Tata Communications Ltd

TO THE MEMBERS OF TATA COMMUNICATIONS LIMITED

1. We have audited the attached Balance Sheet of TATA COMMUNICATIONS LIMITED ("theCompany") as at 31^st March, 2010, the Profit and Loss Account and the CashFlow Statement of the Company for the year ended on that date, both annexed thereto. Thesefinancial statements are the responsibility of the Company’s Management. Ourresponsibility 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 acceptedin India. Those Standards require that we plan and perform the audit to obtain reasonableassurance about whether the financial statements are free of material misstatements. Anaudit includes examining, on a test basis, evidence supporting the amounts and thedisclosures in the financial statements. An audit also includes assessing the accountingprinciples used and the significant estimates made by the Management, as well asevaluating the overall financial statement presentation. We believe that our auditprovides a reasonable basis for our opinion.

3. As required by the Companies (Auditor’s Report) Order, 2003 (CARO) issued bythe Central Government in terms of Section 227(4A) of the Companies Act, 1956, we give inthe Annexure a statement on the matters specified in paragraphs 4 and 5 of the said Order.

4. Further to our comments in the Annexure referred to in paragraph 3 above, we reportthat:

(i) we have obtained all the information and explanations which to the best of ourknowledge 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 theCompany so far as it appears from our examination of those books;

(iii) the Balance Sheet, the Profit and Loss Account and the Cash Flow Statement dealtwith by this report are in agreement with the books of account;

(iv) in our opinion, the Balance Sheet, the Profit and Loss Account and the Cash FlowStatement dealt with by this report are in compliance with the Accounting Standardsreferred to in Section 211(3C) of the Companies Act, 1956;

(v) in our opinion and to the best of our information and according to the explanationsgiven to us, the said accounts give the information required by the Companies Act, 1956 inthe manner so required and give a true and fair view in conformity with the accountingprinciples generally accepted in India:

(a) in the case of the Balance Sheet, of the state of affairs of the Company as at 31^stMarch, 2010;

(b) in the case of the Profit and Loss Account, of the profit of the Company for theyear ended on that date and

(c) in the case of the Cash Flow Statement, of the cash flows of the Company for theyear ended on that date.

5. On the basis of the written representations received from the Directors as on 31^stMarch, 2010 taken on record by the Board of Directors, we report that none of theDirectors is disqualified as on 31^st March, 2010 from being appointed as adirector in terms of Section 274(1)(g) of the Companies Act, 1956.

ANNEXURE TO THE AUDITORS’ REPORT

(Referred to in paragraph 3 of our report of even date)

(i) Having regard to the nature of the Company’s business/ activities/ result forthe year, clauses (vi), (xii), (xiii), (xiv), (xviii), and (xx) of CARO are not applicableto the Company.

(ii) (a) The Company has maintained proper records showing full particulars, includingquantitative details and situation of fixed assets.

(b) According to the information and explanations given to us, the fixed assets werephysically verified by the management in accordance with the programme of verification,which in our opinion, is reasonable having regard to the size of the Company and thenature of its assets. The differences identified pursuant to the physical verificationhave been duly adjusted in the books of account. Having regard to the size of the Companyand on the basis of the explanations received, in our opinion, the net unadjusteddifferences were not significant.

(c) The fixed assets disposed off during the year, in our opinion, do not constitutesubstantial part of fixed assets of the Company and such disposal has, in our opinion, notaffected the going concern status of the Company.

(iii) (a) As explained to us, the stocks of stores and spares have been verified by theManagement in accordance with the programme of verification.

In our opinion, the frequency of verification is reasonable.

(b) In our opinion and according to the information and explanations given to us, theprocedures physical verification of stocks followed by the Management are reasonable andadequate in relation to the size of the Company and the nature of its business.

(c) In our opinion and according to the information and explanations given to us, theCompany is maintaining proper records of inventory. The discrepancies noticed onverification between the physical stocks and book records were not material having regardto the size of the operations of the Company.

(iv) According to the information and explanations given to us, the Company has nottaken or granted any loans secured or unsecured from or to companies, firms or otherparties covered by the register maintained under Section 301 of the Companies Act, 1956.

(v) In our opinion and according to the information and explanations given to us, thereis adequate internal control system commensurate with the size of the Company and thenature of its business for the purchase of inventory and fixed assets. The internalcontrol systems for rendering of certain enterprise data services needs to be suitablystrengthened.

Except for the forgoing, we have not observed any continuing major weakness in theinternal control systems.

(vi) (a) To the best of our knowledge and belief and according to the information andexplanations given to us, we are of the opinion that the transactions that need to beentered into the register maintained under Section 301 of the Companies Act, 1956 havebeen so entered.

(b) In our opinion and having regard to our comments in paragraph (v)(a) above, andaccording to the information and explanations given to us, transactions made in pursuanceof contracts or arrangements entered in the register maintained under Section 301 of theCompanies Act, 1956 and exceeding value of Rupees five lakhs in respect of any partyduring the year have been made at prices which are reasonable having regard to prevailingmarket prices at the relevant time, where such market prices are available.

(vii) In our opinion, the Company has an internal audit system commensurate with thesize and nature of its business.

(viii) We have broadly reviewed the books of account and records maintained by theCompany relating to telecommunication activities pursuant to the Rules made by the CentralGovernment for the maintenance of cost records under Section 209(1)(d) of the CompaniesAct, 1956 and are of the opinion that prima facie, the prescribed accounts andrecords have been made and maintained. We have, however, not made a detailed examinationof the records with a view to determining whether they are accurate or complete.

(ix) (a) According to the information and explanations given to us, the Company isgenerally regular in depositing with appropriate authorities undisputed statutory duesincluding Provident fund, Investor Education and Protection Fund, Employees’ stateinsurance, Income tax, Wealth tax, Sales tax, Customs duty, Excise duty, Service tax, cessand other material statutory dues applicable to it.

(b) According to the information and explanations given to us, no undisputed amountspayable in respect of Provident fund, Investor Education and Protection Fund,Employees’ state insurance, Income tax, Sales tax, Customs duty, Excise dutyand cess were in arrears, as at March 31, 2010 for a period of more than six months fromthe date they became payable.

(c) According to the information and explanations given to us, details of dues of Salestax, Service tax and Income tax which have not been deposited on account of any disputeare given below:

(x) The Company does not have accumulated losses. The Company has not incurred cashlosses during the financial year covered by our audit and in the immediately precedingfinancial year.

(xi) In our opinion and according to the information and explanations given to us, theCompany has not defaulted in repayment of dues to a financial institution or bank ordebenture-holders.

(xii) In our opinion and according to the information and explanations given to us, theterms and conditions on which the Company has given guarantee for loans taken by othersfrom banks or financial institutions are not prima facie prejudicial to the interest ofthe Company.

(xiii) To the best of our knowledge and belief and according to the information andexplanations given to us, in our opinion, term loans availed by the Company were primafacie applied by the Company during the year for the purpose for which they were obtained.

(xiv) According to the information and explanations given to us, and on an overallexamination of the Balance Sheet of the Company, funds raised on short term basis haveprima facie not been used during the year for long term investment.

(xv) According to the information and explanations given to us and the records examinedby us, security/ charges have been created in respect of secured debentures issued.

(xvi) To the best of our knowledge and belief and according to the information andexplanations given to us, no fraud by the Company and no material fraud on the Company wasnoticed or reported during the year, although there have been few instances of receivablesbecoming doubtful of recovery, consequent upon fraudulent representation made by thecustomers, the amounts thereof are not material in the context of the size of the Companyand the nature of the business and which were subsequently written off.