation and reconciliation of balances recoverableand payable. Impact on Profits not ascertainable.
b) Not applicable
c) That debtors are unsecured except to theextent covered by security deposits receivedfrom subscribers and the same fact isdisclosed in Schedule-H of balance sheet.
d) This will be reviewed in the year 2008-09, if required.
e) There are no reported / confirmed MSMEcompanies and accordingly action for thecompliance does not arise
a) This is a disclosure on account of changein accounting policy
b) Noted
c) In case of exchange equipments, wherevalue is substantial, the replacement costhave been capitalized after adjustment ofthe relevant cost/written down value. In caseof other assets, where the value isnegligible, the replacement cost have beencapitalized without any adjustment of therelevant cost and written down value of suchassets from the fixed assets block. WFMSSystem of Account ing is beingimplemented, and the other assets are alsobeing accounted for after adjustment of therelevant cost and written down value
xxi) The necessary adjustments, if any, willbe made on confirmation.
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xxii)The company has adopted the basis of valuation ofinventories (except for WLL handsets) as stated in SignificantAccounting Policies of the company, which is in accordancewith the Accounting Standard - 2 on "Valuation of Inventories"issued by the Institute of Chartered Accountants of India whichprescribes for valuation of the same at the lower of the costand net realizable value. This is a change in the AccountingPolicy which has resulted in understatement of inventoriesby Rs. 1.11 Millions and profits by Rs. 1.11 Millions.
xxiii)The accounting policy for revenue and phonogram has beenchanged from cash basis to accrual basis. This has resultedin the Income being more by Rs. 0.14 Millions and thedebtors more by the same amount. However, the impact ofabove change in policy in respect of Delhi unit is negligible.Thus, the Net Profit of the company is overstated by Rs.0.14 Millions and Current Assets are correspondinglyshown higher by the same amount.
xxiv) As per the change in Accounting Policy in respect of IntangibleAssets which include Application Software, the depreciationis charged assuming there will be no residual value at the endof the life of the assets. This has resulted in increase inDepreciation amounting to Rs. 2.62 Millions. Thus the profit isunderstated by Rs. 2.62 Millions and Fixed Assets are alsounderstated by equivalent amount. [Refer Note No. 3(d)].
xxv)During the year, the company has changed the policy withregard to reciprocal services and stated there is noreciprocal arrangement with BSNL / DOT. Since in theprevious year also, no revenue was booked, as such impactof change of policy on the account is not ascertainable. Ithas further been reported by the branch auditors that theyare unable to comment whether all the reciprocalarrangements with DOT have been accounted for.
Annexure I to the Auditors report
1. full particulars of the assets & locations as required are notmaintained in most of the cases. In respect of assets acquiredfrom DOT on 1st April 1986, particulars of location are notavailable. In case of Mumbai Unit and MS unit Mumbai, fixedassets registers maintained w.e.f. 01.04.2002 are adequatein so far as these give full particulars of quantitative detailsand identification of situation of fixed assets is in progress. InMS unit - Delhi, records of fixed assets have been maintained.However, full particulars of assets and location as requiredare not maintained in many cases. Corporate Office hasmaintained fixed assets register showing full particularsincluding quantitative details. The situation / location of fixedassets have, however, not been mentioned in most of the cases.
2. In our opinion, the area of physical verification needs to bestrengthened and discrepancies need to be categoricallyreported. In respect of Corporate office, no physicalverification has been conducted by the Management.
3. In our opinion, the procedure of physical verification of theinventory followed by the management needs to bestrengthened and frequency needs to be increased.
xxii) This is a disclosure on account ofchange in accounting policy
xxiii) This is a disclosure on account ofchange in accounting policy
xxiv) This is a disclosure on account ofchange in accounting policy
xxv) This is a disclosure on account ofchange in accounting policy
The management is in the process ofreviewing the same in the year 2008-09 .
Noted
Noted
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According to the information and explanations given to us,the physical verification of all the items of stores wascarried out during the year by Delhi and Mumbai units.However, at MS unit, Delhi, physical verification wasconducted only for SIM cards. Detailed physical verificationreports for all the above units except Mumbai, were notmade available for the verification of auditors. We, in viewof the same, are unable to offer our comments on the same.
4. However, in case of Delhi unit, Auditors have shown theirinability to comment on the procedures with respect to thepurchases under tenders floated and evaluated bycorporate office. Further, reconciliation & confirmation ofdeposits to various departments, reconciliation betweenthe exchange generated calls & billed calls, reconciliationof the balance in subscriber deposit account with subsidiaryrecords needs to be strengthened. Further, in respect ofMumbai Unit, the overall internal control on revenue billingand records of use and return FWP instruments, ADSLModems and CDMA handsets needs to be strengthened. Incase of MS units, the overall internal control system onrevenue billing needs to be strengthened as the sundrydebtors, deposits and service tax generated by system isnot in agreement with the financial books. Further, in MS unitDelhi, the system of reconciliation of IUC payable needs tobe strengthened, as the amount generated as per thesystem for the payable, in certain cases, has to be reconciledwith certain operators. In addition to above, there iscontinuing failure to correct the above weakness in theInternal Control System. In our opinion, there should be asystem of cross checking of IUC billing to operators.
5. The company has, however, obtained and provided theservices from / to the companies, firms or other partieslisted in the register required to be maintained under section301 of the Companies Act, 1956. The above transactions,though required to be entered in the register required to bemaintained under section 301 of the Companies Act, 1956,have not been entered.
6. However, the extent of coverage of the areas of operations,frequency / quality of reporting / timeliness of the reporting and thefollow up of internal audit observations need to be strengthened.
7. There were no undisputed amounts payable in respect ofStatutory Dues including Contributory Provident Fund,Investor Education and Protection Fund, Income Tax, SalesTax, Wealth Tax, Custom Duty, Excise Duty, Cess and anyOther Statutory Dues outstanding as at 31.03.2008, for a periodof more than six months from the date they become payableexcept service tax payable on amount lying in unlinked creditsaccounts in units (amount not ascertainable)
(R.S.P. Sinha)Chairman & Managing Director
Place : New DelhiDate : 29th August, 2008
The management is reviewing the internalcontrol system.Reconciliation of variousitems is in progress.
Noted
Noted
The reconciliation of Service tax payable onunlinked credit is in progress.
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ANNEXURE TO DIRECTORS' REPORT
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OFFICE OF THEDIRECTOR GENERAL OF AUDIT, POST AND TELECOMMUNICATIONS
Sham Nath Marg (Near Old Secretariat) Delhi-110 402
ConfidentialNo. Report-II/MTNL/A/cs/2006-07/602
Date : 29th August 2008
To,The Chairman and Managing Director,Mahanagar Telephone Nigam Limited,New Delhi.
Subject : Comment of Comptroller and Auditor General of India under Section 619(4) of theCompanies Act, 1956 on the accounts of Mahanagar Telephone Nigam Limited for theyear ended 31 March 2008.
Sir,
I am to forward herewith the comment of the Comptroller and Auditor General of India underSection 619(4) of the Companies Act, 1956 on the annual accounts of Mahanagar Telephone NigamLimited for the year ended 31 March 2008 for information and further necessary action
Kindly acknowledge receipt.
Yours faithfully,
(J.N. GUPTA)Director General of Audit (P&T)
Encl(s) : As above Tel. : 23812666, 23814533
lR;eso t;rs
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Comment of the Comptroller and Auditor General of India under Section 619 (4) ofthe Companies Act, 1956 on the accounts of Mahanagar Telephone Nigam Limitedfor the year ended 31 March 2008.
The preparation of financial statements of Mahanagar Telephone Nigam Limited for the year ended 31March 2008 in accordance with the financial reporting framework prescribed under the CompaniesAct, 1956 is the responsibility of the Management of the Company. The Statutory Auditor appointedby the Comptroller and Auditor General of India under Section 619 (2) of the Companies Act, 1956 isresponsible for expressing opinion on these financial statements under Section 227 of the CompaniesAct, 1956 based on independent audit in accordance with the auditing and assurance standardsprescribed by their professional body the Institute of Chartered Accountants of India. This is statedto have been done by them vide their Audit Report dated 31 July 2008.
I, on the behalf of the Comptroller and Auditor General of India, have conducted a supplementaryaudit under Section 619 (3) (b) of the Companies Act, 1956 of the financial statements of MahanagarTelephone Nigam Limited for the year ended 31 March 2008. The supplementary audit has beencarried out independently without access to the working papers of the Statutory Auditors and islimited primarily to inquiries of the Statutory Auditors and Company personnel and a selectiveexamination of some of the accounting records. Based on my supplementary audit, I would like tohighlight the following significant matter under Section 619 (4) of the Companies Act, 1956 which hascome to my attention and which in my view is necessary for enabling a better understanding of thefinancial statements and the related Audit Report:
(A) Comment on Profitability
1. ExpenditureLicence Fee Rs. 4,215.11 million
As per Department of Telecommunications' (DoT's) instructions of May 2002, while calculating theAdjusted Gross Revenue (AGR) for the purpose of working of the amount of Licence fee payable to DoT@ 10 per cent of AGR, the Public Switching Telecom Network (PSTN) related call charges andRoaming charges, which have actually been paid to Bharat Sanchar Nigam Limited (BSNL) and otherservice providers by MTNL during the year should be deducted from the Gross Revenue. However, inviolation of the above instructions of DoT, MTNL while calculating AGR for the current year 2007-08,deducted Rs. 3.405.26 million from its Gross Revenue towards PSTN related call charges and Roamingcharges, which have actually not been paid by MTNL to BSNL and other service providers during theyear. This resulted in understatement of Licence Fee as well as Current Liabilities and overstatementof Profit for the year by Rs. 340.53 million each.
The impact of the above comment on the Company's accounts is overstatement ofprofit to the extent of Rs. 340.53 million.
For and on the behalf of theComptroller and Auditor General of India
Place : Delhi (J.N. Gupta)Date : 29th August 2008 Director General of Audit (P&T)
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Comments of the Comptroller and Auditor General of India under Section619(4) of the Companies Act, 1956 on the accounts of Mahanagar TelephoneNigam Ltd for the year ended 31st March 2008
Comments of CAG
(A) Comment on Profitability
ExpenditureLicence Fee Rs. 4,215.11 million
As per Department of Telecommunications' (DoT's)
instructions of May 2002, while calculating the Adjusted
Gross Revenue (AGR) for the purpose of working of the
amount of Licence fee payable to DoT @ 10 per cent of
AGR, the Public Switching Telecom Network (PSTN)
related call charges and Roaming charges, which have
actually been paid to Bharat Sanchar Nigam Limited
(BSNL) and other service providers by MTNL during the
year should be deducted from the Gross Revenue.
However, in violation of the above instructions of DoT,
MTNL while calculating AGR for the current year 2007-08,
deducted Rs. 3,405.26 million from its Gross Revenue
towards PSTN related call charges and Roaming charges,
which have actually not been paid by MTNL to BSNL and
other service providers during the year. This resulted in
understatement of Licence Fee as well as Current
Liabilities and overstatement of Profit for the year by
Rs. 340.53 million each.
Replies of the Management
The licence fee is being paid
on the basis of "accrual based
revenue", irrespective of the
realization as well as bad debts
arising out of such revenue.
The revenue share payable is
primarily relating mostly to IUC
charges to BSNL. Accordingly,
the amount payable or adjusted
to netting is taken as paid for
the purpose of arriving at AGR.
The amount payable to BSNL
towards revenue sharing has
been paid in full through
adjustments. This adjustment
of netting of Rs. 6042.33 Million
payable to BSNL has been paid
out of the total recoverable of
Rs.12079.71 Million from BSNL
as on 31.03.08. The payments
to other operators are being
MTNL
109
(J.N. Gupta) (R.S.P SINHA)Director General of Audit (P&T) Chairman & Managing Director
Place : New DelhiDate : 29th August, 2008
settled on monthly basis.
Therefore, the licence fee has
been worked out as per
definition of AGR.
In view of the above reply,
there is no impact on the profit
of the company.
The impact of the above comment on the Company's
accounts is overstatement of profit to the extent of Rs.
340.53 million.
MTNL
110
STATEMENT PURSUANT TO SECTION 212 OF THE COMPANIES ACT,1956RELATING TO SUBSIDIARY COMPANY
1. Name of the Subsidiary Company Millennium Telecom Ltd.(MTL)2. Financial Year of MTL ended on 31st March, 20083. Extent of MTNL's interest in MTL at the
end of financial year 2007-08 100%4. Net aggregate amount of MTL's profit (Loss). So far as it
concern the members of MTNL and is not dealt within theaccounts of MTNLi) For the Financial Year of MTL ended
on 31st March 2008. Rs. 2,805,053ii) For previous Financial Years of MTL
since it became subsidiary Rs. 23,738,6895. Net aggregate amount ot MTL's profit (Loss). So far as
it concern the members of MTNL and is dealt withinthe accounts of MTNLi) For the Financial Year of MTL ended
on 31st March 2008. Nilii) For previous F.Y. of MTL since It became subsidiary Nil
6. Where the Financial Year(s) of MTL does not coincide Not Applicablewith that of MTNL, then :a) Change in MTNL's interest in MTL between
the end of F.Y. of MTNL and that of MTLb) Details of material changes which have
occured between the end of F.Y. of MTNLand that of MTL in respect ofi. MTL's Fixed Assets'ii. Its investments:iii. The moneys lent by itiv. The moneys borrowed by it for any purpose
Other that of meting current liabilities
For and on behalf of Mahanagar Telephone Nigam Limited
(S.R. Sayal) (R. C. Sen) (Anita Soni) (R.S.P. Sinha)Company Secretary Dy. General Manager (Acct.) Director (Fin.) Chairman & Managing Director
Place : New DelhiDate : 25-08-2008
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111
STATEMENT PURSUANT TO SECTION 212 OF THE COMPANIES ACT,1956RELATING TO SUBSIDIARY COMPANY
1. Name of the Subsidiary Company Mahanagar Telephone (Mauritius)Ltd. (MTML)
2. Financial Year of MTML ended on 31st March, 20083. Extent of MTNL's interest in MTML at the
end of financial year 2007-08 100%4. Net aggregate amount of MTML's profit (Loss). So far as it
concern the members of MTNL and is not dealt within theaccounts of MTNLi) For the Financial Year of MTML ended
on 31st March 2008. Rs. 1,454,217ii) For previous Financial Years of MTML
since it became subsidiary Rs. (85,828,921)5. Net aggregate amount ot MTML's profit (Loss). So far as
it concern the members of MTNL and is dealt withinthe accounts of MTNLi) For the Financial Year of MTML ended
on 31st March 2008. Nilii) For previous F.Y. of MTML since it became subsidiary Nil
6. Where the Financial Year(s) of MTML does not coincide Not Applicablewith that of MTNL, then :a) change in MTNL's interest in MTML between
The end of F.Y. of MTNL and that of MTMLb) Details of material changes which have
occured between the end of F.Y. of MTNLand that of MTML in respect ofi. MTML's Fixed Assets'ii. Its investments:iii. The moneys lent by itiv. The moneys borrowed by it for any purpose
Other that of meting current liabilities
For and on behalf of Mahanagar Telephone Nigam Limited
(S.R. Sayal) (R. C. Sen) (Anita Soni) (R.S.P. Sinha)Company Secretary Dy. General Manager (Acct.) Director (Fin.) Chairman & Managing Director
Place : New DelhiDate : 25-08-2008
MTNL
112
BOARD OF DIRECTORS(AS ON 30.08.08)
Shri R.S.P. Sinha Chairman
Shri Kuldip Singh Director (Technical)
Smt. Anita Soni Director (Finance)
Shri J.S. Deepak Director
CHIEF OPERATING OFFICERShri Piyush Aggarwal
COMPANY SECRETARYShri S.R. Sayal
REGISTERED OFFICE15th Floor, Telephone House,
V.S.Marg, Dadar(W),Mumbai-400028
STATUTORY AUDITORSM/s. Kapadia & Birader
8th Lane, Mangaldas Market,390 Shaikh Memon Street,2nd Floor, Mumbai-400 002
Millennium TMillennium TMillennium TMillennium TMillennium Telecom Limitedelecom Limitedelecom Limitedelecom Limitedelecom Limited(A Wholly Owned Subsidiary of MTNL)
MTNL
113
MILLENNIUM TELECOM LIMITED(A wholly owned subsidiary of MTNL)
DIRECTORS REPORT
Dear Shareholders,
The Directors of your company have pleasure in presenting the 8th Annual Report of your Companytogether with Statement of Accounts and Auditors Report for the period ended on 31st March, 2008.
FINANCIAL HIGHLIGHTS
During the year under report, the Company has earned interest on the Fixed Deposit amounting of Rs.43,17,984and made a profit of Rs. 35,84,321 (before taxation) as against a profit of Rs 5,12,212 (beforetaxation) in the last year.
DIVIDEND
Your company made a net profit of Rs. 28,05,053 (after taxation and prior period adjustment ) and it hasbeen decided to plough back the same. Therefore, the Board of Directors has not considered it prudent todeclare any dividend for the year ended on 31.03.2008.
OPERATIONS OF THE COMPANY
SUBMARINE CABLE PROJECT
Your company has felt the need for a new international submarine cable system extending between Indiaand other Asian countries, including UAE, to serve its needs.
Information in respect of MCS (Millennium Cable System) project of MTL
Millennium Telecom Limited (MTL), a joint venture of two Government of India Enterprises, MahanagarTelephone Nigam Limited (MTNL) and Bharat Sanchar Nigam Limited (BSNL), has noted the need for anew international submarine cable system extending between India and other Asian countries, includingUAE, to serve its needs.
The cable will be laid from Indian East Coast to South East Asia and from Indian West coast to MiddleEast with an aim for onward connectivity to the Europe and North America through existing and newlyplanned Submarine cables.
M/s AXIOM, France has been appointed as the consultant for Procurement & Implementation of theSubmarine Cable Project.
The Eastern segment of the cable will run from Digha (near Kolkata) to Malaysia and Singapore withpossible branches to Bangladesh, Myanmar, the Andaman Islands, Thailand and Indonesia while theWestern segment will run from Ratiya in India to UAE and Djibouti with possible branches to Pakistan,Oman, Yemen. The existing traffic of MTNL will be carried on these cables and the extra capacity shall beleased out.
The bids for the MCS project were called in Oct 2007 and it was planned that the contract will be awardedby June 2008. However because of some procedural issues, it was decided in June 2008 to refloat thetender and call for fresh bids. Accordingly, the tender for the MCS project was cancelled and fresh bidshave been invited .The bids shall be opened in Oct 2008.
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114
Dialogue with various trunk parties:
Eastern segment: Landing party Agreement for the landing of MCS cable at the Tuas landing station inSingapore has already been signed with M/s SingTel .Further MTL is in dialogue with TM (Telecom Malaysia)for MCS landing in Malaysia. An MOU in this regard has been signed with TM and discussions are inadvance stage for finalizing the LPA for landing of MCS cable at Melaka in Malaysia.
Western segment: MTL is in dialogue with Etisalat for MCS landing in UAE. An MOU in this regard hasalready been signed .Moreover MTL is also going to sign the LPA with Etisalat soon. For landing inDjibouti, discussions are in advance stage for signing the LPA.
MTL is in discussions / negotiations with telecom operators in Middle East and South East countries forlanding facilities to MCS cable in their countries. MTL is also in talks with other / upcoming cable systemslike UNITY North project of Google (Japan to US), SJC( Singapore to Japan) of Singtel, MEF(Middle Eastfiber) from Jeddah to Catania of ASCC, Eassy for capacities swapping/ sharing basis to realize its ultimateaim to reach US form both sides of India.
MTL has applied for the ILD license. The LOI in this regard has been issued by DOT.
SHARE CAPITAL
The paid up Share Capital of the Company is Rs. 2,87,58,800 (28,75,880 equity shares of Rs 10/- each).All the shares are being held by MTNL (Holding Company) and its nominees. The Joint Venture PartnerBharat Sanchar Nigam Limited (BSNL ) and MTNL would subscribe for more capital in the company asand when need for enhancement of the same arises.
DIRECTORS
Sh. R.S.P. Sinha continued to be Chairman of the Company. Smt Anita Soni and Sh. Kuldip Singh continueto be the Directors of your Company.
During the year under report, Sh. Kuldeep Goyal, Sh. S.D. Saxena, Sh. J.R. Gupta and Sh. RajenderaSingh have resigned from the Board of Directors of your company. The Board places on record its deepappreciation for the valuable services rendered by Shri Kuldeep Goyal, Sh. S.D. Saxena, Sh. J.R. Guptaand Sh. Rajendera Singh during their tenure as Directors of your company.
The Department of Telecom has appointed Sh. J.S. Deepak as the Govt. nominee on the Board of yourcompany in place of Sh. M. Sahu who has ceased to be director on 29th April 2008 upon his transfer.
AUDITORS
M/s Kapadia & Biradar, Chartered Accountants continued to be the statutory auditors of your companyas appointed by C &AG of India for the year 2008-09
DIRECTORS' RESPONSIBILITY STATEMENT
Pursuant to the provisions of Sec 217(2AA) of the Companies Act, 1956, the Directors of the Companyhereby confirm that:
(i) in the preparation of the annual accounts, the applicable accounting standards have been followedalong with proper explanation relating to material departures;
(ii) they selected such accounting policies and applied them consistently and made judgments andestimates that are reasonable and prudent so as to give a true and fair view of the state of affairs ofthe company at the end of the financial year and of the profit or loss of the company for that period;
MTNL
115
(iii) they have taken proper and sufficient care for the maintenance of adequate accounting records inaccordance with the provisions of the Companies Act for safeguarding the assets of the companyand for preventing and detecting fraud and other irregularities;
(iv) they have prepared the annual accounts on a going concern basis.
CONSERVATION OF ENERGY AND TECHNOLOGY ABSORPTION
Being a service providing organization, the relevant rules in this regard are not applicable to your Company.
FOREIGN EXCHANGE EARNINGS AND OUTGO
The company has made a payment of Rs.81,00,000/- towards foreign Currency for DTS Contract withEGS to a French consulting firm for Comprehensive Technical and Business consultancy services ofMTL's International Submarine Cable Project.
PARTICULARS OF EMPLOYEES
During the year under report, there was no employee who was in receipt of remuneration in excess oflimits prescribed under the provisions of Section 217(2A) of the Companies Act, 1956 read with theCompanies (Particulars of Employees), Rules, 1975.
ACKNOWLEDGEMENT
The Board of Directors expresses its gratitude to the holding company i.e. MTNL, the Joint Venture partnerBSNL, Department of Telecom(DOT) and other Govt. Ministries/Departments for their help, guidance andsupport extended to your company from time to time.
The Board feels pleasure in placing on record its sincere appreciation for the valuable services renderedby the management of MTNL and BSNL at all levels and employees at all levels.
For and on behalf of Board of Directors
(R.S.P. SINHA) CHAIRMAN
MTNL
116
M/s. Kapadia & Birader8th Lane, Mangaldas Market,
390, Saikh Memon Street,2nd Floor, Mumbai-400 002
AUDITORS REPORTTo
The Members of Millennium Telecom Limited
Report on the Accounts for the period ended 31st March 2008 in compliance with section 227(2) of theCompanies Act 1956.
1. We have examined the Balance Sheet of MILLENIUM TELECOM LIMITED as at 31st March 2008and the related statements of Profit and Loss Account for the year then ended, prepared in conformitywith the accounting principles generally accepted in India. These financial statements are theresponsibility of the Company's management. Our responsibility is to express an opinion on thesefinancial statements based on our audit.
2. We conducted our audit in accordance with auditing standards generally accepted in India. Thosestandards require that we plan and perform the audit to obtain reasonable assurance about whetherthe financial statements are free of material misstatement. An audit includes examining, on a testbasis, evidence supporting the amounts and disclosures in the financial statements. An audit alsoincludes 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 providesa reasonable basis for our opinion
3. In our opinion, and to the best of our information and according to the explanations given to us, theaccompanying financial statements
a. give the information required by the Indian Companies Act, 1956 ('the Act'), in the manner sorequired; and
b. give a true and fair view of the state of affairs of MILLENIUM TELECOM LTD at 31st March 2008and of its profit for the year then ended and have been prepared in accordance with the accountingstandards referred to in Section 211(3C) of the Act.
Further, the balance sheet and the related statement of profit and loss are in agreement with thebooks of account and, in our opinion, the Company has maintained proper books of account asrequired by law in so far as it appears from our examination of those books.
4, On the basis of the information and explanations given to us, and the representations obtained by theCompany, as on 31st March 2008 none of the directors are disqualified from being appointed asdirectors in terms of section 274(1)(g) of the Act.
a. We have also examined the matters specified in paragraphs 4 and 5 of the Companies (Auditor'sReport) Order, 2003 for the year ended 31ST March 2008 as they relate to the Company. Ourreport thereon is annexed.
FOR KAPADIA & BIRADERCHARTERED ACCOUNTANTS
Sd/-Place : Mumbai (Mr. Birader) (M No 010024)
Date : 23-8-2008 PARTNER
MTNL
117
ANNEXURE TO THE AUDITORS REPORT
(i) a) The company is maintaining proper records showing full particulars, including quantitative detailsand situation of fixed assets.
b) The fixed assets have been physically verified by the management during the year in accordancewith a phased programme of verification which, in our opinion, is reasonable having regard to thesize of the company and the nature of its assets. No material discrepancies were noticed on suchverification.
c) As per the information and explanation given to us on our enquiries the disposal of assets duringthe year was not substantial so as to have an impact on the operations of the company, or affectits going concern.
(ii) As the company is not dealing in any goods. Accordingly clause 4 (ii)(a) to (c) does not apply to thecompany.
(iii) As per the information given to us, the company has neither granted any loans, secured or unsecuredto companies, firms or other parties covered in the register maintained under section 301 of theCompanies Act, 1956 ('the Act').Accordingly, clauses (iii)(a)(b)(c) and (d) of paragraph 4 of the Orderare not applicable to the Company.
e) The company has received unsecured interest free loan from its holding company MTNL, theoutstanding balance as on 31st March, 2008 is Rs 230,816/-. As per the explanations given to usby management, the company has maintained register under section 301 of the Companies Act,1956 which is kept at Delhi office and not produced before us.
f) The company has received unsecured interest free loan from its holding company MTNL, thereforerate of interest & other terms & conditions does not apply
g) As the company has received unsecured interest free loan from its holding company MTNL,therefore there is no repayment schedule, no interest payable. These loans are payable on demandso there is no overdue amount.
iv In our opinion and according to the information and explanations given to us, there are adequateinternal control procedures commensurate with the size of the Company and the nature of its business,for the purchase of fixed assets and for the sale of goods. During the course of our audit, no majorweakness has been noticed in the internal controls in these areas
v a. In our opinion and according to the information and explanations given to us, the contracts orarrangements, that needed to be entered into the register maintained under section 301 of thecompanies act, 1956. Have been entered in the register and the register is maintained by thecompany at his Delhi office and the register is not produced before us. In reply to the query ofGovernment Auditors for 2006-2007 the company has promised to produce the register at Bombayoffice for verification of the auditor, but the company has not produced the same before us.
b. In our opinion and according to the information and explanations given to us, the contracts orarrangements referred to in Section 301 of the Act and exceeding the value of five lakh rupees inrespect of any party during the year have been made at prices which are reasonable having regardto prevailing market prices at the relevant time and other relevant circumstances.
vi As per the explanations given to us, the Company has not accepted any deposits from public.
vii The Company has no formal internal audit system. However, its control procedures ensure reasonableinternal checking of its financial & other records.
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118
viii To the best of our knowledge and as explained, the Central Government has not prescribed themaintenance of cost records under clause (d) of sub-section (1) of section 209 of the Companies Act,1956 for the products of the Company.
ix According to the information and explanations given to us by the management Provident fund, InvestorEducation and Protection Fund, Employee's State Insurance, Sales tax, Wealth Tax, Customs Duty,Excise Duty, Cess is not applicable.
x According to the records of the Company examined by us and the information and explanation givento us by the management, the company has no accumulated losses and has not incurred any cashloss during the financial year covered by our audit or in the immediately preceding financial year.
xi According to the records of the Company examined by us and the information and explanation givento us by the management, the Company has not defaulted in repayment of dues to any financialinstitution or bank or debenture holders as at the balance sheet date
xii As per the explanations given to us by management, the company has not granted any loans andadvances on the basis of security by way of pledge of shares, debentures and other securities.Therefore maintaining of adequate documents and records is not applicable.
xiii The Company is not a chit fund company so the clause (xiii) of paragraph 4 & sub-clauses (a) to (d)of clause xiii of second part of paragraph 4 of the Order does not apply.
xiv As per information and explained to us, the Company has not dealt /trade in securities or debenturesduring the year. The Company's surplus funds are invested in Bank Fixed deposit of which properrecords have been maintained and timely entries have been made therein. This Fixed deposit washeld by the Company in its own name.
xv As per the information and explanation given to us, the company has not given any guarantee forloans taken by others.
xvi As per the information given to us and from verification of records, the Company has not obtained anyterm loans.
xvii As per the information given to us, the company has not taken any term loans. Accordingly thisclause (xvii) of paragraph 4 of this Order does not apply.
xviii As per the information and explanation given to us, the Company has not made any preferentialallotment of shares, during the year, to parties and Companies covered in the register maintainedunder Section 301 of the Companies Act, 1956.
xix As per the information and explanation given to us and the records verified by us for the period underconcerned the Company has not issued any debentures.
xx The company in the recent past has not raised any money by public issue.
xxi As per the information and explanation given to us and in our opinion, considering the size and natureof the company's operations, no fraud of material significance has been noticed or reported on or bythe company during the year to which our Audit report is related.
FOR KAPADIA & BIRADERCHARTERED ACCOUNTANTS
Sd/-Place: Mumbai (Mr. Birader) (M No 010024)
Date : 23-8-2008 PARTNER
MTNL
119
MILLENNIUM TELECOM LIMITEDBALANCE SHEET AS AT 31st MARCH 2008
SCHEDULE AS AT 31.3.2008 AS AT 31.3.2007NO. AMOUNT IN RS. AMOUNT IN RS.
I. SOURCES OF FUNDS :1. SHAREHOLDERS' FUNDS
(a) Share Capital A 28,758,800 28,758,800(b) Reserves & Surplus B 27,538,923 24,733,870
56,297,723 53,492,6702. LOAN FUNDS :
(a) Unsecured Loan C 230,816 230,816230,816 230,816
TOTAL 56,528,539 53,723,486II. APPLICATION OF FUNDS :1. FIXED ASSETS D
(a) Gross Block 3,754,782 3,283,721(b) Less : Depreciation 2,124,015 1,710,200(c) Net Block 1,630,767 1,573,521
2. CURRENT ASSETS, LOANS AND ADVANCES :(a) Sundry Debtors E 13,794,405 13,794,405(b) Cash and Bank Balances F 32,389,625 37,593,796(c) Other Current Assets G 4,975,146 3,093,667(c) Deferred Tax Asset G(1) 1,123,233 1,123,233(d) Loans & Advances H 1,982,243 1,572,200
54,264,652 57,177,301Less: Current Liabilities & Provisions
(a) Liabilities I 8,424,641 6,771,097(b) Provisions J 2,263,239 1,477,239
10,687,880 8,248,336NET CURRENT ASSETS 43,576,772 48,928,9653. Miscellaneous Expenditure K 11,321,000 3,221,000
(to the extent not written off or adjusted) 11,321,000 3,221,000TOTAL 56,528,539 53,723,486
Accounting Policies & Notes forming part of Accounts R
Sd/- Sd/- Sd/- Sd/-S.R.Sayal Peeyush Agrawal Anita Soni R.S.P Sinha
Company Secretary Chief Operating Officer Director Chairman
AS PER OUR ATTACHED REPORT OF EVEN DATE
For M/s Kapadia & BiradarChartered Accountants
Sd/-Mr. BiradarPartnerPLACE : MUMBAIDATED : 23-08-2008
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120
MILLENNIUM TELECOM LIMITED
PROFIT & LOSS ACCOUNT FOR THE YEAR ENDED 31st MARCH 2008
SCHEDULE FOR THE YEAR FOR THE YEARNO. ENDED 31.3.2008 ENDED 31.3.2007
(RUPEES) (RUPEES)
INCOMEIncome from Operation L - -Other Income M 4,317,984 2,169,051
TOTAL 4,317,984 2,169,051EXPENDITUREDirect Expenses N - -Employees Remuneration & Benefits O - -Administrative, Operating & Other Expenses P 319,848 1,263,324Depreciation D 413,815 393,515
TOTAL 733,663 1,656,839NET PROFIT/(LOSS) BEFORE TAXATION 3584321 512,212Provision for Bad & Doubtful Debts - 116,961Provision for Taxation- Deferred Tax Asset
On Depreciation - (85377)- Current tax 786000 24,300
2,798,321 285,574Prior Period Adjustments 6732 -Balance carried to Balance Sheet 2805053 285,574Accounting Policies & Notes forming part of Accounts QAverage number of equity shares 2,875,880 2,875,880Basic & Diluted EPS 0.98 0.10
Sd/- Sd/- Sd/- Sd/-S.R.Sayal Peeyush Agrawal Anita Soni R.S.P Sinha
Company Secretary Chief Operating Officer Director Chairman
AS PER OUR ATTACHED REPORT OF EVEN DATE
For M/s Kapadia & BiradarChartered Accountants
Sd/-Mr. BiradarPartner
PLACE : MUMBAIDATED : 23-08-2008
MTNL
121
SCHEDULES ANNEXED TO AND FORMING PART OF THE ACCOUNTS
SCHEDULE-A
SHARE CAPITAL
AS AT 31.03.2008 AS AT 31.03.2007 (RUPEES) (RUPEES)
AUTHORISED100000000 Equity Shares of Rs. 10/- each 1,000,000,000 1,000,000,000
ISSUED,SUBSCRIBED & PAIDUP CAPITAL28,75,880 Equity Shares (P.Y. 28,75,880) of Rs. 10/- each 28,758,800 28,758,800(All shares held by Mahanagar Telephone Nigam Ltdthe holding company and its nominees)
TOTAL 28,758,800 28,758,800
SCHEDULE-B
RESERVES & SURPLUS
AS AT AS AT 31.3.2008 31. 3.2007
(Rs.) (Rs.)
Revenue Reserve 995,181 995,181Profit and Loss Appropriation AccountOpening Balance 23,738,689Add: Current year's profit 2,805,053 26,543,742 23,738,689
TOTAL 27,538,923 24,733,870
SCHEDULE-C
UNSECURED LOAN
AS AT AS AT 31.3.2008 31. 3.2007 (Rupees) (Rupees)
Loan from Holding CompanyMTNL,Corporate Office 230,816 230,816
TOTAL 230,816 230,816
MTNL
122
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MTNL
123
SCHEDULE -E
SUNDRY DEBTORS
AS AT AS AT 31.3.2008 31. 3 2007(RUPEES) (RUPEES)
Outstanding for a period exceeding six months- Unsecured Considered Good 13,695,595 13,695,595Other DebtsOutstanding for a period exceeding six months- Unsecured Considered Bad & not other debts 215,771 215,771Less: Provision for Bad & Doubtful debts 116,961 116,961TOTAL 13,794,405 13,794,405
SCHEDULE-F
CASH & BANK BALANCES
AS AT AS AT 31.3.2008 31. 3 2007(RUPEES) (RUPEES)
Cash in Hand - -Balance with Scheduled Banks-In Current Account with Indian Overseas Bank 1,788,772 492,943-In Current Account with ICICI Bank 100,853 100,853-In Deposit Account 30,500,00 37,000,000Balance with Non-Scheduled BanksTOTAL 32,389,625 37,593,796
SCHEDULE-G
OTHER CURRENT ASSETS
AS AT AS AT 31.3.2008 31. 3 2007(RUPEES) (RUPEES)
Telephone Deposit - -
Prepaid Expenses 4,856 4,856
Receivable from MTNL, Delhi 56,047 56,047
Receivable from MTNL, Mumbai 118,166 118,166
Interest Accrued on FD with Bank (TDS - Rs.773,203) 4,796,077 2,914,598
TOTAL 4,975,146 3,093,667
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124
SCHEDULE-G (1)DEFERRED TAX ASSET
AS AT AS AT 31.3.2008 31. 3 2007(RUPEES) (RUPEES)
Deferred Tax Asset 1,123,233 1,123,233TOTAL 1,123,233 1,123,233
SCHEDULE-HLOANS & ADVANCES (Unsecured)
AS AT AS AT 31.3.2008 31. 3 2007(RUPEES) (RUPEES)
Income Tax Paid (A.Y. 2005-06) 857,155 857,155Income Tax Paid (A.Y. 2006-07) 351,885 351,885Income Tax Paid (A.Y. 2007-08) - -TDS RECOVERED BY BANK - 090402 773,203 363,160TOTAL 1,982,243 1,572,200
SCHEDULE-ICURRENT LIABILITIES
AS AT AS AT 31.3.2008 31. 3 2007
(Rs.) (Rs.)
Outstanding Expenses 71,750 70,232Outstanding Salary - -Earnest Money Deposit - 131600 4,131,283 4,131,283MTNL 1,663,945 1,663,945Profession Tax Payable - -TDS Payable 761,087 -Service Tax Payable 1,670,148 779,119Sundry Creditors 126,428 126,518TOTAL 8,424,641 6,771,097
SCHEDULE-JPROVISIONS
AS AT AS AT 31.3.2008 31. 3 2007
(Rs.) (Rs.)
Provision for Taxation 1435300 649300Provision for Direct Expenses 827939 827,939Provision for Bad & Doubtful debts -
TOTAL 2,263,239 1,477,239
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125
SCHEDULE-K
MISCELLANEOUS EXPENDITURE
AS AT AS AT 31.3.2008 31. 3 2007
(Rs.) (Rs.)
Preliminary Expenses to the extent not w/offRegistration Fees - -Stamp duty - -
Proffessional & Consultancy Charges to the extent not w/off 11,321,000 3,221,000
TOTAL 11,321,000 3,221,000
SCHEDULE-L
INCOME FROM OPERATIONS
FOR THE YEAR FOR THE YEARENDED 31.3.2008 ENDED 31.3.2007
(Rs.) (Rs.)
Income from e-Tendering Services - -
TOTAL - -
SCHEDULE-M
OTHER INCOME
FOR THE YEAR FOR THE YEARENDED 31.3.2008 ENDED 31.3.2007
(Rs.) (Rs.)
Interest on FD with Bank 3,139,775 2,169,051
Miscellaneous Income 1,178,209 -
TOTAL 4,317,984 2,169,051
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126
SCHEDULE-N
DIRECT EXPENSES
FOR THE YEAR FOR THE YEARENDED 31.3.2008 ENDED 31.3.2007
(Rs.) (Rs.)
Website Hosting Charges - -Website Maintenance Charges - -Domain Expenses - -Internet Bandwidth Charges - -
TOTAL - -
SCHEDULE-OEMPLOYEES REMUNERATION & BENEFITS
FOR THE YEAR FOR THE YEARENDED 31.3.2008 ENDED 31.3.2007
(Rs.) (Rs.)
Salary to Staff - -Dearness Allowance - -City Compensatory Allowance - -House Rent Allowance - -Travelling Allowance - -Medical Expenses - -Ohters - -Leave Salary - -TOTAL 0 0
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127
SCHEDULE-P
ADMINISTRATIVE, OPERATING & OTHER EXPENSES
FOR THE YEAR FOR THE YEARENDED 31.3.2008 ENDED 31.3.2007
(Rs.) (Rs.)
Advertisement/Business Promotion Expenses - -
Auditors remuneration 63,250 61,732
Bank Charges & Commission 9,088 2,727
Newspaper, Books & Periodicals - -
Computer Expenses - -
Conveyance 4,603 665
Consultancy Fees 102,000 93,226
House Keeping Expenses - -
Internet Expenses - -
Insurance charges 5,028 7,791
Postage & Courier 275 596
Professional & Legal Charges - -
Membership Fees - -
Miscellaneous Expenses 1,078 2,372
Printing & Stationery 11,824 3,595
Preliminary Expenses W/off - 1,001,612
Rent - -
Repairs & Maintainance - 14,337
Refreshment Expenses 24,012 28,181
Seminar & Training Expenses - -
Travelling Expenses 98,690 46,490
Telephone Expenses - -
Vehicle Hire Expenses - -
Vehicle Running & Maintenance Expenses - -
Wages to Temporary Staff - -
TOTAL 319,848 1,263,324
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128
MILLENNIUM TELECOM LIMITEDCASH FLOW STATEMENT
AS AT AS AT 31.3.2008 31.3.2007
(RUPEES) (RUPEES)
CASH FLOW FROM OPERATING ACTIVITIESNet Profit before tax and extraordinary items 3,584,321 512,212Adjustment for non cash items/items to be disclosed seperately:Interest Income (4,317,984) (2,169,051)Prior Period Items 6,732 -Amortisation - 1,001,612Depreciation 413,815 393,515OPERATING PROFIT BEFORE WORKING CAPITAL CHANGES (313,116) (261,712)INCREASE IN WORKING CAPITAL 3,680,006 (127,058)CASH GENERATED FROM OPERATIONS 3,366,890 (388,770)Extra Ordinary Items 8,100,000 -Income Tax refund received - -Income Tax paid - -NET CASH FLOW FROM OPERRATING ACTIVITIES (A) (4,733,110) (388,770)CASH FLOW FROM INVESTING ACTIVITIES:Purchase of Fixed Assets 471,061 -Sale of Fixed Assets - -Interest received - -NET CASH FLOW FROM INVESTING ACTIVITIES (B) 471,061 -CASH FLOW FROM FINANCE ACTIVITIES: -Proceeds from Issue of Share Capital - -Unsecured Loan taken - -Repayment of Unsecred Loan - -NET CASH FROM FINANCING ACTIVITIES (C) - -NET INCREASEASE IN CASH AND CASH EQUIVALENT (A+B+C) (5,204,171) (388,770)CASH AND CASH EQUIVALENTS AS AT 1st April, 2007 37,593,796 37,982,566(OPENING BALANCE)CASH AND CASH EQUIVALENTS AS AT 31st March, 2008 32,389,625 37,593,796(CLOSING BALANCE)
Sd/- Sd/- Sd/- Sd/-S.R.Sayal Peeyush Agrawal Anita Soni R.S.P Sinha
Company Secretary Chief Operating Officer Director Chairman
AS PER OUR ATTACHED REPORT OF EVEN DATE
For M/s Kapadia & BiradarChartered Accountants
Sd/-Mr. BiradarPartnerPLACE : MUMBAIDATED : 23-08-2008
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129
SCHEDULE-R - PART - A
SIGNIFICANT ACCOUNTING POLICIES
1. Basis of presentation of financial statements :The financial statements are prepared under the historical cost convention, on the basis of goingconcern and in accordance with generally accepted accounting principles in India and as per theprovisions of the Companies Act, 1956.
2. Fixed assets:Fixed assets are stated at cost (Gross block) less accumulated depreciation.
3. Depreciation:Depreciation on fixed assets has been provided on straight-line method at the rates and in the mannerprescribed in schedule XIV to the Companies Act, 1956.
4. AmortizationPreliminary Expenses has been fully written off.
5. Income recognition:All incomes have been recognized on accrual basis. Interest on deposit with banks is recognized onday-to-day basis.
6. Foreign Currency Transactions:The company has made a Payment of Rs.81,00,000/- towards in foreign Currency for DTS Contractwith EGS to a French consulting firm for Comprehensive Technical and Business consultancy servicesOf MTL's International Submarine Cable Project.
7. Provision for Current & Deferred Tax:Provision for current tax has been made on the basis of estimated taxable income for the currentaccounting year in accordance with the Income Tax Act, 1961. Deferred tax resulting from timingdifferences between the book and the taxable profits for the year is accounted for, using the tax rates& the laws that have been substantively enacted as of the balance sheet date. Deferred tax assets isrecognized and carried forward only to the extent there is reasonable certainty that this would berealized in future.
8. Retirement benefits:
No provision for retirement benefits has been made since there are no employees.
sd/- sd/- sd/- sd/-S.R.Sayal Peeyush Agrawal Anita Soni R.S.P Sinha
Company Secretary Chief Operating Officer Director Chairman
for M/s Kapadia & BiradarChartered Accountants
Sd/-Mr. BiradarPartner
PLACE: MUMBAIDATED : 23-08-2008
MTNL
130
SCHEDULE-R - PART - B
NOTES TO ACCOUNTS
1. In the opinion of Board of Directors, current assets, loans & advances, have value on realization inthe ordinary course of the business at least equal to the amounts at which they are stated andprovision for all known liabilities has been made in the accounts.
2. The entire equity share of the Company is held by Mahanagar Telephone Nigam Ltd, the holdingcompany & its nominees.
3. Contingent liabilities include I) Guarantee given by Banks of Rs. 2.00 crores &
II) As Regards Income Tax of Rs.29,82,670/- pertaining to Assessment Year 2005-2006 as per theDemand notice received from Income Tax Department. The company has filed an appeal againstthe Assessment Order and the appeal is pending against Commissioner of Income Tax
III) As Regards of Sub Marine Cable Project, Payment to Consulting Firm M/s Axiom is pending uptoRs.4,39,00,000/-
4. Payment to Auditors includeCurrent year Previous Year
a) Audit Fees Rs. 34,500/- Rs. 30,000/-
b) Certification Fees Rs. 28,750/- Rs. 25,000/-
c) Service Tax Rs. 6,732/-
5. No payments to Creditors include payment to Small Scale Industries.
6. Unsecured Loans include amount due to holding company.
7. Related Party Disclosures as per AS 18:
a) Name of the related party : MTNL
b) Description of the relationship : Holding Company
c) Description of the transaction : NIL
d) Volume of the transactions in monetary terms : NIL
e) Outstanding item pertaining to related parties as atthe balance sheet date.
i) Due from MTNL
a) Sundry Debtors : Rs.1,36,37,395
b) Other Current Assets : Rs.1,74,213
ii) Due to MTNL : Rs. 16,63,945
iii) Unsecured Loan from MTNL : Rs.2,30,816
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131
8. The Computation of Earnings per share Net Profit/(Loss) for the year including provision for taxation in Rs. : Rs.16,26,844
Average number of equity shares : 28,75,880
Basic & Diluted EPS in Rs. : Re.0.57/-
9. Previous years figures have been recast & regrouped wherever necessary.
10. The payments of Rs.1,13,21,000/- made for the purpose of submarine cable project is shown asdeferred revenue expenses since the project is in progress and it has not been written off because theproject has not started to earn any revenue.
11. The liaison officer appointed by MTL has an additional income of pension of Rs.5870 from IIT PostOffice, the total income of the officer is coming as Rs.1,72,440/- which is not exceeding the taxablelimit when he saves up to Rs.1,00,000/-. So the TDS has not been deducted from his consultancyfees.
sd/- sd/- sd/- sd/-S.R.Sayal Peeyush Agrawal Anita Soni R.S.P Sinha
Company Secretary Chief Operating Officer Director Chairman
for M/s Kapadia & BiradarChartered Accountants
Sd/-Mr. BiradarPartner
PLACE : MUMBAIDATED : 23-08-2008
MTNL
132
ANNEXURE TO DIRECTORS' REPORT
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OFFICE OF THEDIRECTOR GENERAL OF AUDIT, POST AND TELECOMMUNICATIONS
Sham Nath Marg (Near Old Secretariat) Delhi-110 402
ConfidentialNo. Report-II/F-112/MTL/A/cs/2007-08/343
To,The Chairman,Millennium Telecom Limited,Mumbai.
Subject : “Non-Review” Certificate on the accounts of Millennium Telecom Limited for the yearended on 31 March 2008.
Sir,
I am enclosing a “Non-Review” Certificate on the accounts of Millennium Telecom Limited for theyear ended on 31st March, 2008 for information and necessary action.
Yours faithfully,
(J.N. GUPTA)Director General of Audit (P&T)
Telephone : 23812666, 23814533Telegram : CENOFF.DELHI
Fax : 91-11-23813822
lR;eso t;rs
MTNL
133
COMMENTS OF THE COMPTROLLER AND AUDITOR GENERAL OF INDIA UNDER
SECTION 619 (4) OF THE COMPANIES ACT, 1956 ON THE ACCOUNTS OF MILLENNIUM
TELECOM LIMITED, MUMBAI FOR THE YEAR ENDED 31 MARCH 2008
The preparation of financial statements of Millennium Telecom Limited for the year ended 31 March
2008 in accordance with the financial reporting framework prescribed under the Companies Act, 1956 is
the responsibility of the Management of the Company. The Statutory Auditor appointed by the Comptroller
and Auditor General of India under Section 619 (2) of the Companies Act, 1956 is responsible for expressing
opinion on these financial statements under Section 227 of the Companies Act, 1956 based on independent
audit in accordance with the auditing and assurance standards prescribed by their professional body the
Institute of Chartered Accountants of India. This is stated to have been done by them vide their Audit
Report dated 23 August 2008.
I, on the behalf of the Comptroller and Auditor General of India, have decided not to r.;view the
report of the Statutory Auditor on the accounts of Millennium Telecom Limited for the year ended 31 March
2008 and as such have no comments to make under Section 619 (4) of the Companies Act, 1956.
For and on the behalf of the
Comptroller and Auditor General of India
(J.N. Gupta)
Director General of Audit (P&T)
MTNL
134
MAHANAGAR TELEPHONE (MAURITIUS) LTD.
INDEPENDENT AUDITORS’ REPORT TO THE MEMBER OF MAHANAGARTELEPHONE (MAURITIUS) LTD.
REPORT ON THE FINANCIAL STATEMENTSWe have audited the financial statements of MAHANAGAR TELEPHONE (MAURITIUS) LTD, set out onpages 5 to 18, which comprise the balance sheet at 31 March 2008 and the income statement, statementof changes in equity and cash flow statement for the year then ended and a summary of significantaccounting policies and other explanatory notes.
Directors’ Responsibility for the Financial Statements
The Directors are responsible for the preparation and fair presentation of these financial statements inaccordance with International Financial Reporting Standards and in compliance with the requirements ofthe Mauritian Companies Act 2001. This responsibility includes: designing, implementing and maintaininginternal control relevant to the preparation and fair representation of financial statements that are free frommaterial misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies;and making accounting estimates that are reasonable in the circumstances.
Auditors’ Responsibilites
Our responsibility is to express an opinion on these financial statements based on our audit. We conductedour audit in accordance with International Standards on Auditing. Those standards require that we complywith ethical requirements and plan and perform the audit to obtain reasonable assurance whether thefinancial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures inthe financial statements. The procedures selected depend on the auditors' judgement, including theassessment of the risks of material misstatement of the financial statements, whether due to fraud orerror. In making those risk assessments, the auditors consider internal control relevant to the company’spreparation and fair presentation of the financial statements in order to design audit procedures that areappropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness ofthe company's internal control. An audit also includes evaluating the appropriateness of accounting policiesused and the reasonableness of accounting estimates made by the directors, as well as evaluating theoverall presentation of the financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for ouraudit opinion.
Opinion
In our opinion, the financial statements on pages 5 to 18 give a true and fair view of the financial positionof the company at 31 March 2008 and of its financial performance and its cash flows for the year thenended in accordance with International Financial Reporting Standards and comply with the MauritianCompanies Act 2001.
Other matter
This report, including the opinion, has been prepared for and only for the company's members, as a body,in accordance with Section 205 of the Mauritian Companies Act 2001 and for no other purpose. We do notin, giving this opinion, accept or assume responsibility for any other purpose or to any other person towhom this report is shown or into whose hands it may come save where expressly agreed by our priorconsent in writing.
MTNL
135
Report on Other Legal and Regulatory Requirements
We have no relationship with or interests in the company other than in our capacity as auditors.
We have obtained all the information and explanations we have required.
In our opinion, proper accounting records have been kept by the company as far as it appears from ourexamination of those records.
MOORE STEPHENS
Chartered Certified Accountants
PORT LOUISMAURITIUS
A. ROGBFER FCCA
Chartered Certified Accountants
MTNL
136
MAHANAGAR TELEPHONE (MAURITIUS) LTD.Income statement
for the year ended 31st March 2008
Note 2008 2007Rs Rs
Turnover 2 188,823,889 168,992,043
Cost of sales (Appendix I) (78,906,653) (87,884,385)
Gross profit 109,917,236 81,107,658
Personnel expenses (8,667,169) (5,900,092)
Licence fee (20,743,188) (22,083,008)
Reversal of ICTA Special account fee 20,131,657 -
Administrative expenses (Appendix II) (42,281,020) (33,033,641)
Marketing expenses (7,774,354) (6,289,774)
Depreciation (41,574,236) (23,931,674)
Profit / (Loss) from operations 10 9,008,926 (10,130,531)
Other income 11 10,314 87,941
Net finance income / (expense) 12 (561,637) 497,905
Profit / (Loss) before taxation 8,457,603 (9,544,685)
Taxation 4 (7,480,365) 450,455
Profit / (Loss) after taxation 977,238 (9,094,230)
Earnings/(Loss) per share 13 0.00 (0.02)
MTNL
137
MAHANAGAR TELEPHONE (MAURITIUS) LTD.Balance sheet
as at 31st March 2008
Note 2008 2007Rs Rs
ASSETS
Non-Current Assets Rs Rs
Property , plant and equipment 3 3 379,546,791 408,443,237
Deferred taxation 4 9,464,576 16,944,941
389,011,367 425,388,178
Current Assets
Trade and other receivables 5 120,491,229 106,885,927
Cash and bank balances 6 42,904,073 28,263,296
163,395,302 135,149,223
TOTAL ASSETS 552,406,669 560,537,401
EQUITY & LIABILITIES
Capital & Reserves
Share capital 7 494,187,544 391,821,713
Accumulated losses 8 (57,677,029) (58,654,267)
Shareholders' interests 436,510,515 333,167,446
Current Liabilities
Trade and other payables 9 115,896,154 226,649,284
Bank overdraft 6 - 720,671
115,896,154 227,369,955
TOTAL EQUITY & LIABILITIES 552,406,669 560,537,401
Sd/- Sd/-
Director Diector
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138
MAHANAGAR TELEPHONE (MAURITIUS) LTD.Cash flow statment
for the year ended 31st March 2008
Note 2008 2007Rs Rs
Profit before taxation 8,457,603 (9,544,685)
Adjustments for:-
Depreciation 41,574,236 23,931,674
Interest payable - 54,381
Interest received (1,608,244) (832,949)
Operating profit before working capital changes 48,423,595 13,608,421
Increase in trade and other receivables (13,605,302) (70,770,277)
(Decrease) / Increase in trade and other payables (110,753,130) 194,710,397
Cash generated from operations (75,934,837) 137,548,541
Interest received 1,608,244 832,949
Interest paid - (54,381)
Net cash flows from operating activities (74,326,593) 138,327,109
Cash flows from Investing activities
Purchase of property, plant and equipment (12,677,790) (271,832,682)
(87,004,383) (133,505,573)
Cash flows from financing activities
Issue of share capital 102,365,831 122,566,451
Net Increase / (Decrease) in cash and cash equivalents 15,361,448 (10,939,122)
Movements in cash and cash equivalents
Cash and cash equivalents at the beginning of the year 27,542,625 38,481,747
Cash and cash equivalents at the end of the year 6 42,904,073 27,542,625
Net Increase / (Decrease) in cash and cash equivalents 15,361,448 (10,939,122)
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139
MAHANAGAR TELEPHONE (MAURITIUS) LTD.Notes to and forming part of the financial statements
for the year ended 31st March 2008
1. INCORPORATION
Mahanagar Telephone (Mauritius) Ltd is a private limited Company incorporated in Mauritius on14 November 2003. The address of the registered office is MTML Tower, 30 Dr Eugene Laurent Street,Port Louis.
The main activity of the Company is to provide telecommunication services.
2. ACCOUNTING POLICIES
The principal accounting policies adopted by the company are as follows:-
(a) Basis of preparation
Statement of compliance
The financial statements have been prepared in accordance with International Financial ReportingStandards.
Basis of measurement
The financial statements have been prepared on a historical cost basis.
Functional and presentation currency
The financial statements are presented in Mauritian rupee (Rs) which in the Company's functionalcurrency.
Use of estimates and judgement
The financial statements are prepared in accordance with International Financial ReportingStandards and the generally accepted accounting principles that require the Directors to makeestimates and assumptions that affect the reported amounts of assets and liabilities and disclosureof contingent assets and liabilities at the date of the financial statements and the reported amountsof revenues and expenses during the reporting year. Actual results could differ from thoseestimates.
(b) Operating leases
Payments made under operating leases are recognised in the income statement on a straight-line basis over the term of the lease.
(c) Revenue recognition
Revenue relates to telephone services, data communication services, phone cards and othercorollary services.
Revenue is recognised on an accrual basis and is net of discount. International revenue is derivedfrom outgoing calls from Mauritius and from payments by foreign network operators for calls andother traffic that originate outside Mauritius but which use the Company's network.
MTNL
140
The Company pays a proportion of the international traffic revenue it collects from its customersto transit and destination network operators. These revenues and costs are stated gross in thefinancial statements. Amount payable and receivable from the same foreign network operatorsare shown net in the balance sheet where a right of set off exists.
(d) Taxation
Income tax on the profit or loss for the year comprises of current and deferred tax. Current tax isthe expected tax payable on the taxable income for the year, using tax rates enacted at thebalance sheet date.
Deferred tax is provided using the balance sheet liability method, providing for temporarydifferences between the carrying amounts of assets and liabilities for financial reporting purposesand the amounts used for taxation purposes.
The amount of deferred tax provided is based on the expected manner of realisation or settlementof the carrying amount of assets and liabilities, using tax rates enacted at the balance sheetdate. A deferred tax asset is recognised only to the extent that it is probable that future taxableprofits will be available against which the asset can be realised. Deferred tax assets are reducedto the extent that it is no longer probable that the related tax benefit will be realised.
(e) Cash and cash equivalents
Cash comprises cash at bank and in hand, demand deposits and bank overdrafts. Cashequivalents are short-term highly liquid investments that are readily convertible to known amountsof cash and which are subject to an insignificant risk of change in value.
(f) Finance income and expense
Finance income comprises interest income and foreign exchange gains. Interest income isrecognised as it accrues, using the effective interest method.
Finance expenses comprises interest expense and foreign exchange losses. Interest expense isrecognised in the income statement as it accrues using the effective interest method.
(g) Financial instruments and associated risks
Fair Value
The carrying amounts of the Company's financial assets and liabilities approximate their fairvalues.
Associated risks
The Company's activities expose it to various types of risk in the normal course of its business.The following summary is not intended to be comprehensive summary of all risks.
- Credit risk
At balance sheet date there was not significant concentrations of credit risk. The maximumexposure to credit risk is represented by the carrying amount of each financial asset in thebalance sheet.
- Currency risk
The Company is exposed to foreign currency risk on its transactions that are denominated incurrencies other than Mauritian rupee.
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- Interest rate risk
The Company's income and operating cash flows are substantially independent of changes in
market interest rates. The Company's only significant interest earning financial asset is cash at
bank. Interest income may fluctuate in amount, in particular due to changes in interest rates.
(h) Provisions
A provision is recognised in the balance sheet when the Company has a legal or constructive
obligation as a result of a past event, and it is probable that an outflow of economic benefits will
be required to settle the obligation.
(i) Related parties
For the purpose of these financial statements, parties are considered to be related to the company
if they have the ability, directly or indirectly, to control the company or exercise significant
influence over the company in making financial and operating decisions, or vice versa, or where
the company is subject to common control or common significant influence. Related parties may
be individuals or other entities.
(j) Property, plant and equipment
Recognition and measurement
Items of property, plant and equipment are measured at cost less accumulated depreciation and
impairment.
Cost includes expenditures that are directly attributable to the acquisition of the asset. The cost
of selfconstructed assets includes the cost of materials and direct labour, any other costs directly
attributable to bringing the asset to a working condition for its intended use, and the costs of
dismantling and removing the items and restoring the site on which they are located.
When parts of an item of property, plant or equipment have different useful lives, they are accounted
for as separate items (major components) of property, plant and equipment.
Subsequent costs
The cost of replacing part of an item of property, plant or equipment is recognised in the carrying
amount of the item if it is probable that the future economic benefits embodied within the part will
flow to the branch and its cost can be measured reliably. The costs of the day-to-day servicing of
property and equipment are recognised in income statement as incurred.
Depreciation
Depreciation is recognised in income statement on a straight-line basis over the estimated useful
lives of each part of an item of property, plant and equipment. Additions during the year bear a
due proportion of the annual depreciation charge.
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The annual depreciation rates used for the purpose are as follows:Computer equipment - 16.21 %Furniture, fixtures and fittings - 6.33 %Office equipment - 4.75 %Motor vehicles - 10.00 %Plant and equipment - 10.00 %
Gains and losses on disposal of property, plant and equipment are determined by reference totheir written down value and are included in determining operating profit.
(k) Financial instruments
Non-derivative financial instruments
Non-derivative financial instruments comprise trade and other receivables, cash and cashequivalents and trade and other payables.
Non-derivative financial instruments are recognised initially at fair value plus, for instruments notat fair value through income statement, any directly attributable transaction costs. Subsequentto initial recognition non-derivative financial instruments are measured as described below.
A financial instrument is recognised if the company becomes a party to the contractual provisionsof the instrument. Financial assets are derecognised if the company's contractual rights to thecash flows from the financial assets expire or if the company transfers the financial asset toanother party without retaining control or substantially all risks and rewards of the asset. Regularway purchases and sales of financial assets are accounted for at trade date, i.e., the date thatthe company commits itself to purchase or sell the asset. Financial liabilities are derecognised ifthe company's obligations specified in the contract expire or are discharged or cancelled.
Cash and cash equivalents comprise cash balances and call deposits. Bank overdraft is includedas a component of cash and cash equivalents for the purpose of the cash flow statement.
Other
Other non-derivative financial instruments are measured at amortised cost using the effectiveinterest method, less any impairment.
(l) Foreign currencies
Transactions in foreign currencies are translated to Mauritian rupee at the exchange rate ruling atthe date of transaction. Monetary assets and liabilities denominated in foreign currencies aretranslated at the exchange rate ruling at the balance sheet date and gains or losses on transactionare recognised in the income statement.
(m) Impairment
The carrying amounts of the company's assets are reviewed at each balance sheet date todetermine whether there is any indication of impairment. If any such indication exists, the asset'srecoverable amount is estimated. An impairment loss is recognised whenever the carrying amountof an asset exceeds its recoverable amount. Impairment losses are recognised in the incomestatement in the period in which the impairment is identified.
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3. PROPERTY, PLANT AND EQUIPMENT
Computer Furniture, Office Motor Plant Totalequipment fixtures equipment vehicles and
and fittings equipmentRs Rs Rs Rs Rs
Cost
At 01 April 2007 460,233 478,391 270,043 2,259,738 429,131,324 432,599,729
Additions 161,644 1,214,628 335,519 - 10,965,999 12,677,790
At 31 March 2008 621,877 1,693,019 605,562 2,259,738 440,097,323 445,277,519DEPRECIATION
At 01 April 2007 115,753 62,699 25,759 336,328 23,615,953 24,156,492
Charge for the year 74,208 52,841 18,242 214,675 41,214,270 41,574,236
At 31 March 2008 189,961 115,540 44,001 551,003 64,830,223 65,730,728NET BOOK VALUE
At 31 March 2008 431,916 1,577,479 561,561 1,708,735 375,267,100 379,546,791
At 31 March 2007 344,480 415,692 244,284 1,923,410 405,515,371 408,443,237
4. TAXATION
The Company is liable to income tax at a rate of 15% (2007: 22.50%) on its profit as adjusted for taxpurposes.
2008 2007Rs Rs
Current tax charge - -
Deferred tax charge 7,480,365 (450,455)
Total tax expense in income statement 7,480,365 (450,455)
Reconciliation of effective taxation
Profit / (Loss) before taxation 8,457,603 (9,544,685)
Income tax at 15% / 22.50% 1,268,640 (2,147,554)
Non-allowable expenses 15,518 47,650
Tax rate differential 6,196,207 1,649,449
7,480,365 (450,455)
Deferred tax assets
At 01 April 2007 16,944,941 16,494,486
Movement during the year (7,480,365) 450,455
At 31 March 2008 9,464,576 16,944,941
Deferred tax assets are analysed as follows:
Accelerated capital allowances (36,189,991) (14,268,918)
Tax losses 44,535,240 30,392,018
Provision for bad debts 1,119,327 821,841
9,464,576 16,944,941
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5. TRADE AND OTHER RECEIVABLES
2008 2007Rs Rs
Trade receivables 115,076,844 105,207,140
Other receivables and prepayments 5,414,385 1,678,787
120,491,229 106,885,927
6. CASH AND BANK BALANCES
2008 2007Rs Rs
Cash in hand and at bank 42,904,073 28,263,296
Bank overdraft - (720,671)
Cash and cash equivalents in the cash flow statement 42,904,073 27,542,625
7. STATED CAPITAL
2008 2007Rs Rs
Ordinary shares of no par value 494,187,544 391,821,713
8. ACCUMULATED LOSSES
2008 2007Rs Rs
At 01 April 2007 (58,654,267) (49,560,037)
Loss for the year 977,238 (9,094,230)
At 31 March 2008 (57,677,029) (58,654,267)
9. TRADE AND OTHER PAYABLES
2008 2007Rs Rs
Trade creditors 72,357,542 155,375,997
Other creditors 43,538,612 71,273,287
115,896,154 226,649,284
10. PROFIT/(LOSS) FROM OPERATIONS
Profit/(Loss) from operations is arrived at after charging the following items:-
2008 2007Rs Rs
Staff Costs 8,667,169 5,900,092
Depreciation on property, plant and equipment 41,574,236 23,931,674
Directors' emoluments 10,000 20,000
Auditors' remuneration 90,000 158,000
Number of employees at end of the year 16 15
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11. OTHER INCOME
2008 2007Rs Rs
Other income 10,314 87,941
12. NET FINANCE INCOME / (EXPENSE)2008 2007
Rs Rs
Interest income 1,608,244 832,949
Foreign exchange gain - -
Finance income 1,608,244 832,949
Interest expense (54,381)
Foreign exchange lossess (2,169,881) (280,663)
Finance expense (2,169,881) (335,044)
Net finance (expense) / income (561,637) 497,905
13. EARNINGS/(LOSS) PER SHARE
The calculation of earnings/(loss) per share is based on net profit/(loss) for the year after taxationattributable to ordinary shareholders and on the number of shares in issue throughout the two yearsended 31 March 2008.
14. RELATED PARTY TRANSACTIONS
2008 2007Rs Rs
The Company had the following transactions with related parties.
Directors fees 10,000 20,000
Remuneration and other short term benefits to keymanagement personnel 2,321,847 2,225,044
All related party transactions are priced on commercialterms and conditions.
16. COMMITMENTS(a) Operating leases
Leases as lesseeThe future aggregate minimum lease payments under non-cancellable operating leases are as follows:
BTS sites Buildings TotalRs Rs Rs
Within one year 3,912,000 3,263,192 7,175,192
Between one year and five years 15,570,000 11,098,368 26,668,368
Over five years 11,482,000 5,549,184 17,031,184
30,964,000 19,910,744 50,874,744
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(b) Bank guarantee
There is a contingent liability not provided for in the accounts in respect of guarantees given to thirdparties amounting to Rs 7,931,909 ( 2007: Rs 6,853,038).
(c) Capital commitments
Capital expenditure contracted and not provided for in the accounts amount to Rs 51,774,394.
16. HOLDING COMPANY
The holding Company is Mahanagar Telephone Nigam Ltd, a Government of India Enterprise.
17. FINANCIAL SUMMARY
2008 2007 2006Rs Rs Rs
Issued and Fully Paid Up
Stated capital 494,187,544 391,821,713 269,255,262
Accumulated losses (57,677,029) (12,534,940) (49,560,037)
Profit / (Loss) before taxation 8,457,603 (9,544,685) (17,836,949)
Profit / (Loss) after taxation 977,238 (9,094,230) (13,420,803)
MAHANAGAR TELEPHONE (MAURITIUS) LTD.
Secretary's Certificate under Section 166(d) of the Companies Act 2001
In accordance with Section 166(d) of the Companies Act 2001, we certify that to the best of our knowledgeand belief, the Company has filed with the Registrar of Companies, all such returns as are required of theCompany under the Companies Act 2001.
For and on behalf of
Company secretary
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MAHANAGAR TELEPHONE (MAURITIUS) LTD.Schedules to the Income Statementfor the Year ended 31st March, 2008
2008 2007
Rs. Rs.
1. Cost of sales
ICTA Special account fee 14,356,443 16,533,254
Carrier charges 19,903,584 23,500,052
IPLC charges 7,234,326 5,043,337
IUC charges 37,412,300 42,807,742
78,906,653 87,884,385
2. Personnel expenses
Salaries and allowances 8,120,756 5,235,097
Other benefits 546,413 664,995
8,667,169 5,900,092
3. Licence fee
PLMN 8,000,004 8,000,004
PSTN 8,000,004 8,000,004
ILD 1,999,992 1,999,992
Microware 1,000,008 1,000,008
Spectrum 1,693,180 3,024,000
ISP 50,000 59,000
20,743,188 22,083,008
4. Administrative expenses
Meeting expenses 124,951 116,974
Directors fees 10,000 20,000
Rental accomodation 1,242,307 1,125,599
Rental BTS sites 4,472,478 4,758,884
Rental of building 2,774,592 2,774,592
Rental of stores 74,666 -
Company Licence 6,000 8,000
Electricity 9,816,749 6,179,048
Water charges 14,024 -
Motor vehicle running expenses 997,933 708,164
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Vehicle hire charges 957,775 921,061
Repairs and maintenance - mess 321,213 263,236
Fuel for BTS 93,216 181,863
Repairs and maintenance - office 770,340 303,975
Overseas travelling expenses - 179,777
Repairs and maintenance - shop 128,986 -
Printing 876,333 424,857
Stationery 202,906 91,179
Communication expenses 1,702,906 1,099,524
Bank charges 488,794 951,147
Library books 2,807 -
Horticulture expenses 10,300 21,953
Computer consumables and repairs 187,308 21,777
Professional charges 347,084 406,146
General expenses 130,124 177,255
Entertainment 103,450 138,517
Cuttlery expenses 21,783 8,557
Repairs for office equipment 53,887 25,169
Commission and brokerage fees 6,931,489 7,375,527
Office insurance 102,926 199,050
Security charges 538,326 626,144
Rates and taxes 1,313,189 273,042
Provision for bad debts 7,462,178 3,652,624
42,281,020 33,033,641
Marketing expenses
Electricity for shops 25,746 -
Gifts - 11,500
Rent of shops 515,329 -
Call centre charges 3,074,820 1,918,400
Printing expenses 110,710 195,791
Publicity and advertisement 4,038,149 4,160,083
Website development and maintenance 9,600 4,000
7,774,354 6,289,774
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ECS MANDATE FORMMAHANAGAR TELEPHONE NIGAM LTD.
REGD OFFICE: JEEVAN BHARTI BUILDING, TOWER I, 12TH FLOOR,124, CONNAUGHT CIRCUS, NEW DELHI - 110 001
For shares held in Physical Mode Please complete the form and mail to the Company
Shares held in Electronic Mode should inform respective DPs
Dear Sir/Madam,
Change in mode of payment to ECS
I hereby consent to have the amount of dividend on my equity shares credited through the ElectronicClearing Service (ECS). The particulars are:-
1. Folio No./Client ID No._______________________________________(folio No. given in equity share certificate(s)/Customer ID Nos. given by your DPs)
2. Shareholder's Name___________________________________________
3. Shareholder's Address____________________________________________________________
4. Income Tax Permanent Account No. _________________________________
5. Particulars of the BankBank Name_____________________________________________
Branch name and address_____________________________________________________________
Telephone Nos. of Bank_______________________________________________________________
The 9 digit code number of the Bank and branch appearing on the MICR cheque issued by thebank:_____________________________
(please attach the photocopy of a cheque or a cancelled bank cheque issued by your bank for verifying theaccuracy of the code number)
Account type (please tick) • Savings • Current • Cash Credit
Account number : _____________________________
(as appearing on the MICR cheque book)
6. Date from which the mandate should be effective:_______________________
I hereby declare that the particulars given above are correct and complete. If the transaction is delayed ornot effected at all for reasons of incomplete or incorrect information or non-availability of ECS facility withcompany's banks at my place/city, I would not hold the Company/Registrar & Share Transfer Agents ofthe Company responsible. I also undertake to advise any change in the particulars of my account tofacilitate updation of records for purpose of credit of dividend amount through ECS).
Signature of the first/sole shareholderPlace:Date:
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MAHANAGAR TELEPHONE NIGAM LIMITEDRegistered Office : Jeevan Bharti, Tower-I, 12th floor,
124, Connaught Circus, New Delhi – 110 001
PROXY
NAME FOLIO NO. NO. OF SHARES
DP-Id*................................ Client Id*................................
I /We…………………..... . . . . . . . . . .……………of………....….... . . . . . . . . .…………………in the distr ict
of………………………….........……..being member(s) of Mahanagar Telephone Nigam Ltd. hereby appoint
Shri/Smt………………...……………of……....………………in the district of……..………………………..or
failing him/her, Shri/Smt………….......…….of………….......……….in the district of…......…………………as
my/our proxy to attend and vote on my/our behalf at the 22nd Annual General Meeting of the Company to
be held on 26th September, 2008 at 3.00 P.M. or any adjournment thereof.
Date…..........…………. Signature…..........………….
Note:1. The proxy need NOT be a member2. The Form signed across the revenue stamp of requisite value should reach the Company’s Registered
Office at least 48 hours before the meeting.
*Applicable in the case of shares held in electronic form.
MAHANAGAR TELEPHONE NIGAM LIMITEDRegistered Office : Jeevan Bharti, Tower-I, 12th floor,
124, Connaught Circus, New Delhi – 110 001
ADMISSION SLIP
NAME FOLIO NO. NO. OF SHARES
DP-Id*................................ Client Id*................................
I hereby record my presence at the 22nd Annual General Meeting of Mahanagar Telephone Nigam Ltd.being held at FICCI Golden Jubilee Auditorium, Tansen Marg New Delhi - 110 001 on 26th September, 2008At 3.00 P.M..
Signature of Member/Proxy
NAME OF PROXY, IF APPLICABLE (IN BLOCK LETTERS)1. Members/proxies are requested to bring the duly signed Admission Slip to the meeting and hand it
over at the Registration Counter.
*Applicable in the case of shares held in electronic form.
Please note that no gifts of any sort would be distribted at the AGM
Please note that no gifts of any sort would be distribted at the AGM