Tulip Telecom Ltd

Dear Members,

Your Directors are delighted to present the 18^th Annual Report on thebusiness & operations of the company together with the Audited Financial Statements& Accounts for the year ended on 31^st March, 2010.

FINANCIAL HIGHLIGHTS

In the financial year 2009-10, your Company recorded a steady and consistenceperformance in operations culminating into a robust financial performance. Your Companyhas recorded an overall revenue of Rs. 201193.40 Lacs, a growth of 22.47% over thecorresponding period of the previous year. Profit after tax was Rs. 27553.13 Lacs. Brieffinancial highlights with comparison of previous year are as follows:-

(Rs. in Lacs)

POSTAL BALLOT

The Directors of your company in their meeting held on 14^th May, 2010proposed the following resolutions for the approval of members by way of postal ballot:-

i) Ordinary Resolution under Section 94 (1) (d) of the Companies Act, 1956, for Sub– division of 1 (one) Equity Share of Rs. 10/- each into 5 (five) Equity Shares ofRs. 2/- each

ii) Special Resolution under Section 309 (4) of the Companies Act, 1956, for payment ofremuneration to Non Executive Independent Director(s)

iii) Special Resolution under Section 81 (1A) of the Companies Act, 1956, for variationin Employees Stock Option Scheme "ESOS -2007".

DIVIDEND

In view of the Company’s outstanding performance, the Directors are pleased torecommend for approval of the Members a Dividend of Rs. 8/- per equity share of Rs. 10/-representing 80% of the face value as against 40% of the corresponding previous year. Thefinal dividend, if declared, and approved by you, would involve an outflow of Rs. 2320Lacs towards dividend and Rs. 394.28 Lacs towards dividend tax, resulting in a totaloutflow of Rs. 2714.28Lacs. However, after the sub-division of the equity shares from oneequity share of Rs. 10/- each to five equity shares Rs. 2/- each, the amount of dividendper share would stand modified from Rs.8/- to Rs. 1.6/- for each equity share.

The Register of Members and Share Transfer Books for the purpose of dividend willremain closed from 23^rd August 2010 to 30^th August 2010, (both daysinclusive).

TRANSFER TO RESERVES

• General Reserve

The Company proposes to transfer Rs. 2755.31 Lacs (Previous Year Rs. 2495.76 Lacs) toGeneral Reserve out of the amount available for the appropriation and an amount of Rs.15631.51Lacs (Previous Year Rs. 19841.95 Lacs) is proposed to be retained in the Profit& Loss Account.

• Debenture Redemption Reserve

The Company proposes to transfer Rs. 6333.33 Lacs (Previous Year Rs. 1187.50 Lacs) tothe Debenture Redemption Reserve out of the total amount available for the appropriationsas per Section 117C of the Companies Act, 1956.

SHARE CAPITAL

The Directors of your company proposed to the members through postal ballot, thesub-division of one equity share of Rs.10/- to five equity shares of Rs.2/- each.Consequent to the members approval through postal ballot, the Authorized Share Capital ofthe Company will be modified from Rs. 40,00,00,000 (Rupees Forty Crore only) comprising of4,00,00,000 (Four Crores) equity shares of Rs. 10/- each to Rs. 40,00,00,000 (Rupees FortyCrore only) comprising of 20,00,00,000 (Twenty Crores) equity shares of Rs. 2/- each.

ISSUE OF COMMERCIAL PAPERS

During the year, your Company has raised Rs. 6000 Lacs by issuing unsecured CommercialPapers to NABARD and ALLAHABAD Bank by way of a private placement at an interest of Rs.7.5 % p.a. with a maturity period of 182 & 180 days respectively.

NON CONVERTIBLE DEBENTURES (NCDS)

During the year, your Company has issued Non Convertible Debentures (NCDs) to the tuneof Rs. 32,500 Lacs to liC mutual Fund asset management Co. ltd. and iCiCi bankltd.

FOREIGN CURRENCY CONVERTIBLE BONDS (FCCBS)

During the year, pursuant to the Circular vide no. A. P. (DIR Series) Circular No. 39dated 8th December 2008 issued by the Reserve Bank of India towards the buyback/Prepaymentof Foreign Currency Convertible bonds (FCCbs), your Company had boughtback/repurchased the FCCBs aggregating to USD 19.6 millions through automatic route.

As on the date of this report, the FCCBs worth USD 97 million are still outstanding andare forming part of the unsecured loans.

EXTERNAL COMMERCIAL BORROWINGS

During the year, your company has raised an External Commercial Borrowings (ECB) forUSD 15.00 Million.

SUBSIDIARY COMPANIES

Your Company has three, wholly owned subsidiary companies, i.e. Tulip IT ServicesSingapore Pte. Ltd., Tulip Swan IT Services Limited and Tulip Telecom Inc.

As per Section 212 of the Companies Act, 1956, your Company is required to attach theDirectors Report, Auditors Report, Balance Sheet and Profit & Loss Account of thesubsidiary companies to its Balance Sheet. Your Directors believe that the auditedconsolidated accounts present a full and fair picture of the state of affairs and thefinancials conditions of the Company and its subsidiaries as is done globally. Hence, theCompany made an application to the Central Government seeking the exemption from therequirement of attaching Directors Report, Auditors Report, Balance Sheet and Profit &Loss Account of the subsidiaries to its Balance Sheet.

In terms of approval granted by the Central Government under Section 212 (8) of theCompanies Act, 1956 vide letter no. 47/428/2010-CL-III dated 18^th May, 2010, acopy of Balance Sheet, Profit & Loss Account, report of the Board of Directors andAuditors of the aforementioned subsidiary companies for the year ended 31^stMarch, 2010 have not been attached with the Balance Sheet of the Company. Annual Accountsof the subsidiary companies are available for inspection by any member of the Company whomay be interested.

As required by Accounting Standard-21 issued by the Institute of Chartered Accountantsof India, the financial statements of the Company reflecting the Consolidation of theAccounts of its subsidiaries to the extent of equity holding of the Company in theseCompanies are included in this Annual Report.

DIRECTORS

During the year, Mrs. Maninder Bedi and Ms. Sukhmani Bedi have resigned from thedirectorship of the Company on personal grounds.

In accordance with the provisions of Section 255 & 256 of the Companies Act 1956,& Articles of Association of Company, Lt. Gen. (Retd.) Amar Nath Sinha, PVSM, AVSM andMr. Vinod Chander Sinha, Directors of the Company are liable to retire by rotation at theensuing Annual General Meeting and being eligible offers themselves for re-appointment.

Your Directors recommend their re-appointment.

A brief resume, nature of expertise, details of directorship/ committee membership inother companies as stipulated under Clause 49 of the Listing Agreement with the StockExchanges is annexed to the notice convening the Annual General Meeting.

AUDITORS

M/s R. Chadha & Associates, Chartered Accountants, Statutory Auditors of theCompany retire at the conclusion of the ensuing Annual General Meeting and being eligible,offer themselves for re-appointment.

Your Directors recommend their re-appointment.

EMPLOYEE STOCK OPTION SCHEME

The Directors of your Company proposed, through postal ballot, increase in the numberof stock options from 1,00,000 stock options to 10,00,000 stock options under EmployeesStock Option Scheme (ESOS -2007).

However, after the sub-division of the equity shares become effective from one equityshare of Rs. 10/- each to five equity shares Rs.2/- each, the number of stock optionswould stand modified to 50,00,000 stock options equivalent to similar number of equityshares of Rs. 2/- each.

During the year ended on 31^st March, 2010, your Company have not issued andallotted any stock options under the ESOS 2007 Scheme. However the disclosures as requiredunder Clause 12 of SEBI (Employee Stock Option Scheme & Employee Stock PurchaseScheme) Guidelines, 1999 are furnished as annexure a, forming part of this Report.

HUMAN RESOURCES MANAGEMENT

Your Board believes that Employees are vital to the Company. Your Company has created afavourable work environment which encourages innovation and meritocracy. The Company hasalso set up a scalable recruitment and human resource management process which enables usto attract and retain high caliber employees.

RESPONSIBILITY STATEMENT

In terms of and pursuant to Section 217 (2AA) of the Companies Act, 1956, yourDirectors, in relation to the Annual Statement of Accounts for financial year 2009-2010,state and confirm that:

• the Accounts had been prepared on a ‘going concern’ basis and in suchpreparation the applicable accounting standards had been followed with proper explanationrelating to material departures;

• your Directors had selected such accounting policies and applied themconsistently and made judgments and estimates that are reasonable and prudent so as togive a true and fair view of the state of affairs of the Company at the end of thefinancial year, and of the profit of the Company for that year; and

• your Directors had taken proper and sufficient care for maintenance of adequateaccounting records in accordance with the provisions of the Companies Act, 1956 asamended, for safeguarding the assets of the Company and for preventing and detecting fraudand other irregularities.

LISTING WITH STOCK EXCHANGES

The Equity Shares of the Company are listed at Bombay Stock Exchange Ltd (BSE) &The National Stock Exchange of India Limited (NSE).

Zero Coupon Convertible Bonds (FCCBs) are listed at Singapore Stock Exchange (SGX– ST).

Secured Redeemable Non Convertible Debentures (NCDs) are listed under WDM segment atBombay Stock Exchange Ltd (BSE).

The annual listing fee for the year 2010-2011 have been paid within the scheduled timeto BSE, NSE & SGX – ST respectively.

INTERNAL AUDIT

M/s S. S. Kothari Mehta & Co., and M/s JRA & Associates have been appointed asthe Internal cum Management Auditors of the Company for the financial year 2010-11.

Your Company also have a separate and dedicated Internal Audit Department in order tohedge the exposure towards the fraud, malfunctions and deceptive activities at variouslevels and in various departments. The Internal Audit Department also facilitates theirsupport and co-operation to the Internal Auditor(s), during the course of the InternalAudit.

CORPORATE GOVERNANCE REPORT AND MANAGEMENT DISCUSSION AND ANALYSIS STATEMENT

As per Clause 49 of the Listing Agreement, report on Corporate Governance together withManagement Discussions and Analysis Statement and Certificate from Company’sStatutory Auditors are annexed elsewhere in this report.

PUBLIC DEPOSITS

During the year under review, your Company has not accepted any deposits under theprovisions of Section 58A of the Companies Act, 1956, and Rules made there under.

PARTICULARS ON CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGEEARNINGS & OUTGO

Your Company, being a service provider organization, most of the information asrequired under Section 217(1)(e) of the Companies Act, 1956, read with the Companies(Disclosure of particulars in the report of the Board of Directors) Rules, 1988, asamended, are not applicable. However, the information as required have been given in annexureb to this report.

QUALITY INITIATIVES

Reinforcing its commitments to high standards of quality, your Company was successfullyassessed for its ISO certificates Intertek Systems Certification for the following:-

• QMS (Quality Management System) as per ISO 9001:2005 for providing SystemIntegration, Network Integration, VPN

Services and Managed Services.

• ISMS (Information Security Management System) as per ISO 27001:2005 covering allinformation assets owned or managed by your Company related to providing Data Centerservices & Network Operation Center from Delhi & Mumbai premises for delivering ofManaged Services as per SOA version 1.0.

• ITSM (Information Technology Service Management System) as per ISO 20000-1:2005covering the delivery of managed services to its customers for Network Operation Centre atMumbai Premises & Data Center & Network Operations Centre at New Delhi premiseswithin the technical & organizational boundaries of your Company.

• The Banglore Data Center of your Company was certified for ISO 27001:2005 by BMTrade Certification Ltd. For providing Data Center services through its Bangalore premisesto its clients.

PARTICULAR OF EMPLOYEES

Information required to be furnished in terms of section 217 (2A) of the Companies Act,1956 read with Companies (Particulars of Employees) Rules, 1975 is required to be set outin the Annexure to this report. However, in terms of Section 219(1)(b)(iv) of theCompanies Act, 1956, the report and accounts are being sent to members excluding aforesaidAnnexure. Any member interested in obtaining a copy of the same may write to the CompanySecretary at the Registered Office. None of the employees except Lt. Col. H.S. Bedi, VSM,CMD and Mr. Deepinder Singh Bedi, Executive Director, listed in the said Annexure arerelated to any Director of the Company.

ACKNOWLEDGEMENTS

Your Directors would like to express their gratitude for the cooperation and supportreceived from Members, Bankers, Department of Telecommunications (DOT), Telecom RegulatoryAuthority of India (TRAI), Wireless Planning Commission (WPC), Government of India, otherRegulatory Bodies, Customers and other business constituents during the period underreview.

Your Directors place on record their deep appreciation for exemplary contribution ofthe employees at all levels. Their dedicated efforts and enthusiasm has been integral toyour company’s impressive growth.

Annexure – a to the Directors’ Report regarding ESOS scheme

Employee Stock Option Scheme – "TULIP ESOS - 2007"

Note: No stock options were granted under the plan during the year ended on March31, 2010.

Information relating to Conservation of Energy, Technology Absorption, Research andDevelopment and Foreign Exchange Earning and Outgo forming part of Directors’ Reportin terms of Section 217(1) (e) of the Companies Act, 1956 read with the Companies(Disclosure of particulars in the Report of the Board of Directors) Rules 1988 asfollows:-

A. CONSERVATION OF ENERGY

Tulip being a telecommunication service provider requires minimal energy consumptionand every endeavor has been made to ensure the optimal use of energy, avoid wastage andconserve energy as far as possible.

RESEARCH AND DEVELOPMENT (R & D)

I) Specific Areas In which R & D carried out by The Company

Due to the nature of business of the Company, your Company is not initiating anyspecific research. However to be acquainted with the latest technology available in themarket or the future technologies, your Company is taking all necessary steps, i.e.employee trainings, organizing workshops, participating in seminars, conferences andvarious technology forums.

Ii) Benefits derived as a result of the above R&D

By virtue of the above initiatives, your Company is able to choose/adopt appropriatetechnology (ies)/product (s) for rendering better services at competitive prices.

iii) Future plan of action

Your Company continues to evaluate and adopt innovative and high quality products andtechnologies to meet the ever changing consumer needs, drive growth, continuous focus onreducing costs to fund the growth and reduce the operating costs.

Your Company is not initiating any specific research due to nature of this businessoperations, therefore, all the expenditures incurred for the activities mentioned in B(i)above, are charged to the respective expenditures accounts and cannot be separatelyidentified.

Your Company has its own technically qualified staff in the field of computer software,hardware and networking. To carry out the business operations, your Company do not requireany imported technology.

C. FOREIGN EXCHANGE EARNING AND OUTGO

Total Foreign Exchange Earnings and Outgo during the year pertaining to company’sown generated products and services is as