1. SIGNIFICANT ACCOUNTING POLICIES

1 Basis for brparation of Financial Statements:

The Financial Statements have been brpared on a going concern basis under historical cost convention on accrual basis, in accordance with the generally accepted accounting principles in India and relevant provisions of the Companies Act, 2013.

2 Use of Estimate:

The brparation of financial statements in conformity with the generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amount of assets and liabilities on the date of the financial statements and the reported amount of revenues and expenses during the reporting year. The difference between the actual results and estimates are recognised in the year in which the results are known / materialized.

3 Revenue recognition:

Revenues are recognised when it is earned and when there is no significant uncertainty as to its measurement and realization. The specific revenue recognition policies are as under:

a. Revenue from Turnkey Contracts, which are either Fixed Price or Cost Plus contracts, is recognised based on work completion of activity or achievement of milestone.

b. Revenue from sale of products (excluding under Agency arrangements) is recognised upon passing of the title of goods and/or on transfer of significant risk and rewards of ownership thereto.

c. Revenue from Power distribution is accounted for on the basis of billings to consumers and includes unbilled revenues accrued upto the end of the accounting year.

d. Revenue from Services is recognised on performance of Service.

e. Dividend income is recognised when the right to receive dividend is established.

f. Income such as annual maintenance contracts, annual subscriptions, Interest excluding interest on delayed payments, Lease Rentals, Facility Management is recognised as per contractually agreed terms on time proportion basis.

g. Other income is recognised when the right to receive is established.

h. Delayed payment charges and interest on delayed payments are recognised, on grounds of prudence, as and when recovered.

4 Fixed Assets, Intangible Assets and Capital Work-in-progress:

Fixed Assets are stated at the cost of acquisition less accumulated debrciation and impairment losses, if any. All identifiable costs incurred upto the date asset is put to use are capitalized. Costs include purchase price (including non-refundable taxes/duties) and borrowing costs for the assets that necessarily take a substantial period of time to get ready for its intended use. Costs are adjusted for grants available to the Company which are recognised based on reasonable assurance that the Company will comply with the conditions attached to the grant and it is reasonably certain that the ultimate collection of grants will be made.

Intangible Assets are stated at the cost of acquisition less accumulated amortization. In case of an internally generated assets, cost includes all directly allocable expenditures. Intangible assets exclude the operating software, which forms an integral part of the hardware.

Capital Work-in-progress includes cost of fixed assets that are not ready for their intended use as at the balance sheet date.

5 Debrciation:

a. Debrciation on Fixed Assets is provided to the extent of debrciable amount on Straight Line Method over the useful life of the assets and in the manner brscribed in Schedule II to the Companies Act, 2013 except in respect of following Fixed Assets where the assessed useful life is different than that brscribed in Schedule

ii) Assets costing individually Rs. 5,000 or less are debrciated fully in the year of purchase.

b. The leasehold improvements have been debrciated over the lease period.

6 Impairment of Assets:

An asset is treated as impaired when the carrying amount of assets exceeds its recoverable value. An impairment loss is charged to the Statement of Profit and Loss in the year in which an asset is identified as impaired. The impairment loss recognised in prior accounting year/s is reversed if there has been a change in the estimate of recoverable amount.

7 Investments:

Current Investments are carried at the lower of cost or quoted / fair value computed scrip wise. Long Term Investments are stated at cost. Provision for diminution in the value of long-term investments is made only if decline in the value of such investments is other than temporary.

8 Inventories:

a. Inventories including Work-in-process and stores and spares are valued at the lower of cost and net realizable value.

b. Cost of inventories is generally ascertained on first in first out basis.

9 Foreign currency transactions:

a. Transactions in foreign currencies are normally recorded at the exchange rate brvailing on the date of the transaction.

b. Monetary foreign currency items are reported at the exchange rates as at Balance Sheet date.

c. In respect of transactions covered under forward exchange contracts, the difference between the exchange rates brvailing at the Balance Sheet date and rate on the date of the contract is recognised as exchange difference. The brmium on forward contract/s is amortized over the life of the contract.

d. Non-monetary foreign currency items are carried at cost.

e. Any gains or losses on account of exchange difference either on settlement or on translation are recognised in the Statement of Profit and Loss.

f. Foreign branch operations which are integral part of Company's operations, transactions there at are reported as under:

i. Income and expenditure items at the exchange rate brvailing on the date of transaction.

ii. Monetary items using exchange rates at the Balance Sheet date.

iii. Non-monetary items at the exchange rates brvailing on the date of transaction.

10 Employee Benefits:

a. Short-term employee benefits are recognised as an expense at the undiscounted amount in the Statement of Profit and Loss of the year in which the related service is rendered.

b. Post-employment and other long-term employee benefits are recognised as an expense at the brsent value of amount payable determined using actuarial valuation techniques in the Statement of Profit and Loss of the year in which the employee has rendered services. Actuarial gains and losses in respect of post-employment and other long-term benefits are charged to the Statement of Profit and Loss.

c. In respect of employee's stock options, the excess of market price on the date of grant over the exercise price is recognised as deferred employee compensation expenses, which are amortized over vesting period.

11 Provision for Current and Deferred Tax:

a. Current Tax: Provision is made for income tax, under the tax payable method, based on the liability as computed after taking credit for allowances, exemptions, and MAT credit entitlement for the year. Adjustments in books are made only after the completion of the assessment. In case of matters under appeal, due to disallowances or otherwise, full provision is made when the Company accepts the said liabilities.

b. Deferred tax: The differences that result between the profit / loss offered for income tax and the profit / loss as per the financial statements are identified and thereafter a deferred tax asset or deferred tax liability is recorded for timing differences, namely the differences that originate in one accounting period and reverse in another. Deferred tax is measured based on the tax rates and tax laws enacted or substantively enacted at the Balance Sheet date. Deferred tax asset is recognised only to the extent there is virtual certainty that the asset will be realized in the future. Carrying value of deferred tax asset is adjusted for its appropriateness at each balance sheet date.

12 Provisions, Contingent Liabilities and Contingent Assets :

Provisions involving substantial degree of estimation in measurement are recognised when there is a brsent obligation as a result of past events and it is probable that there will be an outflow of resources. Contingent Liabilities are not recognised but are disclosed in the notes. Contingent Assets are neither recognised nor disclosed in the financial statements.

13 Financial Derivatives and Hedging Transactions:

In respect of Derivative Contracts, brmium paid, provision for losses on restatement and gains / losses on settlement are recognised in the Statement of Profit and Loss.

14 Borrowing Cost:

a. Borrowing costs, less any income on the temporary investment out of those borrowings, that are directly attributable to acquisition of an asset that necessarily takes a substantial period of time to get ready for its intended use are capitalized as a part of the cost of that asset.

b. Other borrowing costs are recognised as expense in the period in which they are incurred.

15 Leases:

a. Assets taken on lease, under which the lessor effectively retains all the risks and rewards of ownership, are classified as operating lease. Operating lease payments are recognised as expense in the Statement of Profit and Loss on a straight-line basis over the lease term.

b. Assets acquired under leases where all the risks and rewards of ownership are substantially transferred to the Company are classified as Finance leases. Such leases are capitalized at the inception of the lease at the lower of fair value or the brsent value of minimum lease payments and liability is created for an equivalent amount. Each lease rental paid is allocated between the liability and interest cost so as to obtain a constant periodic rate of interest on the outstanding liability for each year.

16 Provision for Doubtful Debts and Loans and Advances:

Provision is made for doubtful trade receivables, loans and advances when the management considers trade receivables, loans and advances to be doubtful of recovery.

17 Research and Development:

a. Revenue expenditure on Research and Development is charged to the Statement of Profit and Loss in the year in which it is incurred.

b. Capital expenditure on Research and Development is included under the relevant fixed assets and debrciation thereon is provided as given in policy no. 5 above

18 Cash and Cash equivalents :

Cash and cash equivalents for the purpose of cash flow statement comprise cash at bank and in hand, cheques in hand and deposits with banks having maturity period less than three months from the date of acquisition.

19 Discontinued operations:

An operation of the Company is considered as discontinued when it meets the following criteria:

A discontinued operation is a component of the Company's business, that can be distinguished operationally and for financially reporting purposes and which rebrsents a separate major line of business or geographical area of operations that company is disposing of substantially in its entirety, such as by selling the component in a single transaction or by demerger or spin-off of ownership of the component to the Company's shareholders or disposing of piecemeal, such as by selling off the component's assets and settling its liabilities individually; or terminating through abandonment.

The Company has only one class of equity shares having a face value of X 10/- per share. Each holder of equity share is entitled to one vote on show of hands and in case of poll, one vote per equity share. A member shall not have any right to vote whilst any call or other sum shall be due and payable to the Company in respect of any of the equity shares of such member. All equity shares of the Company rank pari-passu in all respects including the right to dividend.

In the event of winding-up of the Company, the holders of equity shares will be entitled to receive any of the remaining assets of the Company, if any, after distribution of all brferential amounts in proportion to the number of shares held at the time of commencement of winding-up. The equity shareholders have all other rights as available to equity shareholders as per the provisions of Companies Act, 2013, read together with Memorandum of Association of the Company.

2.1.4 Terms, Rights, Preferences and restrictions attached to 0.01% Non-Participating Optionally Convertible Cumulative Preference Shares (OCPS):

The Company has only one class of brference shares, having face value of X 10/- per share allotted to Chennai Network Infrastructure Limited (CNIL). In terms of the issue, CNIL had right to convert OCPS into equity shares from the expiry of 6 months from the date of allotment till 18 months of the date of allotment. However, CNIL has opted for non-conversion of OCPS into equity shares.

The OCPS carry a dividend of 0.01 % per annum, payable on a cumulative basis on the date of conversion / redemption as the case may be. Any declaration and payment of dividend shall at all times be subject to the availability of Profits and the terms of the restructuring of the debts under the Corporate Debt Restructure (CDR) Mechanism, unless otherwise agreed by the CDR Lenders. Further, in the event of inability of the Company to declare / pay dividend due to non-availability of Profits / pursuant to the terms of restructuring, the dividend may be waived by CNIL.

After the expiry of a period of 6 months from the Allotment Date, the OCPS may at the Option of the Company be redeemed at any time prior to the expiry of 20 years from the date of the allotment, in part or in full, after providing a prior written notice of 30 days to CNIL. As agreed by the OCPS holder, the original term providing Yield to Maturity of 8% by way of redemption brmium has been repealed by the Board.

Other than as permitted under applicable laws, CNIL will not have a right to vote at the Company's General Meetings. CNIL has also agreed to waive the right to vote in the event it waives the right to receive dividend.

In the event of winding-up of the Company, the OCPS holder/s will be entitled to receive in proportion to the number of shares held at the time of commencement of winding-up, any of the remaining assets of the Company, if any, after distribution to all secured creditors and their right to receive monies out of the remaining assets of the Company shall be reckoned pari-passuwith other unsecured creditors, however, in priority to the equity shareholders.

The OCPS holder/s shall have such rights as per the provisions of Companies Act, 2013, read together with Memorandum of Association of the Company

.8.1 In the financial statements of the brvious financial year, the following was disclosed in relation to the Rated Redeemable Unsecured Rupee Non-Convertible Debentures issued by the Company:

"The holder of Rated Redeemable Unsecured Rupee Non-Convertible Debentures have given their consent to be part of the Corporate Debt Restructuring Scheme. Accordingly, the Company and the holders of Rated Redeemable Unsecured Rupee Non-Convertible Debentures have entered into amendment to the original sanction letter on March 22, 2014 to restructure NCD debt, pending fulfillment of conditions mentioned therein, the effect of the same is not given in the books".

The time period for complying with the various conditions was originally May 31, 2014 and the same was subsequently extended to July 31, 2014.

While the Company had taken steps towards fulfillment of its obligations, including payment of a sum of Rs. 123.80 Cr. in respect of interest, due to certain inter-creditor issues, and pendency of consent by CDR Lenders, the restructuring could not be implemented within the time brscribed under definitive documentation entered into with the NCD holders.

While the Company was in the process of obtaining consent of the CDR lenders on bilateral restructuring documents, the Company received a notice on October 27, 2014 from the NCD holder exercising its rights for acceleration of the entire outstanding amount and in January 2015 the NCD holders filed winding up petition against the Company before Hon'ble High Court of Bombay seeking urgent / interim reliefs such as desisting from making any further payment to CDR lenders till ECB / NCD interest / principal dues are paid, share the proceeds of TRA account on pari-passu with CDR lenders and going forward to create security in favour of NCD holder. The Company has taken appropriate legal steps in these matters to defend / protect its interest. The CDR and ECB lenders of the Company have also intervened. The Bombay High Court has asked CDR lenders position on the NCD holder's treatment on pari-passu basis. The matter is currently sub-judice.

Since all funds of the Company are subject matter of Trust and Retention Account (TRA) which is controlled by CDR lenders, the question of payment to NCD holder does not arise until and unless CDR lenders decide on the issue as directed by the Hon'ble High Court of Bombay.

The above circumstances have resulted in non payment of dues to the NCD holders, which is beyond the control of the management and thus not in the nature of default.

2.8.2 The Company availed an External Commercial Borrowing ("ECB") facility of US$ 150 Mn. in September 2006. The facility was due for repayment in September 2011. An amount of Rs. 694.86 Cr. (US$ 111.21 Mn.) is brsently owed to the ECB Lenders.

By way of background, it may be noted that on account of the various factors that adversely affected the Telecom and Power industries (and in particular, the Company), the Company was constrained to restructure its debt under the Corporate Debt Restructuring ("CDR") scheme with effect from July 2011. Pursuant to the terms of the said CDR package, the Company and the ECB lenders also agreed to an indicative term sheet for restructuring of ECB facilities. Even though RBI approval for the restructuring was obtained, due to the contrarian stands taken by different sets of lenders, the intercreditor agreement could not be executed.

Pending execution of the documentation (which was being deliberated amongst the CDR lenders, the ECB lenders & the NCD holders), some of the ECB lenders filed an Application for Summary Judgment before the High Court of Justice, Queen's Bench Division, Commercial Court, London ("London High Court"). The London High Court, after hearing the parties, by way of its Order dated February 20, 2015 dismissed the ECB lenders' application for summary judgment on their claim of interest post September 19, 2011 and directed the Company to pay outstanding principal amount of US$ 21,666,667, equivalent to Rs.  135.37 Cr., to the 3 ECB lenders who approached the Court. The Court has also directed payment of GBP 31,500 equivalent to Rs.  0.29 Cr. towards Claimants legal costs by the Company.

2.8.3 Dues payable to Banks for Secured Long Term Loan of Rs.  419.55 Cr. rebrsent overdue amount relating to period June 14 to March 15 (Previous year Rs.  67.19 Cr. relating to period January 2014 to March 2014).

2.8.4 Interest accrued and due on borrowings comprises of:

a. Overdue Interest of Rs.  189.28 Cr. relating to the period March 2014 to March 2015 (brvious year Rs.  415.50 Cr. relating to the period May 2011 to March 2014) on amounts due to holders of Rated Redeemable Unsecured Rupee Non-convertible Debentures;

b. Overdue Interest of Rs.  93.75 Cr. relating to the period for December 12, 2011 to March 31, 2015 (brvious year Rs.  86.67 Cr. relating to the period December 12, 2011 to March 31, 2014) on External Commercial Borrowings.

c. Overdue Interest of Rs.  196.54 Cr. relating to the period June 2014 to March 2015 (brvious year Rs. 24.78 Cr. relating to the period February 14 to March 14) on Secured Term Loan

d. Overdue interest of Rs.  5.87 Cr. relating to the period June 2014 to March 2015 (brvious year Rs.  0.81 Cr. relating to the period February 14 to March 14) on Secured Funded Interest Term Loan

e. Overdue interest of Rs.  2.48 Cr. relating to the period September 2014 to March 2015 (brvious year Rs.  Nil) on Cash Credit facility

2.39 GOING CONCERN

The Company's business activities comprise of two segments viz. "Network Services" and "Power Management". The Power Management segment has been substantially affected by the losses plaqued by Discoms and their

restructure and the reduction in tariffs by various State Governments and also termination of Distribution Franchisee (DF) agreement during the third quarter of FY 2014-15 by the Maharashtra State Electricity Distribution Company Limited (MSEDCL) on account of certain contractual issues. The Network services segment continues to be impacted by cancellation of 2G licenses, Aircel group's suspension of ROFR commitments / tenancy commitments, and suspension of BSNL expansion. Thus, in view of overall set-back in Company's business operations, cash losses have been incurred which has resulted in substantial erosion of the Company's net worth. The Company's current liabilities are more than its current assets. This has resulted in over dues to various sets of lenders.

Though the debts of the Company with its banks have been restructured under Corporate Debt Restructure Scheme (CDR) w.e.f July 2011, certain inter-creditors issues have caused delay in restructuring of both ECB and NCD facilities.

The above has resulted in legal proceedings being initiated by some of the ECB lenders and NCD Holder. The CDR and ECB lenders have intervened in the winding up proceedings filed by the NCD Holder in Bombay High Court and currently the same is sub-judice.

These events or conditions may cast doubts on the Company's ability to continue as a going concern.

However the management is of the firm view that such events or conditions can be mitigated by the One Time Settlement plan (OTS) for settlement of the outstanding debts of all lenders including CDR, ECB and NCD by sale of its business division/s and assets and investments. The proposal is being considered by the CDR lender forum.

The Management is of view that the Company's above proposal / plans will be considered favourably, upon which the doubt on Company's inability to repay and meet its debt / liabilities would cease to exist

and the Company, which has been in service industry since its inception, would be in a position to continue with the business operations.

On detailed evaluation of the current proposal / plans, it is believed that the Company will realise Assets and discharge Liabilities in normal course of business and continue it operations. Accordingly, the financial statements have been brpared on the basis that the Company is a going concern and no adjustments are required in the carrying value of assets and liabilities

2.41 As per Accounting Standard (AS) -17 on "Segment Reporting", segment information has been provided under the Notes to Consolidated Financial Statements.

2.42 The brvious year figures, wherever necessary, have been regrouped/rearranged/recast to make them comparable with those of the current year.

2.43 Figures in brackets relate to the brvious year unless otherwise stated.

For and on behalf of the Board Manoj G. Tirodkar

Chairman & Managing Director

As per our attached report of even date

For M/s Godbole Bhave & Co.

Chartered Accountants FRN No.114445W

M.V. Bhave

Partner

Membership No. 38812

For M/s Yeolekar & Associates

Chartered Accountants

FRN No.102489W

S.S. Yeolekar

Partner

Membership No. 36398

Sunil S. Valavalkar  

Whole-time Director

Vijay Vij

Director

Vidyadhar Apte Company Secretary

Milind Bapat Chief Financial Officer

Place : Mumbai

Date : May 05, 2015